Energy Finance Report

Grid–Scale Energy Storage: Stakeholder Participation Key to Successful Implementation of FERC Order 841

Posted by Jeffrey Karp on 8/8/18 5:11 PM

In recent posts, we have discussed how Order 841 issued by the Federal Energy Regulatory Commission (“FERC”) on February 15, 2018 is expected to create new opportunities for the expansion of grid-scale (“in front of the meter”) energy storage. Order 841 is intended to encourage deployment of energy storage by addressing participation of energy storage resources in wholesale electricity markets operated by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”).  

Since FERC issued Order 841, it has become apparent that RTOs and ISOs will face challenges in revising their tariffs to develop participation models that better incorporate energy storage into the market. Stakeholders need to participate in this process, as there are many issues left open to future resolution. We have highlighted below some of these issues and their potential importance to stakeholders. 

  • State v. Federal Jurisdiction. RTOs and ISOs are uncertain about the overlap of federal and state authority posed by Order 841, particularly at the distribution level (as opposed to the wholesale level.)  A FERC petition filed by PJM Interconnection LLC on April 9, 2018 to address state clean energy subsidies brought to the forefront the emerging conflict between state energy policies and federal regulation of wholesale electricity markets. State and federal interests do not always align -- states have the authority to give preference to certain types of energy resources (e.g., renewables), while FERC has the obligation to ensure that electricity generated by these resources is sold at just and reasonable rates.
  • Resilience. FERC (and many states) are seeking to expand the role of energy storage in furthering the goal of grid resiliency. This issue has taken on increased importance given the lack of enthusiasm for proposals to compensate coal and nuclear facilities that maintain on-site fuel reserves.
  • Transmission and Generation Infrastructure. Advocates of energy storage contend that it is a solution to both transmission and generation needs. Questions remain, however, regarding the adequacy of current transmission incentives policies, and whether they are sufficiently inclusive.
  • Financial Viability of Energy Storage Projects. Notwithstanding the issuance of Order 841, many investors and lenders are not persuaded yet that energy storage projects will (1) provide sufficiently long-term, concrete and reliable revenue streams; (2) offer technologies that are well-proven and reliable; and (3) achieve adequate participation by creditworthy counterparties or those that have access to financial assurance instruments such as performance insurance.
  • Complexity of Participation Models. Because energy storage projects may generate economic benefits through one or more different value streams, the preparation of participation models by RTOs and ISOs will be challenging. Stakeholders will need to find a cost-efficient way to get a “seat at the table” with policy makers and regulators managing this process.
  • Federal Tax Policy. Currently, the federal investment tax credit is only available to energy storage projects that are an inherent part of a larger renewable energy project. This is believed to have created an artificial distinction between stand-alone energy storage projects and “paired” projects, and a disincentive to invest in the former.
  • Need for Policies that are “Technology Agnostic.” Although FERC Order 841 is “technology agnostic” on its face, subsequent debate on implementation has focused almost exclusively on batteries. States must be encouraged to offer a “level playing field” to historical approaches such as “pumped storage,” as well as the newer generation of energy storage technologies including advanced battery storage.
  • Permitting. Policy makers and regulators need to establish flexible requirements that allow energy storage projects to be permitted as either generation or transmission projects. Environmental permitting requirements should be reasonable so as not to deter innovation.

Implementation details of the participation models will be driven at the RTO/ISO level. Compliance filings by RTOs and ISOs originally were due on December 3, 2018, but on April 13, 2018, FERC issued a “Tolling Order” to allow it more time to consider various motions for clarification and requests for rehearing filed in response to Order 841. Nonetheless, system operators are moving forward to comply with the requirements of Order 841. The policies adopted by RTOs, ISOs and states in establishing participation models likely will have a significant impact on the advancement of renewable and energy storage resources. Thus, stakeholder involvement is critical.

Topics: Energy Storage, FERC, Order 841

U.S. House Committee on Energy and Commerce Hearing on Energy Storage Highlights Need for Further Federal and State Initiatives

Posted by Administrator on 8/7/18 3:42 PM

By Kevin Fink

On July 18, 2018, the U.S. Congress House Committee on Energy and Commerce held a hearing to assess the progress being made by federal and state governments to promote the role of energy storage in the U.S. electrical system. A panel of five witnesses – an executive from the California Independent System Operator (“CAISO”); a partner at an energy and environmental economic consulting firm; and executives from E.ON, Fluence Energy, and Duke Energy – were present to testify and answer questions of the legislators.

The experts were largely favorable in their assessment of the steps taken by the federal government to promote energy storage and reduce existing barriers through opening up wholesale markets. In particular, there was a nearly universal consensus that FERC Order 841 (February 2018) had the desired effect of catalyzing energy storage’s role in the electrical grid by directing Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) to create market rules for energy storage participation in the wholesale energy, capacity, and ancillary services markets. However, the testifying experts also expressed the view that Order 841 was but an initial step to promote energy storage, and that additional measures must be taken to allow energy storage to reach its full potential by clarifying certain provisions of the order, creating of additional policies and roadmap(s), and creating federal tax credits. Moreover, most experts agreed that finalizing Order 841 and 845 (Order revising the definition of generating facility to explicitly include energy storage) and denying requests for a rehearing would speed up the implementation process.

