In hundreds of installations and over years of run-time, customer-sited energy storage technology has been proven to offer a multitude of benefits to the electricity supply chain. The challenge and opportunity are that the term “energy storage” can mean different things to different people; more often than not, it’s simply batteries in a box. From our perspective, customer-sited distributed storage means an integrated platform where best-in-class components are chosen for their reliability, safety and performance and integrated with cloud-based controls and algorithms into a UL-certified appliance intended for use as a grid asset. When aggregated and orchestrated to serve as a single resource -- a Virtual Power Plant -- this option represents an attractive, economically viable approach if all potential value streams are accounted for and properly compensated.
Building the business case for storage swimming upstream
For storage projects to pencil out and technologies to take hold, the business case needs to make sense. From a network perspective, a commonly acknowledged value stream is the avoided or deferred capital expenditure associated with conventional grid capacity augmentation or reinforcement. Through load shifting and solar smoothing, integrated energy storage platforms can reduce grid strain caused by high penetrations of renewables and help utilities defer costly distribution infrastructure improvements.
Other line-side potential sources of value include (in no particular order):
- More efficient sources for upstream wholesale or market energy as compared to less-efficient peaker plants
- More cost-effective management of grid operations resulting from increased intelligence installed at the edges of the grid
- Resources to provide ancillary services to address market shortfalls
- Ability to offer voltage regulation and power quality enhancement
- Increased grid efficiency inherent with distributed storage resources as compared to central generation with its T&D losses
On the customer side of the equation, in addition to the societal value associated with reduced greenhouse-gas emissions (when paired with solar), lower grid operating costs can translate into bill reductions for ratepayers. Hybrid inverters ensure code-compliant, reliable and uninterrupted power during grid outages, and customer-sited storage offers the greatest degree of customer choice as to where and when the renewable energy is used.
Capturing and realizing these value streams requires the involvement of multiple participants across the energy delivery supply chain. Distribution network system providers must be involved to capture benefits of avoided capital expenditure and enhanced reliability; electric retailers and generators can aggregate customer-sited storage and derive value from participating in wholesale markets through portfolio investments or financial products to maximize customer revenues and minimize exposure to wholesale peak prices; and energy customers realize value through reduced bills and incentives, as well as by taking advantage of compelling programmatic offerings.
With all the opportunity on the table, how can integrated energy storage companies capture aggregated value in a disaggregated market to ensure the best outcomes across the whole value chain?
Answer: With evolved regulation policies that properly reflect granular locational/time-oriented electricity supply and delivery costs through residential customer electricity pricing and new business and ownership models. These policies must eliminate the barriers to value attribution that currently exist, while still preserving market competition and accessibility.
The platform for success
The parallel paths to success in energy storage markets involve two separate but equally important components. The first is a scalable, flexible and “utility-grade” solar-plus-storage platform capable of operational protocols that optimize the storage charge and discharge functions while supporting higher penetrations of local renewables with beneficial impacts on the grid. The second component is a business model that serves as the mechanism for ensuring value can be harmonized and shared across the energy supply chain.
Left unaddressed, as the number of distributed energy resources operating on the grid in an unstructured manner continues to grow, so does the potential to cause the grid more harm than good. Platforms which enable utilities to aggregate localized intelligent storage assets and orchestrate them as a fleet of units are critical to cost-effectively optimizing operations and addressing both system and localized needs. This virtual power plant (VPP) approach also achieves the business-model objective of unlocking value and harmonizing the benefits across homeowners, system owners/operators, and utilities. Access to the coordinated value streams ensures all participants are positioned to maximize their benefits from home to network.
Once in place, an integrated energy storage platform also serves as an effective “grid citizen,” working in concert with other prevalent smart technologies (e.g., metering, thermostats, EV chargers) and advanced analytical tools to proactively identify and address grid hot spots. A reliable utility-scale resource, VPPs are flexible and dynamic and can be reconfigured on the fly and deployed where resources are needed most.
As demand-disruptive technologies force utilities to evolve their business models from centralized generation to something more granular which effectively integrates distributed resources, the policies and regulations influencing technology adoption are as complex as the grid management technologies needed to manage them are sophisticated. These policies and regulations will and must evolve, enabling new service models and resources that will lower electricity costs and expand the adoption of renewables along the way. New policy regulations and mindsets are being developed to support the efficient operation of markets and adoption (and fair sharing) of benefits among all participants, including the following:
- Residential time-of-use tariffs
- New distributed energy resources (DER) interconnection rules and requirements for smart inverters
- Smart metering and more granular usage data for residential customers
- More sophisticated resource-planning models that zoom in on local distribution network constraints to discretely value capacity and operational needs
- A focus on customer-centric reliability and grid resiliency
- Opening up wholesale markets to aggregated pools of resources that can now be sited at residential properties
This bottom-up evolution in the way utilities do business will fundamentally transform how we make and use energy.
Sunverge subscribes to the belief that the grid and its operators (utilities) exist in part to serve the good of society. Regulatory policies encouraging more granular electricity cost correlation and value stream enablement using informed strategies, not merely uncorrelated technology subsidization, will accelerate industry adoption of innovative technologies.
For the energy consumer, it’s the beginning of a whole new world of choice.
Kenneth Munson is CEO of Sunverge Energy, a California-based company founded in 2009 with the vision of integrating solar, storage, and smart controls to maximize value for both electricity consumers and providers.