After an embarrassingly long time, it seems the US has finally stopped dithering at the starting line and entered a race that Europe and China have been running for years.
This week, Deepwater Wind put steel in the water off the coast of Rhode Island. This is the first offshore wind installation in the US, and although it is a relatively small demonstration project – 5 turbines with a combined capacity of 30 MW – it is hugely significant for the offshore wind industry in this country, which has seen prior promising projects succumb to economic barriers, permitting struggles and legal challenges.
Offshore wind presents enormous potential benefits. Not only are winds steadier and stronger offshore, but the technology can provide a renewable resource to the 53 percent of the US population living in densely populated coastal areas, where energy is expensive, demand is high, and land-based renewables are often limited. In the case of the Rhode Island project, the wind farm will help Block Island residents to reduce their reliance on the expensive and polluting diesel generators that have supplied their island grid. The small wind farm is expected to save Block Islanders up to 40 percent on energy bills, and lower carbon pollution by 40,000 tons annually.
With more than 8,000 MW of offshore wind installed worldwide, the Block Island project is a drop in the bucket, in terms of generation. But the project is significant symbolically, and it should help to dispel some myths and fears that have frustrated previous attempts to deploy this proven technology in the US. If it smooths the way for future, larger offshore wind development in the US, the Block Island demonstration project will have been worth its considerable price tag.
https://www.cleanegroup.org/wp-content/uploads/blogphoto-dww.jpg330480Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-31 11:29:102016-01-20 16:18:07Offshore Wind: At Long Last
Energy storage is a difficult resource to pin down. When it’s charging it can be an electrical load. When it’s discharging it can be a generator. Energy storage can be a demand response resource. It can provide instant power to relieve grid congestion. This versatility is part of what makes energy storage such a varied and valuable asset.
This versatility also leads to an important question:
What role should utilities play in ownership of energy storage resources?
A strong case can be made for treating energy storage deployed as a distribution system resource as a natural utility asset. But what if that same resource discharges energy to participate in utility calls for frequency regulation? Or to fill a need for generation in order to meet peak demand on a hot summer day? Should a utility be allowed to own a dispatchable resource that could be in direct competition with independently owned energy resources?
This is primarily a concern in deregulated states like Texas, New York, and Pennsylvania and partially deregulated states like California. In deregulated markets, utilities are prohibited from owning generation and transmission assets. Regulated utilities, on the other hand, are vertically-integrated, meaning that they own or control the entire flow of electricity from generation to the customer meter. Even in regulated markets, where there is little controversy over utilities owning storage resources located directly on the transmission and distribution system, the question still remains as to whether utilities should have the ability to own and control customer-sited, behind-the-meter storage systems.
One approach to the question of ownership is to look at what’s best for the power system as a whole. On one side, a level playing field that encourages competition between distributed and centralized storage resources will tend to promote innovation and drive down market prices – a vote against utility ownership. On the other, storage deployment at locations and scale optimal to the power system will tend to produce the most efficient use of resources – a vote for utility ownership, as utilities are the party most informed of grid needs and positioned to deploy resources throughout their territory.
How about looking at some of the pros and cons of utility ownership?
Capacity to accelerate the energy storage market by achieving economies of scale
Knowledge of power system to optimize location, size, and timing of storage deployment for maximum benefit
Ability to integrate storage into long-term, system-wide resource planning
Direct integration and coordination with other grid resources
Potential for market manipulation: stifling competition, growth, and innovation
Inherent familiarity and access to customers could create unfair market advantage
Rate-basing energy storage investments could drive down market value of services
Regulatory limitations of rate-based investment process
Little to no incentive for utility optimization of system, particularly through deployment of small-scale, distributed resources
Based on these points, an argument could be made to support either side of the utility ownership question. However, a lack of utility incentives for optimizing the power system through strategic deployment of smaller distributed resources and limitations involved in the process of rate-basing investments tends to bend the debate towards encouraging independent ownership.
So, what are states doing?
Well, different states have proposed different solutions to the energy storage ownership dilemma.
