While the battle between utilities and residential solar owners is often widely publicized — solar owners want compensation for their production, utilities aren’t too sure — one thing not making headlines is utility hatred of customer-sited energy storage. In fact, more utilities are grouping residential batteries into virtual power plants (VPPs) and paying customers for the opportunity to call on their stored energy when the grid needs it most.
It’s a considerable change in utility thinking that is sweeping the country. From progressive utilities in the Northeast to grid operators desperate for quick reliability fixes in the West, VPPs are a win-win on both sides of the electric line. Utilities get access to thousands of mini power plants and clean energy without building their own substations, and customers get extra benefits from their emergency backup resources.
Utilities usually first establish their VPPs and then work with battery suppliers for interaction protocols. For example, Arizona Public Service has initiated a pilot VPP program that currently only works with Enphase and SolarEdge batteries. Pacific Gas and Electric has its own pilot program, but only with LG and SolarEdge batteries. More utilities in the Northeast are setting up bring-your-own-device VPPs, and payout is determined by the brand of battery and how much it is used.
Swell Energy acts as an aggregator for the utility and battery owners, making sure both sides receive their benefits. CEO Suleman Khan said VPP relationships are increasing rapidly across the country and Swell is curating consumer-sited resources in a manner most valuable to the utility.
“The recent commissioning of several high-capacity VPPs has introduced a new asset class (with multiple revenue streams) to the capital markets. Technical innovation has led to financial innovation and is now redefining how we finance distributed energy resources as VPP portfolios,” he said. “With this comes the opportunity to reshape the energy landscape over the next decade in a manner that shatters the renewable glass ceiling, reduces the need for centralized power plants, preserves open space and habitat and is inclusive in its benefits across the socioeconomic spectrum.”
Although that extra compensation for helping green the grid isn’t yet a driving force for residential battery adoption, more battery owners may sign on to VPPs if the stand-alone storage ITC is passed in the BBB Act. As the tax code stands now, a battery can only take advantage of the ITC if it is 100% charged by solar panels for a determined amount of time (often five years). If the battery participates in various demand arbitrage situations — and charges via the grid at a time when electricity rates are low and sun exposure is limited, for example — then it forfeits its right to claim the ITC. This makes participating in utility-run virtual power plants impossible until the battery finishes its five years under the “ITC contract.”
But if batteries can receive the ITC on their own (as is written in the draft of the BBB Act), then solar charging isn’t a requirement, and homeowners can receive both the tax credit and compensation for participating in a VPP on Day 1. And more utilities can take advantage of decentralized power banks.
“With battery storage, homeowners gain energy independence and control for their household, even as blackouts and power shut-offs increase,” said Peter Faricy, CEO of SunPower, after announcing SunPower’s SunVault battery was accepted to Northeast VPPs. “Now with the SunPower VPP, our customers can choose to participate in programs that will help stabilize the grid for their community while simultaneously offsetting the cost of their system. Citizens and utilities working together to provide reliable and renewable energy is the future of the grid.”