While some California utilities have been in the news lately for blocking homeowners from backing up their rooftop solar panels with batteries (we’re looking at you, Southern California Edison), another is working on solar-storage combinations that help the grid and residents alike -- even if it takes a couple of trips around the block to make it work right.

The utility in question is Sacramento Municipal Utility District (SMUD), the publicly-owned power provider that’s rolling out a wide array of smart grid technologies and tech-enabled services to its 600,000 customers, helped along by the $127.5 million Department of Energy smart grid grant it won in 2009.

The solar-storage project is the 2500 R Midtown housing development, where 34 homes have been outfitted with solar panels and a combined lithium-ion battery pack, inverter and power control system, all contained in a closet-sized box built by Stockton, Calif.-based startup Sunverge Energy.

Patrick McCoy, SMUD’s solar program planner, described the project’s goals as not just to test whether the technology works, but also to see how it can support the peak-shaving, grid-balancing and customer energy-saving concepts that SMUD and the DOE have in mind.

“We’re thinking, 'Is there a way to capitalize customer capex, having to do with PV and batteries?'” he said during a panel moderated by Greentech Media’s Stephen Lacey at Tuesday’s VERGE conference in San Francisco.

Given that almost all battery-based solar energy storage projects are utility pilots right now, that may sound like a speculative question. But with customer-owned solar PV systems booming in California, and customer-owned energy storage emerging as a viable, if still uncommon, option for homeowners and third-party solar installers like SolarCity, it’s starting to look more like an accurate forecast of the future.

Many of those customers, who can get paid more by utilities for their net-metered solar than they return in power bills, are seen as a threat to the continued survival of utility business models. That’s a particularly pressing problem when it comes to “net-zero-energy” homes, designed to use no more grid power than they generate over the course of a year, as is the case with the 2500 R development.

Still, if those homes can be used as a resource to help utilities meet renewable portfolio standards and carbon reductions goals, “In that perspective, I think it’s an opportunity,” McCoy said. (The confluence of solar, energy storage and utility business models will be part of the conversation at Greentech Media’s U.S. Solar Market Insight 2013 conference this December in San Diego, Calif.)

Trial and Error on Battery-Backed, Grid-Integrated Homes

That doesn’t mean that SMUD has solved all the problems involved. Speaking after the panel, McCoy got into some detail on the long path the utility has taken since it started testing out combinations of solar systems, inverters, batteries, home energy controls and grid integration systems back in 2009. 

That’s when SMUD launched its first battery-backed solar home project with DOE, SunPower and GridPoint, the once high-flying, richly funded smart grid startup that has since failed to deliver on any of its multiple lines of business.

That $6.4 million project (PDF) used a combination of in-home solar battery-inverter devices from Baxter, Minn.-based startup Silent Power and community energy storage systems from French battery giant Saft. Arlington, Va.-based GridPoint did the technology deployment and grid integration, and Navigant Consulting did project management support and business analysis.

But the project ran into all kinds of problems, McCoy said. First off, many of the battery packs failed far earlier than projected, leading to project delays and additional costs, he said.

Beyond that, the project design placed the solar PV systems and the batteries behind separate inverters, which meant that power from panels to batteries went through two separate conversions, leading to power efficiencies falling to as low as 60 percent, he said.

The new project with Sunverge should avoid many of those problems, however, he said. The company’s UL-certified Solar Integration Systems (SIS) combine batteries, power electronics and multiple energy inputs in one box, avoiding the problem of DC-to-AC-to-DC conversion losses, and it manages the interplay of those systems from its cloud-based software platform, which simplifies integration with utility systems. (Here’s a link to a 2011 Greentech Media article on the startup’s business plan and the roots of its core technology for monitoring solar-battery power flows and integrating it with the grid.)

Finding the Win-Win for Customers, Utilities

That still leaves plenty of issues for SMUD to figure out, including how best to use its Silver Spring Networks smart meter network and its raft of demand response and pricing programs to get those customer-owned systems to meet its grid needs.

So far, California’s investor-owned utilities have taken the stance that solar-equipped customers are both a destabilizing force to the grid and an economic burden for the rest of utility customers, who may end up paying more in rates to cover the diminishing share being paid by solar system owners.

The solar industry and its supporters, in contrast, have claimed that the state's IOUs are throwing up roadblocks to the spread of rooftop solar, from seeking changes to state ratemaking policy to make it less economically viable, to denying net metering contracts to customers who add batteries to their solar-equipped homes, as Southern California Edison and Pacific Gas & Electric have started to do this summer.

On the latter point, “There are multiple sides to this debate,” McCoy said. On one side, he sees the problem that could come from misusing systems by storing grid power and then feeding it back to the grid under the guise of solar power, as the IOUs have claimed. On the other hand, he said, it’s possible for utilities to ask the question, “What do we care, as long as the battery storage helps us manage peak demand?”

That’s an important point, because for most utilities, including SMUD, demand peaks between 4 p.m. and 7 p.m., when people come home from work and start turning on their air conditioners, televisions and household appliances. But that peak comes hours after solar systems have reached their top generation capacity and start falling away, making storage a useful tool for shifting that solar power to meet system needs.

SMUD is exploring different ways to incentivize battery-backed-solar customers to do that, he added. Of course, as a publicly owned utility, it has more freedom to create rate plans and variable pricing programs than do investor-owned utilities, which must clear any such changes with state public utility commissions in complex rate cases that take years to put into effect.

SMUD also has more leeway than the IOUs under California’s plan to mandate its utilities to add an unprecedented 1.3 gigawatts of energy storage to the grid by 2020. While the IOUs are being asked to comply with strict biannual procurement targets by the California Public Utilities Commission, public utilities like SMUD are facing a less-onerous process administered by the California Energy Commission to consider storage targets.

Still, McCoy noted that these differences don’t exempt SMUD from the same fundamental responsibilities that all utilities share. “We can’t refuse service to anybody,” he said, no matter what combination of distributed generation and energy storage they choose to install on their own property.

That means that customers and regulators need to recognize, “as regards to design standards, as regards to standards around inverters, that these are part of processes as a whole, and they’re done to ensure that the grid is reliable, and that it’s safe.”

Don't miss the annual U.S. Solar Market Insight Conference in San Diego this year. The two-day event will take place December 10-11, 2013 and feature speakers from FERC, NRG Solar, SEIA, GTM Research, Jinko Solar, and more.