A prominent talking point focused on the need to extend federal tax credits to energy storage projects, particularly those that were not incorporated into larger renewable energy developments and are eligible to receive an investment tax credit (“ITC”). Most notably, the experts concurred that extension of the ITC to include stand alone energy storage projects would both lower the cost of the investment and accelerate its implementation. A continuing theme was that almost everyone in the renewable energy space benefits from tax credits and that energy storage technologies were maturing at such a rate that any targeted tax benefits would only be necessary for a few years. Moreover, one expert noted that application of the ITC to energy storage should be commonplace as Section 48 of the Internal Revenue Code (“IRC”) allows renewable energy paired with energy storage to receive the ITC – raising the question of why should energy storage not be able to receive credit as a stand alone, when it is performing the same function when paired with renewables. The expert suggested that the definition of which technologies qualify for the ITC be broadened to include energy storage. It should be noted that legislation has been introduced in both the Senate (S. 1868) and the House (H.R. 4649), proposing to amend the IRC to allow investment tax credits for energy storage technologies and battery storage technology.  

Federal vs. state initiatives was another hot button topic, and it was noted that a number of states, such as New York and Massachusetts, have begun to adopt their own energy storage policies and roadmap)s. Nonetheless, most believed that a federal energy storage roadmap was imperative in order to reiterate the federal government’s commitment to energy storage, and to serve the critical function of educating stakeholders on the benefits of energy storage.

There is little doubt that energy storage technologies will become integrated in the renewable energy sector by necessity, given the intermittent nature of wind and solar power. However, the House is still grappling with how the federal government can best accelerate the development of the energy storage market and incentivize competition. 

Kevin Fink is a law clerk with Boston-based law firm Sullivan & Worcester LLP.  

Topics: Energy Storage, Renewable Energy, U.S. House of Representatives, Investment Tax Credit

Energy Storage and Hydropower Experts Offer Industry Perspectives at 2018 Grid Scale Energy Storage Summit

Posted by Administrator on 7/23/18 1:26 PM

By Kevin Fink

Sullivan & Worcester counsel recently participated in the “Grid Scale Energy Storage Summit,” part of the expansive Hydrovision International conference held at the end of June in Charlotte, North Carolina. For the first time on an international scale, the Summit brought together both energy storage and hydropower experts from around the world for the purpose of debating, among other things, the future role of hydropower in the mix of energy storage options.  

In addition to Sullivan & Worcester and other counsel, energy sector participants included representatives from the U.S. Department of Energy, renewable energy trade associations such as the Solar Energy Industries Association, and Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”).  The hydropower industry was represented by a variety of trade associations including the National Hydropower Association, International Hydropower Association, and the Low Impact Hydropower Institute.

The energy storage industry is growing exponentially in the United States. Total installed capacity exceeded 1,000 MWh in 2017 – a record amount – and energy storage is forecast to add an additional 1,000 MWh capacity in 2018. As a result, energy industry experts in both the private and public sectors are grappling with how best to manage energy storage’s role in the electrical grid as well as capitalizing on the maturing industry.

Discussions focused on the role of energy storage in addressing new challenges to the reliability of the electric grid posed by increasing reliance on wind and solar, the implications and adequacy of new policies and regulations that have created expanded opportunities for energy storage participation in interstate markets, and whether sufficient market demand exists to encourage the pairing of “pumped hydro” with other renewable technologies such as wind and solar.  “Pumped hydro” facilities are currently the predominant form of energy storage, and typically operate through the storage of water in one or more reservoirs.  During periods of peak electricity demand, water from an upper reservoir is released to a lower one and moves through turbines to generate power. In instances of low demand, low-cost electricity from the grid is used to pump water back up into the upper reservoir. 

pumped-hydro

A common theme throughout the Summit was the expression of frustration by the hydropower industry that while “pumped hydro” has existed since the 1920’s and currently accounts for 97% of the nation’s installed energy storage capacity, current regulatory policies tend to encourage the development of newer, not yet matured energy storage technologies such as batteries, compressed air, and flywheels.  A consensus emerged regarding the need for a level playing field so that all energy storage technologies, including “pumped hydro,” are utilized to their greatest potential. It was further agreed that stakeholders and the public need to be educated regarding the untapped potential of “pumped hydro” and that the public’s perception of “pumped hydro” is often associated with large, conventional hydropower (which involves larger impacts from both an environmental and financial perspective) rather than smaller, local projects which can present lesser environmental impacts and financial burdens.    

In conclusion, although the deliberations largely focused on hydropower’s role in the emerging energy storage market, there were many key takeaways that apply to the energy storage industry beyond just hydropower.  Of particular interest was the February 2018 FERC Order 841, which directed RTO/ISOs to establish “participation models” for energy storage. While viewing Order 841 as a favorable start in terms of establishing a regulatory framework for energy storage, most conferees expressed the desire that FERC take a more expansive approach in the Order and set more explicit requirements governing “participation” and “interconnection,” but also acknowledged that each ISO/RTO region has different needs and resources to address those needs.  

