Energy demand varies throughout the day and the cost to generate electricity changes as demand fluctuates. During peak hours, when electricity consumption is higher than average, utilities must complement their base-load generators with more flexible but costly forms of generation, such as oil and natural gas fired generators. These secondary generators are used to manage demand fluctuations. This causes the retail price of electricity to increase as demand increases. Therefore, the cost to generate electricity during high demand time periods causes the price of electricity to fluctuate throughout the day. These cost fluctuations can be illustrated in the many time of use tariffs where pricing is higher during on-peak hours and lower during off-peak hours. Many utilities and utility customers are looking for price competitive solutions that reduce or supplement the cost of energy consumption/generation. One of these solutions is solar energy.
Government regulators are offering subsidies to consumers and utilities to drive growth in the renewable energy sector. Photovoltaic (PV) systems are gaining popularity with consumers to augment their energy needs, oftentimes with the added benefit of being able to sell excess energy back to the utility. During the second quarter of 2017, the United States added 2,387 megawatts (MW) of solar PV. This represents an 8% increase from the second quarter of 2016, and the industry is estimated to install over 12 gigawatts (GW) of solar capacity by the end of 2017. Figure 1 illustrates the growth in total solar capacity year over year.
This rapid expansion of PV capacity is beginning to negatively affect how utilities handle overgeneration, as much of the solar power generation occurs during off-peak times when demand for energy is low. This is causing many utilities to invest in robust demand response systems. One approach in handling overgeneration due to renewables is to use energy storage systems (ESS).
Energy storage systems store energy in long-term storage formats. These formats include batteries, compressed air, and pumped hydroelectric storage. Recent advancements in ESS are creating an opportunity for utilities to utilize overgeneration from PV systems for use during on-peak hours. Not only can this approach be used as a kind of demand response, it can also help utilities manage some of the challenges of adapting current grid management techniques to increasingly decentralized forms of energy generation.
ESS technology has multiple applications including energy management, load leveling, frequency regulation, and grid stabilization. This white paper will look at some of the current challenges with renewable electricity generation and how ESS applications can be used to address some of these issues.
Impact of Renewable Energy
Distributed Generation – Rapid demand buildup
In 2013, CAISO released a report outlining the negative impact of PV systems, and the findings are illustrated below in Figure 2.
The Duck Belly Curve illustrates the critical moment where PV systems lose generating efficiency while demand for grid resources increases sharply. Though manageable with today’s technology (rapid deployment of secondary generators), this curve is projected to increase dramatically over the next ten years as installed solar capacity grows. If left idle, the sudden decrease in generating capacity caused by PV system efficiency losses when the sun sets and subsequent increase in demand could cause interruptions of service for millions of Americans.
ESS may be able to compensate for these difficulties by quickly normalizing grid demand and providing a stable and flexible power source as utilities normalize grid resources.
Dynamic Generation from Net Energy Metering Customers
Traditionally, utilities have relied on base load generators, such as coal-fired and nuclear power plants, to supply most energy in the grid. To handle spikes in demand, utilities deployed more responsive oil and gas-fired generators. Now, utilities are facing the challenge of managing capacity on a grid with an increasing number of dynamic generators from net energy metering (NEM) customers. NEM is a renewable energy program offered to customers who generate their own electricity. This program allows customers who generate more electricity than they use to sell electricity back to the utility. The over-generated electricity is then piped back into the grid.
PV systems have emerged as the most prominent type of generation with NEM customers for several reasons. Based on pricing reported in the first quarter of 2017, PV systems are becoming cheaper, with a retail price between $2.87 and $3.85 per watt. Additionally, advancements in battery technology are inspiring many NEM consumers to add energy storage systems to new and existing PV systems, thereby using ESS to manage and maintain the energy generated from their own PV. This is known as “behind-the-meter” energy storage. In the second quarter of 2017, the ESS segment grew 151% over the first quarter of 2017. Figure 3 illustrates behind-the-meter storage deployments by segment.
