Power outages caused by extreme weather events serve as all-too-frequent reminders of the vulnerability of buildings to grid disruptions. But what if building owners accounted for the value of avoided grid outages when deciding whether to invest in projects that could supply uninterruptible power after natural disasters?
A new study by researchers from the National Renewable Energy Laboratory (NREL) in collaboration with Clean Energy Group, a Vermont-based nonprofit, finds that “accounting for the cost of electric grid power outages can change the breakeven point for PV and storage system investment.”
In a summary of a paper submitted for publication, the authors write that “even though a PV and storage system might not appear to be economical under traditional cost-benefit calculations, placing a value on the losses incurred from grid disruptions can make a PV and storage system a fiscally sound investment.”
“In most cases,” they add, “incorporating the value of resilience will increase the optimal sizing of both the PV and battery systems.”
“It’s clear that placing a value on resiliency does increase the value of the project and increases the value that the combination of solar and energy storage can add to a project,” Seth Mullendore, vice president and project director for the Clean Energy Group, told GTM in an interview. “It definitely adds to the economic viability of a project.”
The value of resilience provided by solar-plus-storage in commercial buildings
The researchers modeled the results of solar and storage projects installed at three types of buildings in Anaheim, California: a primary school, a large office building and a large hotel. To place a value on resilience, the study used the expected cost of a power outage (loss of business or the liability incurred) based on values included in 30 utility customer surveys.
The study assumed that solar and storage systems can power critical loads, or about 50 percent of a building’s typical electrical load, during an outage. Modeled outages lasted two hours. Simulated outages were based on the Customer Average Interruption Duration Index values reported by utilities.
For each building type, researchers analyzed the net present value (NPV) of the solar and energy storage system. At the primary school, solar-plus-storage was economical even before accounting for the cost of avoided outages. After factoring in the value of avoided grid disruptions, the size of the optimal solar PV system increased by 20 percent to 134 kilowatts and the storage system increased by more than 13 times to 32 kilowatts/79 kilowatt-hours. The NPV under the resilience scenario more than doubled, from $28,759 to $58,399.
For the large office building, a solar PV system was economical before accounting for resilience, but an energy storage system was not. After factoring in the cost of avoided outages, the ideal configuration called for a 35 percent larger PV array and a 156-kilowatt/271-kilowatt-hour battery storage system. Combine the value of avoided outage losses with the increased electricity bill savings, and the net benefit for the building owner increased by $178,000 over 20 years.
Before placing a value on resilience, neither a solar PV system nor energy storage was cost-effective for the large hotel. After factoring in the value of avoided outages, a configuration with 363 kilowatts of solar PV and a 39-kilowatt/60-kilowatt-hour battery storage system was optimal. “In this case,” the authors write, “valuing resilience enables PV and storage to become the least-cost solution.”
The researchers note that building owners should plan for the added cost necessary to make a solar and storage systems islandable. They estimate that the necessary hardware -- including transfer switches, critical load panels, and controls -- could add incremental expenses ranging from 10 percent to 50 percent of the cost of a non-islandable system.
“I would call this a rather conservative estimate of the value you would get for a project from including the resiliency,” said Joyce McLaren, a renewable energy research analyst at NREL, in an interview. “The outages that we were looking at were relatively short compared to something you saw in Puerto Rico or elsewhere after a hurricane.”
Mullendore added that the resilience value used in the study -- avoided outages -- doesn’t fully capture the benefits provided by solar and storage systems after natural disasters or other life-threatening emergencies.
“When you get into the values when you are talking potential loss of life, or impacting quality of life,” he said, “it gets a lot harder to place a value on, but certainly it is a lot higher than when you’re just talking about business losses.”
An opening for solar-plus-storage to replace diesel generators
McLaren and Mullendore said they're not aware of any formal government effort to develop a national standard to value the resilience provided by solar and storage systems. But planning for grid disruptions caused by extreme weather events is a mounting priority for government officials.
“The reason we were interested in this,” said McLaren, “is resiliency is of increasing interest to a lot of building owners and other stakeholders, particularly city planners and city governments that are concerned about the impacts of power outages for extended periods of time.”
Mullendore cited one successful model, Massachusetts’ Community Clean Energy Resiliency Initiative, a $40 million grant program for local government projects that deploy solar panels, energy storage, and other clean energy technologies to avoid service interruptions.
Mullendore added that jurisdictions could do more to create an opening for solar-plus-storage systems by revising standards that favor diesel generators as the default backup power source for buildings.
“Those standards tend to be written with generators in mind,” he said. “So there’s not an easy opening for new, advanced technologies to play that same role, whether it’s energy storage or fuel cells. New technology solutions need to be allowed to fulfill the same role that generators typically have.”