The storage industry and the power sector more broadly have pushed ahead even as coronavirus uncertainty brought the economy to a standstill.
Here at Greentech Media, we pride ourselves on giving you the straight talk, not puffing up stories to feel good. We cover the industry with a skeptical eye in the hopes of addressing some of the crucial questions that lack easy answers. For unmitigated Elon Musk worship, you’ll have to look elsewhere.
But that doesn’t mean that we can’t report encouraging news — when the facts support it. As I scanned through recent headlines, they struck me as falling into two contrasting categories: fallout and crushing uncertainty from the coronavirus pandemic, on the one hand, and on the other, feats of accomplishment happening nonetheless.
Since I devoted last week’s column to a preliminary exploration of the coronavirus impacts on storage activities, this week I'll explore the brighter side of the duality: the strides that storage professionals and the clean energy sector are making in spite of this unprecedented crisis.
Major storage deals are still getting signed
In case you missed it heading into the weekend, sPower signed a contract with Southern California community-choice aggregator Clean Power Alliance to build a 100-megawatt battery outside Los Angeles in a timeframe of a little over a year. The parties held a virtual signing ceremony over video conference last week.
This story intersects several storylines we’ve been tracking:
- CCAs are proving themselves to be a reliable and robust market for storage. These local power purchasers have only been around for a few years, but despite scant credit histories and small staffs, CCAs up and down California have put together significant storage deals. The projects help them fulfill resource-adequacy obligations to the state, but they also serve the mission of enabling a lower-carbon grid. If you add up all the CCA deals, they easily outrank many entire state storage markets.
- Storage vs. peakers. Clean Power Alliance has to obtain capacity on behalf of its 1 million customer accounts; instead of going the traditional route, with natural gas, it only looked at battery storage. In that sense, the new storage is taking the place of gas, even if it’s not replacing an existing plant. Once operational, it will bid into the market during peak hours, competing with the gas generators for dispatch. Instead of burning fuel, it will have the opportunity to load up on cheap electricity at a grid node surrounded by utility-scale solar plants, and then arbitrage that power for the evening peaks. Clean Power Alliance Executive Director Ted Bardacke told me he wants the project to prove through its operations that storage can serve California’s peak power needs.
- The storage industry is learning fast. Since the largest battery in the world has a discharge capacity of 100 megawatts, I refer to the “100 Megawatt Club” as an arbitrary distinction for the energy storage big leagues. With this project, renewables developer sPower jumps into the 100 Megawatt Club without having completed any large storage elsewhere. And it’s happening at a rapid clip: The timeline from bid to contract was less than six months, and now sPower has until August 2021 to finish the largest battery on the planet. Compare that to the AES Alamitos storage plant, which will be the same size. Southern California Edison awarded that contract in 2014, giving AES seven years to build it. These days, developers can do big things with surprising swiftness.
The grid still works
Not many critical supply chains can absorb a sudden and massive shift from commercial distribution channels to reaching individual consumers.
Toilet paper has become emblematic of this challenge: as Vox reported, the current difficulty in finding the precious rolls (sold out in every L.A. store I’ve been to, unless you track when the resupply shipment arrives and camp out for it) derives from how much paper used to be consumed in office or business settings. Stay-at-home orders triggered a shift in demand from B2B to B2C, and the supply chain couldn’t keep up.
Electricity demand followed the same shift. Commercial loads are down, residential demand is up; the impact is especially strong in New York City, where weekday morning demand has fallen as much as 18 percent for certain hours. But we haven’t seen any rolling blackouts as a result. This speaks to the durability of electrical distribution infrastructure and the hard work of utility crews to keep everything humming when so much else abruptly stopped.
Energy storage is meant to build a little more slack into the instantaneous balancing of supply and demand. The current success in navigating shifting grid demand could imply that actually the grid can handle itself just fine, thank you very much. But that’s right now.
