With prices dropping rapidly for both renewables and battery storage, the economics of decarbonizing the grid are changing faster than most policymakers, journalists, and others realize. So, as part of my ongoing series, “Almost Everything You Know About Climate Change Solutions Is Outdated,” I will highlight individual case studies of this real-time revolution.
My Monday post discussed the Federal Energy Regulatory Commission’s (FERC) report that in the first quarter, the U.S. grid added 18 megawatts of new natural gas generating capacity, but 1,291 MW of new renewables. But one of FERC’s “Electric Generation Highlights” for March deserves special attention as a leading indicator of the revolutionary new economics of solar plus storage:
Half Moon Ventures LLC’s 4.2 MW Minster Solar Project in Auglaise County, OH is online. This project includes an energy storage capacity.
The Minster “solar + storage system is the largest U.S. facility of its kind connected through a municipal utility,” according to S&C; Electric Company, which built and integrated the storage system. It combines a 4.3-MW photovoltaic systems and a 7-MW/3-MWh storage management system that provides power conversion with lithium ion batteries.
How does a storage system based on lithium-ion batteries make economic sense? The answer is: in a few different ways, with a system called “revenue stacking.” It’s worth taking a slightly wonky look at how such a system can stack or combine multiple revenue sources, since this is a defining feature of the game-changing new economics of solar energy plus storage.
To get the scoop on the system, I spoke to S&C;’s Director of Grid Solutions, Troy Miller, who described this as “one of the first, if not the first” energy storage system to allow so many different revenues sources. The company has also posted online the full case study.
Capturing the Multi-Faceted Value of Energy Storage
First, this system lets Half Moon Venture sell into PJM’s market for frequency regulation. PJM is the regional transmission organization that coordinates wholesale electricity movement and maintains grid reliability for over 60 million customers in 13 Eastern and Midwestern states and the District of Columbia. Frequency regulation is “the injection and withdrawal of power on a second-by-second basis to maintain grid frequency at 60 Hz.”
To make this happen, “the battery system was sized for frequent charging and discharging cycles.” The control platform for the system was designed “to interface with PJM market interfacing software to enable the system to follow a signal from PJM.” The system analyzes both grid conditions and market pricing to determine how to optimize revenues by either dispatching to or absorbing electricity from the grid.
Second, the Village of Minster had a major power quality problem — “occasional low power factor,” which wastes energy and requires expensive equipment to fix. Minster had been planning to install $350,000 worth of capacitor banks dedicated to dealing with this issue. But S&C; was able to design the storage system to “provide power-factor correction concurrent with frequency regulation services.” That saved Minster $350,000.
Third, the system will allow Minster to reduce peak mid-day demand charges. Utilities typically charge customers a fee whose size depends on the maximum power consumed during a day since, they argue, they have to maintain enough capacity to deal with the very biggest peak demand they might see — typically during a hot summer day.
For a large electricity user like Minster, “PJM looks at the five highest two-hour peak load periods across its entire territory” at the end of a given year. PJM then assesses the user a “Peak-Load Contribution” charge based on how big the peak is. In Minster’s case, it is some 11 megawatts. To save Minster money, S&C; designed their energy storage system software “to predict when these peaks would occur” and, when they do, to “switch from providing frequency-regulation services to demand response services.” The system should be able to shave Minster’s peak demand some 2 MW.
The bottom line, according to Miller, is “Revenue stacking is one of the quickest ways to create a strong return on investment for energy storage systems.” He expects to see a lot more projects like these in the future.
I asked him how much the sharp drop in battery prices had opened the door to such projects. Miller explained that battery prices had come down by a factor of three in the last few years, which greatly “expands available opportunities that are currently in the money.” Lots of stuff that didn’t make economic sense now does.
We already know there are a number of ways to greatly increase the penetration of renewable energy using existing hardware and software. What we are now witnessing is the dawn of a revolution that will enable lithium-ion batteries to play a larger and larger role in that increased penetration.
Renewables are more unstoppable than ever. The only questions that remain now are 1) will we embrace the kind of aggressive deployment programs needed to avoid catastrophic global warming, and 2) will we nurture a domestic market that will maintain U.S. leadership in key job-creating low carbon technologies, or will we outsource more jobs to China and Europe.