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Published on February 4th, 2016 | by Glenn Meyers


The Looming Electricity Storage Threat Our Utilities Face

February 4th, 2016 by  

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.

electricity distribution shutterstock_123527116Thus 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.

utility cover shutterstock_193464239

San Francisco utility cover

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.”

electric meter register 35 yr old shutterstock_270848840Utilities 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.

Images: Electricity distribution via Shutterstock, San Francisco utility cover via Shutterstock; 35-year old electric meter register via Shutterstock

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About the Author

is a writer, producer, and director. Meyers was editor and site director of Green Building Elements, a contributing writer for CleanTechnica, and is founder of Green Streets MediaTrain, a communications connection and eLearning hub. As an independent producer, he's been involved in the development, production and distribution of television and distance learning programs for both the education industry and corporate sector. He also is an avid gardener and loves sustainable innovation.

  • LuapLeiht1

    “If the growth of the IT industry is any indicator”

    Unfortunately, you can’t just use the IT industry as an indicator for whatever you want. Moore’s law is applicable due to improved miniaturization and production capabilities unique to semiconductor production.

    Energy storage is not an exercise in the small, but in the large. In this regard, it is more akin to the auto industry. In order to produce the storage this article says is necessary, industrial output rather than information advances is the key.

    If you believe that Moore’s law applies to industrial production, please point to an example where industrial output doubles every 18 months without a corresponding increase in inputs.

    The fact the author doesn’t seem to understand these basic facts leads me to disregard the rest of his points.

    • jeffhre

      “Energy storage is not an exercise in the small, but in the large. In this regard, it is more akin to the auto industry. In order to produce the storage this article says is necessary, industrial output rather than information advances is the key.”

      Li Ion battery prices have gone down an average of 7% a year for the last 25 years. Auto prices rise yearly with inflation, added safety and convenience features.

  • Uncle B

    When Saudi/OPEC decide to “run” the price of oil, as “Part Two” of their “Oil Play” on the Americas, and gasoline skyrockets, Americans, and likely all folks in the Americas, will seek and find very good electric cars, bikes, utility vehicles. From Teslas to China’s three motor Aoxin Ibis, every one of them store huge amounts of electricity and are charged according to computer programs that favor the owners. This includes the ability to discharge back into the system when most profitable. These gains offset the higher cost for electric cars. Then of course the wiser and richer investors with private and/or Co-op Solar Charging Banks/ Wind Turbine setups will have to be taken into consideration. A more recent development concerns consumer consumption. Smaller houses, increasingly modest lifestyles, far different from the 8 to 5 office workers or the shift workers in factories, will affect demand and time of peak demand.

  • Bob Vittengl

    Sonnen is the real deal , it’s not just a battery , but invertor , interface , that has 10,000 full cycles for life span , capacity to draw down to zero, Internet hook up so you can preset certain loads to come on after battery is fully charged , or you can deploy multiple devices from your smart phone, a/c , pool pump , washer or dryer, etc. And yes it also forecasts the weather days ahead so you can plan for energy use. this mixed with tiered electric pricing so utilities can use battery power in late afternoon after being charged by sun to help shave demand on a hot summer day to be recharged by grid at reduced rates in middle of the night.
    Sonnen and Tesla lead the way , yea 🙂

  • Roger Lambert

    “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.”

    And there you have it – the perfect argument to throw out the ” traditional utility business model “. Because ” a community installing a combination of solar panels and storage ” is a pretty good example of progress, of the future.

    Utilities should not be in the business of making a profit in an era when energy comes pouring out of the sky and sea for free. They should be in the business of making and distributing electricity at the lowest possible cost and in comfortable oversupply. They should all be run as community, State, or Federal entities and their costs of infrastructure and operations be paid for with local, State, and Federal taxes just like the National Guard or the U.S. Military.

    Having lights, and heat, and cooling, and transportation must be seen as basic unalienable human rights in the post fossil fuel age.

    If homeowners and communities can enjoy free electricity after paying off the cost of infrastructure, then all of us should enjoy the same benefits. And our utilities should be helping us, not fighting us, to do so.

    The people should own their energy future, not the corporations.

    • Mike Dill

      While this seems to make sense, the utilities want me to pay for the infrastructure that they put in for my use. That I do not want or need the infrastructure is irrelevant to them, and goes against their business model.

