The Same Communities Reeling from COVID-19 are Hit Hardest by Utility Disconnects and Power Outages – Resilient Power Can Help

Authors: Marriele Mango, Clean Energy Group, and Mayra Cruz, Catalyst Miami | Projects: Resilient Power Project, Energy Storage and Health

The impact power outages have on public health can be severe. Emergency management and public health leaders rely on decades of research and case studies to learn how to better prepare for natural disasters and their consequences, including widespread power outages. This year, those responsible for maintaining public health and safety face a new and unprecedented challenge: how to protect communities when a power outage coincides with COVID-19.

In August, over three million people were left without electricity by the time Hurricane Isaias dissipated. Medically vulnerable individuals, such as seniors, considered their options as their air conditioning and fans stopped working (one senior housing facility was without power for over 30 hours). Those with electricity-dependent home medical equipment, such as oxygen concentrators, were left searching for places to charge their devices. People risked exposure when they stayed with friends or relatives that still had power. 

Re-Emergence of Utility Disconnect Programs

It’s not only severe weather threatening energy security. As federal and state mandated COVID-19 protections lapse, utilities will once again begin to disconnect electricity to customers behind on their bills, many of whom now depend on electricity to homeschool their children and/or work remotely due to COVID-19 restrictions. Of the 32 states that restricted utilities from conducting disconnections during the pandemic, ten have already ended their bans. Twelve more are scheduled to allow for disconnections to resume in the coming months. North Carolina and Texas, states still reeling from recent hurricanes, are set to resume disconnects in the coming weeks.

The communities at highest risk of utility disconnects are the same communities being hit hardest by COVID-19: Black, Indigenous, and People of Color (BIPOC), medically vulnerable populations, and low-income communities. The Center for Disease Control and Prevention reported that Black and Hispanic populations are nearly three times more likely to contract COVID-19 and almost 5 times more likely to be hospitalized.

Low-income and BIPOC communities are also more likely to be environmental justice communities and therefore must contend with disproportionate health impacts of COVID-19 and climate change, such as extreme heat, simultaneously. Florida, for instance, is set to resume disconnects October 1. The Florida Public Service Commission estimates approximately 600,000 customers are behind on their utility bills. As average temperatures in Florida – and throughout the Southeast region – continue to rise, disconnections coinciding with both COVID-19 and days of extreme heat could be potentially deadly.

And it’s not only health disparities—almost half of the Hispanic population has faced an economic hardship (took a pay cut or lost their job) due to COVID-19. In low-income communities, 18 percent of Hispanic and 16 percent of Black households were unable to pay an energy bill between April and May of this year, compared to under 9 percent of white households. A shocking 23 percent of low-income households with a family member dependent on electricity for a medical device were unable to pay their electric bill.

Opportunities for Resilient Power

While there is no single solution to protecting vulnerable populations through an emergency, and the situation is increasingly complicated as the COVID-19 pandemic continues, there’s an opportunity to embrace innovative solutions to build community-based solutions. It’s time to re-evaluate business-as-usual solutions and consider new, innovative technologies that can address community resilience more holistically.

Working in tandem with weatherization and energy efficiency programs, solar and battery storage systems (solar+storage) can reduce utility bills, improve emergency preparedness, and transform the energy landscape of the most vulnerable communities. Solar+storage systems are both community-based emergency power resources and economic assets; providing reliable backup power in the event of an outage, lowering energy burdens by reducing utility bills, and generating revenue through grid services during regular operations.

As a zero emissions power source, solar+storage is especially beneficial for environmental justice communities, where pollutants from fossil-fuel powered generators can contribute to already poor air quality. Solar+storage can also reduce utility burdens, the percent of income spent on utility bills, and provide an opportunity for wealth creation in low-income communities by participating in grid services programs such as demand response.

In the event of an outage, solar+storage can improve health outcomes by providing reliable power to critical loads. In individual residences, solar+storage can support some types of electricity-dependent home medical equipment through an outage or provide enough backup power to safely wait until emergency assistance can arrive. Residential systems could also help to reduce the risk of exposure during a pandemic by allowing high-risk residents to shelter-in-place.