Kevin Fink is a law clerk with Boston-based law firm Sullivan & Worcester LLP.

Topics: Energy Storage, Renewable Energy, FERC, hydropower

FERC ENERGY STORAGE RULE CREATES NEW OPPORTUNITIES FOR SMALL, LOW-IMPACT HYDROPOWER PROJECTS

Posted by Administrator on 2/28/18 3:49 PM

By Edward Woll Jr.

OVERVIEW

The United States has produced clean, renewable electricity from hydropower for more than 100 years. Today there are approximately 2,500 domestic dams and pumped-storage facilities that provide roughly 100 gigawatts (“GW”) of electricity. In addition, there are more than 80,000 non-powered dams, i.e., existing structures that could produce power, with the potential capacity of 12 GW. New England’s non-powered dams potential capacity is 243 mega watts (“MW”).  Many of the 80,000 non-powered dams could be converted to produce hydropower at relatively low cost and within a relatively short timeframe. See U.S. Department of Energy, An Assessment of Energy Potential at Non-Powered Dams in the United States (2012).

The energy storage rule, Order No. 841, issued on February 15, 2018 by the Federal Energy Regulatory Commission (“FERC”), creates new opportunities for hydropower facilities to participate in the wholesale power market, and thus incentivizes the conversion of non-powered dams to hydropower and the addition of storage to existing hydropower facilities. This article explores the opportunities presented by the new energy storage rule, particularly with respect to small, low-head non-powered dams where the installation of energy generation capacity can be achieved with lower installed costs, lower levelized cost of energy, fewer barriers to development, less technological and business risk, and in a shorter time frame than development requiring new dam construction.  Moreover, energy from low-head hydropower installations can be aggregated for coordinated dispatch into a regional transmission organization (“RTO”), thereby leveraging its ability to be a peak shaving resource, which is an area FERC has determined is important for removing barriers, but has concluded should be the subject of a separate proceeding in order to permit the Commission to gather more information.

UNDERSTANDING ENERGY STORAGE

An “energy storage resource” is a commercially available technology that is capable of absorbing energy, storing it for a period of time, and thereafter dispatching the stored energy to the wholesale or retail electricity market. Existing technologies include (1) batteries (lead acid, lithium ion, sodium sulfur, flow, dry cell); (2) fly wheels (mechanical devices that harness rotational energy to deliver instantaneous electricity); (3) compressed air storage that uses electricity to compress air and store it, which is then expanded through a turbine to generate electricity later; (4) electrochemical capacitors that store electricity in an electrostatic charge; (5) thermal energy storage that uses either heat sinks like molten salts to store heat energy which can be used to either generate electricity or provide heating later; or electricity to freeze water into ice that can be used to provide air conditioning later and (6) pumped hydro power. New developing battery technologies include, for example, sodium-ion and solid magnesium electrolyte.

Energy storage technologies are viewed favorably by most regulatory bodies for many reasons that conform to smart energy policy. They can reduce the emission of greenhouse gases, reduce demand for peak electrical generation, defer or substitute for an investment in generation, transmission or distribution assets, improve the reliable and stable operation of the electrical transmission or distribution grid and reduce or eliminate variability and flicker that accompany some renewable energy sources. These storage technologies are seen as essential to the continued expansion and value of renewable energy, and as key to balancing energy generation and consumption and to maintaining grid stability.

Prior to issuance of the current rule, FERC regulated U.S. interstate wholesale electrical energy markets by participant categories – generators, transmitters and distributors, with different rules for different categories. While generators were authorized to sell into the wholesale market at market-based rates, transmission remained largely subject to cost-of-service ratemaking and required strict adherence to open-access transmission tariffs and non-discriminatory service to customers.

Because energy storage technologies can both inject electricity into as well as withdraw (i.e., be charged by) electricity from the grid, they transcend the Commission’s traditional “siloed” regulatory framework for generation, transmission and distribution resources. Understandably, therefore, FERC’s rules on how to connect energy storage to the electricity grid were inadequately defined and were designed to accommodate traditional technologies that are markedly different from energy storage.  See Massachusetts Clean Energy Council and Massachusetts Department of Energy Resources, State of Charge: Massachusetts Energy Storage Initiative (2016).

FERC’S ENERGY STORAGE RULE

In November 2016, FERC proposed amendments to its regulations to remove barriers that discouraged energy storage resources and distributed energy resources aggregators from participating in the capacity, energy and ancillary services markets operated by the six regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) subject to FERC jurisdiction. Pending public comment on the proposed rule, in January 2017 FERC issued a policy statement clarifying that an energy storage resource may provide services at both cost-based (e.g., transmission, which is regulated) and market-based (generation, which may be non-regulated or market-based) rates at the same time so long as (1) there is no double recovery of costs to the detriment of cost-based ratepayers, (2) the potential for cost recovery through cost-based rates does not inappropriately suppress competitive prices in wholesale electric markets to the detriment of other competitors who do not receive such cost-based rate recovery, and (3) the level of control in the operations of the electric storage resource by an RTO/ISO does not jeopardize its independence from market participants.