      • Roger Lambert

        Because you got yours, right? Another homeowner who paid for his power, but doesn’t like the idea of ensuring that ALL of get clean cheap energy.

        I get the same feeling when I hear some fat cat, who spends $40K to send each of his kids to prep school complain about how he hates to pay his local school tax.

    • Hans the Elder

      I don’t even think utilities should be in the business of making or selling electricity. Even if run on a non-profit basis, distributed power will always be a threat to a vertically integrated utility, and the utility will find ways to sabotage the distributed power. The only solution is to put a proper price on pollution, and let the free market rule production and retail. Only the grid is a natural monopoly and should either be publicly owned or a tightly regulated commercial enterprise.

      • Roger Lambert

        Who do you think should be making and distributing electricity if not utilities – the Cub Scouts? The local PTA?

        There are good utilities and bad utilities. We need to change their business models. Or nationalize them. Or, at least talk loudly and often about nationalizing them.

        • Hans

          Again you throw production and distribution on one heap. They are two different things.

          Power should be produced by different companies that compete with each other on a free market. Power should be sold by different companies that compete with each other.
          Only the grid is a natural monopoly.

          In most parts of Europe the traditional utility model has landed on the scrapheap of history. I can shop around for my power supplier.

          • Roger Lambert

            “Power should be produced by different companies that compete with each other on a free market.”

            Really? Says who? The electric utility sector is about 1/2 publicly-owned and almost none of it operates on the “free market”. You think we should have two or three duplicate utility systems, so they can ‘compete’ with one another?!?

            What you propose here is a radical privatization of the sector, which in my mind is the exactly wrong thing to do. Unless you enjoy paying corporations a lot more for our electricity than we need to.

  • goran

    From the little man´s wiew; -cut the wire! They will anyhow tax you to death or steal whatever vales you can produce.

    • Kyle Field

      Cutting the wire is generally really expensive and a big waste of resources if everyone were to do it. It’s much better if utilities move in the right direction (for the planet, for our pocketbooks) and drive change for everyone, at scale.

      • Jamset

        Off-grid homes avoid the transmission fees and losses.

        Maybe some taxes also.

        There are some off-grid mobile phone towers in Nevada.

        • Bob_Wallace

          Do you have any idea what their electricity costs?

        • Kyle Field

          Off-grid towers are a different study altogether and are a fantastic use case for solar+batteries. Running power and data long distances or in crazy terrain is expensive and is actually less reliable than solar+batteries.

        • jeffhre

          On grid homes with PV that produce more than they consume, avoid transmission costs and losses for utility companies.

      • Glenn Meyers

        Very sound point.

      • Mike Dill

        Absolutely correct. Unfortunately my utility does not share your perspective currently.

  • nitpicker357

    The Moore’s Law metaphor sucks. Battery storage, PV, Wind, … none of these are nearly doubling performance/device at similar cost every couple years.

    • JamesWimberley

      Yes, but the learning curve does generalize: costs fall with volume, at a rate which is surprisingly stable for a given technology. Also, the S-shaped logistic curve for adoption has been repeated for many innovations. The great exception is nuclear, with its unique negative learning curve and peaking well before saturation.

      • nitpicker357

        The learning curves for integrated circuits, disk drives, and genome sequencing all involved rapid halving of costs over time. They have dropped in price by a factor of 2 every couple of years.
        PV solar, battery storage, and wind are all coming down in price as a result of manufacturing experience, and investment. They have come down in price by about 20% for every doubling of volume.
        Renewables are starting to take over because of tipping point effects, not because of exponentially improving performance. The tipping point is less abrupt than it might be because the cost of renewables is variable depending on siting and other niche effects.
        It really doesn’t help to use the wrong model.

      • David Bakker

        Agree, but still: invoking Moore’s is wrong here. Moore said that the number of transistors on given area of chip surface would double every 1.5 – 2 years. So Moore is about technology and performance, not price.

        A standard-size solar panel currently has a maximum power of about 250 W. A comparison with Moore’s law might lead to people expecting that in 20 years from now, so after doubling 8 times or so, such a panel could deliver 2000 W. That is not going to happen.

        • jeffhre

          No it cannot happen – two doublings would allow that panel to produce more energy than the there is in all of the sunlight that hits it.

          So price is the primary concern. Whether through technological, manufacturing, process, engineering or efficiency – price drops are what matters.

