SEP 20, 2017
Early this month, Generate Capital – a sustainable infrastructure finance company – and Sharp Electronics Corporation’s Energy Systems and Services Group announced the commencement of a six-site solar plus storage project at the Santa Rita Union School District (SRUSD) in Salinas, California. The project will include more than a megawatt (MW) of solar arrays, combined with 1.2 megawatt-hours (MWh) of Sharp’s SmartStorage on-site energy storage.
This initiative will be supported through the State’s reinvigorated Self-Generation Incentive Program that offers significant incentives to bring more storage to the California power grid. The SRUSD will be able to cut costs of energy (during some months, as much as 70-80% of the district’s electricity needs will be met by the systems). The District will also significantly reduce the its expensive hourly utility demand charges (a dollars per kilowatt fee based on one’s highest demand during the month that can easily contribute to 30-40% of the total bill).
This project is part of a growing trend, as the U.S. market has recently seen a significant uptick in the addition of on-site energy storage. GTM research reports that Q2 2017 saw 443 commercial and residential storage projects installed, totaling 32 MW. A large portion of these recent projects emanated in Hawaii and California. Solar and storage hybrids are coming on strong, and will likely soon become commonplace, so from that perspective, the SRUSD project is not especially newsworthy.
What is newsworthy is the fact that the project was designed not only to save money, but also to provide critical back-up power to the schools in the event of power outages. The project can help the SRUSD ride through brownouts or short-term outages, as well as longer-duration events. And in the aftermath of the recent devastation in Florida and Texas, the importance of back-up power has increasingly come into focus.
Today, many institutions and commercial buildings often rely on back-up diesel generators in the event of an emergency. Though they are not clean, they generally perform well if the duration of the outage is less than a week. However, Generate Capital president Jigar Shah pointed out in a recent interview, it’s extremely costly to store diesel for that rare black swan event.
For emergency responder services, they have to store a week’s worth of diesel on site. That’s a lot of diesel and its really expensive. You have to test four times a year, and the diesel sits there and doesn’t provide any ongoing cash flow. And it runs out in a week. During Sandy they couldn’t replenish the diesel quickly.
In those instances, a diesel generator without fuel becomes little more than an expensive, and entirely useless paperweight. For true long-term resiliency, renewable energy tied to storage has pronounced advantages, especially the fact that the fuel supply cannot be interrupted in the same way that liquid fuels can. This is one reason the U.S. military is increasingly investing in these types of renewables-plus-storage projects.
Generate Capital has one of the largest on-site energy storage portfolios in the country, and Shah is keen to see this expand. One way to do so, he emphasizes, is to focus on the value that renewables and storage can bring beyond the energy bill, especially resiliency. The SRUSD project, he notes,
puts them on a pathway to be able to provide those services in the unfortunate situation of a power outage, and that resiliency benefit is something they vey much valued and specified in this project. We didn’t sell them on it – they specified it in the deal they pitched in the RFP. Clearly these schools are thinking about resiliency in part and parcel with their energy and climate goals.
As far as the current project economics, Shah points out that the solar power is generally good at tracking air conditioning load and cutting peak demand as a consequence. But the appearance of a cloud at the wrong time can lead to a spike in consumption and an increase in monthly demand charges. That’s where battery dispatch can really help the economics, and this is especially true in markets with high demand charges. And there are a quite a few utility settings with respectable demand tariffs.
A newly released report from the National Renewable Energy Laboratory looking at the potential for behind-the-meter storage indicated that close to five million commercial customers in the U.S. “can subscribe to retail electricity tariffs that have demand charges in excess of $15 per kilowatt (kW).” That represents more than 25% of the 18 million commercial customers in the country. In fact, many utilities, including most of those in California, have charges as high as $30 per kW.
As costs of batteries and storage systems continue to decline (one report forecasts these costs to decline by as much as 30% by 2030), this market will broaden considerably.
Peter Kelly-Detwiler is a principal at NorthBridge Energy Partners, a consulting firm providing expertise and market intelligence to companies navigating today’s complex energy landscape.