News Release

Balance-of-systems costs for US non-residential storage to drop

Non-residential storage system costs will fall by 27% in the US over the next five years, according to new research from natural resources consultancy Wood Mackenzie.

The fall in system costs will help drive a more than tenfold growth in the US non-residential storage market by 2024.

Battery cost declines have been the dominant factor in non-residential system cost declines in the past. However, the next five years will see more progress in balance-of-systems (BOS) costs declines than ever before.

By 2024, turnkey BOS costs will decline by more than 20% for non-residential systems, Wood Mackenzie said.

Engineering, procurement and construction (EPC) costs and software-driven declines will be key to the fall of BOS costs.
EPC costs will fall as the non-residential storage market becomes more competitive.

Increasing standardisation around system design, efficiencies in engineering and construction, and changes in business models are poised to drive down EPC costs through 2024, Mitalee Gupta, from Wood Mackenzie’s energy storage team, said.

She said that competition in the market is driving these advances, making non-residential storage increasingly lucrative for developers and EPC companies.

One example of system design innovation is the increasing prevalence of preloaded containers, which make it easier for EPC companies to install solutions on site. Innovations in storage software will also help reduce BOS costs for non-residential storage.

Gupta said: “The trend of consolidation in the energy storage software market is a strong indication of how important software will be to the market in the years ahead.

“Vendors are increasingly bringing software capabilities in house or focusing more intensely on existing software capabilities. 2019 saw a flurry of mergers and acquisitions activity in the space.”

She added that software is becoming more important than ever as utilities begin to use non-residential storage systems for grid services.

As well as delivering revenue from storage assets, storage software helps batteries pair more easily with solar. Software also improves storage system economics by bringing down lifetime costs.

While the forecast for BOS cost declines is notable due to acceleration versus past years, battery prices for non-residential storage in the US will also drop significantly, falling 35% by 2024. The expected drop is largely a result of battery manufacturers achieving new economies of scale.

But Gupta added that while BOS costs are falling, certain soft costs remain stubborn.

“Progress in BOS costs for non-residential storage does not include any soft costs associated with interconnection, permitting, customer acquisition, overhead and margins,” she said.

“These costs still make up a significant portion of system costs today and no major changes are expected over the next five years in the absence of dramatic policy shifts.”