A growing number of utilities are exploring opportunities to develop networks of residential energy storage systems throughout their grid. When properly developed, these programs can provide numerous benefits to both utilities and their customers:
- Reduce peak demand—avoid transmission and distribution upgrades and costly peak generation
- Integrate higher levels of distributed generation
- Improve resilience for customers
- Increase customer engagement and develop new products and services
- Gain greater visibility into usage behind the meter
Given the multitude of potential benefits, residential energy storage is a growing topic of interest among utilities. Projects launched to date have taken different forms around the world depending on the specific needs of utilities and local market structures, such as those in New York, Vermont, and Australia. Working with a diverse group of utilities, Navigant Research has identified best practices for residential energy storage programs and organized them into three key categories: program design, customer adoption, and implementation.
Key to any early stage residential storage initiative is establishing a program that is well-defined but highly flexible. These programs should be developed as if they were full commercial offerings, rather than solely pilot projects, with defined revenue streams and payback/performance targets. As the technology and business model are new to most utilities, it is important to allow for the program to evolve over time based on customer feedback and any technical issues that may arise. Program directors should plan to identify and implement lessons learned as they gain a greater understanding of the impacts and benefits.
It is important to ensure that presenting the program to customers is kept simple, as most customers are likely to be unfamiliar with distributed energy storage technologies and their value. Programs should be designed to target existing concerns or desires of customers. For example, many residential customers place a premium on the ability to have backup power. Some early residential storage programs have marketed their offering mainly as a backup power solution to customers. However, the systems will be used primarily as a tool for the utility to reduce peak demand and congestion in certain parts of the grid.
When implementing and operating a residential storage network, the focus should remain on having a program that is both well-designed and flexible. By defining the necessary operating parameters and specifications, utilities can select the best vendors and products to meet their requirements upfront, limiting the need to add or change suppliers. A key aspect of this is determining the operating specifications for systems up front, while also planning for them to change over time. For example, identifying what percentage of battery capacity must always be held in reserve in case of an outage to ensure customers have backup power. Additionally, the optimal charging and discharging patterns to align with grid needs in each area is an important consideration. These types of parameters should be determined upfront; however, they are likely to change over time and program operators should have a plan in place to make the necessary adjustments.
The residential energy storage industry is evolving rapidly as new products and business models are developed around the world. New potential revenue streams for these systems, such as frequency regulation, may begin to emerge over the coming years. Ensuring that change and evolution are part of any program upfront will enable utilities to realize the maximum benefits of this technology while reducing the risk of stranding assets.