by Jill Cliburn
It’s fair to say that the CSVP was a pioneer in utility-led solar plus DR and storage strategies. Drawing on experience in IRP, renewables and a range of DERs, members of our core team have been working around the edges of solar-plus since the early aughts. Soon after the U.S. DOE SunShot program selected CSVP to carry that work forward, we produced a guide to Demand-Response Companion Measures for High-Value Community Solar Programs. Published in 2016, it’s still a popular planning tool. We also worked with utilities on using various forms of storage, including batteries, and we published a guide to Solar Plus Storage Companion Measures for High-Value Community Solar Programs, last year.
But enough with the self-congratulations! For all we got right, we missed just how fast batteries in particular would take off and exactly how pivotal their role would be. For our recent utility and commercial clients, we’re updating our work on battery economics and opportunities. Here, I thought I’d share some insights on how these market changes apply to high-value community solar strategies today.
The recent Wood Mackenzie/GTM Research Vision Study of Community Solar, commissioned by Vote Solar, embraces the potential for community solar plus storage, DR and other companion measures. However, that study sees such measures coming with a “maturing” community solar market, a decade or more into the future:
“Community solar … can evolve into a portal for more holistic energy services such as energy efficiency, energy analytics and active load control for flexible demand. … (It) also provides a physical location and equipment with which to pair other distribution infrastructure, including smart inverters and energy storage. These assets can be shared between the community solar operator and the grid operator to maximize community solar’s contribution.”
Source: Vote Solar, WM/GTM
But at CSVP, we’ve talked about storage, DR and energy efficiency as “companion measures” that engage utility customers and accelerate development of the 21st Century grid, starting now. GTM foresees the right services and opportunities, but apparently as part of an orderly transformation, resulting in 60 to 80+ GW of community solar by 2030. I would suggest that unless community solar providers and supporters embrace solar-plus as a disorderly and disruptive force, then the community solar sector could be left behind.
Recently, Utility Dive featured an op-ed on this theme, describing a growing number of demonstrations and new use cases for community storage—primarily batteries. Community storage may apply to utility or third-party programs that provide storage for a cluster of customer loads, whether or not associated with a specific solar project. The range of possibilities is geographically and conceptually broad. But it is easy to see the solar connection here, too—established in part because the ITC tax incentives for batteries apply only when batteries are co-located with solar generation. Austin Energy, a public power leader, launched its community solar program with co-located battery storage in 2017, and today the list of similar projects nationwide is long and growing.
For example, Connexus Energy, a large electric co-op in Minnesota, recently announced plans for a 20 MW, 40 MWh storage system, to be co-located with 10 MW of solar. We like a smaller, new project at United Power in Colorado, where I worked with in-house visionary Jerry Marizza on community solar nearly a decade ago. Now United has launched a similar shared storage program for commercial and industrial customers, for whom the energy-only offsets of most community solar programs would fail to address significant C&I demand charges. Neither of these are community solar-plus programs, but they remind us of what's coming.
Recently, Utility Dive featured an op-ed on this theme, describing a growing number of demonstrations and new use cases for community storage—primarily batteries. Community storage may apply to utility or third-party programs that provide storage for a cluster of customer loads, whether or not associated with a specific solar project. The range of possibilities is geographically and conceptually broad. But it is easy to see the solar connection here, too—established in part because the ITC tax incentives for batteries apply only when batteries are co-located with solar generation. Austin Energy, a public power leader, launched its community solar program with co-located battery storage in 2017, and today the list of similar projects nationwide is long and growing.
For example, Connexus Energy, a large electric co-op in Minnesota, recently announced plans for a 20 MW, 40 MWh storage system, to be co-located with 10 MW of solar. We like a smaller, new project at United Power in Colorado, where I worked with in-house visionary Jerry Marizza on community solar nearly a decade ago. Now United has launched a similar shared storage program for commercial and industrial customers, for whom the energy-only offsets of most community solar programs would fail to address significant C&I demand charges. Neither of these are community solar-plus programs, but they remind us of what's coming.
