Solar Energy and Battery Storage Coupled Provide Demand Response & Utility Peak Shaving

Borrego Solar, a developer, and Stem, an energy storage firm, discuss when PV, storage or both will benefit commercial customers the most.

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>” […] Thanks to advancements in technology, there are more energy solutions available to consumers. As a result, the confusion about which option to choose — solar, storage or solar-plus-storage — is growing.

Utility energy costs

To understand the benefits of energy storage and solar at a customer facility, it’s essential to first understand the elements of most organizations’ utility energy costs: energy charges and demand charges. This is the bread and butter for energy managers, but many leaders in finance and/or operations aren’t as aware of the energy cost mix — despite it being one of their largest budgetary line items. It should be noted that this billing structure isn’t in place in every market.

Energy charges, the price paid for the amount of energy used over the course of the billing cycle, are how most people think of paying for electricity. A price is paid for every kilowatt-hour used. Demand charges are additional charges incurred by most commercial customers and are determined by the highest amount of energy, in kilowatts, used at any instant or over some designated timeframe — typically a 15-minute interval — in that billing cycle.

Demand charges are a bit more complex. They come from a need for the grid infrastructure to be large enough to accommodate the highest amount of energy, or demand, needed at any moment in order to avoid a blackout. Every region is different, but demand charges typically make up somewhere between 20 percent and 40 percent of an electricity bill for commercial customers.

Why storage?

Intelligent storage can help organizations specifically tackle their demand charges. By combining predictive software and battery-based storage, these systems know when to deploy energy during usage peaks and offset those costly demand charges. Most storage systems run completely independently from solar, so they can be added to a building whether or not solar is present.

Storage can reduce demand charges by dispensing power during brief periods of high demand, which in essence shaves down the peaks, or spikes, in energy usage. Deploying storage is economical under current market conditions for load profiles that have brief spikes in demand, because a relatively small battery can eliminate the short-lived peaks.

For peak demand periods of longer duration, a larger, and considerably more expensive, battery would be needed, and with the higher material costs, the economics may not be cost-effective. As system costs continue to decline, however, a broader range of load profiles will be able to save with energy storage.

Why solar?

For the commercial, industrial or institutional energy user, solar’s value proposition is pretty simple. For most facilities in states with high energy costs and a net metering regime in place, onsite solar can reduce energy charges and provide a hedge against rising electricity costs. The savings come primarily from producing/buying energy from the solar system, which reduces the amount of energy purchased from the utility, and — when the installation produces more than is used — the credit from selling the excess energy to the grid at retail rates.

The demand savings are a relatively small part of the benefit of solar because the timing of solar production and peak demand need to line up in order to cut down demand charges. Solar production is greatest from 9 a.m. to 3 p.m., but the peak period (when demand for energy across the grid is highest) is typically from 12 p.m. to 6 p.m. If demand-charge rates are determined by the highest peak incurred, customers with solar will still fall into higher demand classes from their energy usage later in the day, when solar has less of an impact.

That being said, solar can reduce a significant portion of demand charges if the customer is located within a utility area where solar grants access to new, solar-friendly rate schedules. These rate schedules typically reduce demand charges and increase energy charges, so the portion of the utility bill that solar can impact is larger.  […]”<

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California Resort Hotel First to Upgrade to Energy Storage + EV Charging

Shore Hotel in Santa Monica, California, is a luxury establishment with an energy storage system and fast DC electric vehicle (EV) charging — reportedly, the first one in the US to have this setup. It is expected that the lithium-ion energy storage system will help it reduce electricity demand charges by 50%. Over time, that savings


>” […]  So what is the connection between energy storage and EV charging? When an EV is plugged into a charger, electricity demand increases, so the hotel could be on the hook for a high rate for the electricity, depending on the time of day. Demand charges are based on the highest rate for 15 minutes in a billing cycle. So, obviously, a business would want to avoid spikes in electricity usage so it would not have to pay that rate.

That’s where the energy storage comes in. When there is a spike, electricity can be used from the energy storage system, instead of from a utility’s electricity. Avoiding demand charges in this way, as noted above, can thus help businesses save money. […]”<

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Why Demand Response will shape the future of Energy

Matching supply to demand is crucial when it comes to energy — and this concept can help us do it.


>” […] Our energy grid is not designed to put out a steady amount of energy throughout the day. Rather, it is designed to crank up or wind down depending on the amount of energy that’s being demanded by the markets.

