Navigant Research Blog

Energy Storage Access Issues for Low Income Customers

— June 1, 2017

The total cost of ownership of distributed battery energy storage systems (BESSs) has gone down significantly in the past several years. Given the anticipated continuance of this trend and the emergence of energy storage financing asset classes, Navigant Research expects the global market for residential Li-ion BESSs to reach $310.70 per kWh and commercial and industrial (C&I) Li-ion BESSs to reach $413.90 per kWh by 2026. The drivers behind the growth of this market will encourage the adoption of new technologies like rooftop solar PV + energy storage as well. However, the deployment of these technologies is often inaccessible to many low income customers who perhaps would benefit the greatest from the environmental and economic advantages of storage. Key barriers to the deployment of energy storage that low income households face include:

  • Lack of upfront capital resources
  • Limited appetite for tax credits
  • Poor housing conditions
  • Financing barriers

Energy Storage Providers Face Challenges in Serving Low Income Customers

The need and business case for low income customers for energy storage and other distributed energy resources (DER) is dependent on several factors (e.g., geographic location, housing type, regulatory structures, local electricity prices, and reliability needs). Historically, DER technology companies target suburban, middle- and upper-class customers partly because of favorable capital resource availability and financing credit scores. However, project developers are now focused on expanding their markets and are looking to develop the customer marketing and engagement strategies required to succeed in serving all their customers, particularly their low income contingent.

Community energy storage (CES) is an emerging new model for low income neighborhoods to overcome these hurdles while also lowering customer utility bills, reducing harmful emissions, and strengthening resilience in the face of potential grid disruptions. CES can meet customer needs and overcome barriers by:

  • Allowing co-ownership of energy storage assets through a utility-based customer subscription and cooperative financing structure, which shields project developers from the individual customer financial risks associated with typical project ownership.
  • Aggregating low income households across a diverse, regional customer base to enable larger, more cost-effective projects.
  • Providing subsidized loans, which gives low income customers the opportunity to prepay CES subscription costs at low interest rates.

Restrictions and Possibilities of CES

CES, like community solar, is an issue not only for low income customers, but also for those who do not own a house or have the correct building orientation (roof integrity, adequate room for battery, etc.). Both community solar and community storage vendors are working to educate building owners who rent to tenants to show the many benefits that having community assets could provide to its residents. Flexible ownership structures would help address the social justice of community solar and/or energy storage.

California’s proposed Senate Bill 700 (SB 700), known as the Energy Storage Initiative (ESI), is an example of how to properly incent the development of CES in low income markets. If passed, SB 700 would require the California Public Utilities Commission (CPUC) to establish an ESI to pair with its support of distributed solar generation, effectively creating an incentive program for solar customers to add storage to their systems. Additionally, SB 700 would require up to 25% of the money utilities collect from this initiative to be applied to the deployment of ESSs in low income neighborhoods and housing, along with programs to encourage job training and employment opportunities in the local community. If the bill passes, current ESSs that are eligible for rebates under the Self-Generation Incentive Program (SGIP) would be transferred to the ESI program.

Overcoming Barriers to Provide More Affordable Clean Energy

Barriers to accessing affordable clean energy are rooted in broader systemic issues that low income customers face, like lack of quality housing, education, employment, and healthcare. Community ownership of renewable assets can serve as recurring and long-term sources of revenue for residents. Proactive innovation will help ensure that low income homeowners and renters are not isolated from renewable energy technologies and their benefits.


New Energy Solutions Shaped by Local Challenges

— January 3, 2017

HydrogenThe transition to a renewables-based energy system is taking different forms in regions around the world. This stands in contrast to the traditional approach to energy infrastructure and development, which has been very much one-size-fits all, utilizing large centralized generation and standardized transmission and distribution systems. Moving forward, the optimal grid architecture and mix of energy generation and storage technologies will vary based on the particular needs and resources of a given area. A prime example of this dynamic are Scotland’s remote Orkney Islands, which are ahead of most of the world in the transition to renewables-based energy. While much of the world is looking to batteries to solve challenges associated with the intermittency of renewable energy, local conditions in Orkney are driving the islands to take a different approach.

Innovation on the Islands

The islands are home to the European Marine Energy Centre (EMEC), where innovative wave and tidal energy systems are being tested. The EMEC recently launched its Surf ‘n’ Turf project to capitalize on the excess energy produced at the facility using a 500 kW electrolyzer from ITM Power for hydrogen storage. Elsewhere on the islands, another hydrogen storage project is helping maximize the use of renewable generation while improving grid stability and reducing the need to import fuels for transportation. The BIG HIT project launched early in 2016 aims to limit the amount of curtailed wind energy, which has reached nearly 30% annually over the past 3 years. This project will use excess wind energy to power a 1 MW electrolyzer to generate hydrogen that can be used for power generation in fuel cells, as fuel for a new fleet of 10 fuel cell powered vehicles, or to supply two recently installed hydrogen powered boilers for district heating.

A hydrogen-based energy storage system is an ideal solution for the Orkney Islands for a number of reasons. With only two 33 kilovolt cable connections to the Scottish mainland, the islands do not have the luxury of exporting excess renewable generation to neighboring systems and are forced to curtail energy during peak production. While batteries are able to store a few hours’ worth of excess generation, the islands often require an entire night’s worth of generation to be stored for relatively long periods of time. Storing excess electricity in the form of hydrogen is much more well-suited to this need and provides numerous other benefits, as well.

Like most islands, residents in Orkney pay high prices for transportation fuel given the lack of local resources and the need to transport everything via ships. The Orkney Islands Council is hoping to improve this situation through the use of battery and fuel cell electric vehicles powered by energy generated locally on the islands. The Council also believes hydrogen will play an important role in the islands’ future as fuel cell technology becomes increasingly common for powering ships. By establishing and refining hydrogen storage and fuel cell technology for the maritime industry, the islands hope to emerge as a hub of innovation and develop technologies to export worldwide.

Local Resources, Local Solutions

Given the specific local conditions and challenges, a hydrogen-based energy system is well-suited for the islands. However, this will not be the case in all locations. As the industry continues to evolve in the coming decades, energy systems will be based more on local conditions and resources than ever before. This will result in a much more diverse and complex industry as the resources available in each region are tapped into. Orkney is providing an early example of how local conditions will shape the development of the next generation of energy systems.


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