In the Ask an Expert series, HeatSpring instructors and industry thought leaders answer a question on the minds of the HeatSpring community. This session, we are joined by Chris Brown and Chris LaForge, instructors of the Utility Scale Commercial & Industrial Solar and Storage Series. They answer the question – what are some of the challenges of adding more distributed energy to the grid? To check out their response, tune into the video or read the transcript below.
Brit: Hello, HeatSpring community. Thank you for joining us for this Ask an Expert session. Today we actually have two experts. We have both Chris Laforge and Chris Brown, who are co-instructors for the Utility Scale Commercial and Industrial Solar and Storage courses, both 101 and 201.
Today they’re going to answer the question – what are some of the challenges of adding more distributed energy to the grid?
Chris Brown: Awesome. Thanks, Brit. Appreciate you having us on, I’m going to start with – what’s not the challenge right now – which is finding customers. I think it’s – very specifically right now – the ability to get an off-taker or somebody who wants to host an energy storage system at their C&I property, really feels subjectively, like it’s at an all-time high. There’s just such a huge demand for companies to find ways to meet their sustainable goals. And then also the cost of energy is a very big concern to a lot of businesses, especially manufacturing. I’m seeing right now, large consumers of energy, trying to find ways that they can understand their long-term cost of energy.
A lot of companies that had looked at solar in the past are now saying, okay, I think this is the year we’ve got to pull the trigger. So starting off with, you know, finding customers now is really almost too easy and going very well. It’s really being driven, I think, a lot by this inflationary environment that we’re in – where everything seems to be getting more expensive every day. And energy is one of those.
But from a development perspective, it can be quite the challenge. So say I want to go and sign a PPA with company X and meet their sustainability goals and help lock in their rate of power for 20 years. We signed that contract today, let’s say, and it’s going to take me one or two or maybe even three years to construct the system because of how long it takes to go through the process. And so this worked well – in our favor – as renewable energy developers over the last 10 or 15 years, because we’ve been in, what they call, the solar coaster. So it’s all over, up and down. But very generally speaking, the price trajectory of solar and batteries has been declining every year.
So if you sign a contract in year one and you build it in year two, typically your cost of materials would come down. And you’re trying to be competitive in price based on where you think pricing will be in the future for sure. But we’re in this environment where we don’t really know what our cost of capital is going to be in a year. We don’t know what the cost of lithium carbonate or silicon is going to be in a year and everything else that flows from our commodity materials all the way through labor, you know, what is the labor. Labor costs are going up. And, and so it’s really difficult to lock in a price on a long-term contract in this inflationary environment.
So we’re working hard at figuring out ways that we solve that problem for our customers. You know, I think the other major issue, probably issue number two, that we’re seeing right now is related, but it’s really the supply chain and getting access to the products that we need in a timely manner.
The lead times are getting increasingly long. Shipping costs are at an all time high. So getting everything there that you would need to construct the system, the supply chain is still struggling. It feels like just about everything is struggling with supply chain issues right now.
So those are probably issue one and issue two. I think, you know, other challenges that we’ve seen, interconnection is a tough one in a lot of markets. We’ve put so much solar into the grid in a lot of places that the process of getting an interconnection application approved and signed is taking a long time.
And that’s basically because there’s so much distributed generation in a lot of places already that the utility really has to study the infrastructure and that’s taking a long time to do in many cases. Number two is the cost of interconnection. There’s a lot of upgrades that need to happen to our grid and grid modernization that needs to happen.
And if you want to put a solar storage project at a lot of places, the utility is going to say, well, you’re going to have to pay this amount. And that amount may ultimately make your project “fatally flawed” , let’s call it.
Chris LaForge: For some sort of transmission upgrade, some sort of transformer upgrade at the site, is real hard dollar costs, not just the engineering studies and stuff like that.
Chris Brown: No, it’s physical material that needs to be deployed. Absolutely. And it can be over a million dollars for a relatively small project and that kills the project. So finding ways that we can, you know, update our grid because we need it, right? We need a grid that’s going to be flexible; that’s going to be bi-directional; that’s going to allow for all this distributed energy resources – that doesn’t come free, right? So there has to be a way to pay for it.
But simultaneously we need renewable energy adoption now more than ever for whether it’s climate change, national security, you name it. There’s a bunch of reasons, we need to go now today deploying as much distributed energy as possible.
And so really it’s looking at policy, focused policy on the issue of interconnection. How can we take the cost of modernizing the grid and find ways – if we’re going to subsidize renewable energy, maybe we direct it towards the interconnection as one of our weak points right now.
So getting faster time to turn around interconnection impact study and then lower cost barred by the project owner – that we can find ways to deal with.
So outside of that, I think permitting still remains an interesting challenge. There’s…we want to have the education of your authority having jurisdiction. Batteries, especially lithium-ion batteries, that are the size of a shipping container are completely new to most places.
And so you really have to go through the education process and make sure you jump through the hurdles with the local authorities, so that they’re comfortable with, for example, fire suppression technology that you may be deploying on the site and other concerns that they may have. And then, there is still a lot of nimbyism that happens everywhere with any development.
Local folks may not necessarily look favorable at solar all the time, especially when you get into larger and larger sized arrays that are being deployed. So I think that from my perspective covers the major challenges that I’m seeing in the market today.
Chris LaForge: And I just want to circle back – and I really agree with Chris – but the interesting thing is that we’ve moved from a situation where we’re really short on solar industry readiness to a situation where we’re really short on utility readiness. The issues Chris was bringing up – a lot of them are that the utility is not ready to take on our industry.
And the industry has ramped up to the point where we’re actually making a few little waves. We’re making an impact on the grid and it would really benefit everyone to get some very clear policy mandates. Right now we’re going to see certain policy mandates sunset, like the ITC. And it’s at an interesting time when we’re seeing other volatile energy costs, like running a gas plant, just skyrocket. This is something that we in the renewable energy industry pointed out for years, is that if you rely on something like gas, you have no control over what your costs are, because that gas price is going to be volatile. Right now gas prices are going crazy. Well, this is where we would really benefit to have some solid policy at the federal and at state levels to encourage increased grid readiness. So the grid upgrades don’t all fall on the developer of the solar project completely. If there’s some sort of incentive to allow for a more receptive grid , and figuring out how to share that burden so that it’s not a project killer.
Chris Brown: Absolutely. And because you brought up ITC, I think these videos may be on the web for a while. You know, where we record today is at an interesting point where we’re looking at some serious legislation that could be passed this year to allow the ITC to continue further and even provide potentially an ITC for standalone storage. So there’s definitely some great renewable energy policy being contemplated in Washington. So I’m hopeful that this video is in a future where the ITC is not sunsetted and we can only hope for it now.
Brit: Awesome. Thank you guys so much for sharing some of those challenges and not challenges that we’re seeing with distributed energy. Thank you guys for being here. We appreciate it.
Chris LaForge: Thank you, Brit.