Quick to halt stand-alone solar, utilities are asking for customer-sited storage in the Northeast
Virtual power plants make behind-the-meter storage more attractive to utility companies.
The adoption of residential energy storage is growing in the Northeast, and there are no government mandates behind the rising numbers. Surprisingly, it is utilities that encourage customers to buy batteries and enroll them in virtual power plants (VPPs). Rather than being threatened by customer-centric renewable energy systems, VPPs make solar and storage a convenient resource for utilities.
The U.S. electrical grid has long performed as a one-way street: utilities supply power to customers, but never demand power from customers. That’s why residential solar has always been an obstacle for utilities – they don’t ask for peak solar power generation in the afternoon, while still having to start up fossil fuel generators to meet peak demand at 6 p.m.
Only the addition of batteries can make customer-facing solar a shippable resource for utilities to operate – if they access it through groups of distributed batteries behind the meter known as VPPs.
“Now the utility company can say, ‘We need those batteries to discharge between 5:00 PM and 8:00 PM on Thursday, when we expect a peak in demand.’ If they feel they have some degree of control, it goes a long way in helping them feel better about behind-the-meter storage,” said Todd Olinsky-Paul, senior project director of Clean Energy Group (CEG).
CEG recently released a report on best practices for energy storage policies across New England and found that meeting battery deployment targets is not the best use of resources. While sustainable portfolio standards require certain amounts of solar and wind to be added to the grid, batteries must be promoted with a purpose. For example, the Clean Peak Energy Standard in Massachusetts requires utilities to provide clean peak sources, making all those residential batteries more attractive.
“What will make the difference is the virtual power plant. Utilities will find out that they can use these customer resources instead of just being at the mercy of the resources,” said Olinsky-Paul.
If utilities and grid operators are open to VPPs, it’s often a win-win situation on both sides of the power line. Utilities gain access to thousands of mini-power plants and clean energy without building their own substations, and customers get additional benefits from their emergency backup resources.
And the Northeast is currently a shining example of how virtual power plants can work for all parties.
“The Northeast is one of the most receptive areas [to VPPs]. They have a stable base solar policy and they have tiered storage incentives and storage roster service programs. When you add all that up, it’s a very congenial place to do business,” said Chris Rauscher, senior director of market development and policy at Sunrun, a nationwide installer looking for VPP programs.
Finding Tools VPP Benefits
Some utilities in the Northeast have established VPP programs. Three utilities (Eversource, National Grid, Cape Light Compact) operating in Connecticut, Massachusetts and Rhode Island have joined forces under the ConnectedSolutions program to pay customers annual incentives for access to energy stored behind the meter. The program is designed as a bring-your-own-device (BYOD) design and the payout is determined by the battery brand and how much it is used.
Vermont utility Green Mountain Power (GMP) has also started a BYOD program, but it really established itself in 2017 as the first utility in the country to partner specifically with Tesla to use customer Powerwalls in a VPP. GMP’s use of 3,000 Powerwalls installed in customers’ homes, along with utility batteries, resulted in more than $3 million in lower grid and electricity costs for customers in 2020.
“Storage is one of the most important things we can do as we tackle climate change and also work to increase resilience for our customers and reduce costs. Storage is like a Swiss army knife when it comes to all the different benefits it can offer,” said Kristin Carlson, VP of strategy and external relations at GMP. “That’s why GMP was the first to deliver a Powerwall program to our customers a few years ago. Virtual power plants are an important part of how we face the future.”
GMP is a relatively small utility – it serves approximately 266,000 customers in Vermont. But those customers are GMP’s “North Star,” Carlson said, and any program the utility develops aims to help customers save money and find resilience for electricity.
“We don’t start a program with the idea that we will revolutionize the utility industry. We’re starting a program because we think it will benefit a homeowner or a renter, someone who gets power from us in Vermont,” she said. “That’s our focus, but it’s imperative that utilities act and act quickly given climate change and cost pressures.”
GMP’s small size allows it to quickly implement new, aggressive programs. The success of the first Powerwall program led to the BYOD offering, which includes up to $10,500 for the purchase of a home battery in addition to usage payments. Carlson said other utilities have contacted the request for advice on starting their own VPP programs.
“Our focus is always on Vermont and our customers, but as we do the work here, we hear from utilities across the country wanting to learn more about what we do and how it works,” she said. “GMP has a strong innovation culture and a strong focus on customer culture. We deploy and start the programs because we realize there is no time to lose. We hope we can be a resource for other people who have questions.”
Solar installers are rethinking their approach
National solar installation company Sunrun sees energy storage as an obvious business path to follow, and the policy team is actively working on the adoption of VPPs across the country.
“You really can’t talk about storage without talking about solar. Solar power is the engine of storage,” Rauscher said. “Something like 95% of residential batteries installed today are tied to solar power.”
Rauscher said he and his Sunrun policy team are generally surprised at the easy adoption of energy storage by policymakers. After mainly experiencing pushback in promoting solar policies, Sunrun is getting ready to fight for batteries. Instead, policymakers and utilities bring in their own questions that demonstrate an immediate understanding of the technology’s benefits.
“We thought we would be in a position to try to convince them of the benefits of having aggregated distributed batteries on the [grid] system,” he said. “It’s unbelievable how fast this has happened. We are not faced with skeptical regulators or utility companies telling them to have batteries on the grid. It’s more, what size, where, what function, how are they compensated?”
Sunrun and other installers and third-party aggregators can then do the work of connecting utilities to household batteries through VPP programs. For example, Sunrun is working in the Northeast to bundle 300 of its Brightbox household battery systems to provide power when it calls on New York utility company Orange & Rockland Utilities (O&R). Sunrun simplifies things on both sides: utilities only need to work with one aggregator and customers don’t have to look for incentives. Through this O&R partnership, Sunrun sends power to the utility when it’s most needed, and Sunrun customers initially receive a discounted battery for participating in the VPP and then earn a fee for participating.
“The average middle-class busy family won’t enroll their Powerwall or LG battery in a VPP and manage it and make sure it always has the right charge status and then seek payment,” Rauscher said. “So we all do that for the customer. Often the customer is not even aware that the battery is being used for VPPs in real time. But they will appreciate it if they get a debit card or other incentive from us at the end of the year.”
That extra compensation for helping to green the grid is not yet a driving force behind the adoption of residential batteries. Emergency backup is still the number one reason consumers invest in storage, but utility incentives can be a bonus for those considering their options.
“I wouldn’t say the average consumer comes to us and says they want to be part of a virtual power plant,” Rauscher said. “But that’s the gap we’re trying to bridge – that gap between consumer education and what the utility and market operator needs. A customer will come to us and be interested in resilient solar and batteries and that value proposition, and then we can sweeten the deal by enrolling that customer’s system in a VPP, sharing the revenue and costing to lower.”
Battery use is increasing across the country, fueled by customer interest in emergency backup, and the Northeast is one of the first regions to jointly operate energy storage on both sides of the meter.
“Utilities are generally quite conservative in nature, but they still need to look ahead. I think they see the letters on the wall. Storage is not going to disappear,” Olinsky-Paul said. “Utilities see this coming and will have to deal with it. Some will deal with it by resisting as long as possible, and others will try to get ahead and include it in their wallets.”