Published on February 4th, 2016 | by Glenn Meyers62
The Looming Electricity Storage Threat Our Utilities Face
February 4th, 2016 by Glenn Meyers
Once upon a time, utilities were the keepers of the nation’s electricity storage and distribution infrastructure, or grid, as it were. Using plentiful coal, hydropower, and even natural gas, the job of keeping the lights lit has long represented a modern-day miracle. Flick a switch, and power up whatever might be needed, from a traffic signal to a rock concert, from a smart phone app to an air conditioner, from a drill press to a microwave oven.
So when coal was eventually regarded as a bad boy for spewing ridiculous emissions into the atmosphere and inflaming worries about global warming, gradual change began to take place for the electricity outlook. Coming to the rescue, renewable energy from wind and sun looked like an ideal energy solution for creating and distributing clean electricity. But these were incomplete solutions, as neither sunshine nor wind were ever going to be 24/7 propositions.
Thus our grid managers were able to straddle both sides of the power keepers’ fence, distributing growing amounts of electricity generated from renewable sources and contributing to a cleaner atmosphere, while still feeding the constant demands of a 24/7 grid with their warehouse of fossil fuels, still idling in their supply pipelines.
But with the advent of these clean energy alternatives came more in the way of change: a new breed of renewable energy customers, individuals wanting to be paid for the electricity they produced and fed to the grid. Terms like distributed energy and net metering became commonplace in the vernacular of the grid, spurring face-offs between demanding residential and commercial clean energy suppliers, the power utilities, and state public utility commissions charged with policing all commerce that took place.
Not all state utility commissions agreed on how such commerce should be managed. Some commissions let net metering policies stand as they were, a slap to ongoing lobbying efforts from the utilities. Other decisions favored utilities, such as the recent one in Nevada, where a three-member board of the state’s public utility commission voted unanimously in favor of NV Energy’s pricing request to effectively eliminate what had been a net metering bonanza for solar electricity. Now this decision threatens to force the departure of three of this country’s largest rooftop solar installers and eliminating hundreds of rooftop solar installation jobs.
Like it or not, changes like these are part of the evolution of our infrastructure for electricity.
The question of who really owns all of this free electricity from the sun and wind has now reached another evolutionary stair step. Granted, the infrastructure and its maintenance is the responsibility of the utility, under the watchful eye of a state’s public utilities commission. And when the grid crosses state borders, the role of overseer and regulator grows dramatically in its complexity.
But a growing list of challengers question the need for select utilities to control the distribution of all electricity. This list, while relatively small, includes net metering proponents and off-gridders — those living comfortably off the grid, seeing the utility as an unwelcome monopoly. And let us not forget those many people who have long kept diesel generators on a standby basis, just in case something goes awry with the electrical outlets.
As it turns out, there is no shortage of people willing to gain more control of their own electricity, especially if they can produce it and store what’s left over.
Today, the way that customers view utilities and the contemporary electricity grid continues to change. Some of these changes have been propelled by technology innovations, potentially allowing people to use electricity on their own terms, away from a monthly bill. Innovative low-cost battery systems are being manufactured by companies like Tesla and Sonnen. Retail interest in such battery systems is escalating dramatically, so much so that Utility DIVE, a trade publication for utilities, recently posted this headline on Monday:
“Should utilities be afraid of Sonnen’s new community storage offering?”
Peter Maloney wrote, “No threat to a traditional utility business model would seem to be more clearly defined than the prospect of a community installing a combination of solar panels and storage in order to become independent from the utility grid, or at least substantially reduce demand.”
Pointing to the growing number of distributed renewable energy producers, Maloney provided this perspective: “Instead of selling excess solar power back to a utility at the height of the day, a storage system can store the excess power and release it in the evening when rates are usually highest. That could represent big savings for owners of solar-plus-storage systems and an equally large reduction in revenues for utilities.”
From distributed energy to storage
If distributed solar presents a threat to utilities, storage adds a completely new can of worms to this threat. Instead of selling excess solar electricity back to a utility at the height of the day, storage systems can store excess electricity and release it in the evening when rates are usually highest. “That could represent big savings for owners of solar-plus-storage systems and an equally large reduction in revenues for utilities,” writes Maloney.
Taking the idea of combining solar and storage further, Germany-based Sonnen launched an energy trading platform last year in its home market. By linking solar and storage devices into a virtual grid, community members can trade electricity among themselves and sell excess power into a wholesale market, potentially cutting the incumbent utility out of the picture.
Such a platform may soon exist in the US. Have no doubt about it: the company’s disruptive storage platform will significantly impact the US electricity marketplace. Aptly, Sonnen CEO Boris von Bormann has said, “We are the Airbnb of energy.”
Then there is Tesla, which recently announced a new version of the Tesla Powerwall, another storage device which has turned many heads in the solar industry, states Utility DIVE’s storage newsletter:
“Tesla’s April 2015 announcement of the first versions of the Powerwall and Powerpack batteries is often referred to as the moment that energy storage “went mainstream” in the U.S., sparking widespread interest in the technology inside the utility sector and beyond. The Tesla announcement was followed by the entry of competitors into the residential storage space like Orison and Sonnen, both of which recently announced residential storage offerings of their own in the United States.”
Von Bormann has said Sonnen, now with offices in Los Angeles and Georgia, will offer storage ownership with an appealing financing package. A 4-kWh Sonnen storage system would cost just under $10,000 and have a 6.5 year payback period in a state like Hawaii, which eliminated net metering.
While the impact on utilities has not yet been determined, it is reasonable to anticipate some drop-off in a utility’s electricity revenues if such storage devices gain traction in the consumer marketplace.
Remembering the evolution of IT storage
If the growth of the IT industry is any indicator, it is reasonable to expect electricity storage platforms to rapidly evolve as pricing declines. Just look at what today’s smartphones can accomplish when compared to a state-of-the-art computer 10 years ago. Remember Moore’s Law?
“The observation made in 1965 by Gordon Moore, co-founder of Intel, that the number of transistors per square inch on integrated circuits had doubled every year since the integrated circuit was invented. Moore predicted that this trend would continue for the foreseeable future.”
Utilities are definitely keeping their eyes wide-open concerning the future of stored electricity. Consolidated Edison is reportedly exploring behind-the-meter batteries through its Clean Virtual Power Plant project, and Vermont utility Green Mountain Power has teamed up with Tesla to offer its Powerwall battery.
Maloney believes such partnerships are good for municipal and cooperative utilities, ones not driven by the same profit motives as investor owned, cost-of-service utilities, to invest in battery storage to cut peak demand.
“The municipal utility in Minister, Ohio, in September teamed up with developer Half Moon Ventures to build a 7-MW storage system that will have multiple revenue streams. And last year, American Electric Power, one of the largest and most traditional utilities in the U.S., embraced that model when it signed a deal with the city of Clyde, Ohio, to build, own and operate a 3.6-MW solar array for the city under a 20-year power purchase agreement.
“AEP is taking a similar approach with energy storage. Last September, AEP invested $5 million in Greensmith, a provider of energy storage software and integration services. AEP’s attitude is not “We know best,” but “What is your energy issue and how can we partner with you?” spokesperson Melissa McHenry said.
” ‘Right now everyone is still trying to figure out energy storage,’ Mandel said, and utilities seem to have a different perception of storage. They see it as less of a threat because the dispatch is controllable, he said.”
Utilities will certainly stay tuned. Keeping pace with accelerating changes in the overall electricity distribution network and the most cost-effective storage platforms promises to be huge issues this year.
Just remember Moore’s Law.