Millions of Commercial Customers Could Cut Costs with Battery Storage

Author: Seth Mullendore, Clean Energy Group | Projects: Solar+Storage Optimization, Resilient Power Project

According to industry analysis, the current commercial market for customer-sited battery storage is essentially concentrated in one state, California, but new research shows that more than 25 percent of commercial utility customers across the United States may be able to cut electricity costs with batteries today. What’s more, some of the best economic opportunities can be found in surprising states like Colorado, Nebraska, Michigan, and Georgia.

A new paper released by the National Renewable Energy Laboratory (NREL) and Clean Energy Group (CEG), Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges, details the first comprehensive public analysis of commercial behind-the-meter battery storage market opportunities. The analysis found that around 5 million of 18 million commercial customers nationwide may have the potential to cost-effectively deploy storage under current rate tariffs and battery pricing.

These findings are based on the ability of battery systems to help customers manage demand for grid supplied electricity. Most medium and large commercial customers, as well as some small commercial and residential customers, are billed for electricity demand through utility demand charges. Like volumetric energy charges (billed in $/kilowatt-hour) that are familiar to many customers, demand charges (billed in $/kilowatt) are another way for utilities to recover the costs associated with providing enough generation and distribution capacity to meet their customers’ needs. Demand charges are typically based on a customer’s highest level of electricity demand during a billing period, known as peak demand. The more electrical appliances and equipment a customer uses at the same time, the higher the demand for electricity. (Take a look at this fact sheet if you want to learn more about demand charges.)

Even though demand charges often makeup 30 to 70 percent of commercial customer’s monthly electric bill, many customers don’t have a good understanding of how demand is measured and billed or how to manage these costs. Because demand charge rates can vary considerably across utilities, locations, building sizes, and customer types, there is little transparency regarding the amount customers are paying for electricity demand and the regions where opportunities may exist to reduce demand-related expenses.

The new analysis from NREL and CEG fills this market information gap by analyzing the energy use of U.S. commercial buildings and comparing representative customer load profiles against more than 10,000 existing utility tariffs. With this data, the demand charge landscape (shown in the figure below) can be visualized across the country to identify where rates are high enough to create an economic opportunity to use energy storage for demand charge management. Unlike solar and efficiency, which are great at reducing electricity consumption but not well-suited to reduce peak demand, battery storage is a flexible resource that can be strategically dispatched throughout a billing cycle to decrease demand and lower costs.

Source: “Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges” (NREL/CEG)

The analysis uses a $15/kilowatt demand charge rate as the threshold where battery storage may begin to make economic sense for some customers. (In a survey of rate structures across 51 utilities, GTM Research found that batteries could be cost-effective for demand management at demand charge rates of at least $15/kilowatt. McKinsey & Company calculated that commercial customers could begin to break even with storage at a demand charge rate of about $9/kilowatt.)

In addition to the revelation that one in four commercial customers could be eligible for utility tariffs with demand charges greater than $15/kilowatt, the analysis found a surprising diversity of locations where batteries could play a role in reducing customer energy costs. As expected, California and New York topped the list for both highest demand charges rates and biggest battery market opportunities, but states in nearly every region of the county made it into the top 10 in each category.

Colorado was found to have the third highest commercial demand charge rate in the country, followed by Massachusetts, Arizona, Nebraska, and Illinois. The list was rounded out by Georgia and North Carolina in the South and Vermont in the North. Georgia, Colorado, and Massachusetts also make top appearances in the list of largest potential market opportunities at $15/kilowatt and above, respectively taking spots three, four, and six.

Source: “Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges” (NREL/CEG)

The Midwest is prominently featured in the market opportunity list, represented by Michigan, Minnesota, and Ohio. Texas and Connecticut fill out the remaining spots. When looking at customers eligible for tariffs with demand charges in excess of $20/kilowatt, Kentucky, New Mexico, Alabama, and Iowa enter the list of top 10 largest market opportunities. All-in-all, 19 different states were found to have either some of the highest demand charge rates or behind-the-meter market potentials in the country.