Texas treats energy storage as a generation resource, effectively barring transmission and distribution utilities from owning storage assets. Texas utility Oncor attempted to alter this limitation on storage ownership. In 2014, the utility commissioned a report expounding on the system-wide benefits of storage and laying out the case for utility ownership for the greater good. So far, the state legislature has made no move to change the electricity system rules.
California has proposed a different approach, enacted through its ambitious 1.3 gigawatt energy storage mandate. The mandate allows for utility ownership of energy storage assets but limits utilities from owning more than 50 percent of storage located within each segment of the power system: transmission, distribution, and customer-sited. While the mandate explicitly states that utility can own energy storage resources, it encourages utilities to consider procuring all forms of ownership, including third-party, customer, and joint ownership of systems.
New York, through its Reforming the Energy Vision (REV) initiative, has taken yet another approach. Due to market power concerns over utility ownership of distributed energy resources, including storage, the New York Public Service Commission (PSC) has barred utilities from owning these resources under most conditions. The PSC decision includes three exceptions to the rule barring utility ownership: 1) Utility ownership is allowed for energy storage and generation sited on utility property, as long as it is directly integrated into distribution services; 2) The utility may own distributed resources where markets are not adequately serving the needs of low-income communities; and 3) utility ownership is allowed for the purposes of demonstration projects.
In some regulated regions, utilities are exploring ownership of energy storage assets on both the utility- and customer-side of the meter. So, based on proposed states policies, utilities either can, cannot, can but only half the time, or cannot, except maybe sometimes, own energy storage. Evidently, this is a tricky issue to sort out.
What’s the bottom line then?
There are some legitimate concerns over utility ownership of energy storage resources, particularly distributed behind-the-meter resources, and there are valid reasons to include utilities in the deployment process. While utilities may theoretically have the capacity to invest in large-scale deployment of energy storage resources, the process of advancing new rate-based investments is constrained by its potential cost impacts on customer bills, and by a sometimes politically charged regulatory environment. These limitations could significantly restrict the level and speed of energy storage deployment that utilities are capable of pursing. This type of scenario has already played out in several slow-moving utility initiatives for solar.
An open, competitive market, guided by fair and transparent utility pricing signals, has the capacity to be much more adept at deploying energy storage at a market advancing pace. The New York REV process comes closest to proposing a well-balanced approach between utility involvement and limitations on utility ownership. Earlier this week, New York regulators released a paper outlining the second phase of the REV process, which focuses on ratemaking and utility business models. The paper identifies some of the challenges inherent in encouraging utilities to support the deployment of distributed resources owned by other entities that could chip away at utility profits. The paper also discusses the need for a decoupling of utility earnings from customer energy consumption. Only time will tell if New York’s balanced approach and transition towards increasingly market-based utility compensation will foster a healthy competitive environment under which energy storage development can thrive.
https://www.cleanegroup.org/wp-content/uploads/2015July30-utilities-storage-480x330.jpg330480Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-30 12:00:582016-01-22 19:04:13Should Utilities Own Energy Storage?
States have been using group purchasing and special marketing initiatives to bring down the cost of solar. A wide range of campaigns, each called Solarize, have been launched with leadership from state agencies in Oregon, Massachusetts, Connecticut, and other states. Solarize initiatives combine four components:
1. Community-Driven Outreach: These methods may include peer-to-peer interactions, social media campaigns, town meetings, and booths at community events
2. Competitively Selected Installers: Through a competitive bidding process, the targeted community selects an installer or installers to service the area throughout the duration of the Solarize campaign. This reduces installers’ customer acquisition and screening costs and saves the consumer from the effort of shopping around for a reputable, price-competitive installer.
3. Discount, Tiered Pricing: Pre-negotiated discounts increase as more people sign up within a target community (i.e., the more people who go solar under a Solarize campaign, the lower the price or overall cost savings for everyone who participates in the community).
4. Limited Time Offer: Solarize campaigns are limited-time offers. This motivates customers to act quickly, or risk missing the window of opportunity to install solar PV at a reduced rate.