At critical community facilities, such as medical clinics and schools, solar+storage can provide back-up power for residents to access WIFI, lighting, refrigeration for perishables and temperature-sensitive medications, and outlets to charge medical equipment and cell phones. By strategically installing resilient power systems throughout a community, influxes of people to a single critical community facility (or medical institution) could be avoided, reducing the likelihood that large numbers of people will need to gather in one place and improving the ability of the staff to maintain pandemic safety protocols.

Utilities should be making every effort possible to avoid disconnects and improve the quality of life for their most vulnerable customers. Bill payment assistance programs and medical baseline registries, a program that can help electricity-dependent customers avoid a disconnect, need to be prioritized, improved upon, and expanded. Additionally, utilities should provide subsidized battery storage programs to their most vulnerable customers, similar to the state of California’s Self-Generation Incentive Program (SGIP).

These types of programs can ensure that backup power is affordable and available to high-risk populations, while also reducing the energy burden of low-income households and providing value to the grid—which could lower electricity costs for all utility customers.

 

About Catalyst Miami: Founded in 1996, Catalyst Miami’s mission is to identify and collectively solve issues adversely affecting low-wealth communities throughout Miami-Dade County. Learn more at www.catalystmiami.org.

SMUD’s Energy StorageShares Program: The First Virtual Energy Storage Program in the US

Author: Maria Blais Costello, Clean Energy Group | Project: Clean Energy States Alliance

SMUD’s innovative Energy StorageShares program is the first virtual energy storage program in the US. StorageShares allows SMUD’s commercial customers to invest in an off-site battery storage system and enjoy energy cost savings without siting batteries at their facilities. In this newly launched pilot program, eligible commercial customers make an up-front payment to SMUD for program participation; in exchange, they receive a monthly on-bill credit. SMUD bundles the investments from program participants with its own capital, procures a battery, and installs it in a location that optimizes grid benefits. The program provides guaranteed savings to the customer without impacting their business operations, imposing maintenance obligations, or requiring physical space at their business for a battery system. All SMUD customers benefit from the Energy StorageShares program because SMUD’s costs are reduced through peak demand reduction and deferral of distribution system investments. 

Shared Costs and Benefits 

Launched in January of 2019, SMUD’s Energy StorageShares program allows participating commercial customers to maximize the benefits from energy storage without having to host or purchase a battery system. Program participants make an up-front investment into the StorageShares program instead of installing a battery behind the meter at their business. In exchange for the investment into the program, participants receive “storage shares.” Each share provides 1 kilowatt (kW) of demand charge reduction savings that is credited monthly on the customer’s bill over a 10-year term. The demand savings from a share represents the savings an on-site battery would have provided to the customer for demand charge reduction. Share prices in 2020 range from $475 to $520 per share, depending on the customers electric rate class. 

SMUD bundles the investments from the program participants with its own capital, procures a utility-scale battery, and installs it at a location that increases overall grid benefits. The program provides guaranteed savings to the customer without impacting their business operations, imposing maintenance obligations, requiring prediction of load peaks, or taking physical space at their business. Because SMUD can install a single large battery in place of many small ones, the program also enjoys economies of scale.  

Assessing the Storage Benefit  

The Energy StorageShares program is designed to mirror the economic benefits and value that an on-site battery system would provide to the customer. Estimating those benefits begins by analyzing the electric load to determine the battery size to meet the customer’s need. SMUD has developed a battery sizing tool to perform this calculation. The tool looks at the customer’s most recent 12 months of operating data and estimates the optimal battery size that would meet demand charge reduction needs. This estimate sets the upper limit on the number of shares the customer would be offered through the program. Using actual load data to calculate the optimal battery size ensures that the program is aligned with the benefits a behind-the-meter battery would be able to provide, while preventing customers from over-subscribing in the program to reduce their demand beyond what an on-site battery system could achieve.  