Based on these findings, the market opportunity for cost-effective demand management appears to be much larger and more geographically diverse than it is today. However, despite this apparent market potential, there are clearly barriers to broader adoption of behind-the-meter battery storage. This is due in-part to the invariably slow market uptake of a still-emerging energy technology, but there are also regulatory barriers to greater adoption of customer-sited battery storage and new technology risks (whether real or perceived) that can make storage project financing challenging. Even California’s thriving behind-the-meter storage market is largely driven by storage incentives through the state’s Self-Generation Incentive Program. This should be notable to other states with high demand charges that are looking to spur battery storage market development within their own borders.

The analysis represents an important first step in assessing the potential magnitude of the behind-the-meter battery market in the U.S., but it will take much more locally-focused, on-the-ground work to identify real-world project opportunities. Demand charge rates are just one aspect of the economics of battery storage for demand management. How customers use electricity (their electricity load profile) is a major factor in determining whether or not storage makes economic sense. It will take active interest from local organizations and commercial customers to pursue behind-the-meter storage solutions (ideally coupled with state incentives) to ultimately realize the true market potential of customer-sited battery storage.

NREL and Clean Energy Group will host a webinar on Tuesday, September 19 to discuss the findings of the report. Authors Joyce McLaren and Seth Mullendore will present their research and answer questions from the audience. Read more and register here.

 

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This article was also published in The Energy Collective.

Advancing Clean Energy: 15 Years of State Leadership

Author: Dana Drugmand, Clean Energy Group | Project: Clean Energy States Alliance

As the federal government has retreated from aggressive support for renewable energy, the states are increasingly seen as the locus for innovation and action. New regional and national coalitions of states have emerged to coordinate some of the states’ efforts. But long before the current focus on state action, some of the states joined together to form an important coalition dedicated to advancing clean energy.

That coalition started back in October 2002 when 40 representatives from recently created state clean energy funds, from foundations, and from the financial community met at Jiminy Peak Resort in Hancock, MA to discuss the creation of a collaborative nonprofit organization called the Clean Energy States Alliance (CESA). The purpose of the new organization was to provide better coordination of efforts and information-sharing among the various state public benefit funds to advance clean energy innovation and markets.

Now, 15 years later CESA is still going strong as its members benefit from collaborative programs and learning networks, technical assistance and research, and partnership development. The CESA organization represents state-level clean energy leadership. As it continues to support its members in the advancement of clean energy technologies and markets, the organization is also celebrating more than a decade of market transformation.

The Beginning

The emergence of state clean energy funds was a result of the deregulation of electric utilities in the late 1990s. Lewis Milford, president and founder of the nonprofit Clean Energy Group (CEG), had been advocating the creation of public benefits funds that would develop renewable energy resources. Through the work he had done as vice president at the Conservation Law Foundation, he was involved in many New England utility restructuring dockets. As the vertically-integrated utility model disbanded and competition arose for electricity suppliers, the question of how to incentivize clean, renewable energy came to the forefront. Some states found a solution in mandating a small surcharge on ratepayers’ electric bills – called a system benefit charge – that would go into a fund dedicated to developing clean energy resources.

Managers of these new clean energy funds were left with the task of figuring out how best to use the money to advance renewable energy deployment in their state. As Lew Milford explains, “These public benefit funds, established with the purpose of advancing clean and renewable energy generation, didn’t exist before. States were breaking new ground with every program they created. It made sense for them to share ideas on the best programs to establish and how to implement them.”

After the Jiminy Peak meeting, 15 funds from 12 states officially formed the Clean Energy States Alliance. The new nonprofit entity, managed and staffed by CEG, would serve as a networking space to coordinate the common efforts and goals of the participating clean energy funds.