Significant cost savings result from coordinated education, promotion, and outreach efforts by town volunteers, and in some cases assistance from professional marketing organizations, along with discounted pricing, which takes advantage of reduced customer acquisition costs. These savings are passed along to homeowners and create a compelling reason to sign up for Solarize.
Oregon Starts the Ball Rolling
The first Solarize campaign began in southeast Portland, Oregon in 2009 when residents sought to increase their solar purchasing power by banding together. Through a local neighborhood coalition, Southeast Uplift, the residents reached out to Energy Trust of Oregon for advice on how to get started. Energy Trust, an independent nonprofit empowered by the State of Oregon to deliver cash incentives and services to help utility customers invest in energy efficiency and renewables, worked with Southeast Uplift to develop and pilot a solar volume purchasing program, which it dubbed “Solarize Portland.”
The initial Solarize campaign successfully reduced the financial and logistical barriers of going solar, with over 115 southeast Portland residents signing installation contracts during the first six months of the program. Together with several subsequent campaigns, Solarize was responsible for increasing the amount of installed solar in Portland by more than 400 percent over three years. The campaigns helped lay the foundation for a strong and durable solar market in Oregon. The results were so impressive that the idea spread elsewhere, creating jobs, lowering energy bills for residents, and decreasing the carbon footprint of participating communities.
Massachusetts and Connecticut Hop on Board
Solarize Massachusetts (Solarize Mass) was launched in 2011 when the Massachusetts Clean Energy Center partnered with the Green Communities Division of the Massachusetts Department of Energy Resources to pilot a program in four communities, resulting in 829 kW of new solar. The success of Solarize Mass led to many subsequent rounds of the program. Now in its fourth year, Solarize Mass has led to more than 2,400 residents and business owners signing contracts for small-scale solar electricity systems. Through active Solarize marketing and educational outreach, thousands of people have learned about the economic and environmental benefits of solar electricity. Almost every community participating in Solarize Mass has more than doubled its number of residential-scale solar projects and has seen the rate of adoption increase relative to the rate prior to participating. In addition, the average number of systems and the average capacity contracted per community has continued to increase in every round.
The Connecticut Green Bank, formerly CEFIA, began Solarize Connecticut in May of 2012, choosing four towns from its pre-existing Clean Energy Communities Program. The Green Bank partnered with SmartPower, a non-profit marketing firm with experience conducting community energy campaigns, for the development of promotional materials, recruitment of municipalities, management of town websites and social media, and coordination of local community outreach campaigns.
Phase I of Solarize Connecticut, which ran from August 2012 until January 2013, was a marked success, with approximately 280 signed contracts, and more than 2.2 megawatts of installed capacity— all generated from four towns. The Solarize Connecticut program has just finished Phase 5. In total, Solarize Connecticut has conducted 38 campaigns in 49 municipalities. The Connecticut Green Bank is now launching six Solarize U campaigns for homeowners associated with participating universities.
The successful Solarize marketing approach has spread to many other parts of the country. Sometimes, as in the case of Rhode Island and New York, state or quasi-state agencies have played a crucial role in initiating the program. In other places, community groups, grassroots organizations, or solar businesses have been the key instigators. But the Solarize model would not have been developed as fully or spread as widely without the initial work performed by state programs in Oregon, Massachusetts, and Connecticut.
This blog post was originally published in the Clean Energy States Alliance (CESA)’s 2015 report “Clean Energy Champions: The Importance of State Policies and Programs.” This report provides the first-ever comprehensive look at the ways states are advancing clean energy and suggests how to further encourage clean energy growth. Read the full report at: http://bit.ly/CESA-Champions. For more information about CESA, please visit www.cesa.org.
https://www.cleanegroup.org/wp-content/uploads/solar-blogphoto.jpg330480Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-25 12:24:302018-09-19 12:36:25States Spur Solarize Successes
A new report from the National Surveys on Energy and Environment reveals that a majority of Americans (59%) responded “don’t know” when asked whether their state requires a set percentage of electricity to be generated renewably (via a renewable portfolio standard). And of the 41% who did answer the question, only half got it right – in other words, they were no more accurate than a coin flip.
Interestingly, according to the same survey, 74% of Americans agree that state governments should require a set portion of all electricity to come from renewable sources.
