Japanese giant could help startup compete with Stem, Tesla, others in burgeoning energy storage market.
GTM Research predicts that behind-the-meter batteries could expand to make up nearly half of the rapidly growing U.S. energy storage market by decade’s end — and there’s also great potential for international growth in solar-rich and energy-constrained countries like Germany and Japan. That means that the startups serving this market will need equipment, manufacturing and financing partners to help them scale up to meet this demand.
Green Charge Networks is one such startup, competing with the likes of Stem,Coda Energy and Sunverge, as well as the 800-pound gorilla in the market,Tesla. This week, the New York-based company announced it’s working with Japan’s Itochu Corp. to “distribute, supply and procure Green Charge Networks’ intelligent energy storage solutions internationally,” starting in Japan.
Details on the strategic partnership remain scarce at this point. But in a Wednesday interview, Green Charge CEO Vic Shao said that it could include Itochu putting the startup’s lithium-ion battery-based systems in properties it owns and manages, as well as supplying equipment and financing to lower the upfront cost of getting them installed.
“I think that Itochu recognizes there are a whole set of value streams inside and outside of Japan that they can capture,” he said. “One is, they have a huge real estate portfolio around the world,” from manufacturing plants and food processing facilities to office buildings and data centers. “If it’s attractive from that angle, we can sell into facilities they own and operate. Number two, they have a huge balance sheet, and they buy a lot of stuff — and that stuff includes batteries and inverters.”
Financing could be another part of the partnership, he noted. Like its competitors, Green Charge offers “no-money-down” installations in commercial buildings, and then pays itself back through sharing the savings from the reductions in demand charges that come from injecting battery power into buildings to avoid peaks in power consumption. So far, it has raised $66 million to fund this business model, and while Shao wouldn’t say if or when Itochu might add to that financing stream, “there are multiple benefits to this relationship, and financing is one of them.”
Japan’s behind-the-meter battery opportunities
“Finally, it gives us access to the international market,” he said, adding that “Japan is currently a very, very active energy storage market.” Green Charge’s systems are now in 7-Eleven and Walgreens stores in New York and California, in schools in California and other sites, and at buildings hosting electric vehicle charging stations from NRG Energy’s eVgo service. But it hasn’t gone outside the United States yet, he said.
Japan’s energy storage needs are driven by its decision to take almost all its nuclear power plants offline following the Fukushima disaster, its need to strengthen its grid to prepare for future earthquakes, and its growing challenge in incorporating a rising number of solar power projects, he noted.
The Japanese government has created a $300 million grant program to support large-scale battery deployments, with both utility-scale and distributed storage playing a role. Over the past several years, Japanese “smart city” projects seeking to integrate solar PV, energy storage, smart grid and energy management systems have gone up around the country.
At a March 2014 event in San Francisco, Hiroaki Murase of Itochu said that a Japanese government program that covers roughly 30 percent of the cost of distributed energy storage systems had helped support the deployment of battery systems in about 15,000 homes across the country. “What’s missing is how we connect this storage together, and how we control it,” he said.
Japan, of course, has plenty of domestic giants providing energy storage solutions to meet this need. Murase was joined at last year’s event by Hiroshi Hanafusa, head of Panasonic’s Energy Solutions Center, who described thecompany’s LiEDO platform to network its distributed batteries to extend their effective lifespan and aggregate their collective capacity for multiple energy purposes. Japanese companies participating in the country’s smart city projects include Panasonic, Toshiba, Fuji Electric, Hitachi, Mitsui and Osaki Electric.
A path to subsidy-free energy storage, solar connections
Shao said that Itochu may be working with other behind-the-meter energy storage providers. “They take a very long time to vet out a solution, and to get comfortable with a technology. They’ve done that with us. I won’t comment on whether they’ve done that with anybody else.”
At the same time, the partners are looking at broader opportunities in Asia and other markets, he said. “Because we have these building blocks in place, we can go to an international market in months, rather than years.”
Green Charge has secured other partnerships to back its growth plans, including a strategic supply agreement with Samsung SDI to deliver as much as 25 megawatt-hours’ worth of lithium-ion batteries over the next two years, and an “on-demand” manufacturing deal with contract manufacturer Flextronics.
The vast majority of U.S. behind-the-meter battery projects have beenboosted by state subsidies, like California’s Self-Generation Incentive Program (SGIP), or other forms of government support, such as the grid resiliency and microgrid initiatives underway in hurricane-prone East Coast states like New York, New Jersey, Massachusetts and Connecticut.
But Shao said that his opinion is that “a subsidies-driven use case ultimately will not gain mass adoption. Only use cases that make money will be here to stay. The way we’re looking at the Japanese market is, it has a good start, but for it to stick and to gain adoption, there has to be an economics-driven approach to it.”
Reducing demand charges in commercial buildings is one possible route to that subsidy-free business model. So is marrying batteries with solar power, which GTM Research projects will grow into a $1 billion market in the United States by 2018, and is also growing in Germany and Japan.
On that front, Shao said that Green Charge is getting ready to announce its own solar partner, though he wasn’t ready to say when it was coming or which solar company it would be working with. This is a fast-moving landscape for collaborators, with partnerships between SolarCity and Tesla or Sunverge and SunPower, or SunEdison’s acquisition of Solar Grid Storage, setting the stage for more to come.
Originally published on Greentech Media.
By Jeff St. John, March 27, 2015