One of the first collaborative efforts was a clean energy branding and public education campaign. This began in 2003 with five states working together to overcome market challenges facing renewable energy. The goal was to show that fossil fuel alternatives were available, viable, and up to the task of powering our world. The campaign used a simple slogan, “Clean Energy: It’s Here. It’s Real. It’s Working. Let’s Make More.” Working with Gardner Nelson & Partners and SmartPower, the public education campaign created a suite of multimedia tools, including radio spots, TV advertisements, posters, and a logo that were available for CESA member organizations to use.

Other early projects included a public fuel cell alliance, a marine and hydrokinetic energy project, wind siting and offshore wind projects, a solar PV advancement project, and an RPS implementation project. Over the years, as CESA member programs and the renewable energy technologies they work to advance have evolved, so too have the activities and projects that CESA has led.

Major Milestones

A primary policy driver for renewable energy deployment at the state level is the Renewable Portfolio Standard (RPS). From CESA’s inception, the organization has worked to help states implement their RPS policies, but that work expanded to a national scope in 2008 with the establishment of the State-Federal RPS Collaborative. Supported by funding from the U.S. Department of Energy and the Energy Foundation, the Collaborative’s purpose was to foster and facilitate dialogue among RPS managers regarding effective policy design and implementation, with emphasis on state-to-state and state-to-federal discussions. The Collaborative was essentially the only national forum for RPS administrators to network with one another. CESA managed this forum and engaged stakeholders in a series of webinars and national summits. The RPS Collaborative is an ongoing project with 29 states and the District of Columbia having RPS programs.

Recipients of the 2009 SLICE Awards pose for a photoAlso in 2008, CESA established a national awards program to recognize exemplary clean energy projects and programs implemented by CESA members. The State Leadership in Clean Energy (SLICE) Awards highlight state-level programs that are most effectively accelerating adoption of clean energy technologies and advancing clean energy markets. The first SLICE awards were presented at the National Press Club in January 2009. CESA presented a second round of awards in October 2010, and every two years thereafter. This biennial awards program is also ongoing with the next awards to be presented in 2018.

“The SLICE awards are a great way to showcase state innovation around clean energy market development and share best practices between CESA members and other clean energy stakeholders across the country,” said Maria Blais Costello, CESA’s Manager of Program Administration, who has been with the organization since its founding. “One example of this replication is the Solarize programs that have taken hold across the country as a group purchasing model for solar PV. That program was started with assistance from Energy Trust of Oregon, a CESA member since 2002 and a winner of two SLICE awards.” Case studies and webinars on award winning programs can be found on CESA’s SLICE webpage.

In 2009 state clean energy funding received a boost from the American Recovery and Reinvestment Act. The federal stimulus bill earmarked $3.1 billion for clean energy through new State Energy Program funding. CESA assisted states as they grappled with how to best use this funding to advance clean energy. Specifically CESA provided information on financial incentives, program design and best practices. Nadeane Howard, director of the Ohio Energy Resources Division of the Ohio Department of Development at that time, noted that: “As Ohio develops and implements nearly $500 million in energy programs through the American Recovery and Reinvestment Act, we highly value CESA as an important resource for best practices and advice.”

CESA Executive Director Warren Leon accepts the 2013 Wind Powering America Eastern Regional Leadership AwardIn 2011 CESA launched two initiatives to facilitate and accelerate the wind energy market. The Interstate Turbine Advisory Council (ITAC) strives to support certification, and strengthen the market, for small and midsized wind turbines. ITAC has produced a unified list of wind turbines that meet certain certification standards required by state incentive programs. For offshore wind, CESA created the Offshore Wind Accelerator Project (OWAP) to support stakeholders in tackling the major challenges facing offshore wind development in the U.S. OWAP activities over the years have ranged from a broad communications campaign, to maintaining an online database of offshore wind documents, to helping coordinate a project to develop a roadmap for multi-state cooperation on offshore wind. The Department of Energy recognized CESA for these wind energy initiatives by awarding the organization the 2013 Wind Powering America Eastern Regional Leadership Award.

CESA also expanded its membership to include a second, “affiliate” tier. Affiliate members can include a wide range of state, municipal, and federal agencies that work to advance clean energy deployment. There are currently 13 affiliate members, in addition to the 17 core members.