Putting these statistics together, we get a strange picture: 74% support the idea of an RPS, but 80% have no idea their own state already has one.
Whether we like it or not, the power system remains a black box to most people. You flip a switch, and the lights go on; each month, the local utility sends you a bill. That’s about all many people know, or feel the need to know, about the electric grid.
This general lack of knowledge about electricity – how it is generated, how electricity markets work, what government regulations exist – suggests a tremendous need for education. As indicated by the National Surveys study, people tend to be positive about renewables and energy storage generally, so long as these concepts remain abstract. But there is widespread ignorance about the details, and ignorance can quickly turn to fear when we are confronted with unfamiliar energy technologies in our own backyard. We have seen this repeatedly with technologies as benign as wind turbines; decades after the technology proved its value, the wind industry is still fighting project-by-project battles against opponents who use scare tactics, such as fictitious health impacts, to delay and defeat proposed wind farms. But the promise of resilient power technologies – distributed, clean technologies, such as solar+storage, that can provide local power to critical facilities when the grid is down – can only be realized if customers welcome these technologies into their homes, businesses, and neighborhoods.
Furthermore, the economic success of resilient power technologies depends on customers taking advantage of opportunities presented by complicated electricity services markets. Until now, most electricity customers have remained blissfully ignorant of the very existence of these markets, which were the exclusive province of utilities, regulators, generators, and a few large industrial customers; but in the very near future, understanding how these markets work will be crucial information for anyone looking to own or lease an energy storage system, because it is these markets that will provide revenue streams to help offset the costs of storage.
As we enter another electricity revolution, marked by grid modernization, distributed generation, energy storage, electric vehicles and “smart” devices, the electric system is once again edging closer to those who use it. No longer an “out of sight, out of mind” system, the grid and all its components will grow increasingly visible to, and interactive with, the general public. If not paced by education, this can create problems. Already, we see an emerging movement to resist the installation of smart meters on homes, and developers report that overly restrictive fire codes are preventing deployment of lithium ion batteries in New York City. More than ever before, education about the electric system is needed, before ignorance and fear of the unknown hobbles a much-needed and long-delayed evolution of our antiquated grids.
https://www.cleanegroup.org/wp-content/uploads/2015July21-hello-grid-480x330.jpg330480Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-21 12:00:522015-12-07 15:16:20Say Hello to the Grid
The path to scaling up clean energy technologies like solar+storage sometimes can seem like uncharted territory. It can be challenging to figure out the best strategies to develop large, mainstream markets for clean energy technologies. So, it’s good to know that we’ve been on this path before, and that energy transitions of the past can provide some lessons for the future.
This comforting conclusion is provided by Arizona State University professor, Christopher Jones, in his recently released book Routes of Power: Energy and Modern America. In it, Jones largely focuses on how various energy transportation routes, like pipelines and rail, were some of the most important reasons why fuels like oil and coal became cheap enough to create America’s major energy transitions in the 19th and 20th centuries. He writes about how the U.S. transitioned its power from wood to coal, for example, and then later from kerosene to electricity. In his book, Jones, and historians before him such as Thomas Parker Hughes in Networks of Power and David Nye in Electrifying America, also provides important lessons and insights for those who want to bring about the next energy transition to a clean energy world.
Here are some key historical takeaways that are likely to guide the energy revolution away from fossil fuels to cleaner technologies like solar+storage:
People don’t demand new energy solutions, businesses create the demand for them. Steve Jobs wasn’t the first entrepreneur to figure out that companies don’t wait for customers to demand new products. Instead, companies create innovative new products like iPhones and computers, and they then create consumer demand for the new technologies. It happened with coal, and it happened with electricity.
In 1820, companies had sunk huge investments into new ways to mine coal in Pennsylvania, but customers in major markets such as Philadelphia were happy burning wood for heat. So coal companies “needed to build demand if they were to pay off their debts and return dividends to investors,” writes Jones. At the time, coal was more expensive than wood. Company boosters took a different marketing tack by not promoting the cheap price of coal, but selling instead its convenience for home heating.
