Residential battery storage in the US is growing quickly as more customers become familiar with solar-plus-storage options for backup power.
Wood Mackenzie recently launched a new series of research insights that examine individual state solar-plus-storage markets. The inaugural insight targets New Jersey, one of the states where the behind-the-meter solar-plus-storage market is still at a very early stage.
New Jersey is an example of a state that lacks the right cocktail of incentives and grid reliability issues to move quickly out of the nascent, “early adopter”- only market stage – where most homeowners aren’t yet opting to install batteries in their homes, and many solar installers do not pitch storage.
Looking at detailed vendor and installer data, Wood Mackenzie finds that New Jersey’s market has a few key characteristics that are consistent with the state’s low solar-plus-storage demand.
Low attachment rates
The popularity of energy storage in a region is typically captured in the “attachment rate,” which indicates the percentage of new residential solar installs that also include a battery. New Jersey had a low attachment rate of 1.15% during the analysis period (meaning that out of every 100 new solar installations, between 1 and 2 had storage attached).
Even the leading solar-plus-storage installer in the state, Sunrun, had an attachment rate that was notably lower than in other markets where storage demand is higher.
High installer and vendor market concentration
New Jersey is a state where battery storage is not yet being offered by most solar installers when they pitch to homeowners. Those installers know from working closely with homeowners that despite theoretical interest in storage, few customers end up signing a contract, since the mix of incentives and grid reliability risks does not yet tip the scales in favor of adding battery. Many solar installers, therefore, don’t offer storage, which leaves national installers Tesla and Sunrun with almost total market dominance.
Additionally, because Sunrun and Tesla have a corner on installs, the New Jersey storage install base in the time period analyzed is made up almost exclusively of Tesla Powerwall and LG Resu models – the only models that these two installers carry.
However, if market conditions in New Jersey were to lead to greater storage demand, it would result in diversification of new battery models. Vendors would seek to establish a foothold in the New Jersey solar market, and installers would start to carry a wider variety of batteries to meet increased customer demand.
Low TPO rates
Solar-plus-storage is more expensive for a homeowner than solar alone. Counterintuitively, however, rates of third-party ownership (TPO) tend to be lower in New Jersey for systems that include storage. This illustrates both the lack of financing options for solar-plus-storage and lack of price sensitivity on the part of homeowners who purchase batteries – another sign of a market made up mainly of early-adopters.
The path forward
According to the September 2021 Energy Storage Monitor, 93 MW of residential storage was installed nationwide in Q2 2021. Wood Mackenzie’s new series of state-level insights will dive deeper into the markets where this residential storage is concentrated, analysing the underlying trends behind who dominates the behind-the-meter solar-plus-storage installation and vendor landscapes. Growing demand will come from the introduction of new incentives in US states, as well as product and market innovation that will drive down the ultimate cost of adding a battery.