These members have been instrumental in supporting the remarkable growth in renewable energy markets and deployments. Solar and wind power are now the fastest growing forms of new power generation. California leads the nation in installed solar capacity as of 2016, according to the Solar Energy Industries Association. Solar accounts for 13.39% of the state’s electricity, and nearly 5 million California homes are now powered by the sun. From 1998 to 2011, CESA member organizations supported the installation of about 32,000 solar PV projects. By contrast, California alone now has 691,748 distributed solar PV projects, according to California Distributed Generation Statistics. Another CESA member state – Iowa – leads the nation in wind generation as a percentage of total power output, 36.6% as of 2016. According to the Iowa Economic Development Authority, MidAmerican Energy, the state’s largest electric utility, now sources nearly half of its electricity from wind. In 2004 none of the utility’s generation capacity came from wind. As of 2011, CESA members had supported 259 total wind projects; by contrast, Iowa alone currently has over 100 wind projects online.

Looking Forward

CESA member organizations have invested literally billions of dollars in clean energy, leading to more than 10 gigawatts of generation capacity. But CESA’s impacts can be seen not only in the number of gigawatts installed by its members or in the billions invested in renewable energy projects by leveraging public sector funds with private investments, but also in the role it plays in facilitating exchanges between members that enable them to implement the most effective clean energy programs possible. “The real value is for our members to have a collegial space to share concerns, ideas, and best practices,” observes CESA Executive Director Warren Leon.

At a time when many issues including energy policy have become politically polarizing, having such a nonpartisan forum for states to work together and learn from one another becomes critical. “As the policymaking landscape has become increasingly politically contentious, the need for CESA has become greater,” Leon explains.

CESA members gathered in DC in June 2017 for an annual membership meetingCESA will continue working with states as they strive to meet their clean energy goals and standards. Some emerging areas that CESA is currently working in are energy storage and offshore wind. These technologies and industries are taking off, and CESA will be there to support members as they navigate the new markets. CESA also continues to work on initiatives to make clean energy affordable and accessible to all, with a particular focus on low-income households. This work will also be important in the years ahead.

States have long been innovators and leaders when it comes to clean energy. “States are the true laboratories for renewable program design and play a vital role in the development of renewable energy markets,” said John Geesman, former commissioner at the California Energy Commission, a CESA member organization. “As interest in renewable energy surges throughout the United States, CESA’s coordination role becomes increasingly important.”

A Senate panel speaks for sound clean energy policy — and rebukes Trump

Authors: Lewis Milford, Clean Energy Group, and Mark Muro, Brookings | Projects: Clean Energy Innovation, Energy Storage and Climate 

Something has changed in Congress’ dealings with the Trump administration.

The effort to repeal the Affordable Care Act foundered. New sanctions on Russia were passed despite President Trump’s objections. Senators from both sides of the aisle proposed legislation to protect Special Counsel Robert Mueller’s independent and ongoing investigation of Russian meddling. An immigration proposal appeared to be dead on arrival after being immediately shot down by leading Republicans.

But amidst all of the high-profile political developments, a dramatic example of legislative pushback in clean energy policy received too little attention.

Recently, the Senate Committee on Appropriations issued a bipartisan report on the FY18 Budget for the U.S. Department of Energy (DOE). Senator Lamar Alexander (R-Tenn.) leads this committee, which it turns out has now set out a completely different clean energy agenda than the President’s proposed budget.

Recall that the Trump administration’s budget for DOE calls for massive funding cuts to high-profile clean energy projects, including the elimination of DOE’s Advanced Research Projects Agency-Energy (ARPA-E) and huge gouges into the budgets of numerous renewable and energy efficiency programs. Underlying these cuts is the familiar right-wing assumption that DOE should retreat back to the business of basic research, and not seek to test or commercialize technologies in the marketplace. “Let companies do projects and keep the government at the lab bench” has been the mantra.