As strange as it might seem today, at that historical time and place, coal was the more convenient and cleaner choice for fuel. The companies pointed out how it was easier to use coal than cutting cords of wood, how it was cleaner than sooty wood burning, and how it would create more heat. Hundreds of new patents were issued for new coal stoves spurring a decade of technology innovation. In the end, the convenience of coal and its declining costs resulted in the displacement of wood as the fuel of choice for heating. In the first ten years of heavy coal marketing, ten percent of the Philadelphia’s population had converted to wood. In thirty years, the transition to coal for home heating was complete.
The same thing happened with electricity at the end of the 19th century. When it was first introduced, electric power lighting was more expensive than kerosene. It also required new wires and new equipment. Nobody wanted to convert to it.
A New York Times article from that era said flatly that the incandescent bulb could not compete with the cost of gas, a fact which, they wrote, “Mr. Edison has repeatedly acknowledged.” To some, Edison’s choice to develop a central generating station for electricity was “an invitation to throw money down a rat hole.”
To gain market share and acceptance by the general public, Edison sold electric lighting at a loss that was subsidized by his more lucrative sales of electricity to power motors and new appliances. He knew that he faced the challenge of “market creation” – getting customers to demand a product they didn’t know they needed or wanted, and one that cost more than their current source of lighting. When it was first introduced, people did not at all appreciate the need or value of electricity. But over time, the safety features and the better illumination capabilities of electric power and light bulbs convinced people to switch from gas and kerosene lamps to electric lighting.
Just like solar+storage or other new cleaner energy technologies today, the introduction of electric power in its day presented problems that were substantially without precedent and that required new methods of deployment. One historian, who has chronicled the origins of the electric industry wrote, “Although today we consider electric lighting a necessity, we must remember that there was no obvious need for electricity lighting in the late nineteenth century, especially because it was more complex and more expensive than the existing alternatives of gas or kerosene…By emphasizing that electric light was scientific, modern and progressive [the early innovators] helped persuade businessmen that it would be appropriate to risk money on the new technology…They had to be educated to its use…Suitable manufacturing methods as well as adequate ways of distributing the manufactured product had to be devised…Customers did not exist; they had to be created.”
After enough customers were convinced of its value, electric power for lighting was adopted, but it was not truly cost competitive until well into the 1920s.
Cities Have Been the Early Adopters Driving Energy Transitions. Today, as we debate the role of public investment and public markets for clean energy as well as the role of cities and states to promote new technologies, it’s also useful to reexamine the actions that cities took in the early 20th century transition to expand markets for electricity. The first major adopters of cleaner energy during that time were public entities. They created the market momentum for electric power at the turn of the last century; based on that initial market push, the remaining segments of society then adopted electric power until it maintained a majority share of energy use by the 1920s.
There are two lessons from the past that are relevant today: First, cities converted to electricity over a hundred years ago not for cost savings but to promote public safety. Second, these new public markets, like those for street lighting and streetcars, were the principal drivers for electrification of the rest of society — the cities went first, along with big businesses, and then individual customers followed.
Hundreds of cities at the turn of the 20th century converted to electricity largely for public safety purposes. Cheaper cost was not the reason. For businesses such as department stores and for shows in New York City (it’s still called the Great White Way, due to the white arc light), electric lighting was used to attract customers to the newly emerging downtowns and to make those public places safer—a public protection and business development strategy. The cities invested in street lights powered by electricity to keep the streets safe. And they invested in electric street cars to replace horse-drawn transit, with its detrimental manure pollution problem, to move people around the city using a cleaner technology—an environmental protection strategy.
To get a sense of the impact of public investment in electricity by cities, the streetcar industry represented nearly half of all electricity used in the entire country in 1902, in over two hundred cities that built electrified systems. This was at a time when only one in ten people had electricity in their homes. This is a similar market to where clean energy is today.
Philanthropies Help Provide Access to Energy Technologies for the Poor. We tend to think that non-profit work in the energy area, helping the poor adapt to new technologies, is a new concept; but it’s not. It all started in Philadelphia in the 19th century, when the city was the epicenter of the emerging fossil fuel industry.
