Now that wind and solar energy have proven their ability to generate cost-effective electricity, energy storage is the next technology advance needed to take renewables to another level. Wind and solar create energy on an inconsistent basis that often doesn’t line up with a home, business, or utility’s energy needs, a problem energy storage can solve.

That’s why investments from established energy players in the energy-storage space are important and telling about where the industry is headed. A recent agreement with Duke Energy (NYSE:DUK), one of the largest coal consumers in the country, is a big step for the future of batteries.

Duke Energy’s move into energy storage
On Tuesday, Duke Energy announced an agreement with Green Charge Networks to enter the energy-storage market “behind the meter.” The companies will work to deploy energy storage with REC Solar, which is majority owned by Duke Energy, hoping to leverage the company’s existing network.

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Behind the meter energy storage means the batteries are on a home’s or business’s side of the electricity meter, giving customers control instead of utilities. This strategy is currently being used to lower demand charges — a charge based on peak consumption during a period, not amount of consumption — for commercial or government customers, and the savings can be 10%-15% of a building’s electricity bill. But that’s just the start of how Duke Energy and Green Charge Networks are hoping to make money off of batteries.

A new business model is emerging
What’s interesting about this move is that a major utility is trying to find a way to make money off batteries at all. And it’s using a model many battery and solar companies are trying to launch themselves.

Reducing demand charges is one known way to make money off of batteries. But an emerging model will be shifting locally produced energy from when it’s consumed to when it’s most valuable to the building owner. Hawaii and California, where Duke Energy will first concentrate its work, are starting to develop rate structures that will make this possible.

If a building has rooftop solar, for example, today it can feed electricity back to the grid when it’s producing an excess of what its building needs. But that net metering structure is changing in Hawaii, and likely will change soon in California to a structure that pays less for excess electricity than it costs to purchase. In Hawaii, one option for homeowners will be to sell excess energy to the grid for about $0.15 per kWh, which is about half of what it costs to buy energy at $0.30 per kWh. That spread creates an opportunity for batteries to store energy and use it at a later time, creating $0.15 per kWh in value.

This is what Tesla Motors (NASDAQ:TSLA) is selling with its Powerwall and Powerpack as it explores growth in markets like Hawaii and California.

Speaking of Tesla Energy
As Tesla Energy starts to roll out its battery-storage products in a large way, it’s developing business models to make them financially viable. One that just emerged was from Green Mountain Power, which says it can generate about $50 in value from each 7 kW Powerwall system through price arbitrage and demand reduction.

While the idea of energy storage is easy to understand, the economics behind it aren’t. Duke Energy and Green Mountain Power are starting to develop business plans that could make it profitable; that’s good for energy storage and renewable energy adoption, in general.

The next revolution in energy
With solar and wind energy now competitive with fossil fuels, it’s up to energy storage to fill the gap and add grid services utilities need to keep the lights on. With a company like Duke Energy on board with the energy storage revolution, there are bright days ahead for these disruptive technologies.