BTM ESS lets NEM customers store surplus energy at a lower cost per watt by purchasing energy at low off-peak prices to consume later during on-peak hours. Consumers may also use BTM ESS to charge batteries during off-peak hours and sell the electricity to utilities or to other consumers during peak hours.
While BTM ESS will help flatten out the Duck Belly Curve, this presents an issue with how utilities manage dynamic generation on the grid. Utilities will need to account for customers with BTM ESS and structure new NEM programs. For example, Red Clay Consulting recently worked with a large west coast utility to implement new NEM calculation logic on a utility software platform. This logic was used in calculating billing scenarios for the public utilities commission when deciding on how to restructure the NEM program under new rules. While energy storage systems address many of the challenges utilities face in effectively managing dynamic generation, utilities will also need to leverage software and the expertise of industry partners to develop a complete solution for new NEM programs.
Managing Generation Cost
Traditional generation techniques are becoming more expensive. Between October 2005 and 2015, electricity retail prices increased 34%. Meanwhile, PV systems are steadily becoming more affordable to install. These factors are driving more customers to consider supplementing their energy consumption with PV systems. Like behind-the-meter energy storage systems for utility customers, utilities are also using ESS to store surplus energy for later consumption, which helps in shifting high generation costs from on-peak to off-peak hours.
ESS could also be used as a cost shifting method to sell energy from NEM generators through electric vehicle (EV) charging stations. This method could significantly reduce the cost of NEM programs. For example, when NEM customers overgenerate energy, the resale value under the NEM program is typically close to the retail price the utility would charge its non-NEM customers. This creates an issue for utilities where the built-in cost of maintaining grid resources is lost when buying energy produced by NEM customers. Utilities could store this high cost energy in an ESS for use with EV charging stations. This approach could minimize the total cost of net energy metering and shift that cost to charging station customers.
Red Clay recently worked with a large utility to develop a billing system for its electric vehicle (EV) charging stations. The billing system was designed to allow electric vehicle owners to conveniently charge their vehicles and have the electricity cost automatically included in their monthly bill from the utility. Utilities at the forefront of EV solutions, such as this particular Red Clay client, are building a foundation for future success by developing programs that can shift the cost burden of NEM programs to EV customers.
As a rapidly growing industry, energy storage systems promise to revolutionize the way utilities manage the grid. ESS can be used to smooth out load shifts caused by PV systems and other renewables, as well as to address the growing generation costs during on-peak hours. These techniques and technologies represent a smart approach to ESS adoption and are only limited to the flexibility of the application.
The concept of effectively storing energy is a game changer. Coupled with smart billing technologies and strategic partners, ESS technology will revolutionize how utilities manage grid resources.
About the Author:
As an Infrastructure Support Engineer at Red Clay, Jacob Ellefson is responsible for providing infrastructure support to clients and internal teams. Additionally, he is responsible for installing Oracle Utilities software, performing configurations and integrations, testing performances, and documenting implementation results. His project experience and Information Systems degree give him a strong foundation for the programming environment and solid understanding of the SDLC. Jacob has worked previously with clients in configuring Oracle Utilities products related to rate management and billing systems. Prior to configuration, Jacob was responsible for gathering infrastructure requirements and designing a performance-based system loading interval data for approximately 2 million meters.
Perea, Austin, et al. “U.S.SOLAR MARKET INSIGHT.” Solar Energy Industries Association (SEIA), June 2017.
“FlexibleResourcesHelpRenewables_FastFacts.” California Independent System Operator, 2016.
Munsell, Mike. “A Record-Breaking Quarter for America’s Behind-the-Meter Energy Storage Market.” Gtm, Greentech Media, 7 Sept. 2017, www.greentechmedia.com/articles/read/record-breaking-quarter-for-u-s-behind-the-meter-energy-storage-market#gs.pMG0Upg.