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 is value stacking as it relates to solar plus storage? Tune into their answer below.
Brit: Welcome HeatSpring community! We are here with Chris LaForge and Chris Brown, who are co-instructors for the Utility Scale Commercial & Industrial Solar and Storage 101 and 201 class on the HeatSpring platform.
Today they’re going to answer the question for us – What is value stacking as it relates to solar plus storage?
Chris Brown: So thank you, Brit. I appreciate you having us here today. And it’s one of these questions that I end up talking about all the time… because value stacking is the name of the game when it comes to solar and storage.
It’s really about, you know, maybe a little cliche, but it’s trying to get one plus one equal three, right? To get as much as you can out of the value of the system that you’re building.
I think the simplest way to start thinking of value stacking is with just a solar project – a solar only project without a battery – grid connected. And in that situation, you have a kilowatt hour of energy that you generate, right?
You generate energy from the system. And then you also, in many cases, have a REC, a renewable energy credit, that’s produced parallel to the solar and storage system. So in that case where you have just a regular straight grid type solar system, you’re already value stacking with your kilowatt hour and your REC.
Where it starts to get really fun -and this is actually what got me into storage or originally – it was when I started doing the research into the value stacking around the storage system or solar plus storage system. All of a sudden, there’s all these new and exciting things that you can do when you have that battery in your system.
The Rocky Mountain Institute put out a great report in 2015 about the different value stacking in storage. And that’s part of our course when you take it. We go through the report and it’s a good primary resource that we use.
So just thinking about storage – I think that a great way to kind of break up the different value streams and the parts of the value stack is to think about services to a customer, like a behind-the-meter load, services to the load-serving entity or essentially the utility. And then a third is going to be services that are provided to the RTO or the ISO. In the United States, the way our power grid is built, we essentially have regional ISOs – independent system operators.
And so where I am in Massachusetts, it’s ISO New England. In California, it’s CAISO and then a whole bunch in between. And so the ISO is basically a revenue-neutral party that’s going to make sure that there’s sufficient capacity and generation available to the utility’s load-serving entities, so that we don’t have blackouts. Essentially that’s their job, and they’re services we can provide at each of those levels.
And our whole course is really in-depth looking at all the different parts of the value stack. So it’s impossible in a quick video here to really go through everything in value stacking. But I’m going to just try to hit on a couple that are easy to describe.
So when you have a behind-the-meter system, we already talked about solar where you get your REC, you get [a certain] kilowatt hour of energy…. but the battery, I think the beginning, or maybe the most simple way that you could utilize the battery is for backup power. So that’s one portion of the value stack.
Not every energy storage system is going to provide backup power. Oftentimes in commercial industrial applications, you won’t include what we call islanding or the ability for that battery to provide backup power because it is an added expense and it can get quite complicated. But looking back at sort of the residential/small commercial space of the past, battery backup was a pretty big part of the value stack and still is today.
Number two – one of the other value streams that we see is time-of-use optimization. So in certain markets, like specifically California, their rate of power is going to be pretty different if you’re consuming at-peak or off-peak hours. And so, when you take that spread, you essentially can do some arbitrage where you would charge the battery from solar, or from the grid when the costs are low, and then discharge the battery when prices are high – which tends to be, in California currently, the late afternoon.
Other markets around have different time-of-use rates. And so it can work in some places, like Connecticut here in the Northeast. It’s only maybe 3 cents spread between a peak and off-peak, and that is not a huge amount that you can really play with.
Another behind the meter value stack is going to be the ability for self-consumption or additional utilization of solar resources.
There are certain markets where you’re not allowed to export your solar or you have a net metering rate that is not as good as your import rates. So you may pay – I’m just going to make up easy numbers – let’s say you pay 10 cents/kWh for power coming in, but they only buy it back for 5 cents. Right? So in those circumstances – or in the case of Hawaii – you’re not even allowed to export it at all – so in those cases, you use this part of the value stack would be additional utilization of solar that would otherwise be lost by having the curtail export.
Finally, there’s other behind the meter services, but just one more I’m going to hit on is going to be demand charge management.
So a large – especially in the C&I sector – a large part of the utility bill is going to be based on the demand. You have a supply charge for kilowatt hours and a demand charge for the amount of power that’s consumed over a certain interval time. And if you have the right load profile, you’re going to be able to do demand charge management.
So essentially leveling out of the spikes, so that you can bring your demand charges down.
Then looking at the value stack as we go into the utility level. The one that I think is most common right now is demand response, which is a really interesting way that we can help support the grid with our assistance.
Essentially what it is is the utility is going to have certain times when they’re going to need power the most, or they’re going to need demand reduced the most, or supply to the grid. And during these events, they can – through a program that they’ve created – we’re able to – they can call on the battery.
So if it’s August and it’s very hot and everyone’s got their air conditioners on and the grid needs power most, they make a call and they dispatch all of their resources in the program simultaneously and help bring the entire network’s demand down. And then they compensate the battery owner for being able to meet those calls.
And then, thinking about the ISO that gets more and more confusing and complicated, but they essentially have a whole number of various different types of wholesale power markets that you can participate in, typically for in-front-of-the-meter type system configurations. But the name of the game is value stacking – meaning very rarely is any one of those value streams sufficient to justify the addition of the battery. But when you start to stack all of the different value streams together, all of a sudden you get compelling returns. So that’s a quick overview of value stacking from my perspective.
Chris LaForge: That’s fantastic, Mr. Brown. I am excited to see the options of values growing over time so that as we see the grid gets smarter and the utilities understand what we’re capable of doing with solar plus storage systems. The number of different values that are out there move into more and more diversity – so that utility services are going to be able to be seen, not just in immediate, using the battery to intervene on frequency or on demand, but also to use distributed storage and solar systems to affect how they plan to change their distribution, so that they don’t have to necessarily do distribution upgrades or transmission upgrades; or when they’re dealing with congestion, they don’t always just have to throw more wire at it, which is always an expensive operation.
If the utilities can start to see where our techniques come in and alleviate or delay those kinds of upgrades, then we’ve got a service that’s a little bit less immediately cash-understandable to the battery operator, but the utilities will see value in it.
I’m all about trying to make sure that the utilities understand that, as we enter this market, we’re the connective tissue. Once we bring in batteries along with our renewable energy, we connect all the elements of services with our solar and wind resources in a way that really provides a lot of benefits to utilities and it doesn’t need to be seen as a disruptive kind of competition thing.
Brit: Excellent. Well, thank you guys for answering that question. We appreciate you joining us for this Ask an Expert session.
Chris Brown: Thanks Brit.