Energy storage for the residential solar market has always been something of a holy grail for advanced energy companies. If storage becomes cheap enough, it could allow a rooftop solar system to provide all of the energy a homeowner needs, potentially making it possible to go off-grid. It could also be the energy hub for the home, deciding how to use energy most efficiently and connecting the smart devices that are beginning to become more common.

In 2017, the commercial and utility energy storage markets started to thrive and grow, and in 2018, it looks like the residential energy storage market will start to show the same promise. Here's why that is and why SunPower (NASDAQ: SPWR), SolarEdge (NASDAQ: SEDG), and Sunrun (NASDAQ: RUN) -- and not Tesla (NASDAQ: TSLA) -- are the three to watch next year.

Image source: SunPower.

Energy storage systems finally make financial sense

The reason energy storage hasn't been common in the home is that there was no financial reason to have it. Net metering allowed customers with solar systems to sell excess electricity to the grid at the same price they paid for electricity, effectively making the grid their storage location.

As net metering has come under pressure across the country the economics of residential energy storage systems have changed. In some cases, like Hawaii, utilities are paying lower rates for rooftop solar exported to the grid, allowing a storage system to perform arbitrage. In others, there are demand changes based on the peak energy use of a home during a month, and if a storage system can lower those charges, they can be economical. Another popular structure is time-of-use rates, which adjust the cost of electricity throughout the day, something California has begun implementing. If a storage system can shift when a consumer uses grid electricity from an expensive time to a cheap one, it can make the storage system economical.

These rate structure changes have only become widespread in the last year, driven by rate changes in California, which also happens to be the biggest solar market in the U.S. And those changes are what will make residential energy storage a booming business in 2018.

Installers need an energy storage solution

We might now know that energy storage will start to make sense for customers, but the products still need to get to installers, who will be the sales engine. And there are a few companies and models to watch.

One model is the installer compiling and controlling the energy storage system. This is what Sunrun does with BrightBox and BrightSave. It wants to be your contact for home solar and energy storage and will compile the components and control systems in the background. The battery it now uses is from LG and solar panels are also made by third parties.