Published on September 26th, 2018 | by Charles W. Thurston0
Utility Solar + Storage Accelerates Ahead Of Expectations — #CleanTechnica at #SPI2018
September 26th, 2018 by Charles W. Thurston
The U.S. utility market for energy storage this fall is warming ahead of expectations, with requests for proposals accelerating from a mild demand level earlier this year. This firming 2018 market was not predicted by some storage system manufacturers until two years from now, when more field performance data will be available to confirm manufacturers’ claims.
The current demand timetable is “a profound shift and one that is faster than we anticipated,” says Hugh McDermott, the senior vice president of development and sales for iron flow battery maker ESS, based in Portland.
This acceleration in demand in the market — estimated at close to 2 GW of energy storage capacity for a 4 hour period — was echoed by other industry execs during the opening day of the Third International Battery & Energy Storage meeting here in Anaheim, California.
“We’ve definitely seen solar-plus-storage ramp up in last two years, and it will continue to do so as long as we address performance risk, load risk, and tariff risk,” says Peter Nulsen, a director at Generate Capital, a renewable energy system builder, owner and operator, based in San Francisco. “We also must have multiple revenue streams, installation incentives, utility programs, demand response, and additional host services opportunities,” he suggests. The incentives can also be put together, including programs from federal, state, and local jurisdictions, he adds.
Both of the officials were among speakers at the opening session of the IBESA meeting, which started just ahead of the Solar Power International convention also taking place this week in Anaheim, hosted by the Solar Energy Industries Association, or SEIA, and the Smart Electric Power Alliance, or SEPA.
Demand Growth Follows Savings Gains
Nulsen suggests that the key reason for the growth in utility solar-plus-storage demand is that the two technologies together offer a 20% to 30% energy gain over solar by itself.
Several examples were provided during the session of recent tests involving energy storage, which have been conducted around the country. The examples are seeking to establish the viability of storage in providing multiple revenue streams through the utility services they provide. These included one test with JLM, a multi-state utility that pays for energy storage service.
As the utility demand for energy storage quickens, the interest in systems that can provide power for longer hours is also increasing, says McDermott. “Over the last five or six years, as battery storage became mainstream, the first wave of requested performance was 15 minutes to 30 minutes, but this year, the first utility-scale system of 4 hours has been installed, and recently we were asked by a utility to bid on a system with 6 hours of energy capacity,” he says.
Storage Financing Models Evolve
As the energy storage market unfolds, the most widely accepted financial model for customers will slowly be revealed. At present, there are three models in the market, including a standard Power Purchase Agreement, the least financeable, a Hybrid PPA, which is more financeable, and a kW-based PA, which is the most financeable, says Nulsen.
In the case of the standard PPA, the customer makes a single payment in dollars per kilowatt-hours, so that the cost of the storage is amortized by the base rate. “While the PPA may only cost 10 cents for the energy generated, the storage may yield 14 cents, so the PPA is offset by added demand savings,” explains Nulsen.
In the hybrid PPA, one part is a fixed dollar amount paid for the solar energy generated, and the other is a fixed payment sized against the expected demand response from the battery, Nulsen continues.
And in the kWPA, there is one payment for solar energy and one payment for storage based on the amount of kW shaved from the customer bill. In such a contract, the developer provides a performance guarantee for baseline kWs shaved per year, Nulsen says.
Part of the challenge of providing an energy storage customer with a peak shaving guarantee is having a software and monitoring system that is capable of executing energy arbitrage according to a customer’s best interest, reckons Nulsen. “Software system optimization is of the most challenging requirements to predict and shave demand peaks; it’s a lot harder than it looks,” he says. That task can also be complicated by the calculations comparing multiple value streams. “We often bring a few software companies in for a deal when we have worked with them before,” he says.