Shaving the peaks off commercial and industrial (C&I) electric bills is the top revenue stream for energy storage systems, and given the trend in increasing utility charges for time-of-use consumption, peak shaving can pay for a system in as little as three years, system providers say.
Just how high the peaks need to be in order to justify the investment in an energy storage system varies with geography and jurisdiction, but in general, demand charges of $15 to $20/kW or more are clear candidates, says John Merritt, the director of applications engineering at Ideal Power.
“The vast majority of converters we sold for storage systems in the past year went to California, with eight out of 10 used in applications for peak shaving,” Merritt says. “With the California incentives and the federal tax break, C&I customers can get a payback in as little as three years and in other cases in four or five years.”
A $15/kW demand charge threshold for economic feasibility also necessitates a 50-kW monthly usage level within the peak charge range, suggests Ellen Howe, VP of marketing and corporate development at JLM Energy, based in Rocklin, Calif. Her colleague, Nate Newsom, VP of enterprise sales, says, “Commercial entities that spend 3 percent or more of their monthly budget on electricity and/or experience 40 percent to 50 percent [higher than normal] demand charges typically are a good fit for energy storage.”
The C&I market is virtually untapped
Analyzing the C&I market for energy storage usefulness, the National Renewable Energy Laboratory in Golden, Colo., started with the assumption that demand charges of $15/kW or higher typically result in favorable economics for energy storage projects. Then, counting rooftops, NREL determined that “Of the nearly 18 million commercial utility customers in the United States, almost 5 million of them are exposed to, or could be exposed to demand charges of $15/kW or higher that would indicate cost-effective opportunities for energy storage.”
While not every potential C&I customer will bite the bullet for a stand-alone energy storage system, aggregation through community solar projects, or virtual power plants (VPP), is increasingly an opportunity.
Tesla is among the storage providers that is now active in community solar, with a high-profile October rollout of its commercial-scale Powerpack system at Puerto Rico’s Hospital del Niño, a children’s hospital in San Juan. As of April, Tesla had provided commercial Powerpacks and residential-scale Powerwalls to over 600 locations, with the count rising daily. The company has been quoted stating a goal of providing up to 40 percent of the island’s power storage needs via community solar system build-outs.
One new provider of VPP services is solar converter maker SolarEdge Technologies, which in May announced a solution for grid services and virtual power plants, thanks to its recent acquisition of Gamatronic Electronic Industries. The solution includes grid services of aggregative control and data reporting that enable the pooling of PV and storage in the cloud for the creation of VPPs.
Fig 1. Example of the steep savings achieved just through shaving peak demand.
Storage + trackers (plus pumps, plus…)
A relatively new storage configuration for C&I customers is the use of storage with solar trackers, like the 1.1-MW project at the Maharishi University of Management in Fairfield, Iowa. This project will use the NEXTracker NX Flow integrated solar-plus-storage system, in combination with an Ideal Power SunDial Plus converter and a Vanadium flow battery. The project is NEXTracker’s first large-scale installation of the NX Flow solution.
Another budding C&I application for storage is with water authorities, which can typically generate energy from solar for less than it costs to pump water uphill for a discharge to a generator turbine. The San Diego County Water Authority, for example, won $1 million from the California Public Utilities Commission to install intelligent energy storage that will tap the energy from solar panels already installed at the SDWA’s Twin Oaks Valley Water Treatment Plant.
The SDWA energy storage project, being operated by Santa Clara-based ENGIE, is expected to save an estimated $100,000 per year by storing low-cost power for later use during high-demand periods for peak shaving. The storage will help the plant cope with its highest energy use period, during peak afternoon hours. ENGIE acquired majority control of energy storage management software leader Green Charge in 2016.
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The backbone of storage: data crunching
It is tricky enough to coordinate a community solar or VPP operation, providing power on demand to participants and storing the rest until the utility calls for help. But knowing precisely what times, and advising customers as to when it is most optimal to use grid energy, or substitute with storage, is another matter, thanks to U.S. utility rate mayhem.
NREL notes that “There are almost 3,500 electricity providers in the United States, and each one has their own set of tariff sheets, rate structures and pathways for compensating non-utility-owned energy generation.” Add a dynamic dimension of rate evolution arising from rate cases, and it becomes a bit difficult to keep up with when it is most economic to use how much power.
Here the data crunchers enter the fray. Stem, for example, recently launched its Athena analysis product, which uses artificial intelligence to learn, predict and optimize energy in real time. Athena collects data at a rate of 400 megabytes per minute to continually fine-tune its algorithms. The system also has learned from operating systems for over 5 million hours, from processing nearly 200 million data intervals and from running over 35 million project simulations. As a result, the system decides and tells the battery when to store and to discharge power, responds to demand response opportunities and methodically shaves peak utility rates.
Stem has working relationships with eight utilities thus far and expects that number to grow significantly as the company helps shave peak demand, which is costly on both sides of the transformer. Stem has been dispatching batteries into California’s wholesale energy markets where it responded to more than 600 calls from state grid operator CAISO last year, according to the company.
On top of new legislative challenges, the industry has faced high and growing customer acquisition costs over the past few years. According to GTM Research, customer acquisition costs on average now represent a disproportionate 17 percent of the total system cost. This is where a new service from Urjanet, a global leader in utility data aggregation, comes into play. Its new Utility Data for Solar, a data-as-a-service solution that provides on-demand access to residential and commercial energy usage, cost and location data from more than 900 electric utilities in over 15 countries. Urjanet Utility Data for Solar enables a more cost-effective, customized approach to selling solar systems that allows vendors to effectively focus on the needs, requirements and situation of each residential or commercial buyer.
Fig 2. Here’s where the harshest demand charges are across the U.S., courtesy of NREL.
Storage as a service emerges
When solar leasing became popular, the common knowledge about actual savings from such arrangements was about 15 percent of a residential utility bill, if that. With C&I customers, the savings opportunities are as high as the sky or at least whatever the utility bill looks like pre-storage.
JLM Energy is one of the latest energy storage solution providers that offers financing for energy storage customers through a $25 million project financing fund. The company uses a lease structure to achieve shared savings on a monthly basis for 20 years, with no upfront cost. JLM owns, maintains and guarantees system performance.
Stem has long been financing storage solutions, and now has a $500 million investment pool from which it can draw to finance a project, thanks to a host of private sector investors, including the Ontario Teachers’ Pension Plan.
Wall Street may not have climbed onto the PV wagon when the industry began to mature, but the storage peak-shaving proposition apparently seems as clear and understandable to such investors as the bottom line of the utility bill.
Charles W. Thurston is a freelance writer covering solar energy from Northern California.
— Solar Builder magazine