Residential Solar+Storage: Balancing Money and Power

When U.S. consumers decide to install a new solar PV system, they are increasingly also choosing to install a battery storage system. Indeed, residential attachment rates are mushrooming in some jurisdictions. Hawaii’s attachment rate reached an astonishing 95% in 2023. California’s rate climbed to 14% in 2023 – and is growing rapidly as the state transitions to a new net-billing tariff, which incentivizes solar customers to co-install storage. Of the residential PV systems installed under California’s new net-billing tariff, 60% are paired with battery storage – compared to just 10% under the predecessor tariff. One leading U.S. installer of residential PV systems recently reported attachment rates of 100% in both Hawaii and Puerto Rico, and 46% in Texas.

What’s driving the ongoing growth of behind-the-meter (BTM) residential solar+storage systems in some areas? In addition to retail electricity prices, primary contributors include rate structures that support or encourage attachment, the increasing frequency and duration of power outages and corresponding consumer interest in backup generation (with a growing preference for clean backup generation), federal tax incentives for solar and battery storage, state and utility programs that support solar and/or battery storage (including virtual power plants or VPPs), and emerging market opportunities for BTM solar+storage systems.

How Do Solar+Storage Systems Perform?

Considering the growth of residential BTM solar+storage systems in some jurisdictions and strong prospects for growth in others, a better understanding of how these systems perform – or are likely to perform – during outages can benefit installers, government officials, utilities, and consumers. Happily, Lawrence Berkeley National Laboratory (LBNL) is completing a three-year initiative to explore the use of BTM solar+storage systems for backup generation. LBNL’s work has explored, under various scenarios, the technical capabilities of these systems, including how residential customers can evaluate tradeoffs between backup power and other potential value streams. The Smart Electric Power Alliance (SEPA) is supporting LBNL’s work in these areas through stakeholder engagement and industry outreach.

LBNL’s first study under this initiative, published in 2022, analyzed the capabilities of BTM solar+storage to provide critical-load or whole-building back-up power during synthetic (simulated) events across a broad range of U.S. geographies, building types, and power interruption conditions. The study also evaluated how solar+storage systems would have performed in providing back-up power during 10 historic events with outages exceeding 24 hours. Among other conclusions, the study found that a smaller system (with 10 kWh of storage) can fully meet basic back-up needs (excluding heating and cooling loads) for a typical single-family home during a three-day outage in virtually all U.S. counties in any month. (See here for additional key findings.) Because this study was based on current U.S. building stock, it provides a “baseline” for LBNL’s subsequent study.

LBNL’s second study, published in 2023, analyzed how the potential for BTM solar+storage to provide backup power during long-duration outages will evolve as homes become more efficient and electrified, and more flexible with respect to demand. This study focused primarily on scenarios where backup power is provided to support heating and cooling loads, which tend to account for some of the largest residential loads. The study found that building efficiency and load flexibility measures can significantly reduce – by more than half, in some U.S. locations – required battery sizing. In general, these measures especially reduced required battery sizing needs for homes in hot locations and homes in cold-winter locations with electric heat. (See here for additional key findings.) LBNL’s first two studies addressed the technical potential – but not the economic potential – of BTM solar+storage systems to provide home backup power during outages.

Bill Savings vs. Reliability Value

LBNL’s third and newest study, published in October, assesses how the customer value of BTM solar+storage serving a single-family home is impacted by the battery’s backup reserve setting, considering the trade-off between reliability value and utility bill savings. (Most residential battery systems have a “reserve setting,” which allows the customer to maintain a minimum level of storage in reserve in case of a power disruption. Raising the level of battery capacity held in reserve increases the customer’s ability to ride through a power outage, but reduces the customer’s ability to achieve bill savings on a day-to-day basis.) The new study is designed to inform customer and installer decision-making when configuring BTM solar+storage systems, as well as product, business model, and policy design that consider the multiple potential value streams of BTM solar+storage.

LBNL modeled results for systems installed in 10 U.S. locations (counties) that reflect a diverse range of geography, climates, insolation levels, and building stock (including heating type/fuel), and which take service under two common tariff structures – net billing and time-of-use (TOU) rates – that incentivize residential battery storage deployment. PV systems were sized at 100% of the customer’s annual consumption, up to the available roof area of the home.

LBNL found that across all 10 locations analyzed, the reliability value is “surprisingly” insensitive to the battery’s reserve level. Therefore, the opportunity cost of holding battery storage in reserve, in terms of foregone bill saving, tends to outweigh any gains in reliability value from mitigated power outages. These findings hold true both on average and in years with relatively frequent interruptions. Furthermore, this outcome holds across the two different tariff structures and most sensitivities considered, including those related to electricity rates, customer load size, and battery size.

Primary conclusions of LBNL’s new analysis include:

• Bill savings and reliability value are both important components of the overall value equation for residential BTM solar+storage systems.
• Bill savings tend to be more sensitive to the battery’s reserve level setting, and therefore in most cases justify maintaining as low a reserve level setting as allowed.
• The individual customer’s specific circumstances should be considered when determining the battery’s reserve level setting. In very limited cases, raising the customer’s battery’s reserve setting would actually increase total customer value (i.e., bill savings plus reliability value). This outcome would apply to customers who live in areas with very poor reliability, have an exceptionally high reliability value, take service under a net-billing rate or under a TOU rate that allows grid discharging but not grid charging, and are subject to a relatively modest price arbitrage differential on that rate.
• Interconnection rules (e.g., whether grid charging is allowed) impact how customers make tradeoffs between bill savings and reliability value.
• Technological advancements (e.g., dynamic reserve settings, predictive algorithms that anticipate possible interruptions) may also impact how customers make tradeoffs between bill savings and reliability value.

Figure 1: LBNL’s modeled results for annual average reliability value vs. annual bill savings for a BTM solar+storage system serving a representative home in Memphis, Tennessee, under base-case assumptions. The colored lines represent a standardized set of tariff structures applied across all 10 study locations (either net billing with flat rates or net metering with TOU rates), with varying rules related to grid charging and/or discharging, in LBNL’s study. To determine marginal reliability value, the study assumes a value of lost load (VoLL) of $5/kWh and 1.5 interruptions per year. (Source: LBNL)

Figure 2: LBNL’s modeled results for average annual total customer value for a BTM residential solar+storage system in 10 different U.S. locations. Line colors represent locations. Solid vs. dashed lines reflect two different tariff structures (i.e., net billing vs. TOU self-consumption). (Source: LBNL)

A kWh for Your Thoughts?

SEPA and LBNL are interested in learning more about how key industry stakeholders can – or should – put LBNL’s analysis, findings, and recommendations to use in order to benefit consumers and to support policy and industry goals, including decarbonization. Accordingly, we invite your feedback on the following questions:

• How can residential solar+storage system installers use this information to benefit customers in terms of providing guidance and assisting with decision-making?
• How can government entities (including utility regulators) use this information to benefit consumers, in terms of providing guidance and assisting with decision-making, and to support policy goals, such as modernized rate design, demand flexibility, and decarbonization?
• How can utilities use this information to benefit customers, in terms of providing guidance and assisting with decision-making, and to support utility priorities and policy goals, such as modernized rate design, demand flexibility, and decarbonization?

Please send your recommendations and ideas to [email protected].

To learn more about LBNL’s work addressing the use of solar+storage for backup generation, contact Rusty Haynes. To get involved in SEPA’s work in this area and adjacent areas, consider joining SEPA’s Customer Programs Working Group, Energy Storage Working Group, and/or Microgrids Working Group. (Participation is limited to SEPA members.)