Swell Launches All-in-One Home Energy System With Zero Down Financing

The energy storage startup Swell Energy has launched an all-in-one home energy product it predicts will make residential storage more marketable and profitable.

Residential storage doesn't make economic sense in most parts of the U.S. Hawaii has a self-consumption program designed to encourage battery adoption, California has a slew of state incentives and a few utilities elsewhere have implemented residential demand charges and time-of-use rates. But in general, home storage is really just an emotional sell.

Venice-beach based Swell doesn't make its own batteries. Rather, it packages ones made by partners LG Chem, Sonnen and Tesla. The newly announced EnergyShield doesn't bring new technology to the table, but instead innovates in the packaging and financing. The solar-plus-storage offering will play a pivotal role in Swell's contract with Southern California Edison to deploy 20 megawatt-hours of storage across 3,000 homes for grid services.

The EnergyShield combines rooftop solar and lithium-ion batteries from its partners, plus an energy management system. There are certainly other companies offering solar products paired with storage products, but Swell says system was built from the ground up with a focus on optimizing the battery.

Only a few percent of solar customers buy storage as well. Thus, storage often gets sold as a kind of add-on to a rooftop solar installation, rather than a piece of the whole system.

“Right now, storage is being sold electively,” said Suleman Khan, a managing partner at Swell. “Ours is a battery-centric product. We are selling a battery with enough PV to charge the battery and optimize your savings.”

Swell picked three sizes for the EnergyShield that scale up the amount of capacity the household can supply for itself. The basic setup starts with 2.1 kilowatts of solar paired with a 6 kilowatt-hour battery, enough to power a kitchen and internet in a blackout, the company says. The pricing varies by location, but the quote generator on Swell's website pegs a basic system in Los Angeles at $32.41 a month — or about $1 per day — with zero money down. The price factors in energy savings and tax incentives, but not the SCE grid service payments that will eventually start flowing.

The high end “luxury” package, for $74.93 per month, wields 6 kilowatts of solar and 25 kilowatt-hours of storage, and essentially runs the whole house as if it were off-grid. The systems are designed to stay connected to the grid, though, to enable revenue generation from selling power to the utility.

Overall, EnergyShield weights the balance more heavily toward storage than typical household installations.

The pre-set, standardized format functions as a key element of the product strategy, because it reduces customer acquisition costs. 

“We believe the EnergyShield could get on majority of rooftops without much customization,” Khan said. “You don't need hours or days of planning to get it on your roof.”

Financing is the key

Low-cost financing proved crucial in the mainstreaming of residential solar, and the same is true for storage; it just hasn’t happened yet.

There’s more progress in the commercial and industrial space, where there is more to gain from offering it. Sharp and Tabuchi, for instance, rolled out zero-money-down financing just last month. Financiers are still getting comfortable with residential storage offerings.

The folks at Swell aim to change that.

“We are convinced that the cost of capital for EnergyShield will be lower than the cost of capital for typical residential PV systems,” Khan said.

This becomes possible by bringing the utility into the picture. Swell plans to leverage contracted revenue streams from utilities for grid services provided by the network of installed EnergyShields. The deal with SCE is the only one inked so far, but the company is talking with other utilities around the country to set up similar programs.

Under the SCE contract, Swell will install 20 megawatt-hours of backup energy across 3,000 homes. The systems must be ready with 15 minutes’ warning to dispatch up to 5 megawatts for a continuous four-hour period; Swell handles the cloud-based software to aggregate energy from the fleet of batteries and push it into the grid. The contract calls for everything to be operational by mid-2019. Swell will start installs Q1 2017 and plans to finish by Q2 2018. 

This arrangement allows Swell to pitch investors with guaranteed payback from a major corporate entity, coupled with the anticipated payments from the individual customers. That lowers the risk for the financing. The company is in the midst of raising a $40 million fund to finance the rollout of the systems. Swell will still sell to customers who aren't in SCE's territory, but not having grid services revenue will affect the financing. 

Companies like Advanced Microgrid Solutions, Green Charge Networks and Stem have similar programs for C&I customers, combining storage-as-service payments with utility revenue.

On the residential side, Sunverge is out in front so far — having shipped thousands of systems, raised more than $50 million and inked pilots for aggregating systems with Con Edison and the Australian utility AGL. 

A few other companies are piloting this model for the residential storage market, like Tesla’s 500-system program with Green Mountain Power, or Enphase and SolarCity’s 50-home pilot with PG&E.

Swell, though, is operating at a far larger scale. When completed, its 3,000-home project would make it a clear leader.

Customers could also choose to buy an EnergyShield outright. The company said the payoff period for a cash purchase would be around 10 years. For those leasing, Swell says the monthly payment will be at least partially covered by the energy bill savings and grid services revenue. The sharing of that revenue will be contracted up front with customers, because SCE pays a set annual payment to Swell for the capacity it provides.

How big a deal is this?

If this product and business model succeed, it's imperative that consumers easily understand what they're getting.

“On the storage side, most companies have had a hard time coming up with a clean and simple financing model or third-party ownership model,” said Ravi Manghani, director of energy storage at GTM Research. “You always get into the problem of what’s going to be the denominator?”

Storage performs many functions, with many denominators. Try pitching a layperson on dollars per kilowatt-hour of reduced peak demand per month, provided they reside in jurisdictions with residential demand charges, of course. Or dollars per kilowatt-hour of peak time-of-use rates avoided by arbitraging from off-peak. The monetary value of the product depends on the interaction of many factors beyond the product itself, which makes it hard for a customer to envision hard benefits up front.

Swell's model offers the customer full-service electrical independence in exchange for a monthly fee. No need to delve into the details of rate design there. By taking away any large up-front costs and responsibility for maintaining one's system, Swell hopes it will make for an easier sell.

“On paper, it seems like a really smart financing model here,” Manghani noted.

All of this is still on paper. Though the project with SCE has scale, it's still a test for this new residential self-supply-as-service business model. It hasn't been proven yet.

“One project doesn’t make a strategy — if they were to get two or three big contracts, you could say that’s a strategy,” Manghani said.

from GTM Solar http://www.greentechmedia.com/articles/read/Swell-Launches-All-in-One-Home-Energy-System

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