In 2019, Massachusetts commenced a nation-leading experiment by, for the first time, incorporating behind-the-meter energy storage into the Commonwealth’s three-year energy efficiency plan, through the ConnectedSolutions program, as a peak demand reducing measure. The state argued that this represented a new type of efficiency. Batteries do not generally reduce net consumption of electricity – the goal of traditional efficiency measures – but they are very good at shifting consumption from peak to off-peak times, something traditional efficiency measures can’t do. This is a highly valuable service, as shown by a report, State of Charge, published by the Massachusetts clean energy agencies in 2017, which found that 40 percent of the state’s annual spend on electricity was attributable to just 10 percent of the hours each year when demand was highest. Lowering those occasional demand peaks can make the whole system more efficient and lower capacity and transmission costs for utilities, in turn saving money for the ratepayers. The ConnectedSolutions program, launched statewide in 2019, does just that.
Meanwhile, in neighboring Vermont, the state’s largest utility was facing similar peak-related expenses. Green Mountain Power had already installed a large utility-scale battery in Rutland, but was interested in the potential to scale storage up by using smaller, behind-the-meter batteries. GMP conducted a pilot project in 2016, placing batteries in 14 modular homes comprising an affordable housing development, McKnight Lane, in rural Waltham, VT. Through this pilot, GMP learned to aggregate and coordinate behind-the-meter battery charging and discharging, and worked out software bugs in the battery controls. Based on the success of McKnight Lane, GMP launched a customer battery program in partnership with Tesla, and then a Bring-Your-Own-Device (BYOD) battery program that allowed customers to choose between several home battery manufacturers. GMP now has more than 2,000 enrolled battery customers, and saves hundreds of thousands of dollars each year by dispatching behind-the-meter batteries during monthly and annual peak hours.
Both the MA and VT programs have been widely replicated. ConnectedSolutions is now offered in Massachusetts, Rhode Island and Connecticut, and has been proposed in New Hampshire. The GMP BYOD model has been copied by utilities in New Hampshire, New York, California, Oregon and Utah. Announcements of new “virtual power plant” pilot programs seem to pop up almost daily.
The two models – ConnectedSolutions and BYOD – are different, but have much in common. The main difference is that ConnectedSolutions is run through state energy efficiency programs, while BYOD is typically considered part of utility demand response programs. In both cases, customers purchase and install behind-the-meter batteries, often with favorable financing, and sign a contract with their utility to provide battery services on a pay-for-performance basis. Utilities the pay customers for the peak demand reductions the batteries actually provide, and dispatch the aggregated, distributed storage fleet during peak demand hours to reduce capacity and transmission costs, meaning batteries are directly competing with fossil fuel peaker plants. Residential customers in Massachusetts can achieve a battery payback in less than seven years based on program performance payments alone, and receive back-up power benefits – their primary motivation for purchasing batteries, according to a recent report – starting on day one (this is particularly important now, when millions of people are reliant on powered home health equipment). Both the ConnectedSolutions and BYOD programs can be marketed to customers by the utility and/or third party developers.
These programs solve a lot of problems that have slowed the adoption of battery storage. For utilities, they allow remote dispatch of customer-owned batteries, thus addressing concerns about customers who might otherwise dispatch batteries on non-coincident peaks. For customers, they provide a funding stream for battery purchases, substantially improving project economics (CEG has conducted economic analysis showing that ConnectedSolutions provides higher returns on investment than a demand charge management model). For policy makers, they directly tie distributed storage resources to ratepayer savings, thus making it easier to justify allocating public funds to support these programs. For lenders, they de-risk battery storage, by making revenues predictable and backing project economics with utility contracts. And for storage advocates, these programs greatly increase the customer base. ConnectedSolutions, for example, is open to all residential and commercial customers in the states where it is adopted (by contrast, the demand charge management model only works for large commercial customers who happen to be paying high demand charge rates, have peaky load profiles, and can consistently and accurately predict their facility demand peaks).
If utilities are to address increasing renewable penetration and 100% clean energy state policy goals, as well as calls for increased resiliency, distributed storage must be brought to scale and harnessed to provide real grid benefits. The ConnectedSolutions and BYOD models show how storage can be added to existing efficiency and demand response programs to seamlessly transition existing funds to support this new technology.
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