The February 2018 final rule adopted the conceptual approach set forth in the 2016 proposed rule and 2017 policy statement. That approach opened and leveled the playing field for energy storage resources by making the resources eligible to participate in the wholesale capacity, energy, and ancillary services markets.  FERC deferred regulatory action with respect to distributed energy resources aggregators until a later date.  The final rule provides regulatory flexibility to effectively deploy energy storage technologies in an array of applications that include improving (i) utility energy efficiency as well as grid stability and security; (ii) grid modernization; (iii) emergency back-up power; (iv) effectuating full use of variable renewable clean energy production facilities such as solar and wind; and (v) lowering annual energy costs.  Each of these applications will contribute to expand state renewable portfolio standards goals and replace fossil fuel and nuclear generating plants.

APPLICATION TO HYDROPOWER

Energy storage resources that are deployed in conjunction with, and charged by small, low-head hydropower projects, can function as an independent energy source that provides: (1) reliable energy for a predictable time period, (2) peak power shaving at a substantially lower cost of electricity than the cost of peak power from conventional fossil-fueled sources, (3) reduced variability and flicker that have accompanied renewable energy sources, and (4) reduced greenhouse gas emissions by displacing demand for more natural gas powered electric power generating plants and natural gas pipelines that have heretofore been relied on to satisfy peak demand. In addition, the Senate Energy and Natural Resources Committee will shortly take up consideration of H.R. 2786, an amendment to the Federal Power Act to incent small-conduit hydropower.  The bill passed the House last year 420-2.

Pursuant to Section 203 of the Federal Power Act (“FPA”), a hydropower facility must be licensed by FERC, receive an order from FERC indicating that it is non-jurisdictional to FERC, or obtain a determination from FERC that it is a “qualifying conduit hydropower facility.”   FERC requires federal licensing when a hydropower project ties into the grid because interstate commerce is affected. 

A non-federal hydroelectric project must also be licensed if it is located on a navigable water of the United States. The complicated issue regarding which waters are deemed “navigable” for purposes of federal jurisdiction is currently being litigated, and the current EPA is seeking to rescind and revise the navigability rules promulgated during the Obama Administration. Non-federal hydroelectric projects are also subject to federal jurisdiction if they (1) occupy lands owned by the United States; (2) use surplus water or water power from a government dam; or (3) are located on a body of water over which Congress has Commerce Clause jurisdiction, project construction occurred on or after August 25, 1935, and the project affects the interests of interstate or foreign commerce. See GZA GeoEnvironmental, Inc., Report on Permitting Small and Low Impact Hydropower Projects in Massachusetts (2016).  

Even small hydroelectric projects that are connected to the interstate grid are deemed to affect interstate commerce by displacing power from the grid, and if the cumulative effect of the national class of these small projects is deemed significant for purposes of FPA section 23(b)(1). However, FERC does not require federal licensing if the hydro project is not tied into the grid, but its power is simply used on site.

Battery storage currently is a preferred technology for shaving peak energy demand and eliminating variability and flicker in renewable, clean energy resources, whether solar, wind or low-head hydropower. Especially important is the fact that battery storage generally can be deployed more quickly and flexibly than other storage technologies to meet peak demand, and at a cost that is expected to continue its significant rate of decline. Hydropower also runs twenty four hours a day seven days a week, subject to water level and environmental requirements. Further, according to the Low Impact Hydropower Institute (“LIHI”), the average capacity factor for LIHI Certified Hydropower is 54.4%.  A “capacity factor” describes how intensively a fleet of generators is run.  A capacity factor near 100% means operation is continuous close to 100% of the time.  In comparison to low-head hydro, the 2017 capacity factor for nuclear was 92.2%, natural gas fired combined cycle – 54.8%, coal - 53.5%, wind - 36.7%, and solar photovoltaic – 27.0%. 

CONCLUSION

A significant opportunity is presented by the potential development of hydro-charged battery storage for peaking facilities at currently existing small to midsize hydro sites. Peaking facilities can be deployed quickly, although installation may require upgraded and smarter transmission and grid infrastructure as well as new grid interconnection construction.  Smart siting and distributed grid integration of battery stored power through hydroelectric generation can significantly reduce the pressure to build more natural gas pipelines to meet peak demand, and cut costs if available when natural gas prices for electricity generators peak.  Other benefits would include enhanced grid reliability, and relatively more stable and predictable electricity prices since these hydroelectric peaking facilities would have small marginal operating costs. 

Advanced energy storage resources are capable of dispatching electricity within seconds without producing direct air emissions. Therefore, significant modifications would not have to meet air quality standards.

