Sharp enters the energy storage fray with a savings guarantee

Observers of the storage industry are noticing a steady and encouraging trend: the industry is growing quite rapidly –albeit from a relatively small base. The most recent numbers available show that in the second quarter of 2015, nearly 41 megawatts (MW) of storage were deployed in the U.S. Of this, about five MW were behind the meter at the customer site, an eleven-fold increase over Q2 of 2014.

Many of the on-site storage deployments are taking place in California, with participants such as Stem, Greencharge Networks, Advanced Microgrid Solutions, and Coda taking aim at high utility demand charges, and in some cases offering third-party financing.

Sharp Electronics Corporation’s Energy Systems and Services Group has also entered the fray with its SmartStorage® system and the first 10-year performance guarantee in the industry, combined with an operations, service, and maintenance agreement of the same length.

To better understand Sharp’s aspirations and motivation for entering the energy storage arena, I recently spoke with Carl Mansfield, General Manager and Founder of Sharp Electronics Corporation’s Energy Systems and Services Group (ESSG). Mansfield comments that Sharp has learned a valuable lesson from observing and participating in the solar industry: hardware – whether solar panels or batteries -can be commoditized. And while the customer benefits from even lower prices, there is precious little margin in selling commodities. Developing a solutions approach, he believes, can be a better business in the long run.

Our overall value-add is intelligent controls and system integration, and our goal is to avoid being caught in a commodity position where we are pushed down the price curve on hardware.

For that reason, the company has stayed away from the battery manufacturing game, choosing instead a flexible product design capable of adapting to integrate market-leading hardware components as markets evolve. The company currently uses UL-certified lithium-ion components from Samsung SDI . As a matter of fact, Mansfield observes that Sharp’s SmartStorage® system is one of the first fully-UL compliant (UL 1973) commercial battery storage systems in the U.S. at the battery rack level.

We can quickly integrate alternative battery technologies as our software is very modular and flexible. For example, if an alternate battery becomes available that is superior in price, performance, reliability and safety, we could quickly and easily shift to them.

Sharp already has a global energy solution division, which realized $2.5 billion of business in the last fiscal year, and that division is constantly looking for new frontiers and opportunities big enough to move the needle. Mansfield believes storage fits that profile, and indicates “the business needs to be north of $100 million to be interesting for Sharp. We believe there is a huge opportunity in this space.”

The product Sharp is selling is similar to that offered by some of the other competitors in the storage market: a lithium-ion package that can be increased in modular fashion, with intelligent software sitting on top. In Sharp’s case, the basic building block is a 30 kilowatt (kW) AC unit, which can be configured to store either 40 or 80 kilowatt hours. Based on the size of the customers and their electricity usage pattern (load profile), the company determines how to best configure the appropriate storage modules. Mansfield indicates the company currently supports from one to 16 of those units at a single installation site, with the largest set-up presently at 480 kW.

Mansfield notes that the company has reviewed more than 500 sites’ worth of load data and the typical sizing for a commercial site is usually in the 90-200 kW range, with most commercial properties running around 120 kW. As far as the properties best suited for the application, Mansfield observes that while the key is to find buildings with “peaky loads,” the product is actually well suited to quite a wide range of building types.

Peakier is better. If the peaks are broader, you might have to add more capital assets to achieve the same savings.

That’s because if the peak is flatter, more battery capacity is required to reduce that peak to the same kW demand savings as compared to a site with a narrower peak. Since battery costs are a dominant contributor to system costs, economics at a site with narrower peaks are more favorable.

It’s hard to be black and white on classes of buildings that always work well and others that are always poor candidates. Our system works well across a very wide range of building types and particularly well when co-deployed with solar.”

And it’s notably more challenging to correctly size a storage system than to install the proper number of solar panels at a site. Sharp has addressed that issue by teaming up with Energy Toolbase. Their software is used to create instantaneous price quotes and return on investment (ROI) calculations, and greatly reduces the likelihood of incorrect system sizing.

