SolarCity, the nation's largest residential solar installer and financier, is coupling Tesla's battery-based energy storage hardware with its rooftop solar systems.

Peter Rive, the co-founder and CTO of SolarCity, spoke at last week's Energy Storage North America conference and said that the standard offering from SolarCity could eventually include storage. Rive added that the combination of solar and storage "won't look that much different for the customer," but that "the benefit to the customer will be that you will have a little backup power."

Defecting from the grid?

A recent RMI blog post contends that "continued rapid declines in the cost of solar and the start of the same trend for storage mean that grid parity may come much sooner than previously thought -- and well within the 30-year planned economic life of typical utility investments." When asked about this report on the economics of consumers defecting from the grid, Rive had this to say: "I hope it doesn't happen. I don't think it makes sense for someone to remove themselves from the grid. If you think about the load on a circuit as opposed to an individual home, an average home on a circuit is maybe 3 kilowatts peak. But you may find that any given home will go up to 10 kilowatts at any given time. [...] That means the battery would have to be sized to 10 kilowatts."

Rive continued, "It's fundamentally way more expensive to remove a home off the grid -- and you just lose the benefits of the network that currently exists. [...] It would be the consequence of really bad policy and economic decision-making for us to arrive at a situation where people are motivated to do that. From a pure engineering perspective, I think it makes most sense for the battery to be operated by the utility and to be an asset of the utility."

Capital moving toward storage?

Rive sees capital moving toward energy storage.

So does GTM Research, which has charted more than $150 million in third-party-ownership funding for storage firms Stem, Green Charge Networks and Coda.

According to the CTO, third-party ownership is just paying for energy the same way you always pay for energy: on a monthly basis.

"It's actually what we do on the commercial side with the SolarCity battery system. We have a product...where we pair a solar power system with a battery and reduce [the customer's] peak charges. We actually structure a true power-purchase agreement as opposed…to an energy-purchase agreement."

Can standalone storage make economic sense?

"If I think about how the grid will play out, I see that there's going to be a wide array of distributed resources and it's great to create an environment in which everybody is wanting to participate. You may have somebody who doesn't necessarily have great solar resources and they can participate with a demand response program, or possibly site a storage system. [... It's] an interesting opportunity for...others to deploy standalone battery systems."

He continued, "The biggest barrier right now is to lower the cost of solar and to work with others to lower the cost of storage in such a way that the price of a solar system and storage system combined is so low that you can beat fossil-fuel-based generation. If you look at the cost trajectory that Tesla has stated publicly and the cost trajectory for the next three years that SolarCity has stated publicly, you see us getting there, in my opinion, fairly easily before the turn of the decade. [...] Then we can offer firm, clean generation at a cost that is lower than fossil-fuel-based generation."

Speaking of balance-of-system costs and permitting, Rive said, "One of the cool things about storage is that if you're already installing a solar system, the incremental cost of also getting a storage system installed is low." Rive sees this as being particularly true once storage systems are integrated into the same box as inverters.

"The bigger challenge is getting utilities comfortable with interconnecting the system. It’s all just very new, and these things take time. Storage is so new that whenever building inspectors see one of our systems, they say, 'What is this thing?' They've never seen it before," he said.

What are the benefits of solar to the utility?

Rive said, "The way that I look at it, there are massive benefits to distributed solar, and there are many great companies that have tried to analyze the avoided costs versus the revenue loss, and the results kind of vary. There are some that say it's on parity in some states -- the avoided costs are higher than lost revenue."

He continued, "Our approach is to basically look at all the things that would make solar more valuable and invest in those things. For example, increasing the capacity value of solar through a combination of load shifting and demand response and integrated storage could dramatically increase the value of solar."

SolarCity is a member of TASC, a downstream solar advocacy organization that favors conserving net energy metering structures for solar power sales, rather than value-of-solar tariffs.

A little more about SolarCity's factory

When asked to name the things that keep him up at night, Rive mentioned that in addition to running a 7,000-employee firm, a major concern of late is that the company is "getting into large-scale solar manufacturing." He said, "We have a really exciting technology company that we acquired recently to manufacture what I consider some of the best solar panels on the planet." (GTM Research's Shyam Mehta took a close look at SolarCity's acquisition of Silevo here; GTM Senior Editor Stephen Lacey covered New York's funding of the factory here. Lacey reported that the incentive package gave SolarCity $750 million in tax breaks and cheap power deals in order to build the production facility.)

The proposed Buffalo, New York-sited, 1-gigawatt-capacity solar factory looks to eventually employ 1,500 workers. Rive asserted that manufacturing solar panels in the U.S. makes sense. In the company's comparison of Buffalo versus China, Rive noted Buffalo's 7.5 cents per kilowatt-hour clean power versus China's 15-cent power-- and that's in a nation with labor inflation.

Rive said that Silevo's "hybrid" crystalline-silicon and thin-film cells will hit 24 percent efficiency when the factory is up and running. Rive suggested that "in some situations, due to its bifacial nature, the cell will be capable of 26 percent."

But, said Rive, "The fundamental value proposition to the customer will be the same: it's just cleaner, cheaper energy."