In addition, the permitting process for advanced energy storage projects is simpler than for more complex infrastructure projects, and construction timelines are considerably reduced. The modular design of many energy storage systems allow components to operate and interconnect the storage resource using simple containerized structures.  Such projects require a much smaller footprint than conventional power plants and easily can be added in local areas to provide grid stability, thus eliminating the need for new gas-fired generation or new transmission facilities to solve local reliability needs. 

Edward Woll Jr. is a partner with Boston-based law firm Sullivan & Worcester LLP.

Topics: Energy Storage, Renewable Energy, Massachusetts, Low-head hydropower, FERC, hydropower

New Jersey's Proposed Renewable Portfolio Standard- Ambitious, but Uncertain

Posted by Jeffrey Karp on 4/20/16 11:28 AM

Co-authors Emma Spath and Morgan M. Gerard

New Jersey is poised to become a national leader in renewable energy by virtue of pending legislation that would substantially decrease the Garden State’s greenhouse-gas emissions through an ambitious Renewable Energy Portfolio Standard (RPS). An RPS is a regulatory mandate that requires utility companies to obtain a certain percentage of the energy they sell from renewable sources such as wind and solar, or purchase renewable energy credits (RECs) from qualifying energy sources. Recently passed by the State Senate, a new bill would require utilities to source 80 percent of their electricity from renewable energy by 2050.  If the General Assembly passes the bill and it survives the pen of Governor Christie, utilities must procure 11 percent of their electricity from renewables by 2017, with an increase every five years of approximately 10 percent until the 80 percent threshold is reached in 2050.

Although New Jersey passed its original RPS mandate in 1999, and has since updated its program to reach 20 percent by 2020-21 (including a solar energy “carve out” requirement of nearly 4 percent), the ambitious new bill faces an uncertain outcome. First, although the bill already has passed one legislative chamber, the Senate vote was strictly divided along party lines.  Second, the General Assembly, which is the next destination for S1707, delayed voting on a similar Senate bill in December 2015.  However, this General Assembly, like the Senate, has a Democratic majority; thus, it seems likely that the bill would pass.  Finally, the bill faces a veto-threat by Governor Christie, which could be overcome by a two-thirds majority in both houses.  In this scenario, a lack of bi-partisan support could doom the legislation due to a failure to obtain the requisite super-majority vote to overturn a veto. 

The bill also may be perceived as political by some or a “hot potato.” In addition to an increased RPS mandate, the legislation would allow the Board of Public Utilities (BPU) to establish an “emissions portfolio standard applicable to all electric power suppliers and basic generation service providers, upon a finding that [t]he standard is necessary as part of a plan to enable the State to meet federal Clean Air Act or State ambient air quality standards.”  The provision may reflect the State Senate’s desire to assure New Jersey’s compliance with President Obama’s Clean Power Plan, an Environmental Protection Agency (EPA) regulation presently under court review that seeks to limit greenhouse gas emissions under authority of the Clean Air Act.  In an omnibus litigation pending before the United States Court of Appeals for the D.C. Circuit, twenty-seven states, including Governor Christie’s administration, seek to block the Plan’s implementation.  Recently, the Supreme Court stayed the regulation and suspended any deadlines for state compliance until resolution of the litigation.

Another possible objection to the N.J. bill—based on the reaction to a similarly aggressive RPS in California—may be its potential significant implications for the power grid. A review of a study concerning the potential impact of California’s plan to increase renewables to 50 percent by 2030 provides insight into the challenges that such measures may pose. That study found that an aggressive RPS could result in over-generation of renewable energy. The study showed that once California reaches a 50 percent RPS, excess power would be generated for 23% of annual hours.  Such an occurrence could result in grid forecast uncertainty, which is very costly for utilities.  Thus, New Jersey lawmakers instructed the BPU to concomitantly evaluate how to ameliorate solar energy volatility. It may behoove the BPU to also look at longer-term grid strategies to mitigate the substantial increase in renewable energy.  Such viable mitigative methods may include requiring steps such as energy storage, smart inverters with future solar photo-voltaic installations, or encouraging a diverse renewable energy portfolio.  While each of these measures may come with its own political baggage, the consideration of such grid solutions may be the palliative that enables New Jersey to substantially increase its RPS.

Topics: Energy Storage, Solar Energy, Renewable Energy, clean power plan, Wind Energy, renewable portfolio standard, Clean Air Act, New Jersey, Grid Security

Tech Update: Another Use for EV Batteries?

Posted by Van Hilderbrand on 12/3/15 4:28 PM

Co-author Emma Spath

EV_Batter.jpgIn the midst of the Fukushima Daiichi nuclear disaster in March 2011, electric vehicle (EV) batteries were used in an unusual and innovative way—as energy storage.  The earthquake caused a plant shutdown, but the following Tsunami waters damaged the back-up diesel generators responsible for cooling the plant’s systems.  Many do not realize that as the situation in the nuclear reactors became increasingly dire and with no ability to generate power onsite, the Tokyo Electric Power Co. (TEPCO) brought in fully-charged EV batteries to supply electricity, restart the pumps, and reestablish steady water circulation for cooling.  Fukushima demonstrated to the world that EV batteries can not only be used for transportation, but also as mobile power sources able to resupply the power grid.