In the 1820s, a local philanthropy in Philadelphia, the Fuel Savings Society, was set up to reduce the fuel costs, first for wood and then coal, to help the city’s poor. First, acting as a coop or bulk purchaser, it bought cords of wood at wholesale prices and then sold it back to the poor at half the market price.
As for coal a decade later in the 1830s, the Society acted similarly as a bulk purchaser and then sold coal to the poor for a dollar less per ton than the retail rate. At the same time, it also subsidized the cost of new coal stoves, and it contracted to build cheaper coal stoves for the poor, since the upfront capital cost of conversion from wood to coal was the primary barrier to adoption of what was then considered a cheaper and cleaner energy source.
In effect, the Fuel Savings Society is an early example of a nonprofit helping to advance energy technology innovation and adoption in disadvantaged communities, and helping to alleviate some of the upfront cost barriers to encourage the adoption of a new, disruptive technology.
Transitions Can Be Swift but Full Turnover Takes Times. People bemoan the fact that the penetration of solar electric generation by homes and businesses is now about 1 percent of national energy production. That’s true, although the statewide numbers in solar-rich states show much higher percentages of market penetration. Nevertheless, those small numbers tend to ramp up very quickly in energy transitions after the first decade.
As noted, the turnover from wood heat to coal was about ten percent in the first decade after the push for adoption of coal burning technologies. A complete turnover to coal power took a few more decades, about thirty years. Electricity also had only about a ten percent penetration rate in the first two decades of use. The wholesale turnover from older forms of local power to centralized electricity took thirty to forty years. In each transition, the first decade saw slower growth, and then scale up occurred exponentially over the next few decades.
So how do these lessons play out today, when we are making another energy transition to cleaner, solar+storage technologies for power resiliency, for reducing demand charges, and to provide clean electric power 24×7, 365?
It goes without saying that history is never repeated, but the lessons from these transitions should be studied for how we shape and direct our 21st century clean energy transition. It is very likely that new technologies like solar+storage will follow the same path.
For resilient power — clean energy power that is continuously supplied and is independent from the grid—we are in the very early stages, the first decade of adoption of this new technology hybrid that has to potential to offer immense environmental, public safety, and economic benefits. The initial push is happening now, with states pouring money into solar+storage and other resilient power technologies, solar companies teaming with battery vendors to offer complete systems, FERC orders transforming electricity markets, and a growing state movement toward grid modernization that relies heavily on distributed energy resources.
Because we see that renewables and storage are superior to carbon-based electricity generation technologies in many ways, we sometimes think that adoption should be a no-brainer, and this can cause frustration when the market transformation does not happen quickly. The historical lesson is that regardless of how good a new technology is, wholesale turnover from the preceding, entrenched technology relies on certain forces to give it the initial push — but once a tipping point is reached, a complete turnover can happen quickly.
As history shows, the cost barrier of solar+storage systems will be overcome by the benefits of convenience, safety, and other environmental benefits that this new technology will bring. In the case of resilient power, key benefits will be greater power reliability and the ability distributed energy systems to operate in times of grid outages. Energy storage will bring in other revenues as solar+storage systems provide other revenue streams and reductions in utility demand and capacity charges. As the market develops and costs come down, a more widespread transition will occur. That transition should be helped by greater public investment at the community level, which as we saw with electricity, was critical to development of widespread electric power throughout society.
In the end, if history is a guide, cities, public investment, technology innovation, philanthropies, new business models and patience will win out, and we will usher in a new energy transition as complete and cleaner than those that have come before.
https://www.cleanegroup.org/wp-content/uploads/2015July20-lessons-markets-480x330.jpg330480Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-20 21:09:362016-01-20 16:15:29The Lessons Coal and Electricity Markets of the Past Can Offer Solar+Storage Markets Today
Forget energy storage as the technology of the future, for many utility customers the time for storage is already here. Commercial and industrial customers in parts of California, New York, and Hawaii are already using energy storage to save on utility bills by cutting demand charge expenses. According to new analysis by the energy systems integration and management software company Geli, those energy storage savings could expand to include customers in another 43 states if battery prices continue their downward spiral.