  • Adrian

    If the utility gets paid to move kWh around, then it’s a massive threat.

    If the utility gets paid to ensure a reliable connection between generators and consumers, then it’s a massive opportunity.

    It’s all about aligning the motivation with the desired outcome, and it’s up to state legislatures to define the desired outcome. Well, ultimately it’s up to us to tell our state reps what their constituents want.

    Personally, I don’t actually want a reliable stream of kWh from my electric utility, or from solar panels and a battery bank, or a standby generator – those are just means of getting what I actually want and am willing to pay for…

    What I ACTUALLY want is a reliably comfortable, well-lit home, my tools to have the power needed to make them work whenever I need them, and a charged car each morning. Without having to think about how it happens, and without creating CO2 emissions. Can my electric utility be restructured to be compensated for providing that “service” instead, please?

    • Frank

      Yes, with a carbon tax, but it’s not the most cost effective way to do it. The utility has a large incentive to sell their own generation, and they get a guaranteed rate of return on everything they can convince the PUC to allow them to provide and charge for, and the more it is, the more they make. If you only let the monopoly utility handle the distribution, and let everybody compete for the rest, then the solutions will be more cost effective. I’m not quite sure how to handle transmission, but certainly if your solar production goes to your neighbor, there isn’t any.

    • Matt

      Thus the need to split generation from local distribution from long distance transmission.

  • Otis11

    Utilities only need to fear residential rooftop solar and storage if they depend on their antiquated monopoly model. Beat solar + Storage on price and people have no incentive to leave. Don’t, and well…

    • Kyle Field

      Good point. If I can install solar on my roof at $3.50/watt, they should be able to (already can) install it for less than half that. Kinda boggles the mind to think that they aren’t installing more solar + storage at the hundreds of MW levels in more places.

      • Otis11

        Especially since there’s nothing stopping them from offering to install it on customer’s houses. And given the ‘free’ advertising on customer bills they could get and the larger scale they could operate on (plus the lower regulatory costs since they’re involved in many of those) – I don’t understand why they can’t do that cheaper too.

        • nakedChimp

          Too big, too heavy.. the ones at the top don’t work like that – they see 2-4 years in that job and then on to the next, bigger, better, paying gig.

  • JamesWimberley

    Glenn is still thinking within the paradigm of the silo vertically integrated utility. This model survives in backwaters like Arizona, but it is not the future or even the present in advanced jurisdictions. The reference point has to be an unbundled monopoly transmission/distribution grid, and competitive suppliers of generation and storage. The problems he describes are much simpler within ERCOT or the UK’s National Grid, or for that matter in India. On storage, it’s easy to see that while solar panels are the same on 3 KW roofs and in 30 MW farms, storage has large economies of scale. In a genuinely open and competitive market, few houses would have batteries: large companies have access to a wider range of cheaper technologies, up to 1 GW pumped hydro plants. Residential storage is an indicator how unfree the market is.

    • bink

      No this model (vertically integrated utility) as you describe it is alive and well in the Western and Southeastern markets.

      • Hans the Elder

        It is clear that these outdated utility models are still in use. But should they? I think it is time that free-market preaching politicians should put the utility where there mouth is and split up the utility and let free markets rule production and retail, preferably combined with a carbon tax and strict limits on mercury pollution.

        • LuapLeiht1

          “let free markets rule production and retail, preferably combined with a carbon tax”

          Methinks you don’t understand what free markets are. If this comment was made in jest, I apologize.

          • Hans

            Methinks you have a very narrow definition of free markets.

    • newnodm

      “In a genuinely open and competitive market, few houses would have batteries”

      Home battery isn’t a purely economic decision for many people. Home battery is also control and safety. With a home battery, the home owner has a power system, not just panels on the roof.

      • JamesWimberley

        This is very much an American cultural thing: the rugged homesteader. Germans and Australians don’t mind being dependent on a community, and buy batteries because it pays. Also, American grids are very unreliable by German standards of under 15 minutes SAIDI. Reliability (buried distribution cables etc) is a big part of the price difference.

        • Jamset

          In Australia when there is a bushfire, houses get cut off from the grid.

          The water pumps cannot be operated, so houses are destroyed.

          In fact, some bushfires have been started by falling power lines.