Use of EV Batteries for Storage is Growing

Elsewhere in the world, traditional EV batteries are gaining support not only to power vehicles, but also as battery storage.  For example, car manufacturer Nissan has partnered with Canadian electric company PowerStream to pilot tests to determine the potential of using its popular model, the Nissan Leaf, for battery storage.  The concept has been called Vehicle to Home, or V2H, and the vehicle would essentially communicate with the power grid, its charging station, and the house to determine when and how much electricity is needed in times of grid strain, such as brownouts in heat waves, or general power outages.  Additionally, V2H could be used to avoid peak energy demand charges.  Nissan states that the 24 kWh of energy could power the average home for 24 hours without power conservation attempts.  The special V2H charging station also has the load capacity to power common household appliances at the same time.

Elon Musk and Tesla have introduced the $3,500 Powerwall, to be delivered in late 2015. Based on the technology used in the Tesla Model S battery, the Powerwall is a home battery that charges using electricity generated from solar panels and has the additional benefit of automatically recharging in the middle of night when energy demand is at its lowest.  This new technology may be most feasible for someone who already has solar panels and a power inverter installed, so one can avoid buying an additional ac/dc inverter. 

In April 2015, Musk also unveiled the Powerpack, a $25,000 version of the Powerwall for businesses. Even before the public announcement, Walmart signed a deal with Tesla to test its stores with Powerpacks in conjunction with existing solar panels.  Musk informed shareholders at the April announcement that as much as 80% of the non-vehicle battery business will likely be to utilities and large industrial customers like Walmart. 

Recycled EV Batteries for Power

Companies are getting involved in EV batteries in a different way—recycled EV batteries.  Recycling EV batteries extends their life and prevents the immediate disposal in landfills.  The typical lifetime of an EV battery is 10 to 12 years, but after the batteries have exhausted their use within a vehicle such as the Chevrolet Volt or Nissan Leaf, the batteries still maintain up to 80% of their capacity.  For example, Chevrolet is currently using five recycled Chevy Volt batteries to power the new General Motors Enterprise Data Center at its Milford Proving Ground, helping the Center to annually deliver net-zero energy use.  The batteries also provide back-up power to the building for four hours in the event of an outage and can provide excess energy to the grid that supplies the Milford campus.  Because electric car sales are currently depressed in Japan and in the United States thus causing supply to be low, time will tell if recycled EV batteries will cause a significant and broad energy impact. 

Through Tragedy Comes Opportunity

The future for EV batteries as storage should gain additional momentum due to a 2013 order from the California Public Utilities Commission, which requires Edison, San Diego Gas & Electric and Pacific Gas & Electric to install or contract for more than 1,325 megawatts of electricity storage throughout the state by 2020, thus creating a significant market for batteries such as the Powerwall and recycled EV batteries.  Additionally, the Department of Energy is conducting extensive research on EV batteries, including ways to reduce size and production costs, both of which may make use of new EV batteries as storage more feasible.  Although in some ways the use of EV batteries as storage was brought to the public eye by a tragedy, the future for this type of battery storage has serious potential, especially as more technological improvements are made regarding size, weight, capacity and costs.

 

Topics: Energy Storage, Renewable Energy, Electric Vehicles

Mid-Atlantic: Distributed Energy Opportunities

Posted by Jeffrey Karp on 11/3/15 11:58 AM

Solar panels at a roof with sun flowersThe Mid-Atlantic region (Maryland, Delaware, Virginia and the District of Columbia) is currently at the forefront of discussions regarding the next generation of distributed electricity markets. Notable developments pushing the region into the spotlight recently include M&A activity, creativity on the part of public service commissions, local innovations in PACE finance, and increasing flexibility on the part of local utilities.

Programs and developments of particular note include:

- Net metering and renewable portfolio standards in Maryland

- PACE financing in Montgomery County, Maryland

- Discussions around undertaking a REV-like proceeding in Maryland

- Interconnection standardization in D.C.

- Microgrid studies being undertaken in D.C.

- Potential third-party bidding for large-scale solar in Virginia

- Renewable portfolio standards and net metering in Delaware

- Community solar innovations and discussions throughout the region

Please join SEIA and Sullivan & Worcester’s Energy Finance team on November 5th live in SEIA’s new offices, or by dial-in, as we host a roundtable discussion on developments in the region and the unique business opportunities they could present. After Rhone Resch’s introductory remarks, Elias Hinckley will moderate a panel comprised of industry experts with unique opinions, including Maryland PSC Commissioner Anne Hoskins, Dana Sleeper of MDV-SEIA, Anmol Vanamali of the DC Sustainable Energy Utility, Bracken Hendricks of Urban Ingenuity and Rick Moore of Washington Gas. Interested parties can register here.