That means there’s a baseload of generation that’s always on — churning out steady amounts of relatively cheap, dependable power night and day. This has typically been made up of coal and nuclear plants, which can produce large amounts of power but can’t be made to cycle up and down efficiently in the face of fluctuating demand. On top of the baseload, you have an increasing amount of intermittent sources as the world transitions to renewable energy technologies like wind and solar. And then, on top of these intermittent sources are so-called “peaking” plants, often running on natural gas and sometimes diesel or even jet fuel. These can be deployed at very short notice, when there’s either unusually high demand or when another source isn’t available (e.g. the sun isn’t shining enough for solar), but are expensive, inefficient and disproportionately polluting.  One of the most effective ways to meet this challenge also happens to be the simplest — reward people for not using energy when it’s in highest demand.

An old idea whose time has come
Demand response, as it is known by those in the industry, is really not all that new. Many utilities have offered cheaper electricity rates for off-peak hours, encouraging consumers to shift their habits and reduce the pressure on the peak. Similarly, energy producers around the world have partnered with energy-hungry industries to ask them to power down at times of high demand. What’s new, however, is an ever more sophisticated array of technologies, meaning more people can participate in demand response schemes with less disruption to their daily lives. […]

A more sophisticated approach
On the commercial side, demand response has been a strategy for some time because it took very little infrastructure to implement — just an energy-hungry business ready and willing to cut its consumption in times of need, and able to educate its workforce about how and why to do so. Here too, however, the concept is becoming a lot more sophisticated and scalable as technology allows us to better communicate between producers and consumers, and to coordinate the specific needs of the grid. And as distributed energy storage becomes more commonplace, consumers may not even have to modulate their overall use — but rather allow the utility to switch them to battery power when grid supply is constrained. […]

A huge potential to cut peak demand
A report from federal regulators suggests that U.S. demand response capacity had the potential to shave 29GW off of peak demand in 2013, representing a 9.9 percent increase over 2012. When the U.K.’s National Grid, which manages the nation’s transmission infrastructure, put out a call for companies willing to cut consumption at key times, over 500 different sites came forward. The combined result was the equivalent of 300MW of power that can be removed from the grid at times of need. And constrained by its rapid growth of renewables following the Fukushima disaster, Japan is now looking at shoring up its grid by starting a national demand response program in 2016. […]”<

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ACEEE Recommends Demand Response as a Strategy to Conquer Peak Demand for Utilities

By Steven Nadel

” … a potential emerging trend that could have a large impact on many utilities: the reduction of the traditional mid-afternoon peak, and the growth of an evening peak. (Peak is the time when demand for power is highest.)”


>” […] In many regions, evening peaks have been growing, as more consumers install air conditioners and operate them when they get home from work. But two other factors are augmenting this trend. First and foremost is the growth in consumer-owned photovoltaic systems. These systems generate the most power on sunny afternoons, which is about when the traditional early afternoon peak occurs. But when the sun goes down, extra power is quickly needed to replace this solar power.  […]

There are many ways to address the growing evening peak, including the following:

  1. Energy efficiency, particularly measures that reduce the evening peak such as efficient lamps, water heaters, stoves and ovens.
  2. Smart controllers that minimize energy use during the evening peak. To provide just one example, a smart refrigerator would not turn on the defrost cycle during this period and might even turn off the main compressor for a few minutes.
  3. Likewise, smart charging systems for electric vehicles could be used, such as a new system recently demonstrated by the Electric Power Research Institute (EPRI), working with a consortium of utilities and auto manufacturers.
  4. Expanded use of demand-response programs to lower the new peak (and coordination of these efforts with energy efficiency programs).
  5. Time-of-use rates and/or demand charges that raise the price of power use during peak times and a lower them at off-peak times.
  6. Use of energy storage at a system, community, or end-user level. Storage able to provide power for several hours could be very useful.Fast ramp-up generation to serve the evening peak and other times when renewable energy production plummets, for example when the wind dies down. Hydro is ideal, but fast ramp-up gas units are now entering the market.

In my opinion, the time of the peak will change in many regions. The shift will be gradual in most areas, so we have time to address it. Rather than trying to stop this change by restricting photovoltaic systems, we’ll be better off figuring out how to manage it, […]”<

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‘Demand Response’ is ‘Disruptive Technology’ Shutting Down Power Plants

FirstEnergy Corp. has a traditional view of wholesale electricity markets: They’re a competition between iron-in-the-ground facilities that can put megawatts on the grid when those megawatts are needed. Think coal plants, nuclear reactors and hydroelectric dams. Missing from the definition is a consumer’s promise to turn off the lights when the grid is stressed — so-called demand response. Instead of creating energy during peak times, demand response resources conserve it, freeing up megawatts […]


>” […]The idea is not new and has been expanding in the territory of PJM Interconnection, a Valley Forge-based grid operator that manages the flow of electricity to 13 states, including Pennsylvania.

