Valuing Customer-Sited Solar and Storage: is adding batteries worth it?
The concept of adding batteries alongside a utility customer’s solar array intrigues utility customers, solar developers and utility planners on several levels, but the underlying question for everyone is whether adding batteries is “worth it.” The new Solar + Storage Valuation report prepared by Clean Power Research (CPR) with funding and support provided by the IREC, is an important first step in addressing that underlying question. The report proposes a methodology to assess the value of solar+storage, which provide states and utility commissions a very useful framework and information tool that can be used to conduct a more comprehensive valuation analysis.
The methodology described can be applied anywhere, although the report focuses on Hawaii, which is a likely early adopter state for storage given its high electricity rates and high penetrations of distributed solar. In fact, Hawaii is first in the nation in terms of solar capacity per capita, and one of the top ten states for overall installed solar capacity.
High penetrations of distributed (i.e. customer-sited) solar energy penetration have promulgated recent utility concerns about interconnecting the thousands of customers waiting to jump on the solar bandwagon. Those utility concerns do have foundation – generation has to roughly match load on any electric grid at any given moment. An island with a lot more generation than load in the middle of the day would experience a damaging voltage rise or even a blackout. Storage has the promise of being the grand solution – moving excess mid-day generation to the evening hours when it is needed. Even more enticing is the fact that Hawaii’s peak load tends to be in the early to late evening, when solar arrays are no longer delivering as much or no power, depending on the season. Solar energy could light up the night, thanks to batteries.
The report establishes a methodology to assess the value of solar and storage together, depending on several different goals and dispatch protocols. If the utility can direct when to discharge batteries at a customer’s home to provide that energy to the grid, then it can reliably cut utility peak load, which means saving the cost of building new generation and new transmission and distribution lines. That makes for a fairly high value.
If a commercial customer controls discharge of on-site batteries, the customer can save money by discharging to offset the customer’s peak demand, and reduce demand charges. That may save the customer money, but it is less reliable for purposes of meeting utility peak load. If a time-of-use customer controls discharge, that customer might be able to buy low and sell high, charging late at night when rates are low and discharging during peak periods. Again, that may work well for the customer, but provides less certain capacity benefits for the utility.
CPR has done several solar valuation studies, and brings to bear all of its expertise to put a value of solar with storage. Most recently, CPR’s solar valuation study in Maine addressed a whole range of non-energy economic and environmental benefits, which CPR notes could be included in any study. For purposes of the Solar + Storage Valuation report, CPR identifies benefits that have been considered elsewhere in other studies and suggest how battery discharging would occur under different scenarios.
Given that CPR is primarily proposing a methodology, the rough estimates of Hawaii solar plus storage valuation should not be the big takeaway from the report. Still, if you are curious, CPR estimates that adding storage to a customer’s solar array in Hawaii adds more than 10 cents of value per kWh generated, at a cost of just over seven cents per kWh generated. The full range of benefits are not calculated in the rough estimates, but including them in a full analysis would obviously increase the value of the storage and solar.
So, is it “worth it” to add batteries in Hawaii? Not every night. Given the cycle life and purchase cost of batteries today, the cost per kWh to discharge from a battery is more than the difference between daytime and nighttime rates. However, using batteries to offset utility peak load can mean avoiding the need to build new utility generators, which translates to cost savings to all customers and the utility, thus suggesting that batteries are worth it.
At the very least, a study based on CPR’s methodology should be undertaken, and attention should be paid to setting rate structures that appropriately compensates customers for the value they provide.
Indeed, now is the time to agree on the methodology to evaluate distributed solar with storage. We are quickly approaching or have already reached a cross-over in early markets for storage, and understanding the value of solar+storage systems can help guide and inform policy and regulatory decisions early on. The new IREC/CPR study lays out the methodology to do just that and provides an important first step in the right direction.