Topics: Water Energy Nexus, Utilities, Water, Carbon Emissions, Energy Security, Thermal Generation, Energy Policy, M&A, Structured Transactions & Tax, Energy Storage, Energy Efficiency, Power Generation, Microgrid, Energy Finance, Distributed Energy, Energy Management, Solar Energy, Renewable Energy, Wind, Oil & Gas

Six Questions to Consider about Microgrids

Posted by Jim Wrathall on 7/14/15 2:30 PM

microgrid ThinkstockPhotos-156606910

 

What is a microgrid?

The traditional electricity distribution model can be viewed as a “macrogrid,” using a large centrally located power station to provide electricity over an extensive service territory. This model was designed during the early days of electrification with the objective of providing affordable and reliable power to as many customers as possible. However, with technological advancements, a localized microgrid may provide the multiple benefits of grid resiliency and cleaner, more efficient energy production and distribution. Regarding resiliency, the microgrid may be able to disconnect or “island” from the macrogrid, minimizing and isolating blackout incidents and providing for power redundancy. Concerning energy efficiency, the microgrid uses local sources of energy to serve local loads, reducing energy loss in transmission and distribution. Additionally, this smaller grid can more easily deploy distributed energy resources (DER) such as solar energy and combined heat and power (CHP) to meet grid demand.

Why the push towards microgrids?

As stated above, microgrids provide the dual benefits of energy efficiency and resiliency. Picture Superstorm Sandy in Manhattan, if downtown had the capability to island and maintain power notwithstanding the downed Con Edison station? Or, perhaps, picture the upper east side of Manhattan being able to provide some power to the seven million people left without electricity? Even the nation’s capitol is vulnerable, as demonstrated when a PEPCO transmission line recently took out power in downtown D.C., with power disruption affecting federal buildings including the White House Complex. Not to mention, electricity can be saved by diminishing losses from long transmission.

Ok great! Why not build microgrids everywhere?

Currently, developers face uncertainties as there is not a clear policy or regulatory path in place, thus affecting the potential to obtain private financing. Previously, we lacked the technological capability to deploy a variety of distributed generation (picture roof-top solar, a traditional combined heat and power station, and a small wind turbine working together in different locations) through a set of advanced, real-time controls to manage energy demand across the entire microgrid. While the idea of a clean-tech microgrid is relatively new, the concept of a microgrid is not so new. University campuses, military bases and some industrial parks have been operating them for years, maybe even decades, but all such grids are on a solitary campus with one stand-alone energy customer. What is new is the desire to place microgrids throughout a utility grid system servicing commercial customers, perhaps in competition with the utility. The potentially competitive relationship with the utility may be why we haven’t seen microgrids popping up everywhere, unless they are utility-sponsored.

What is the utility’s stake in microgrid adoption?

Where a third-party, non-utility provides electric generation and distribution to retail customers, the utility may have a lot at stake. The traditional model always has been the use of a macrogrid, in which a solitary utility provides both the generation and distribution of electricity for a specified geographic area, their “service territory.” Simplifying the regulatory terrain, utilities are heavily regulated in exchange for their exclusivity and must set rates through a proceeding before the state’s public service commission (PSC). This is why electricity bills typically remain constant because change can only occur in a rate making proceeding. Depending upon how the state set up its relationship with the utility (during the late 1800s or through some subsequent restructuring), the utility may own its right to exclusivity, making it very difficult for a state to change its laws.

Some states and their utilities have opened the market to multiple electricity generating entities and, for example, enabled solar providers such as SolarCity through third party roof-top leasing. However, utilities have invested a great deal of capital in fixed wire distribution systems that physically connect your homes or businesses to electricity. Microgrids would directly compete with such fixed wire distribution; therefore, utility resistance may be expected. Depending upon the jurisdiction, fixed wire distribution may be the exclusive franchise of the utility. However, some states, like New York with its Reforming the Energy Vision (REV) docket, are seeking to modify the utility relationship, showcasing the vast differences in utility precedent by jurisdiction.

Are there other obstacles to microgrid adoption?

Lawmakers and public service commissions may need to realign their energy laws and regulations to enable the clean-tech microgrid. For example, to make a private microgrid financeable, the developers will need to know approximately how many customers (ratepayers) they can lock into their grid. Many states have competition laws that allow customers to choose their electric generation supplier. This approach may disadvantage a financed microgrid, as customers may be able to switch providers. Also, it is unclear what level of regulation microgrids will experience. Are they utilities? The common answer is most likely not, but the question remains: will there be any requirements in place to prevent rate spiking? Another unknown, will the microgrid as a whole be able to net-meter to the macrogrid? What will the interconnection procedures look like? The list of uncertainties needs to be addressed to provide developers and financers with better clarity.

With all of these challenges, what is the future for microgrids?

There is accelerating momentum behind the push to deploy microgrids. SolarCity already is offering a microgrid service to collaborate with municipalities and universities. With more severe and unpredictable storms and increased vulnerability to cyber-attack, microgrids are becoming the next horizon for our energy future. Utility and policy concerns are surmountable as demonstrated by REV and the market restructurings that enabled competitive generation. To gain a foothold, the microgrid revolution will take a tailored approach to local issues, and will be led by some pioneering developers, and, perhaps, a handful of forward-thinking utilities that are ready to capitalize on a new opportunity.