FirstEnergy, which owns power plants and utility companies across several states, wants PJM to abandon the demand response concept.

The Ohio-based energy company says demand response, which doesn’t require any kind of capital commitment, is “starving” traditional generation out of its rightful revenue in wholesale markets.

“We feel that it’s going to lead to even more premature closures of power plants,” said Doug Colafella, a spokesman for the firm.

Specifically, FirstEnergy is fighting to get demand response kicked out of PJM’s annual capacity auction, which ensures there’s enough electricity resources to meet projected power demand three years in advance. The auction establishes a single clearing price that will be paid to all successful bidders, like a retainer fee, in exchange for their promise to be available to be called upon three years from now.

During the May auction, which set capacity prices for the 2017-2018 year, the clearing price was $120 a day for each megawatt of electricity bidders committed. About 6 percent, or about 11,000 megawatts, of the capacity secured came from demand response.

FirstEnergy’s Bruce Mansfield coal-fired power plant in Beaver County failed to clear the auction. The company has since postponed upgrades to the facility, which could jeopardize its functioning beyond 2016.

Capacity payments are a stable source of revenue for baseload generation plants, Mr. Colafella said, and a price signal to the market about which way demand is headed, giving generators some indication about whether new facilities will be necessary and profitable.

Demand response distorts that dynamic, he said.

Since May, FirstEnergy has intensified its efforts to drive demand response out of PJM’s markets, having seized on a related court case involving the Federal Energy Regulatory Commission.

“FirstEnergy’s business model is that electricity consumption has been flattening, so they want to take a larger share of the market and how do you take a larger share? You bulldoze everybody out,” said Mei Shibata, CEO of The Energy Agency, a marketing and communications firm and co-author of a recent report on the market for demand response in the U.S. for GreenTech Media Research.

In May, the D.C. Circuit Court vacated a rule created by the Federal Energy Regulatory Commission in 2011 that said demand response should be treated the same way as power plants in wholesale energy markets. That meant demand response providers could offer to shut down a day in advance, when grid operators book electricity for the following day, and get the same price as megawatts from generation.

An electric power industry group sued the FERC claiming that the call to shut off electricity in exchange for payment is a retail choice and retail falls exclusively within state jurisdiction, not federal. The court agreed, setting in motion FirstEnergy’s challenge to demand response in capacity markets, which were not addressed by the court decision. If demand response is a retail product in one context, then it’s a retail product in all, the logic goes.

The same day the court issued its decision, FirstEnergy filed a lawsuit asking a judge to order PJM to recalculate the results of its May capacity auction stripping out demand response.

PJM objected. The Pennsylvania Public Utility Commission, which intervened in that case, charged FirstEnergy with “jumping the gun” on its logic and called its proposal an “unprecedented and wholly unnecessary disruption of the capacity market auction process.”

Even if demand response is excluded from the daily wholesale market as the court decision wills, the market for this resource will continue to expand, said Ms. Shibata.

If, however, FirstEnergy succeeds in kicking demand response out of the capacity market, “that would be a much bigger deal,” she said.

PJM leads the nation in demand response resources, according to Ms. Shibata’s research, and anything that happens to demand response at PJM would likely trickle down to the other grid operators around the country. […]”<

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Developing an Energy Management Program for Your Business

See on Scoop.itGreen Building Operations – Systems & Controls, Maintenance & Commissioning

Today more than ever, businesses are concerned with maximizing operational efficiency, minimizing costs, and seeking out untapped revenue streams. At the same

Duane Tilden‘s insight:

>Large energy users like many commercial, institutional, and industrial organizations have a unique opportunity to act as a “virtual power plant” while reducing their real-time demand for electricity—and opening up a new revenue stream. This strategy, known as demand response, is not only a cost-free way to reduce energy usage, but also it generates payments for participating businesses simply for being on call.

Demand response providers work with commercial, institutional, and industrial businesses to identify ways for facilities to reduce energy consumption without affecting business operations, comfort, or product quality. In turn, those facilities agree to reduce their demand during strategic times so that utilities and grid operators can improve reliability during times of peak demand. Demand response also helps increase economic efficiency in regional energy markets and integrate renewable generation capacity into generation systems.

Demand response can be considered a form of strategic energy efficiency, but what about long-term, persistent energy efficiency, a second key to a comprehensive energy management program? In even the most high-tech, LEED Platinum certified buildings, it can be very difficult to ensure efficient operation over time. […]<

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