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Energy storage systems become more popular every day as homeowners and business owners look to get even more value from their solar energy systems, as well as backup power during outages.

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What Solar Energy Storage Does

Solar energy storage systems (also known as “battery backup systems”) allow you to store unused solar electricity to be drawn upon later at a time of your choosing. Using stored energy is particularly valuable when:

  • Your solar isn’t producing electricity, e.g. at night or on a cloudy day, but you need power in your home or business
  • There is a planned or unplanned utility power outage
  • Utility rates are most expensive.

With the major utilities in California implementing forced outages to reduce the risk of fires, an increasing number of Golden State consumers and businesses are installing solar energy storage systems to provide backup electricity during utility power cuts.

In addition, both homeowners and business owners can reduce their electric bills with solar energy storage.

About Solar Energy Storage Technology

Solar energy storage systems are compact systems typically installed in a home’s garage or basement. Commercial solar energy storage systems are often installed outside.

Like solar panels, the technology behind solar energy storage is remarkably simple. Lithium-ion batteries—the same ones that power everything from cell phones to electric cars—are the main element in a solar energy storage system. Lithium ions can absorb and discharge power, making them rechargeable.

Lithium-ion is the battery of choice for energy storage because the technology is proven, safe and affordable. The batteries don’t take a lot of space, and they’re easy to procure.

Incentives for Installing Solar Energy Storage

Homeowners and business owners who install solar energy storage systems typically qualify for the federal Investment Tax Credit (ITC), which in 2020 covers 30 percent of the system’s price. Some solar energy storage systems qualify for a Self-Generation Incentive Program (“SGIP”) rebate in California. And commercial solar energy systems typically qualify for bonus depreciation. More details on these incentives here.

How Time-of-Use (TOU) Electric Rates Work

Homeowners who install solar energy systems are typically switched to time-of-use (TOU) rates by the utility company. This means your electricity rate fluctuates based on the time of day, with rates typically highest in the late afternoon or early evening when the “demand” for electricity is greatest or at its peak.

If your home is producing solar energy during that peak demand time, then you’re all set. You use your own solar energy instead of the utility’s electricity. But at other peak times, your solar may not be producing, or not producing enough. That’s where energy storage comes in.

If you pair your solar energy system with a solar energy storage system, you can avoid the more expensive TOU rates by drawing from the electricity stored in your batteries at those peak demand times.

Businesses with solar energy storage systems can also use their own stored solar electricity rather than utility electricity when prices are high, reducing their electric bills.

How Demand Charges Work

Solar energy storage has another important cost-saving aspect for businesses. Commercial and industrial customers of the utilities typically pay a demand charge as part of their electric bills, on top of what they pay for the actual amount of electricity they consume. “Demand” refers to how much electricity a customer draws from the grid at any given time.

For most companies, their highest demand of the month, even if it’s only for 15 minutes, determines the demand rate the utility charges the customer for the entire month. These charges can be substantial—often 30 to 70 percent of the monthly electric bill.

Now, for the first time, companies have a way to influence high demand rates without simply reducing usage. 

Companies that install solar energy systems and solar energy storage systems can draw from their stored power during peak operations, lowering their demand on the utility grid, the resulting demand rate, and their electric bills in one fell swoop.

More Resources on Solar

Beginner’s Guide to Solar Energy Storage Systems »
More about time-of-use (TOU) rates from the California Public Utilities Commission »
More about demand rates from the California Public Utilities Commission »
FAQ on storage for homeowners »
FAQ on storage for businesses »

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