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Community Energy Storage: A New Revenue Stream for Utilities and Communities?

September 24, 2018 by Kyle Flanegin

Although "it depends" is often the correct answer when asking whether energy storage makes sense in a particular context, utilities are exploring opportunities to incorporate community energy storage (CES) systems into the local grid. Utility-owned CES systems are a collection of two or more battery storage units connected to the low-level transformers that serve houses or small businesses. These systems exist on the utility side of the meter, or “in front” of customer meters, and are typically referred to as front-of-the-meter battery storage. Utilities and electric co-ops that are adding batteries to the grid cite many benefits for residential, commercial, and other grid-level stakeholders. At the local scale, benefits of energy storage include the ability to provide backup power, mitigate flicker, and integrate more renewable capacity while maintaining local grid stability. At the broader grid-scale, these systems can provide voltage regulation, peak demand shaving, load-leveling at substations, power factor correction, and other ancillary services.

Utilities contemplating front-of-the-meter battery storage consider how to assign the benefits and the cost of these systems to various stakeholder groups, as seen in Table 1 below.

Table 1. Value Streams for Energy Storage Systems

Service

Description

Potential Value

Grid

Commercial

Residential

Demand charge reduction

Use stored energy to reduce demand charges on utility bills

High

 

x

x

Energy arbitrage

Buying energy in off-peak hours, consuming during peak hours

High

 

x

x

Demand response

Utility programs that pay customers to lower demand during system peaks

High

 

x

x

Resiliency / Back-up power

Using battery to sustain a critical load during grid outages

High

x

x

x

Frequency regulation

Stabilize frequency on moment-to-moment basis

High

x

x

 

Capacity markets

Supply spinning, non-spinning reserves

Medium

x

x

 

Voltage support

Insert of absorb reactive power to maintain voltage ranges on distribution or transmission system

Low

x

   

T&D upgrade deferral

Deferring the need for transmission or distribution system upgrades, e.g. via system peak shaving

Site specific

x

   

Source: https://www.nrel.gov/docs/fy17osti/70035.pdf

Because every utility, whether municipally-, publicly-, or investor-owned, operates under a distinct set of local circumstances, it can be difficult for utilities to accurately predict the return on investment for CES systems. As a result, utilities have experimented with several different models of community energy storage that prioritize different benefits that CES can provide. Several cases are discussed below.

Note: For information about battery system storage sizes, please see the Batteries 101 Series: How to Talk About Batteries and Power-To-Energy Ratios NREL blog.

Xcel Energy, Stapleton, Colorado, 1 MWh Project

In 2017, Investor-Owned Utility Xcel Energy announced plans for a CES pilot project in Colorado, citing increasing demand for rooftop solar, especially in areas of the country like the Southwest, and that implementing battery storage can increase the amount of solar the local grid can handle. Xcel created a pilot project in Stapleton, a suburb of Denver, to incorporate six customer batteries and six grid batteries of various sizes. Although the overall goal of the project is to store and discharge excess solar power in the day/night cycle to allow higher levels of solar penetration, Xcel also wants to evaluate the ability of these batteries to regulate grid voltage, provide backup power, and reduce peak demand, all of which lead to lower operating costs for the utility.

United Power, Firestone, Colorado, 16 MWh Project

United Power, an electric co-op in Colorado recently announced that it is constructing a 4 MW / 16 MWh battery project near Firestone, Colorado in collaboration with SoCore Energy and Tesla. United Power cites curbing peak demand as the main reason for the installation, which will help to improve their overall grid efficiency. This is accomplished through a process where energy is stored in the batteries overnight and then discharged to curb the highest levels of demand during the afternoon and evening. The project in Firestone is unique because it is one of the first projects in the nation that allows users to purchase some of the battery system's output to reduce their personal monthly demand charge.

American Electric Power, Ohio, Several Projects

American Electric Power (AEP) is an IOU operating in Texas, Kentucky, West Virginia, and the Midwest. AEP began installing batteries in Charleston, WV in 2006 in lieu of upgrading substations as a way to reduce costs. Since then, AEP has installed a variety of community energy storage systems, aimed at shaving peak load, demonstrating grid islanding, storing renewable production in the day, and supporting sub-transmission. AEP has continued to incorporate community energy storage into their systems because the systems are typically modular and flexible, and represent a much smaller capital cost than bulk battery storage. The utility also notes that community storage provides an efficient solution for increasing distributed intelligence and speed on the grid.

Village of Minster, Ohio, 3 MWh

The public power utility for the village of Minster, Ohio was awarded Renewable Energy World's Renewable Energy Project of the Year for the completion of their 7 MW / 3 MWh CES system. The benefit of this system for Minster is that it provides multiple revenue streams, such as the integration of frequency and voltage regulation, demand response, and transmission services that flow to multiple stakeholders, including the village, public utility, and residents.

Summary

CES systems may offer utility benefits, including potential cost savings, grid services and, in some cases, the ability to defer transmission and distribution upgrades. However, the these potential revenue streams are still not fully understood. For example, transmission and distribution deferrals may be a straightforward costs for utilities to consider in a cost-benefit analysis for a CES system in a particular context, but the value of CES to provide other services like frequency and voltage regulation to the grid through a utility’s distribution management system are not well-quantified. As the cost of energy storage decreases and the value of the services are better understood, expect further iterations on current pilot models that assign the costs and the benefits of CES systems to different stakeholder groups.

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