For those not familiar with demand charges, it’s a separate fee applied to a customer’s bill based on the maximum kilowatt energy demand that occurs during a billing period. This demand charge is in addition to the more familiar kilowatt-hour electricity consumption fee. For more on how energy storage can reduce demand charges, see Clean Energy Group’s recent webinar on demand charge management.
Demand charges are typically applied only to commercial and industrial customers, though a few utilities offer residential demand rate structures and many more are beginning to explore the option. There appears to be growing interest among utilities to consider demand charge rate structures as an alternative to imposing fixed residential charges to offset eroding profits as more customers install solar and implement energy efficiency measures.
In their analysis, Geli considers a representative facility and uses an ambitious five-year payback period as the standard for judging storage as a good investment. The representative facility is based on the load profile of a California facility with a peak monthly demand of 500 kilowatts and monthly consumption of 18,000 kilowatt-hours. The facility is located in the Pacific Gas & Electric utility territory and benefits from participation in California’s Self-Generation Incentive Program (SGIP). For a 120 kilowatt/240 kilowatt-hour battery system, the facility sees a 23 percent demand charge savings and a system payback of 4.2 years – without the SGIP the payback period increases to 7.4 years.
Geli expands on this to create a more representative case for the facility with no incentives. They assume an all-in battery cost of $1,162 per kilowatt-hour. This price includes all associated hardware, software, permitting, interconnection, and other costs involved in installing a storage system. To achieve a five-year payback, the facility would need to face a steep demand charge of $38 per kilowatt. Few rates hit that price point. However, if the facility could take advantage of the 30 percent federal Investment Tax Credit (ITC) by adding solar to the system, the demand charge for a five-year payoff drops to $24 per kilowatt – a fee found in many more utility rate structures.
The all-in storage system cost assumes a battery cost of $500 per kilowatt-hour, twice that of Tesla’s reported cost for its new Powerpack – priced at $250 per kilowatt-hour. With costs scaled to the Powerpack price point, for a total all-in cost of $766 per kilowatt-hour, customers with a demand charge of $26 per kilowatt would see a positive return after five years, even without the ITC.
What if the all-in cost were $350 per kilowatt-hour? This seems like a big drop, but some experts believe it’s a reasonable estimate for the cost of 2020 battery systems considering the current price trajectory. So, at an all-in cost of $350 per kilowatt-hour, customers could see a five-year payback at demand charges of $13 per kilowatt-hour – a rate currently found in 38 states across 246 utilities. Take off another 30 percent with the ITC for solar+storage systems, and you’re looking at a five-year payback across 46 states and 455 utilities.
These findings are similar to those put out by the global financial research company UBS earlier this year. UBS found that for an energy storage system with installed costs of $400 per kilowatt-hour, customer would begin to see a positive return at demand charges of about $10 per kilowatt.
With battery prices dropping and demand charges on the rise, the economics are going to start looking favorable in a lot more places very soon. Add in additional savings from time-of-use energy shifting, revenue through utility demand response programs and participation in wholesale electricity markets, and the additional benefit of power resiliency when the grid goes down, and things look even better for investing in energy storage.
https://www.cleanegroup.org/wp-content/uploads/blogphoto-NREL-Schroeder-NiCad-batteries-475x325.jpg325475Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-09 10:29:372016-02-10 10:38:26Energy Storage Savings – Coming Soon to a Utility Rate Near You
Solar power plus storage is a technology marriage that can work and is working already. Take Puerto Rico, for example, where the power utility installed 10MW of solar power coupled with 1260 kWh of storage. It’s a smart solution for an island with a relatively small power grid, said Ray Hudson, Director of the Solar Segment at DNV GL, during a recent webinar, titled, “Solar + Storage: Capturing Opportunities and Overcoming Challenges.”
The presenters in this webinar pointed to other possible uses of solar+storage, such as a school in California that is seeking to avoid expensive demand charges, or a densely settled solar-powered neighborhood at the end of a long feeder line that uses battery storage to smooth voltage fluctuations and improve power quality, or an industrial plant using battery storage in combination with solar for ramp rate control.