Why would a community solar vision, like GTM’s or others, see solar-plus developments as far-off? First, if the vision were focused on modifying the business models of established community solar providers, then the move to community solar plus storage might be delayed until the low-hanging community solar fruit were well-picked. Utilities and some state policy makers see this evolution differently. Anxious to preview the battery market, they are looking past community solar providers, to work with developers that focus on battery services or solar-plus-batteries as their main line. (See a reasonably good explanation of market developments in a new EIA report.) If community solar providers come late to this party, will utilities pursue local battery projects without community solar, or will they fill in community solar blanks on their own, with the help of task-specific contractors instead of focused community solar providers?
Either way, the message is that a disruptive market waits for no one. The market researchers who’ve worked on the community solar vision may not have noticed how quickly solar plus storage is becoming commonplace—perhaps even becoming the most prevalent way to develop solar on the grid.
The market researchers who’ve worked on the community solar vision may not have noticed how quickly solar plus battery storage is becoming commonplace—perhaps even becoming the most prevalent way to develop solar on the grid.
Secondly, there is an important dimension to these new battery service providers’ approach, which confounds community solar providers, who have relied on fairly straightforward models. The fact is, battery service providers and solar PPA providers who offer solar-plus are cramming together two very different types of offers, coming up with creative, but very complicated, solar-plus deals.
We would need more than one blog to explain how battery service providers are arranging and pricing their deals. And frankly, we’re still decoding some aspects of these mostly-proprietary deals. But it’s key to remember that solar plus battery services are not the same as buying an energy-only solar PPA, and it’s not the same as buying storage hardware. For example, that GTM and Bloomberg cite operating costs for lithium-ion battery storage plummeting from $1000/kWh in 2010 to a low of $210/kWh in 2017 (inching back up slightly this year). But what do these numbers that mean? The economics that matter depend on how many discharges from what sized battery, for how long, over what time-frame—and whether the battery might be used for demand reduction alone or in addition, for other arbitrage and integration services. In addition, the offer would have to factor in O&M and decommissioning or refurbishing or replacing the battery after about 10 years time, whereas a solar plant is likely to last, with relatively modest degradation, for 30 years or more.
We have a few economic benchmarks for utilities that have purchased batteries, such as the municipal utility in Sterling, Massachusetts and the community solar plus storage project at the Fayetteville Public Works Commission in North Carolina. However, the financing on each of these projects was relatively unique—with Fayetteville self-financing and Sterling using grant funding and incentives.
For most utilities, the more appealing approach would be akin to the PPA. Drawing on publicly available numbers from larger (regulatory-reviewed) solar-plus acquisitions, the median bid price on a Colorado Xcel Energy RFP for combined solar plus storage reviewed late last year came in at $36/MWh. That was way better than Tucson Electric Power’s already-low solar plus storage deal announced just a few months earlier, at $45/MWh. Then, regulators in Nevada shared results of solar-plus storage procurements in that state, coming in around $30/MWh. In practice there is little relationship between the dollars per kWh metric for battery costs or the standard solar PPA metric (traditionally, the LCOE) and these solar-plus PPA prices.
Smaller projects often use a solar PPA plus a separate battery services agreement. But the economics for these deals still striking. Several public power utility managers, who have ongoing solar-plus negotiations, have confided to me that they’ve seen darned good economics on pretty modest solar-plus deals. They cite their fairly limited storage service needs, and the options that battery services providers may keep to sell battery services on the market for other integration services—or even resiliency. It is certainly possible that a rush for solar-plus market share is adding temporary downward pressure.
As it stands, one can guesstimate solar-plus economics for a given project, in order to get through the first gate for a go/no-go decision. But it’s likely that utilities today would be smart to tap expert support at the planning and RFP-development stage, if they wish to produce a basket of informative, competitive bids that look even remotely like apples to apples.
While the market is still maturing, I hope community solar supporters won’t let the market’s current complexity mask the opportunities to act now—especially where local utilities can play a lead coordination role. I do not know how much today’s still-falling solar prices might rise, once current tariffs take hold and kinks in the supply chain work out. Nor could I guess the impact of weakening ITC-related benefits, starting in 2020. But the strength of community solar still relies largely on the idea that communities of people working together can help to move the industry forward. Battery storage strategies do not belong behind a dark curtain. They will evolve faster and better (as a triple-win for providers, utilities and their customers at large) if their business models see the sunlight uniquely associated with community solar. The community solar industry has just scratched the surface of what innovative program designers, working with technical engineers, creative financiers and visionary community leaders can achieve.