Additionally, commercial customers interested in Energy StorageShares are bound by the following eligibility requirements:  

  1. Customers must have actively been considering the adoption of energy storage for demand charge reduction.  
  2. Customer share acquisition is limited to no more than 50 percent of the customer’s peak demand within the most recent 12 months (for example: a customer with a maximum demand in the last 12 months of 500 kilowatts is eligible for no more than 250 shares). 
  3. After joining Energy StorageShares, the customer is not allowed to install on-site energy storage for further demand charge reduction, or they will be expelled from the program. This provision is required to ensure that the customer does not “double-dip” on demand charge reduction savings.  

Once enrolled in the program, participating customers receive a monthly on-bill credit. The value of the credit is not static over the 10-year term of the participation contract; instead, the value will change over time based on SMUD rate changes. That way, just as the value of a behind-the-meter battery increases when demand charge rates rise, the benefits that a share provides will also increase when demand charges increase.  

Since launching this program, SMUD has begun work to procure a new, 4-megawatt (MW)/ 8 megawatt-hour (MWh) utility-scale battery—interconnected at the distribution level—that will provide the initial 4,000 shares for the Energy StorageShares program. This is SMUD’s first utility-scale battery that will help implement the utility’s long-term plans to meet the energy storage needs, which are forecasted to be approximately 246 MW by 2030.  

The battery will be installed in an area forecasted to have increased load growth due to planned new residential subdivisions that will have rooftop solar, as well as the potential load increase due to planned indoor agricultural facilities. With the new battery, this area will no longer need a planned reconductor upgrade to handle the load growth. In addition, when the battery is not being used to support local infrastructure needs, SMUD may also rely on it to provide local grid services, participation in the Energy Imbalance Market, capacity/resource adequacy, energy arbitrage, ancillary services and PV smoothing.  

The StorageShares program is being implemented based on the initial 4-MW battery, but additional sites are being evaluated. Current considerations include a potential locational need for 9 MW/18 MWh of battery storage in 2022 to defer the construction of a new substation and add an additional 9,000 StorageShares to the program. 

Using Energy Storage to Maximize Benefits and Meet Net-Zero Goals 

The Energy StorageShares program is one of the tools developed by SMUD to maximize customer and utility investment into battery storage to ensure optimal benefits in its push for greenhouse gas (GHG) emission reductions. SMUD’s Integrated Resource Plan calls for net-zero GHG emissions by 2040; achieving net-zero GHG emissions requires significant investment in renewable generation, Distributed Energy Resources (DERs) and electrification of buildings and transportation. To ensure that SMUD can meet its 2040 goals, it is developing innovative ways to engage with DERs and enable different types of technology to support the electrical grid.  

Balancing customer and utility benefits can be a challenge because the value of each party does not always align. Traditional demand charge reduction, for example, does not always result in reduced emissions. When a battery is managing the load peaks of an individual customer, which may not be coincident with regional load peaks, the actions of that battery may be counter to the needs of the local grid: load can be added when the grid is constrained, and load may be shed when there is no local need. Additionally, because many commercial batteries are not paired with renewable energy, efficiency losses of a battery system could result in a net increase in GHG emissions when a battery is used just for demand charge reduction. The SMUD Energy StorageShares programs avoids the misalignment between customer operation of a battery and the grid by virtualizing the customer savings and dispatching the battery based on grid needs, rather than the needs of individual customers.  

Because individual customer benefits are separated from battery operating decisions, SMUD can ensure that the dispatch of the battery is providing the most valuable service at any given time. This can result in increased penetration of distributed generation by absorbing excess generation, limiting the amount of new grid infrastructure that needs to be built due to electrification, and reducing reliance on natural gas power plants. Individual behind-the-meter systems can also support these objectives if coordinated, but this is not generally the case in traditional demand charge management scenarios.  

