Some critics of solar energy rightfully criticize the energy source for its intermittent energy generation, which not only makes solar difficult to manage on the grid, but also limits its potential to grow because fossil fuels are still required for night power generation. But if energy storage can be added to solar systems, it not only levels out the peaks and valleys that can occur during the day, it would lead to a more manageable grid and even the possibility of cutting the grid cord altogether.
California, which is leading the charge into solar, took a step in that direction, eliminating interconnection fees that would add $1,400 to $3,700 to energy storage systems in the state. Utilities argued that a review of energy storage systems were needed while simultaneously arguing against net metering, in part, because of the difficulty it adds to managing the grid. But California's regulators saw things the solar industry's way and eliminated the fees and review, opening up a huge potential market for energy storage.
The energy storage revolution will be televised
Leading the charge against these fees was SolarCity (NASDAQ:SCTY), which is trying to roll out energy storage for both commercial and residential installations. Under the new rules, systems under 10 kW, which would be almost all residential systems, SolarCity will have to put in a meter to measure the interplay between battery charging and solar generation, but the cost is capped at $600.
In the long term, this is also big news for Tesla Motors (NASDAQ:TSLA), which is SolarCity's battery partner and will be supplying batteries from its planned Gigafactory. Tesla's CTO JB Straubel spoke at an energy symposium this week and said that 35 gigawatt-hours of the plants capacity will be for automotive while 15 gigawatt-hours will be devoted to energy storage.
SunPower (NASDAQ:SPWR) is also testing energy storage in at least three locations around the world, and CEO Tom Werner has big plans for storage as well. The plan for SunPower isn't to get into the storage manufacturing business, like Tesla is doing, but rather to use partners for manufacturing. In a way, this is a departure from what SunPower is doing by building its own solar panel technology, but it reduces technology risk, and with huge companies like General Electric, Panasonic, and Samsung, just to name a few, eyeing the battery market, it may be best to be a buyer rather than a supplier.
The next phase of solar growth
A notable development with California reducing entry costs for solar is that regulators are starting to see the value of the solar/energy package. When combined, these two products will have less of a volatile impact on the grid while allowing solar installations to grow at the same time.
As costs fall for both solar energy and energy storage it'll become economical to install both products in many locations around the world. SolarCity, Tesla, and SunPower are certain to lead the way as barriers to energy storage fall.
Travis Hoium manages an account that owns shares of SunPower and personally is long shares and options. The Motley Fool recommends SolarCity and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.