Navigant Research Blog

Can California Wield Energy Storage to Grid’s Advantage?

— July 25, 2017

The California Public Utilities Commission has proposed a ruling that could require thousands of energy storage projects to be more responsive to the dynamic grid as the state continues to grapple with integrating intermittent renewables. The ruling would apply to projects funded by the Self-Generation Incentive Program (SGIP), which underwent a major overhaul this year in a bid to grow energy storage.

In the theme of continual refinement, the ruling proposes to improve projects’ grid support, one of the three key policy goals of SGIP. It would require systems to operate under dynamic tariffs like critical peak pricing or time of use (TOU) or participate as an aggregated demand response or distributed energy resources (DER) product that is bid into the California Independent System Operator’s (CAISO’s) wholesale markets. The goal is to make DER more reactive to real-time changes on the electric grid. The effect on the California’s storage market could be significant, with SGIP likely supporting most of the state’s gigawatt-sized industry through 2020.

Industry Weighs In

The ruling requested comments from all interested parties. Utilities, vendors, and others have weighed in, revealing some key themes:

  • Storage revenue predictability impacts: Many storage deployments primarily monetize by demand charge management, a practice that could become more complex under the new rules. As storage revenue streams continue to be a moving target, this ruling could add complexity to vendors attempting to reliably model the profitability of their projects.
  • Some customers are ineligible: For example, community choice aggregator and direct access customers don’t have access to all the programs and tariffs available to investor-owned utility (IOU) customers. Regarding aggregation in the CAISO market, commentators noted that, while there is a great deal of promise, stakeholder engagement is still in early phases, which could present hurdles to broad adoption.
  • Challenges with existing tariffs: Some expressed concern that existing tariffs and programs may not directly align with SGIP goals. For example, certain TOU customers are guaranteed grandfathered TOU time periods for up to 10 years, which may or may not incentivize battery storage operations to align with SGIP.

New Regulatory Constructs Needed

Many opined that new tariffs or programs are needed to truly get storage systems to align with grid priorities (and carbon emissions mitigation, another of SGIP’s goals). Some predicate their position on whether new TOU rates are rolled out effectively. Others point out that aggregation of storage into virtual power plants may get easier as more DER providers gain approval. And toward the goal of limiting emissions, integrating real-time marginal grid emissions into tariffs would be a major step toward fulfilling SGIPs (and the state’s) carbon emission reduction goals. To that end, companies like the non-profit WattTime are pushing to make such real-time data available, actionable, and ready to implement into tariffs.

The outcome of this ruling remains to be seen, as comments are still being considered. However, one thing is clear: California will continue to push for aggressive integration and aggregation of responsive DER in its quest to develop an advanced and distributed electric grid.


New Technologies and Systems Widening the Solar Market

— September 30, 2016

Rooftop SolarUntil recently, most solar installations have been set up to generate the maximum kilowatt-hours per day/year possible. This was because the incentive programs in place only took into account the overall production of a plant. This is not an issue in regions with low solar PV penetration in their energy mix, but it’s becoming a problem in areas with high solar penetration relative to the peak demand, such as in California, south Germany, northern Chile, and southwestern United Kingdom. As I have argued before, all kilowatt-hours are not equal, but since the two most common policy incentives (feed-in tariffs and net metering) treat them as equal, installers choose to maximize generation.

There are some signs that this is changing. Chile has introduced a tender system that divides the market by delivery time, and there are efforts to introduce solar-based time-of-use (TOU) tariffs in some markets. But perhaps the strongest force pushing the industry away from equal kilowatt-hour values is corporate power purchase agreements (PPAs).

Unlike in traditional PPAs, in which a utility (or the government in the case of feed-in tariffs) buys electricity and then sells it to their customer base (which has different load requirements), corporate PPAs are signed with single entities that have a specific daily load demand curve. In this scenario, the offtaker corporation might prefer to match the PPA agreement (and hence generation profile of the project) as closely as possible to its demand curve, even if that means the project will produce less than its full potential.

New Technologies Widen the Opportunity

In a world that only looks at maximizing output at the lowest cost possible, the premium that innovative solar technologies that tackled the TOU mismatch was almost nothing; the modules that were sold at the lowest price per watt were king. Once TOU enters the equation, installations will favor technologies that maximize revenue (or avoid cost from the corporate view). It is possible to use technologies like energy storage systems or implement demand response systems to match generation and demand, but it can also be tackled from the solar system design, including new technologies like bifacial solar modules based on n-type PERT (passivated emitter, rear totally-diffused) module designs, which allow vertical installations that flatten the daily generation profile of an installation, producing more electricity in the morning and in the late afternoon and less at midday.


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