If only I were a battery, I could be hanging out in Hawaii right now.
The islands have seen a fair number of batteries deployed in recent years, to help solar households self-consume and to smooth large amounts of solar generation on the grid. What they haven't seen is a thriving commercial storage market like California has enjoyed. That hasn't changed yet, but Californian commercial storage specialist Stem has deployed a pilot network of 29 business-sited battery systems to show how this model might work with Hawaiian utilities.
“What we're really trying to do with this first set of customers is help to pave the way for the coming industry, which will include multiple players,” said Tad Glauthier, Stem vice president of Hawaii operations, in an interview at the DistribuTech conference in San Diego. “It's significant in that this is [Hawaii's] first aggregation of energy storage systems across diverse commercial sites for the utility, that they can see and use in the management of the grid.”
Stem uses its software to operate batteries on behalf of commercial customers, giving them savings on demand charges, while also aggregating across the network to provide grid services like demand response. In Hawaii, that made for a double challenge: educating customers about why they would want a battery, and convincing Hawaiian Electric Company that the batteries can reliably deliver 1 megawatt of capacity to the grid when called upon.
Some of the participants in the pilot are local branches of chains Stem has worked with, like Whole Foods and Albertsons. For some of the locally based customers, including an auto body shop, a sheetmetal company and a florist, Stem had to start from scratch pitching why storage would be useful.
Hawaii has the nation's highest electricity rates, so saving money on electricity is top of mind for consumers there. Most of the companies that participated already had rooftop solar or were acquiring it. Often, though, “They don't think about the peak, they think about using less,” said Tad Glauthier, Stem vice president of Hawaii operations.
The business case for commercial demand management isn't as strong in Hawaii as it is in a place like California, because the demand charge there is smaller — $11.69 per kilowatt for small commercial customers in Honolulu. The revenue stream for business-sited batteries providing grid services didn't exist either, because HECO didn't have a model for it.
Nonetheless, Hawaii has a commitment to reach 100 percent renewable power by 2045, and no neighbors to export to. The islands need a better way to manage the influx of solar generation at midday, and a bustling commercial storage industry could help that effort with minimal cost to utilities and ratepayers. That industry, though, is “just squeaking into existence” Glauthier said, with isolated projects popping up where grant funding or local economics make it work.
That was announced in 2014, back when battery prices made commercial deployments hard to justify on their own. Now the tests are complete and the system is up and running. Early feedback from the utility looks highly positive.
“This shows we can scale behind-the-meter energy storage to create a more stable and efficient grid as we provide customers with higher levels of renewable energy to reduce fossil fuel use and greenhouse gas emissions,” said Dora Nakafuji, HECO’s director of renewable energy planning, in a statement.
The exact grid service Stem is providing for the utility is a new classification called “grid response.” Whereas demand response functions as a call for help from the utility when it is strapped for capacity, Glauthier said, grid response acts more like a fast responding generator, offering up to 1 megawatt in 15-minute blocks.
This could be particularly useful for the morning ramp before solar production kicks in — HECO can turn to Stem's batteries to avoid firing up an expensive fossil fuel generator that won't be needed when the solar comes into force minutes later.
Battery prices are still expensive but getting steadily cheaper. Generally, successful sales models rely on multiple streams of revenue, like Stem's two-pronged approach. Now that HECO is on board with networked batteries responding to the grid's capacity demands, Stem and other storage companies have a simpler path to pitching that service in the future and collecting that stream of revenue.
“What we're really trying to do is get the structures right for those new energy storage projects to be in programs where the utility can actually leverage them and pay them and help those economic returns, so that more customers will get them and create a virtuous cycle,” Glauthier said. The goal is to avoid the potential havoc that would ensue if battery deployments grow without the involvement of the utility, resulting in ample capacity operated privately and not in concert with the needs of the grid.
If you spend much time hanging around storage industry conferences, you get used to hearing about all the services advanced batteries and software can provide. At the DistribuTech conference this week, where utility and grid companies predominated, the topic of storage took a different tone: that of an emerging technology that needs extensive testing before it can be trusted with the grid's reliability and ratepayers' dollars.
In that context, the news from Hawaii can go down as one point for “Team Storage Is Ready,” but it's also just a start. The batteries need to keep performing in real world operation the way they did in the testing period. And then the industry needs to find a business model that pencils out in Hawaii's current economic landscape. Glauthier thinks 2017 is the year for that.
Several bills are currently under discussion in the state legislature to incentivize storage with tax credits or rebates. If one of those passes, the payback for commercial storage could come even sooner than expected.
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