by Julian Spector
July 30, 2018

A clean energy legend became fact, and we’re going to print the facts here.

Any energy transition enthusiast worth their value stack has recounted the theory that small-scale, distributed equipment can save a bunch of money for the bulk electricity system. With the right incentives, private capital could install equipment in customers’ homes that works together with the utility for the benefit of all.

You could argue that California’s commercial storage companies have made this happen, aggregating batteries at businesses for grid-scale capacity or demand response. And New York did something tangible for once with the Brooklyn Queens Demand Management substation upgrade deferral project.

But what about distributed energy at the smallest scale — in the home — and performing in real-world operations, not in some one-off pilot?

Now we’ve got it.

A heat wave descended on New England the week of July 4, sending electricity demand surging in the afternoons.

“You step outside and it was like stepping into mud,” recalled Josh Castonguay, VP and chief innovation executive at Green Mountain Power, Vermont’s largest utility. “When the humidity starts to ramp up, the air conditioning starts working hard.”

For the utility, that meant watching out for the New England ISO annual system peak, which sets a capacity charge that each utility in the region has to pay, proportional to their consumption during that hour. Those 60 minutes drive a considerable portion of the costs that GMP passes on to customers every year.

In the old days, utilities had to take the peaks more or less as they came. But GMP had a shiny new tool to wield: a fleet of Tesla Powerwall batteries installed in customer homes across its territory.

The heat wave, then, created one of the most robust natural experiments so far to test the efficacy of decentralized energy resources in reducing systemwide stress. Like a firefighter spraying down a burning building, GMP discharged the batteries when the peak was cresting, keeping it from rising higher.

Now the utility knows exactly how much electricity it would have consumed without the storage, and what system peak capacity charge it would have had to pay. It can compare that to its actual demand and resulting charge.

The result: at least $510,000 in savings, and an experience worth studying for anyone trying to optimize customer-sited energy tools to fight system peaks elsewhere on the grid.

The program

GMP talks a lot about serving its customers and embracing the future of distributed grids. The Powerwall program tackles both goals.

The utility began offering heavily subsidized Powerwall batteries to its residential customers in 2015, and followed up with a cheaper program in 2017 after the launch of the Powerwall 2. The homeowner can access the hot gadget for $15 a month for 10 years or $1,500 upfront, far below the (recently inflated) list price of $5,900.

It can’t do a lot for them, to be honest. With full net energy metering, Vermont residents have no economic incentive to shift around solar production or avoid consumption during peak hours.

However, they do suffer from the occasional winter storm, and the Powerwall promises clean, near-instantaneous backup power, which can recharge indefinitely when paired with rooftop solar generation.

Meanwhile, the utility gets a network of distributed batteries it can harness for capacity during monthly and annual peak events. It even got permission to rate-base the project, because it expects it to cover costs and return a significant amount of value to ratepayers overall — $2 million to $3 million in net value over 10 years

Critics of the program have questioned the customer benefit of paying out of pocket in order to host a tool primarily for the utility to use.

GMP’s outage data shows an average customer downtime of a little over two hours per year, Castonguay told me. That means some customers could pay more than their Netflix bill each month for a battery that will never be needed. Others, in more remote, wooded areas, might pay the same and call on the backup several times a year for prolonged outages. The value varies significantly based on customer circumstances.

For a while it looked from the outside like customer skepticism won out and adoption stayed low. Lately, though, the numbers tell a different story.

The program has installed 550 Powerwall 2 units, Castonguay said, with an additional 514 contracts signed and scheduled. Two to four units get installed each day. Another 622 are somewhere in the pipeline before the signing stage, joined by 30 to 40 newcomers each week.

GMP wants to sign up 2,000 units by the end of the year; that's out of a total customer pool of 265,000 meter locations.

“Is $15 a month going to work for folks when they think about the value of resilience?" Castonguay asked. "What we’re seeing in the rollout is that it is.”

Even getting one’s hands on that many units of the notoriously backlogged Powerwall amounts to the cleantech equivalent of parting the Red Sea. GMP initiated that relationship years ago, Castonguay said, even before the Powerwall had fully materialized as a consumer-ready product.

The program has tackled three main questions: Can the utility use the batteries to tackle peaks without causing other problems on the grid; does the battery provide a resiliency value to the host customer; and will the battery fleet reduce carbon emissions from peak capacity?

The peak approaches

Going into July, GMP's indicators warned that a peak was coming.

When the New England ISO's annual peak arrives, each utility in the region pays for its share of the peak demand, plus the reserve margin procured ahead of time through capacity auctions.

"Every megawatt we cut off our peak at the time is that much less that our customers have to pay into the New England capacity market," Castonguay explained. It's better than one-to-one savings, he added, because every megawatt consumed incurs a charge for the extra margin procured.

The utility leaped into action on Tuesday, July 3, which set a peak.

"That day we had all our systems aimed and ready to go," Castonguay said. "We went after that one and hit it."

On July 4, demand dropped due to the holiday. But the next day, it came back with a vengeance. Boston, a major regional load center, stayed hot. Burlington was breaking heat records.

The GMP team, watching in real time, had at its disposal nearly 3 megawatts of Powerwall capacity, plus a 1-megawatt/4-megawatt-hour Powerpack facility and the Stafford Hill battery plant.

"We started rocking and rolling around 4 p.m. with our systems," Castonguay recalled. "We shoot at a two-to-three hour window to make sure we hit it."

The peak arrived in the hour starting at 5 p.m.

GMP previously had been able to verify that the reliability role of the Powerwalls was working for customers, and the system had performed for monthly peaks, which drive payments to the transmission system. But this was the first time it had fired on an annual system peak.

“It was such an awesome test and proof positive of things functioning as expected,” Castonguay said. “We were able to hammer on that peak hour.”

The combined energy storage assets shaved $510,000 from the peak payment. And that was with only a small fraction of the targeted Powerwall deployment.

Yes, but does it scale?

This deployment generated a hard piece of evidence for the theory that distributed batteries can help out both host customers and the customer population at large.

Now the question is whether that success can translate to other jurisdictions.

From a technical perspective, there shouldn't be any obstacle to implementing a similar playbook in another utility territory, Castonguay said. The trick will be tailoring the program to the economics of the new location, as governed by the value streams available in that market. 

"Understanding what those are and how the batteries can capture them is going to give you a different outcome in terms of how much you're going to collect," he noted. "Maybe instead of $15, it has to be $20, or maybe $10 a month."

The regulatory context will influence the design of the program. As a regulated utility, GMP needn't worry about the competition concerns that arise when deregulated utilities try to own certain energy assets.

In New Hampshire, for instance, Liberty Utilities proposed an even more grid-edgy plan where customers would pay monthly for a Powerwall, entering them into time-of-use rates and collectively constituting a non-wires alternative to more expensive traditional grid investments.

That proposal, though, drew opposition from other storage providers who argued it would endanger the competitive landscape to have the utility owning those assets.

Regulators in other states may want to see smaller-scale testing of the concept before signing off on larger programs. Such an attitude would no doubt be couched in caution for the prudent use of ratepayer dollars, but would only delay the cost savings that ratepayers could receive from following GMP's lead.

Indeed, this is one of the few cases in which a utility can claim to have lived out the notion that fortune favors the bold. GMP didn't settle for a timid 30-unit pilot, or 50.

“We’re much more focused on executing for customers, rather than studying and planning and studying in planning," Castonguay said. "Can you produce the value or not?”

Even just a quarter way to its current 2,000-unit goal, the utility saved several hundred thousand dollars in one hour. That leaves one to wonder what could happen with thousands of home batteries ready to rock and roll.