Community Storage: Coming to a Home Near You

Deck: 

A readily available option for storage may be coordinating existing devices that have untapped storage capacity

Fortnightly Magazine - February 2016

For years energy analysts and observers have treated wide-scale energy storage as the "Holy Grail" that would enable the integration of renewable resources, such as wind and solar, while keeping energy costs low. Despite continued optimism that distributed storage will soon become a reality, it has yet to happen, leaving the industry with an unfulfilled need. As the development of renewable resources accelerates and integration challenges increase, utilities need a practical path to distributed storage today. How do we get from where we are today to a future where the value of storage is more fully realized?

Enter "Community Storage." Like community solar, community storage is a utility-sponsored program that enables consumers and utilities to share the system-wide benefits of energy storage - environmental benefits, lower costs and grid optimization - in communities large and small across the country. Such programs maximize the value of distributed energy resources (DER), many of which are already available to participate in energy storage programs through simple retrofits and program design.

As with many innovations, community storage faces challenges from outdated policies that have not kept pace with the changing reality. Current energy efficiency policies are often designed to achieve reductions in kilowatt-hour (kWh) consumption rather than promote strategies that reduce greenhouse gasses through overall optimization of energy resources. If we are to achieve our nation's ambitious greenhouse gas (GHG) reduction goals, utilities should not face disincentives to add beneficial new loads to the electric system during this time of rapidly decreasing carbon intensity in the industry. This is especially true with respect to electric vehicles and electric water heaters, which can meet consumer's daily transportation or hot water needs while simultaneously reducing fossil fuel combustion emissions and providing tremendous value in storage services to the grid.

What is Community Storage?

"Community Storage" is an emerging term for programs that aggregate distributed energy storage resources that are located throughout a community, such as water heaters, electric vehicles, and interconnected storage batteries, to improve the operational efficiency of electric energy services to consumers. The defining characteristic of a community storage program is the coordinated dispatch and optimization of premises-based energy storage resources, often behind a consumer's energy meter, to achieve electric system-wide benefit.

As a real-world example of community storage in action, Great River Energy, a wholesale energy cooperative with 28 distribution co-op members, stores a gigawatt-hour each night, every night, in water heaters in homes across their territory. Some of that energy is sourced from wind generation which would otherwise be curtailed. This storage capacity is valuable, so valuable that Steele-Waseca Electric Cooperative in Minnesota will give any member who signs up to participate in the water heater control program an electric storage water heater at no cost. The member can also purchase the output from solar panels from the community solar project at a discount. This small but exciting project empowers members to contribute to shared environmental goals while saving money by eliminating the cost of purchasing a water heater altogether.

Figure 1 - Existing Utility Programs that Fit the ‘Community Storage’ Model

While co-ops are in the process of introducing "community storage" as a program concept to the broader stakeholder community, many programs that meet the definition are active throughout the country, and additional innovative programs that fit within the framework are rapidly emerging. Readily available opportunities for community energy storage programs are electric water heaters and electric vehicles, which can provide storage services to the grid without any perceptible impact to the consumer's hot water or transportation needs.1 Cost-effective opportunities will likely increase with premises-based battery systems and other behind-the-meter technologies with storage characteristics.

The concept of community storage has emerged in the wake of significant research activity and industry collaboration on practical energy storage programs. For example, Rocky Mountain Institute recently described the potential of "demand flexibility" or "flexiwatts" to provide billions of dollars in grid service benefits through thermal load shifting.2 The Regulatory Assistance Project highlights water heater thermal storage programs as a way to "Teach the Duck to Fly" or help solve the infamous "Duck Curve" challenges faced in California as solar ramps up and down daily.3 In early 2016, the Brattle Group will issue research titled "The Hidden Battery: Opportunities in Electric Water Heating," which was sponsored by the National Rural Electric Cooperative Association (NRECA), Natural Resources Defense Council (NRDC), and the Peak Load Management Alliance (PLMA). The forthcoming Brattle research highlights the power of using a portfolio of storage technologies to maximize benefits to consumers and utilities.

All of this research and collaboration on common goals of maintaining electricity affordability, reliability and environmental performance while integrating more renewable resources has paved the way for a concerted community storage initiative. And with many millions of these energy storage devices already in service that could easily be incorporated into a community storage project, the initiative can spread rapidly.

