Energy storage can mean different things to different people; more often than not, it’s simply batteries in a box. From our perspective, however, customer-sited distributed storage means an integrated platform where best-in-class components are chosen for their reliability, safety and performance and integrated with cloud-based controls and algorithms into a UL-certified appliance intended for use as a grid asset. When aggregated and orchestrated to serve as a single resource (a virtual power plant), all potential value streams are accounted for and properly prescribed.
For storage projects and technologies to take hold, the business case needs to make sense. From a network perspective, a commonly acknowledged value stream is the avoided or deferred capital expenditure associated with conventional grid capacity augmentation or reinforcement. Through load shifting and solar smoothing, integrated energy storage platforms can reduce grid strain caused by high penetrations of renewables and help utilities defer costly distribution infrastructure improvements.
Other line-side potential sources of value include (in no particular order):
- More efficient source for upstream wholesale or market energy as compared to less efficient peaker plants
- More cost-effective management of grid operations resulting from increased intelligence installed at the edges of the grid
- Resource to provide ancillary services to address market shortfalls
- Ability to offer voltage regulation and power quality enhancement
- Increased grid efficiency inherent with distributed storage resources as compared to central generation with its T&D losses
On the customer side of the equation, in addition to the societal value associated with reduced green-house-gas (GHG) emissions (when paired with solar), lower grid operating costs can translate into bill reductions for ratepayers. Hybrid inverters ensure code-compliant reliable and uninterrupted power during grid outages and customer-sited storage offers the greatest degree of customer choice over where and when their renewable energy is used.
Capturing and realizing these value streams requires the involvement of multiple participants across the energy delivery supply chain. One aspect that differentiates Sunverge from other storage companies is a market philosophy of delivering value to multiple people in multiple places simultaneously. Distribution network system providers (DNSP) must be involved to capture benefits of avoided capital expenditure and enhanced reliability; electric retailers and generators can aggregate customer-sited storage and derive value from participating in wholesale markets through portfolio investments or financial products to maximize customer revenues and minimize exposure to wholesale peak prices; and energy customers realize value through reduced bills, incentives and taking advantage of compelling programmatic offerings.
With all the opportunity on the table, how can integrated energy storage companies capture aggregated value in a disaggregated market to ensure the best outcomes across the whole value chain?
Answer: With evolved regulation policies that properly reflect granular locational/time-oriented electricity supply and delivery costs through residential customer electricity pricing and new business and ownership models. These policies must eliminate the barriers to value attribution that currently exist while still preserving market competition and accessibility.
The Platform for Success
The path to success in energy storage markets is a parallel one involving two separate but equally important components. The first centerpiece is an operational technology which is a scalable, flexible and “utility-grade” solar + storage platform capable of operational protocols that optimize the storage charge and discharge functions while supporting higher penetration of local renewables with beneficial impacts on the grid. The second but equally important component is a business model that serves as the mechanism for ensuring value can be harmonized and shared across the energy supply chain.
Left unaddressed, as the number of distributed energy resources operating on the grid in an unstructured manner continues to grow so does the potential to cause the grid more harm than good. Platforms that enable utilities to aggregate localized intelligent storage assets and orchestrate them as a fleet of units are critical to cost-effectively optimizing operations and addressing both system and localized needs. This virtual power plant (VPP) approach also achieves the business model objective of unlocking value and harmonizing the benefits across homeowners, system owners/operators, and utilities. Access to the coordinated value streams ensures all participants are positioned to maximize their benefits from home to network.
Once in place, an integrated energy storage platform also serves as an effective “grid citizen” working in concert with other prevalent smart technologies (e.g., metering, thermostats, EV chargers) and advanced analytical tools to proactively identify and address grid hot spots. A reliable utility-scale resource, VPPs are flexible and dynamic and can be reconfigured on the fly and deployed where resources are needed most. This capability can have multiplicative effect on the value of deploying integrated energy storage platforms—by 2-3 times—making the whole greater than the sum of the parts.
As demand-disruptive technologies force utilities to evolve their business models from centralized generation to something more granular which effectively integrates distributed resources, the policies and regulations influencing technology adoption are as complex as the grid management technologies needed to manage them are sophisticated. These policies and regulations must and will evolve, enabling new service models and resources that will lower electricity costs and expand the adoption of renewables along the way. New policy regulations and mindsets are being developed to support the efficient operation of markets and adoption (and fair sharing) of benefits among all participants including the following:
- Residential time-of-use tariffs
- New DER interconnection rules and requirements for smart-inverters
- Smart metering and more granular usage data for residential customers
- More sophisticated resource planning models that zoom-in on local distribution network constraints to discretely value capacity and operational needs
- A focus on customer-centric reliability and grid resiliency
- Opening up wholesale markets to aggregated pools of resource that can now be sited at residential properties
This bottom-up evolution in the way utilities do business will fundamentally transform how we make and use energy. For the energy consumer it’s the beginning of a whole new world of choice.
Ken Munson is CEO of Sunverge Energy.