In fact, among all renewable energy technologies, solar+storage is the one with the most activity globally, according to the presenters. They said several application types are pushing sales:
The residential market is looking for backup power for critical household loads during a power outage. There is also an emotional component to the residential market as solar power and battery storage are well liked and coveted due to the appeal of energy independence.
Commercial applications on the customer side are often driven by demand charge reductions and load shifting for customers under time-of-use rate structures. Islanding capability to keep operations running when the grid goes down and microgrids are emerging as an interest among this market as well.
Utilities are increasingly seeing storage as a good thing for themselves and are looking at it as a grid asset as it allows them greater participation in the distributed generation market. Utilities and developers can also benefit from ancillary services provided by storage and capacity deferral through peak load shifting.
Solar+storage is not without challenge, however. Hudson explained that the deployment of solar power and storage would be accelerated by addressing the risks, like a concerns for safety in installations, reliability and performance, and costs of operation and maintenance.
Hudson noted a challenge for financing, specifically: While solar power is a mature technology that is regularly commercially financed, storage is not as mature. Financiers do not yet believe the promises being made by this technology. Independent third-party reviews and high-level reviews of energy storage companies will help boost this confidence, with reliability of the technology being the most critical factor among several listed.
Testing of installed systems is also important to verify performance and standardize safety protocols. There is currently no comprehensive standard for energy storage systems and the majority of tests do not happen at the system level.
These challenges are being addressed, though, through a number of efforts. For example, the work of the Energy Storage Safety Working Group at U.S. DOE is addressing three areas of concern for energy storage: safety validation and risk assessment, codes and standards, and safety outreach and incident response. The testing is being performed at Sandia National Labs and at Pacific Northwest National Labs.
Another important market driver is the increasing need for resilient power systems at critical facilities in communities. At Clean Energy Group, its Resilient Power Project is working with states and municipalities to build energy systems that can reliably withstand damaging power outages from increasingly extreme weather events, and solar+storage is an important technology for achieving this goal.
Clean Energy Group’s recent report, “What States Should Do: A Guide to Resilient Power Programs and Policy,” by Project Director Todd Olinsky-Paul, profiles the leading state resilient power programs in California, New Jersey, Connecticut, and Florida, among others. The lessons learned by these state resilient power initiatives offer key recommendations for other states looking to create resilient power programs and projects. These state programs demonstrate that, when properly designed, the combination of energy storage and renewables offers not only environmental and economic benefits, but can also save lives and protect vulnerable populations.
The report also gives the opportunity to look at the big picture created by this first-ever compilation of these program results. In the two and a half years since Superstorm Sandy, for example, Northeastern states have collectively dedicated more than $400 million to resilient power projects, and have leveraged hundreds of millions more in private funds. As a result, in the coming year, more than 90 critical facilities in the northeast, like emergency shelters and wastewater treatment plants, will have resilient electrical systems in development to improve emergency response. These technology options are becoming more competitive in the marketplace and are proving to be cost-effective in parts of the Northeast and across the country.
The key takeaways from the Clean Energy Group report will be discussed during an upcoming webinar on July 14 at 2-3:30 pm ET. Todd Olinsky-Paul will be joined by program staff from Massachusetts Department of Energy Resources and Oregon Department of Energy to summarize the leading state resilient power programs, explore policy and program tools for states to use in supporting resilient power deployment, and make recommendations based on lessons learned from the first years of state resilient power programs.
As solar+storage technology achieves greater adoption, the work of state resilient power programs across the country will serve as a framework to deploy this technology combination in more communities and will help to provide their populations with greater energy security, along with environmental and economic benefits.
https://www.cleanegroup.org/wp-content/uploads/blogphoto-bigstock-Solar-Panels-On-Homes-480x330.jpg330480Clean Energy Grouphttps://www.cleanegroup.org/wp-content/uploads/Clean-Energy-Group-logo-275x70px.pngClean Energy Group2015-07-08 10:46:002016-02-10 10:52:30Opportunities and Challenges for Solar+Storage Markets