Electric Water Heaters - The 'Low-Hanging Fruit' of Community Storage

Despite battery technology's ongoing ability to grab clean tech media headlines and woo the interests of venture capitalists, the electric utility industry still lacks a clear, practical, cost-effective implementation path for battery energy storage. In sharp contrast, in the basements of tens of millions of homes across the country, the humble, often forgotten water heater has been employed for decades as a storage device by utilities, especially rural electric cooperative utilities.

Figure 2 - Your Heater is a Battery

The storage potential of these resources is vastly underutilized. Utilities could devise cost-effective community storage programs today. As Gary Connett, the director of member services at Great River Energy, a pioneer in the use of electric water heaters for community storage, says "with all of the hype around batteries, there may be a battery already hidden in your basement." Terry Boston, former head of PJM, echoes Gary's sentiment, noting that water heaters are the most cost-effective form of energy storage available to PJM and a resource with a combined energy storage capacity on par with today's pumped storage hydro fleet.4

The chorus of researchers and industry experts who view water heaters as distributed storage devices is growing. The forthcoming Brattle Group report adds to the body of research noting that "electric water heaters are essentially pre-installed batteries that are sitting idle in more than 50 million homes across the US." 5 Traditional batteries supply power when generation is low and absorb power when generation is high. In this way, they help modulate the supply of electricity to follow the load. Water heaters can't supply electricity, but they provide exactly the same functionality by reversing this equation: They can modulate the load in order to follow generation. In times of overgeneration, fleets of water heaters can use power to heat the water and store it for later (thermal storage), and in times of undergeneration, they can be switched off to shed load and redistribute the supply of electricity on the grid. Thus, aggregated water heaters can function as batteries to quickly and effectively control the amount of power on the grid. Moreover, these fleets are completely scalable and, thanks to recent technological advancements, can respond nearly instantaneously to signals from the grid operators.6

The Brattle research provides fascinating practical insight that may help provide a roadmap to for integrating these valuable storage resources into the grid in ways that are both economically advantageous to consumers and utilities and environmentally beneficial. "Residential electric water heaters in the U.S. comprise the largest disaggregated 'thermal battery' on the planet. They represent the most timely and cost-effective opportunity to build the foundation for the 'Community Storage' initiative," notes Steve Koep, PLMA's liaison to the Brattle project.

Research and collaboration on this topic is still picking up steam. PLMA, NRECA, and NRDC, for example, are cofounding a "Community Storage" market development initiative. The initiative is designed to focus the country's attention on the immediate opportunity for national market development efforts to demonstrate the vast potential of "behind-the-meter" electric storage technologies. "We're delighted to join with NRECA and PLMA as founding supporters of the Community Storage Initiative. Rapidly emerging opportunities in a diverse range of distributed storage technologies, from water heaters to electric vehicle batteries to stand-alone batteries, hold great prospect to benefit consumers and the environment if effectively developed," said Robin Roy of NRDC. In addition to supporting the community storage initiative, NRECA is continuing to conduct research that will support the broader market, including a collaborative agreement with DOE's Advanced Research Projects Agency-Energy Program, or "ARPA-e," to develop new forms of water heater and plug load controllers that can support the reliable operation of the grid.

Electric Vehicles - The Battery in the Garage

"Despite battery technology’s ability to grab clean tech media headlines, industry still lacks a clear, practical, cost-effective path. In contrast, in the basements of tens of millions of homes, the humble often forgotten water heater has been employed for decades as a storage device." – Keith Dennis

Electric vehicles offer another clear opportunity for community storage programs. Since each electric vehicle stores energy until that power is needed for driving, electric vehicles offer a flexible electric load. This flexibility can be attractive to utilities. If the utility designs a program that shares the benefits of this valuable energy characteristic, such as incentives for optimizing the storage capability of the vehicle to match load to generation, a win-win relationship can be developed.

