What’s the true, overall value of combined “behind the meter” energy storage plus solar PV deployment to U.S. power utilities and their customers? That’s the big question facing stakeholders in Hawaii and other U.S. states with a need to integrate fast-growing amounts of solar and renewable energy on to power grids.
A new valuation methodology set out in a report commissioned by the Interstate Renewable Energy Council (IREC) and carried out by Clean Power Research offers utilities, grid operators and regulators the means to find out. With Hawaii’s electricity market providing the basis, the IREC-CPR report, “Valuation of Solar + Storage in Hawaii: A Methodology,” fills a gap in the analytic toolkit utilities have at their disposal, IREC and CPR explained in interviews.
A rough analysis using the valuation methodology indicates the incremental value of adding battery storage capacity to solar PV installations in Hawaii comes in at 10 cents per kWh. Those net capacity added benefits accrue to the utility and rate payers. Costs of 7 cents per kWh, which include the costs of solar and storage losses, are paid for by utility customers who deploy these hybrid systems, CPR’s Ben Norris explained.
While these figures are specific to Hawaii, IREC-CPR’s valuation model can be used to determine the value of solar-plus-storage installations in any state or region, he added.
A Method to Help Utilities Value Solar-Plus-Storage
Hawaii plans to meet 100 percent of its electricity needs with renewables by 2045 and the state of its electricity market has been in the news a lot lately. Advanced battery and energy storage solutions hold out the promise of enabling the state to meet this goal while keeping the cost of electricity down and enhancing grid efficiency, reliability and resiliency.
Advanced energy storage and solar energy systems are disruptive technologies without a track record of widespread real-world performance, costs and benefits. IREC-CPR valuation methodology is in the way of a first generation of valuation methodologies that utilities, grid operators and regulators can use to quantitatively assess the overall costs, benefits and value of behind-the-meter solar-plus-energy storage installations.
As such, IREC and CPR’s new valuation methodology provides an essential “tool” that by and large has been lacking in the power industry, Sara Baldwin Auck, IREC’s director for regulatory programs said.
“We wanted to develop a means by which we could help utilities, grid operators and their customers better integrate distributed PV generation while maintaining grid stability and reliability,” she explained.
High rates of distributed PV with net-metering and the highest electricity rates in the U.S. made Hawaii an ideal market and grid for IREC and CPR to develop the model, the two parties explained.
Models and methodologies to evaluate the costs, benefits, returns on investment (ROI) and impacts of distributed PV systems on power grids have diffused quickly and are now commonly used by solar PV and other power industry participants, Baldwin Auck and CPR’s Ben Norris pointed out. Furthermore, various research studies, including one recently published by NREL, use models to evaluate the costs and benefits of behind-the-meter energy storage systems with and without PV.
CPR’s team drew heavily from such studies in developing its valuation model for IREC. More specifically, CPR referenced use of one from Purdue University and others from SolarCity and Tesla. These models and studies primarily adopt a utility customer’s perspective. In addition, research to date tends to be more in the way of geographically specific economic studies and less generally applicable than IREC and CPR designed their valuation methodology to be, Jeff Ressler, president of CPR’s software services group explained.
One of the bigger results of the research effort, according to Norris, was determining how much energy storage capacity utility customers would install and “how that stored energy would be discharged and sent on to the utility grid.”
Solar-Plus-Storage System Benefits
Norris summarized three principal benefits distributed behind-the-meter solar-plus-storage can provide utilities, grid operators and consumers:
- Extremely fast, efficient energy dispatch of sufficient capacity to meet early evening peaks in demand;
- Reduced fuel consumption and associated spending; and
- Less energy losses over transmission lines, as well as less spending on infrastructure.
Additionally, the broader, societal sustainability benefits of deploying these systems could be factored in, Norris noted.
Norris added that the value of distributed solar-plus-storage systems can vary significantly depending on a range of factors including rate structures and regulations about how energy storage capacity can or should be discharged, charged and priced. The total costs and benefits can vary in service areas where demand charges as opposed to other forms of time-of-use pricing are used, for example, he said.
That said, valuation models such as the one CPR has developed for IREC are essential in order for utilities and other industry participants to get a firm grasp of the costs and benefits hybrid behind-the-meter solar-plus-storage systems are likely to yield. And that in turn, is essential if Hawaii and other U.S. states are to make the transition to an energy mix that relies in large part, if not entirely, on clean, renewable energy.
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