The outlook for capacity additions shows that renewables are dominating new construction, pushing supply in an increasingly volatile (albeit low-cost) direction. If a situation like this recurs in five or 10 years, it follows that storage will have a more vital role to play in smoothing the sudden shifts in how and when people consume power.
Clean energy is modeling stability compared to the incumbents
Renewables and storage companies, on the whole, have managed to avoid the kind of flagrant meltdown that the oil and gas industries are going through right now.
The dirty secret about oil is that the world produces way too much of it for the product to stay profitable, so the global industry for decades has carefully throttled production to keep it artificially scarce. The U.S. shale revolution undermined such global planning, by opening up massive new reserves in a place where competitive market participants decide for themselves how much to drill. But the demand drop from COVID-19 took things to another level.
Low demand sent prices down to rock-bottom territory, revealing that quite a lot of projects rely on significantly higher prices to make any money. U.S. companies slashed jobs and executive salaries, while the state-run players in OPEC+ scrambled to agree on cutbacks, which President Donald Trump urged them to do.
All of this exposed a central contradiction in the fossil fuel economy: It’s a supposedly competitive marketplace in which all the key players have a vested interest in keeping prices artificially high. Here’s how the Consumer Energy Alliance, a fossil-industry-backed advocacy group, tried to spin the recent OPEC+ cutbacks: “While we are always in favor of affordable, reliable energy prices for families, farmers and small businesses, no one wins when prices are so low that American energy producers have to shed thousands of jobs.”
The Consumer Energy Alliance says it wants energy to be cheap for consumers — just not too cheap. Too cheap is bad, and global cartel management is good to prevent excessive cheapness for consumers.
Compare this boom-bust cycle and desperate attempts at crisis management to what the clean-energy industry is going through right now. Solar, wind and storage companies are grappling with construction delays linked to permitting slowdowns and safety measures, and some have laid off staff to cut costs. But the actual value of the projects they’re building didn’t plummet overnight. Clean-energy providers didn’t need a government slush fund to bail them out (not to say they wouldn’t take one if offered) or a global cartel agreement to raise the price for their energy.
For an up-and-coming sector of the energy industry, renewables and storage look much more even-keeled and dependable than the “mature” incumbents right now. Fossil producers responded to the coronavirus moment with a frantic effort to make their form of energy more scarce. Clean-energy providers stayed the course on making clean energy more abundant.
Residential installers finally switch to virtual sales
Almost all residential storage comes packaged alongside rooftop solar, so the health of those two products is inextricably entangled. The success of rooftop solar vendors matters even more in places where the resilience of battery backup has material implications, notably the regions of California threatened by wildfire-related blackouts.
The coronavirus pandemic threatened to cripple rooftop solar sales by thwarting the industry’s go-to strategy: in-person sales. The conventional wisdom held that you couldn’t sell solar without the kitchen-table pitch. At the same time, the industry groused about how much it had to pay to acquire customers.
With face-to-face meetings off the table, some of the more tech-savvy solar companies have jumped to entirely digital sales with impressive speed. I surveyed some of them for this story, and the refrain I heard was that sales were down from the norm before the coronavirus hit, but way up from the first days of the crisis when they stopped in-person meetings.
Remote sales still provide the personal touch that’s needed to seal solar and storage deals, but it provides several other benefits. With basic software that was already available to companies, the transition is super easy. It cuts out travel time for sales reps, saving time and money.
It also serves customers by letting them make a decision free from face-to-face pressure while still getting all the information they need. The ability to record digital conversations encourages honesty and forthrightness from salespeople. And for the generations raised on e-commerce, this offers a much more natural-feeling way to make a purchase, even if it comes with a considerably larger price tag than the usual Amazon order.
We don’t have good data on exactly how successful the residential solar-storage companies have been with this new approach. The market will take a blow from its recent record-breaking quarters. But the companies willing to innovate are finding new and better ways to reach customers more efficiently, and those skills will be valuable well beyond the still-unknown duration of the current crisis.