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One example is Great River Energy's Revolt program, a first-of-its kind program that allows cooperative members to upgrade the electricity used to fuel their vehicles with wind energy at no additional cost over their traditional electric service. The program also provides additional incentives to members to install charging stations for their vehicles. Combined with off-peak charging programs, such programs enable collective coordination of community storage resources to achieve electric system-wide benefit. As technology progresses, the specific control strategies and incentive programs could evolve to achieve even greater shared benefits.

Residential Batteries

While the Tesla Powerwall created huge buzz, it is unclear whether on-site battery technology will be cost-effective in the near-term; utilities nonetheless should consider community storage business models that employ this technology.

One such real-world example is a recently announced program at Green Mountain Power (GMP) in Vermont. GMP offers consumers a Tesla Powerwall fully installed for a fixed price and then provides a monthly bill credit for the customer to "share access" to the battery with the utility. GMP also allows consumers to simply pay a monthly fee to have a Powerwall in their home with no upfront cost, provided they share access with the utility. These types of programs are few and far between today, but may increase as consumers and utilities find innovative ways to share the benefits of such technology.

The Value Proposition in Community Storage

Co-ops believe community storage could enable the utility sector to realize the benefits of storage opportunities that are already economical and to some extent already available. This strategy could create a clear, practical path for the industry towards a wide-scale distributed storage solutions in the near-term. The community storage model builds on and takes advantage of several important trends to enhance the value proposition for multiple stakeholders, including the utility, the consumer, and environmental advocates. These trends include:

  • An increasing desire to match energy load to variable renewable energy supply
  • Higher up-front costs of more efficient technology
  • Increased opportunity to reduce GHG emissions by using electricity instead of direct combustion of fossil fuels

First, utilities face an increasing need to match load to supply while integrating renewable resources to meet federal and state environmental goals. Community storage devices, which already exist in the community, when centrally aggregated and controlled, can provide valuable dispatchable resources. And the consumer-participant benefits from the cost reductions when the stored energy is used during peak periods, avoiding the need for more traditional high cost peak energy generation.

Second, upfront costs associated with high-efficiency water heaters, electric vehicles and batteries can be higher than the products they replace. Utilities can use the value of energy services made possible through community storage to help cover the cost of the products through rebates or other incentives - another benefit to consumers. At the same time, utility control and resource optimization can be carried out with little or no impact to the consumer's comfort or convenience. This leaves consumers with more money in their pocket with no reduction in service.

Third, as the electric utility sector reduces GHG emissions from power generation, the use of electricity is increasingly an environmentally beneficial choice over the alternative of using direct combustion of fossil fuel (natural gas, propane, diesel, or gasoline) to power water heaters and vehicles. The environmental performance of an electric water heater or electric vehicle purchased today will improve over the life of the product as emissions decrease from changes in the mix of fuels for power generation. Over their life, these electric products can support the integration of renewable energy generators, could be powered using on-site renewable generation that has not yet been installed, and can participate in energy storage programs. The same cannot be said of gas-powered vehicles and water heaters that will require fossil fuel combustion on-site through the duration of their useful life.7

Another important benefit of community storage is that it can provide additional revenue to utilities while helping to match load to supply, reducing costs to consumer, and reducing GHG emissions. Thus, the utility has a viable business interest to invest in incentives to encourage consumers to use these technologies.

Perhaps most importantly, a well-branded community storage program provides a way to help consumers understand why they would want to participate in programs that may otherwise be less attractive. For example, asking a consumer to participate in a water heater load control program to help "cut costs by reducing peak demand" may be a tough sell considering the average consumer's understanding of how the electric system works. However, the same customer may be more excited about participating in a 'community storage' program that uses their water heater to provide energy storage to the grid, helps them to earn incentives and keep costs low, enables integration of renewable energy, and reduces greenhouse gas emissions. The term "community storage" itself is in synch with sharing models that appeal to younger consumers, such as community supported agriculture, car sharing, and community solar.

Next Step - Rethinking Energy Policy

In order for community storage to work, national policy needs to keep up with changes in technology. Traditionally, federal energy efficiency policy in the electric sector has focused on reduction of kWh sales to end-users - essentially policies aimed to help conserve energy. The origin of this policy dates back decades to a desire to conserve primary energy, mainly as a result of the oil shocks in the 1970s. Reducing greenhouse gases has largely replaced the federal goal of conservation, however. The change in policy focus, combined with the increase of intermittent renewable energy resources that do not emit greenhouse gases, requires a revisiting of policies that have brought us the great progress of decades past.

