FERC Order Boosts Sunrun Acquisition and Residential DER

The US residential energy storage market received a big boost when federal judges ruled to uphold Federal Energy Regulatory Commission (FERC) order 841. The ruling allows energy aggregators at the residential and small commercial levels to be full participants in major wholesale markets. Some observers see the ruling as a potential step-change for residential energy storage. New deployments in the residential energy storage market are anticipated to recover rapidly in 2021 from a 40% decline in 2020 and to expand at a 16.1% compound annual growth rate by 2029.

Installed Capacity by Residential and Non-Residential Storage, US: 2019-2029

(Source: Guidehouse Insights)

Market Players Building a Vibrant Residential Distributed Energy Resource Ecosystem

Residential solar installer, Sunrun, just completed a $3.2 billion acquisition of competitor Vivint Solar. This merger creates a combined customer base of 500,000 homes representing 3 GW of solar assets. Sunrun will promote energy storage additions to its solar installations—likely its own batteries manufactured in partnership with LG Chem. The new FERC ruling will expand wholesale market access for these resources. Sunrun has already capitalized on the ruling, completing a 20 MW aggregation in New England in the competitive independent system operator market. Similar projects will certainly help the new company grow far beyond its 3% penetration of the total US residential solar market.

In the long run, this ruling will also open doors to a virtual power plant provision for frequency regulation in the US market. German residential storage aggregator, sonnen, provides grid stability services, giving high flexibility and responsiveness to its customers. In the US, both the capacity-based and services-based business models could see significant growth after the FERC order is implemented.

Vendor Recommendations

The FERC ruling can also work for other players in the market. Utility-vendor partnerships will likely expand as they leverage the ruling to better serve residential customers that have onsite solar and storage. The idea will help drive wider customer adoption of storage while supporting greater energy savings from a utility-tied and cost-optimized system. For vendors in this space, full and reliable aggregation of all home energy assets will enable savings, as will interoperability with smart thermostats, plugs, and other smart home devices.

To speed adoption among utilities, vendors also need to ensure that offerings reduce the risk of utilities being disintermediated in DER management. This means providing data analytics and cost savings with sufficient customer clarity to motivate participation in programs with utility load monitoring and control. Demonstrating added value to existing smart meter rollout or proposals for future rollout is also a good strategy for utilities.

Vendors aggregating DER need to complement utilities’ broader efforts to engage customers effectively in the home. Software and service-focused offerings are best positioned in this regard because software can add value through predictive high bill notifications and real-time appliance usage monitoring. Software and service-focused offerings also have online and video-based home energy assessments, program cross-promotion, and other benefits.

Large Upside Potential

While the residential storage market already had momentum, the recent FERC order may improve the short-term recovery outlook. Also, it could improve ROI for homeowners purchasing solar plus storage systems and deliver a significant boost to home energy aggregators. Vendors should take note.