Within the next 25 years every home will not only be connected to the electric grid, they'll have their own energy storage system that will keep the lights on in a power outage and help make energy more efficient for everyone to use.
That may seem like a wild concept but some of the most forward thinking companies in energy predict that energy storage will soon be accompanied with every solar energy system in the U.S. With as fast as the residential solar industry is growing it's only a matter of time before a battery box may be hanging in your basement.
Storage solutions are here
Companies have been testing storage solutions for years but they're finally starting to see the light of day in the consumer market. SolarCity (NASDAQ:SCTY) has launched an energy storage solution for the home and a commercial offering with the help of Tesla Motors (NASDAQ:TSLA). The system isn't meant to be a way to go off-grid but it'll keep the refrigerator working and the lights on in a power outage.
SunPower (NASDAQ:SPWR) has introduced a similar small storage system and is offering it in new homes built by KB Home (NYSE:KB). Like SolarCity, the goal isn't to allow homeowners to go off-grid, but storage will instead be used for backup power in case of emergencies.
Inverter maker Enphase Energy (NASDAQ:ENPH) jumped into the game this week with an AC battery that's meant to be an easy to install addition to residential and commercial solar projects. Enphase is making the product modular so more than one battery can be put in a home, and it's supposed to allow for smarter energy storage for nighttime or high consumption usage instead of just drawing energy from the grid.
Why energy storage is the future of energy
These energy storage solutions may seem like small steps but they're part of a much larger move into making distributed energy production smarter and more efficient. Right now, homes and businesses that have solar systems are pushing power to the grid or drawing from the grid at unpredictable times, forcing utilities to run spinning reserves and putting strain on the local distribution network. If built properly, even small energy storage systems can smooth out the load on the grid and make the entire network more efficient.
As the cost of solar power comes down the industry will grow to nearly every home and I think these energy storage solutions will become a standard offering as part of a solar system. As that critical mass is reached, storage will become even more important as a way to stabilize the grid, even with small storage systems. That's why I think it's only a matter of time before we all have energy storage systems.
Where to make money in energy storage
Companies are rushing to get into energy storage but the winners may not be who you think. Batteries are already a commodity product around the world and most energy storage systems are using lithium ion batteries that are essentially plug and play in the market.
Instead, the companies integrating batteries and solar systems will be the big winners long term. For example, SunPower's energy storage solution is also the solar system's inverter, turning DC solar electricity into AC power we use in the home. This full solution is where the value is added, not just in the batteries.
SolarCity is doing something similar, although it isn't yet an inverter manufacturer. But as Tesla Motors builds out its Gigafactory and batteries become a more common offering I would be surprised if they didn't start making inverters with energy storage included.
This is also the strategy Enphase Energy is taking, being the point of contact for the grid, energy storage, and the solar system.
Energy storage will be another important tool in the kit for solar companies in the future and those who can integrate it effectively will be a step ahead of competitors. As SunPower and SolarCity add energy storage look for them to continue to be big winners in this space but keep an eye on Enphase Energy. It is moving into more of an energy management role and that's a better way to add value to this space than just supplying a commodity product like inverters to the market.
Travis Hoium manages an account that owns shares of SunPower and is personally long SunPower 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.