Indiscriminant conservation of kWh consumption is not an optimal greenhouse gas emission reduction strategy for several reasons. First of all, not all kWh are produced from the same source. A kWh of reported savings in most energy efficiency programs may have been produced from any number of sources such as wind, solar, hydro, nuclear, natural gas or coal. Increasingly it is the generation source that matters in considering emissions, not the quantity of kWh produced. Energy storage technology can help grow the share of non-emitting sources in the national fuel portfolio. The ability to 'soak up' renewable energy that is only available when the sun is shining or the wind is blowing supports renewable energy integration and avoids curtailment of these resources. These values of storage technology are not currently accounted for in efficiency policy designed to simply reduce kWh sales.

Appliance standards and technology has made end-use appliances extremely efficient and additional end-use efficiencies are coming at increasingly higher costs. At the same time, the grid itself is becoming more efficient with rapid retirement of older, less efficient power plants and replacement with highly efficient combined cycle natural gas plants and renewables. As the grid lowers in carbon intensity and generation efficiency improves, the value of end-use efficiency decreases. For each kWh of reduced consumption, the emissions savings decreases as the grid decarbonizes. For example, Minnesota has a greenhouse gas emission reduction goal of 80 percent of 2005 levels by 2050. If the state reaches that goal, each kWh of energy consumption reduction in 2050 will only yield 20 percent of the emission reduction on average that it would have in 2005. And due to increases in end-use appliance efficiency, that kWh will likely be more difficult and costly to achieve. At some point it will become obvious that shifting load may be a more effective emission reduction strategy than traditional end-use efficiency.

Finally, as I wrote about extensively in an Electricity Journal article titled "Environmentally Beneficial Electrification: Electricity as the End-Use Option," federal policy and the metrics and tools used to support it need to accommodate and encourage "beneficial electrification." Many experts agree that meeting greenhouse gas and other climate goals will require aggressively electrifying both the transportation and end-use space and water heating sectors. Accordingly, electric water heating equipment will replace fuel oil, propane, and natural gas, while electric vehicle systems will replace gasoline and diesel in order to reduce carbon dioxide emissions. The result will be that, overall, more kWh will be produced and less fossil fuel consumed. If we do not align policy to encourage beneficial electrification, we are missing opportunities to better achieve our environmental goals.

Conclusion

The path to a future with lower carbon dioxide emissions requires greater use of renewable energy. Yet we cannot make the economics of renewable resources work until we can integrate them and manage them in a way that makes the grid operate efficiently, affordably and reliably. We must therefore find a method for making renewable energy available for use not only when it is produced, but when consumers want to use it. Community storage will be an important tool to make this happen. A readily available option for storage may be coordinating devices already in service throughout the community that have untapped storage capacity. While community storage does not necessarily require a break-through technology, it will require public education and engagement. The present and future success of community storage suggests that this barrier will be overcome, and community-focused electric utilities are well-suited to the task. 

Endnotes:

1. Other community storage opportunities that are cost-effective today include ice storage in commercial HVAC systems and thermal storage in ceramic bricks, among other technologies.

2. The Economics of Demand Flexibility: How "Flexiwatts" Create Quantifiable Value for Customers and the Grid, Rocky Mountain Institute, 2015, Rocky Mountain Institute.

3. Jim Lazar, Teach the Duck To Fly: Integrating Renewable Energy, Regulatory Assistance Project, 2014.

4. Terry Boston. April 7, 2014. Urgent Action on Energy Conservation Standards for Residential Water Heaters.

5. DOE Docket # EERE-2012-BT-STD-0022.

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6. The Brattle Group. 2016. The Hidden Battery: Opportunities in Electric Water Heating.

7. See ESource. 2014. Battery Killers: How Water Heaters Have Evolved into Grid-Scale Energy-Storage Devices.

8. For a more detailed discussion on this issue, see: Dennis, K., Environmentally Beneficial Electrification: Electricity as the End-Use Option. Electr. J. (2015).


Lead image © Can Stock Photo Inc. / shodan