          A recent report said

          • nakedChimp

            There is more people in cities than in the countryside worldwide.. those hand full of houses in the bush are negligible and don’t affect the big picture James had in mind when he was saying this.

          • Jamset

            They have wildfires in California also.

            More houses will go off-grid than you think.

          • jeffhre

            In California? Americans don’t think much in terms of reliability. Wildfires, floods. Who cares it’s cheap land! And reliability impinges on our freedoms.

            Putting power lines underground is a socialist inspired plot to steal our money and take away our giant transmission towers connected to drooping residential lines, surrounded by snow covered plane trees. (Oh, that reminds me, I should trim that tree soon)

          • Jamset

            Nice joke. But GTM says that in 20 states, rooftop solar power is at grid parity and that will be the case in 40 states by 2020.

            Batteries are coming down in price.

        • newnodm

          German’s spend more money on overbuilt housing appliances and fixtures than anyone else on earth.

          • Geek Alphabet

            …..paying for efficiency? that is of course what German’s a known for….

          • Uncle B

            America’s cars already built for less in Asian lands by SMART super efficient Asian manufacturers and astoundingly austere lifestyle Asian workers

            Solar Cell Tariff

            Did you know that American citizens pay huge “tariffs” on Chinese solar panels (200+%) because: American industrialists found it cheaper to bribe (lobbyists) government officials to impose “so-called’ dumping tariffs than to do as the Chinese have done: Become better Capitalists by Investing heavily in totally automating their factories, streamlining their production systems, spending on research for faster, cheaper, better, SMARTer ways to compete on world markets, spend money on scientists to make more efficient product. Who gets hurt by this pseudo-protectionism? The American peon alone.

          • Bob_Wallace

            Would you please link to proof that ” American industrialists found it cheaper to bribe (lobbyists) government officials to impose “so-c alled’ dumping tariffs “?

            And while you are at it explain how the EU was also bribed to impose “so-called dumping tariffs”?

          • jeffhre

            “America’s cars already built for less in Asian lands by SMART super efficient Asian manufacturers and astoundingly austere lifestyle Asian workers”

            You may want to revisit this theory – GM has said that they spend less than $800 per car on labor, for an average $25,000 – 35,000 car.

          • Bob_Wallace

            I wonder if the $800 labor number covers only assembly costs or also includes all manufacturing and shipping labor costs.

            If labor is really that low for a complete car (which I doubt) then we should see only the very low volume Rolls/Lambo cars built in one country and shipped around the world.

          • jeffhre

            Shipping is still relatively expensive. Lambos are imported – Accords are made in Ohio.

          • Uncle B

            Overbuilt or just with technologies Dumbed Down Americans cannot properly evaluate . . .

          • jeffhre

            “or just with technologies Dumbed Down Americans cannot properly evaluate”

            Some world views go forth so smoothly – with a cold Miller Lite!

    • ToddFlach

      The silo paradigm I find to be more curious is that battery storage is the only form of energy storage which is relevant. There is already a commercial energy storage business for making ice in warm climates during off-peak hours for use in daytime airconditioning, there is heat storage in cold climates during off-peak hours, and there are several thermal storage concepts coupled to steam turbines for late evening or off-peak production (energy-nest is one I know well-full scale pilot under operation in Masdar). There are even pilots for producing synthetic methane based on “surplus” electricity.
      All of these undermine the traditional utility business model. Unless the utility itself is taking a stake in the new solution. Some will, many will not, and the natural cycle of competition will play out.

  • eveee

    Microgrids are happening in Australia. Could be a deal for Hawaii, too.

  • Charlotte Omoto

    “… anticipate some drop-off in a utility’s electricity revenues if such storage devices gain traction in the consumer marketplace.” Yes, if seen in isolation. However, if the same utilities promoted EVs by placing charging stations then imagine if, for example, 10% of vehicles were electric. That should help offset electricity vehicles, I would think.

    • Glenn Meyers

      New revenue sources?

  • Tom Capon

    More battery storage can only help the grid and the climate. Every peaker plant in the country could be shut down and replaced decentralized battery storage. This will make the grid cheaper, greener, and more reliable. Good to know at least some utilities have an economic motive to install them. It would suck if those that are against net metering set their sights on behind-the-meter batteries and insist they get all the profits, control or both even though the customer paid for it.

    • Kyle Field

      In 5 years, battery prices and supply will drive this from a pure economic perspective across the board.

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