With storage, it’s a lot more complex to understand the economic value of what the system delivers to a site. It’s much more challenging to sell a storage solution – it’s difficult to predict how much demand will be reduced – this depends on the load shape, the system sizing and how the algorithms work.

As a consequence, the sales process can be complicated and time-consuming for installers and integrators working to develop the right proposal. The collaboration with Energy Toolbase – integrated with Sharp’s SmartStorage® software – facilitates more accurate predictions of system savings.

This allows our channel allies to go into Energy Toolbase’s system, enter load profile data and other pertinent project information, and be provided with a pass or fail result for the site along with recommend sizing for the SmartStorage system.

Of course, in order to effectively and profitably interface with the grid and be commercially viable, the configuration must also have software intelligence built in. This comes in the form of Sharp’s controller that connects to the devices and to local metering points in order to optimize performance.

This software performs two basic functions: It possesses a prediction engine. Based on a site’s historical usage, system sizing, and other factors, it will predict the set-point for automatically capping customer demand. And in real time, the system will also monitor grid consumption. If the power level rises above a target set-point, the battery will be discharged.

Some competitors have similar functionality. But what Sharp is counting on to distinguish it in the marketplace is its 10-year performance guarantee, combined with its O&M service agreement.

The company is targeting the California market based on its attractive returns (driven by the utility demand charges – which can represent up to 50 percent of a customer’s electricity bill – and the generous SGIP subsidy). But Mansfield says that certain states in the Northeast are ripe as well, including New York, New Jersey, and Massachusetts. The company has also supported proposals with customers and channel allies in Hawaii. Beyond that, he observes that “Arizona and Colorado are close to being economically viable.”

One key to growth in the long-run will be the addition of financing to the package, and Mansfield indicates that Sharp intends to offer this shortly on a broad basis. Mansfield recognizes that this was one important key to success.

While we have provided some initial lease-based financing, we are currently putting together a larger program for storage and solar-storage hybrid installations. We view that a financing offer is really critical for this business…it has taken a while for battery prices to drop, but they are at a point now where we believe we are on the verge of true third party partner-based financing, where all parties in the value chain can make a profit.

Peering into the future, Mansfield discerns several factors, in addition to steadily declining system costs, which augur well for the storage industry. One may well be the looming reduction in the federal Investment Tax Credit, which is set to decline from 30 percent to 10 percent in the commercial solar sector at the end of 2016.

As a lot of larger companies are racing to complete solar deployment before the expiration of the ITC , solar combined with storage will be key to unlocking business beyond 2016. We’ve already modeled this and we are confident our storage solutions will allow solar projects to remain financially viable beyond the ITC.

The utility push against net metering may help storage as well. Currently, in many states, customers with on-site solar panels are able to sell their surplus into the market at the same rate they pay for electricity. Some utilities are looking to reduce that rate or to apply fixed demand charges to customers with on-site solar. The utilities are also concerned about high local penetration rates of solar that can create instability on the grid. Batteries can help here in a number of ways, storing surplus power and stabilizing the grid.

This really creates an opportunity for us. In the early stages, when we were deploying our pilot system, what we found is we had no problem getting (utility) interconnection approval, whereas others struggled with utilities not giving interconnection approval. We didn’t need net metering…our system can eliminate any kind of back-feed.

For the moment, Sharp is focusing on growing the commercial storage business in limited areas, but the company’s long-term aspiration is much greater. It intends to trade on its global reputation, long history, and leverage its global resources – something most storage start-ups simply cannot match, an attribute that may be attractive both to some customers as well as to yieldcos. Mansfield repeats unequivocally “Success for us would be $100 million in annual business.”

One initial sign that Mansfield is heading in the right direction may be seen within Sharp itself. Mansifled is happy to note that while the product was initiated and developed in the U.S, teams in Japan are now  looking to advance the concept in Japan, “which is the inverse of what usually happens at Sharp.”

http://www.forbes.com/sites/peterdetwiler/2015/10/01/sharp-enters-the-energy-storage-fray-with-a-savings-guarantee/2/