Topics: Utilities, Energy Policy, Structured Transactions & Tax, Energy Storage, Energy Efficiency, Microgrid, Energy Finance, Distributed Energy, Energy Management, Solar Energy, Renewable Energy, Public/Private Partnership, Wind

What do Tesla Batteries mean for Solar Power in Texas?

Posted by Graeme Walker on 5/26/15 6:39 AM

Tesla Alba

Source: Tesla Motors

Last week, Elon Musk announced Tesla’s new battery system, the first of its kind for solar power. Musk presented the sleek looking, wall-mounted Powerwall as an affordable alternative to the battery rooms currently on the market, which are often criticized as expensive, odorous, clunky and unreliable.

Since then, the Internet has gone into a frenzy, with some critics prophesizing the end of nuclear energy and others heralding Tesla’s solution as the Holy Grail that will negate our dependence on fossil fuels. There’s a lot of conflicting information about the Tesla battery, its usability and viability, but the orders to date (worth $800 million in potential revenue) would suggest that at least a few people are excited about the latest innovation from the renewables giant.

According to the EDF, there is enough solar energy potential in Texas to power the world twice over, and yet with approximately 57,000 home using solar power we rank 10th in the nation. What does Tesla’s latest venture mean for consumers here, and the solar industry at large? As a consumer interested in solar power as an alternative to fossil fuels, what are your options?

Priced at $3,500, Tesla’s battery holds 10kWhs of electric energy and will deliver approximately 2kWhs of continuous power. For homeowners, there are two offerings currently available: the smaller 7kWh system can be charged on a daily basis, and a 10 kWh system designed for weekly recharging.

Let’s look at each of these options individually. Firstly, the smaller system. In Texas, most solar systems allow for grid use to bridge the gap between the renewable energy supply and peak household demand (e.g. at night or when the sun is not shining). The cost of this grid electricity will be lower than the power produced from the Powerwall. Therefore, the economics of the smaller Tesla system are not yet that attractive, and we would only recommend this system if you are truly looking to go completely off-grid.

For people interested in the batteries in terms of energy security, the larger 10 kWh batteries is a better choice. Designed as a backup for when the grid goes down, they do offer a more cost effective alternative for households during outages. This is a more appealing option for homes with many connected devices or small businesses that need constant power. However, multiple batteries would need to be purchased to power an average household for a night so the price point would be considerably higher than $3,500 with a larger installation.

While Tesla’s solution still has a ways to go in terms of economic and power efficiency, the company’s bold move into home energy batteries will no doubt spark innovation from a number of competitors. Innovation fosters innovation and while Tesla’s solution isn’t quite ready for mass-market adoption just yet, it may just be the catalyst that spurs the market to act.

 

Thanks to our guest author, Graeme Walker, and Alba Energy for allowing the Energy Finance Report to republish their article. For more information on Alba Energy please visit their website or LinkedIn.

Topics: Energy Storage, Distributed Energy, Solar Energy, Renewable Energy

Utilities Seeking Solar and Storage

Posted by Van Hilderbrand on 3/17/15 8:11 AM

solar panels - 466601194

Co-author Jeff Karp

Utilities and other offtakers had an appetite for renewable energy in 2014 according to a recently released white paper by Bloomberg News Energy Finance. The white paper catalogs the 52 requests for proposals (RFPs) by sector, geography, and company, revealing utility trends that can serve as a litmus test for the overall market. The RFP activity demonstrates the procurement interests and needs of the utility sector, which can greatly sway market and investor activity.

The white paper summary notes that solar RFPs dominated clean energy in North America, both in capacity (1.8 GW) and quantity (27 RFPs). With at least 12 RFPs issued, the solicitation activity revealed that a strong interest in energy storage also exists. Mr. Will Nelson, head of analysis for Bloomberg New Energy Finance, stated that “the data reveals particularly strong interest in energy storage . . . interestingly, most storage RFPs are looking for a relatively small amount of capacity, evidence that these may be initial experimental forays into a rapidly changing sector.”

As energy storage technology moves out of the experimental phase and becomes a more integral part of the modern grid system, it is likely that utilities will continue soliciting projects. According to Greentechmedia “the country is forecasted to deploy 220 megawatts in 2015, more than three times its 2014 total, and growth should continue at a rapid clip thereafter.” The 12 storage RFPs issued in 2014 reflect that utilities may be eager to help the nascent industry find firm roots in servicing macrogrid load.

Special thanks to Morgan Gerard who assisted in the preparation of this post.

Topics: Utilities, Energy Storage, Solar Energy, Renewable Energy

Sullivan & Worcester logo

About the Blog


The Energy Finance Report analyzes developments in energy finance as well as provides updates and perspectives on market trends and policies.

Subscribe to Blog

Recent Posts

Posts by Topic

see all