Yet now comes the new view. Two weeks ago, the bipartisan Senate appropriations committee said thanks, but no thanks to the administration’s approach. Instead, the committee’s $38.4 billion budget came in $4 billion higher than Trump’s proposed DOE budget. Most importantly, to support this budget increase, the committee’s report (passed by a vote of 38-1) detailed a full-throated defense of robust and smart federal government action in all phases of clean energy development, from the lab to the marketplace.

Along these lines, the committee report lays out a comprehensive rationale for an aggressive DOE strategy to advance clean energy funding and projects on a wide array of fronts:

The President’s budget request proposes a shift away from later stage research and development activities to refocus the Department on an early-stage research and development mission. The Committee believes that such an approach will not successfully integrate the results of early-stage research and development into the U.S. energy system and thus will not adequately deliver innovative energy technologies, practices, and information to American consumers and companies.

Notably, this is the case with complex systems and structures such as America’s homes, offices and other buildings. The Committee provides funding to support a comprehensive and real-world strategy that includes medium- and later-stage research and development; deployment and demonstration activities; and other approaches that are designed to utilize the most effective means to increase buildings’ energy efficiency in order to promote their affordability, sustainability, resilience, and productivity.

The Senate committee emphasized the agency’s critical role at every stage of clean energy technology development:

The Committee rejects the budget’s sole focus on early-stage research. Most utilities have limited research and development budgets, primarily due to regulatory constraints designed to keep electricity costs low for consumers. Additionally, utilities are unlikely to implement new concepts because most utilities would need to use their own systems for testing and evaluation, which could impact consumers. State public utility commissions also have limited budgets that do not support research and development. The States rely heavily on the Department’s technical assistance on assessments of data and tools to help them evaluate grid modernization alternatives. The Department plays a vital role, not only in early-stage research, but also in deployment, field testing, and evaluation.

Having expressed its rationale, moreover, the committee then acted on it. Specifically, the members increased the budgets for DOE’s solar programs, as the committee “recognizes that solar energy is one of the fastest growing industries in the United States, and employs over 260,000 workers today.”

The committee also increased funding support for offshore wind development, noting that the increased budget “will enable these technologies to compete in the marketplace without the need for subsidies, and on activities that will accelerate fundamental offshore-specific research and development, such as those that target technology and deployment challenges unique to U.S. waters.”

Additionally, the Senate committee increased the DOE budget for energy storage, noting that government support for storage research and demonstration projects, both in terms of innovation and advancement in distributed energy resources, “is helping the Nation’s power grid to better address reliability, resiliency, safety, and accessibility.” Further, the committee declared:

This [work to advance distributed energy resources] enhances our Nation’s energy security and global leadership. Energy storage is needed to better enable distributed energy resources; integrate intermittent uses such as water heaters, electric vehicle chargers, battery storage systems, and pumps; help balance supply and demand in the power grid to aid consumers to better manage their energy costs; protect residential and commercial customers and public services from power interruptions; and improve grid security and reliability.

In the end, the Senate committee sent a strong, upper chamber congressional rebuke to Trump’s proposed budget. Quite simply, the panel left no ambiguity in its stance that the country needs greater support for clean energy—for national security, economic, and environmental reasons. And beyond that it declared that Congress should not be held responsible for allowing the country to diminish its leadership in clean energy.

In some ways, the Senate’s budget actions resembled its recent refusal to repeal and replace current laws on health care. In large part, the decision not to repeal the Affordable Care Act—a law viewed by many as imperfect—was a result of it becoming an engrained part of the country’s health care system. Clean energy, much like health care, is now also mainstream, woven deeply into the fabric of the larger American energy and economic system. It’s not easy to reverse a policy course that has become firmly embedded into our economy. Clean energy is here to stay, and the Senate confirmed that in its approach to DOE in its budget.

In sum, the last few weeks were a notable reassertion of the Senate’s role as a constitutional check on executive overreach. But they also provided a sensible course on clean energy. Let’s hope the House adopts a bit of the Senate’s moderation.

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This blog post was originally published by Brookings Institution in The Avenue.