In addition to improving the operating effectiveness of the electrical grid, the StorageShares program can also enhance customer business models. For example, Electrify America, an electric vehicle charging company, recently joined the program by investing $1.3 million. In return, it will receive demand charge reduction credits for 12 electric vehicle (EV) charging sites in SMUD’s service territory. Through the Energy Storage-Shares program, Electrify America was able to invest in battery storage, benefit from demand charge reduction, and avoid the risk of stranded assets in the future when direct-current fast chargers (DCFC) become more common at EV charging stations. As EV adoption proliferates and the load factor at DC charging stations improves, the load will become less peaky and the benefits of behind-the-meter batteries will decline—but the value of StorageShares will remain high. Participation in StorageShares reduces the monthly operating cost of the DCFC stations through demand charge reduction savings, avoids the installation of energy storage systems at areas of the grid with limited need for batteries, and supports providing access to high speed charging for electric vehicles.  

Improving Economics and Expanding Battery Storage 

Battery energy storage is approaching cost effectiveness in SMUD’s service territory, but in most cases, economics alone do not justify installing a battery storage system. Based on planned rate changes and anticipated cost reductions in battery storage, SMUD estimates general cost effectiveness will occur around 2023 or shortly thereafter. While the economics are not enough for most customers to adopt batteries, there is a growing number of customers willing to be early adopters and accept longer payback periods when they consider battery energy storage. The StorageShares program is working with those early adopters to improve the economics of energy storage for both the customer and SMUD. When SMUD maximizes the utilization of the battery, it reduces risk of stranded assets through utility ownership, and it defers infrastructure costs, which benefits all customers. When retail benefits align with grid benefits, battery dispatch is based on the needs of the entire electrical system rather than an individual load and on improved economies of scale.  

No outside funding will be used to support or implement this program. SMUD anticipates customer investment will cover about 40 percent to 50 percent of the initial battery procurement for this program. The balance of the battery cost is funded from SMUD’s investment in battery storage. Without this program, SMUD’s investment in distribution energy storage would not be cost effective and may have been delayed while waiting for battery prices to decrease further. However, by enabling customer investment to leverage SMUD’s costs for the battery, the economics of the investment are improved and investment in energy storage is possible today.  

SMUD’s long-term goal for energy storage is for the technology to become a standard tool used by grid planners and operators in their day-to-day work. Successful integration with energy storage means that the technology is evaluated side-by-side with other options during the grid and resource planning processes. When a battery is the right choice to address a grid need, utilities should be confident in selecting that option to solve the problem. Grid infrastructure costs can range from thousands of dollars well into the millions. Batteries may not be the most effective solution to meet all grid needs, but by implementing innovative programs such as StorageShares to improve the economics of battery energy storage, the range of opportunities to use batteries to meet grid needs can be expanded.  

Beyond ensuring effective deployment of battery energy storage and maximizing operational benefits, StorageShares also addresses many barriers that could prevent access to storage for some customers. Grid interconnected batteries remain a nascent technology. Business models for implementing battery storage are continuing to evolve as are discussions around safety, insurance, and liability. Though commercial businesses may be able to benefit from battery energy storage and have strong incentives for investing, many of these customers may not own the facilities where their businesses are located 

Installation of a behind-the-meter battery—although economically possible and beneficial for those customers—may not be feasible based on requirements or restrictions from the building owner. Installation of behind-the-meter batteries can impact lease agreements, insurance costs, and stranded asset risk if a customer invests in a battery and then needs to move to a different location. StorageShares enables SMUD’s commercial customers to access the benefits of batteries to without impacting their lease agreements or insurance considerations, and these benefits can “follow them” if the customer moves to a different facility within SMUD’s service territory.  

The StorageShares program also has the potential to expand to provide a more comprehensive storage value stack in the future. For example, the current design does not provide back-up power benefits, but in the future, there may be an opportunity for a SMUD-owned battery to be located at customer locations. This could provide back-up power to local customers while also providing local grid services. Customer siting of the battery could increase battery revenue by providing back-up power as a service, enable installation of utility-controlled batteries in densely developed areas, and enable in-fill land use opportunities instead of impacting undisturbed land.  

 

SMUD’s Energy StorageShares Program was awarded a 2020 State Leadership in Clean Energy Award by the Clean Energy States Alliance. Guest speakers from SMUD presented on the Energy StorageShares Program in a CESA webinar on August 20, 2020 – slides and a recording of this webinar are available here