Solar + Batteries: The Right Thing to Power my Home?
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Part 2 of our Series on Solar + Batteries
For the rest of the series on Battery Storage, also see Part 1 (Solar + Batteries: Is Tesla’s PowerWall the iPhone of Battery Storage?), and Part 3 (Solar + Batteries: Technologies on the Bleeding Edge)
Full Off-Grid Solar
There is still a fair amount of confusion on exactly what “off-grid” means. Many customers come to us with the expectation that they want to go “off-grid,” but what they actually mean, is that they want to drastically reduce their dependence on the utility company. This approach offers financial freedom and huge environmental benefits but is usually accomplished by being grid-tied, meaning you remain hooked up to the grid for when you need more power than your solar array can produce.
If you produce as much electricity as you consume in a year, your home is considered to be a “net-zero” home, not an “off-grid” home. An “off-grid” home is literally independent of the utility, and while this sounds romantic, traditionally it is not (as can the numerous RE staffers who have lived/currently live off-grid can tell you!).
Due to the relatively limited power storage capabilities of batteries, off-grid homes are generally designed to have significantly reduced electric loads compared to a conventional home. This may mean propane for refrigeration and backup heat, rather than electric options. Even loads that seem inconsequential (coffee pots, hair dryers, computer servers) are significant loads in an off-grid scenario. Having an off-grid home that is heated by air source heat pumps or gets its hot water from an efficient electric tank is unrealistic unless cost is no object. In addition, because batteries are generally relatively short-term energy storage devices (meant to store energy for a couple days or a week, not several months), being off-the-grid means you have to size your solar array to meet your needs at the worst (least sunny) times of year, compared to a grid-tied system which can be sized based on your cumulative annual load and production. The result is that for the same house, an off-grid solar system might be as much as twice as large as a grid-tied system designed to get you to “net-zero”.
Will advances in battery technology like the Tesla PowerWall change this? Maybe. Currently, the PowerWall is competitive with traditional lead-acid batteries used in off-grid systems, but, the limitations of the technology are still such that for most high electricity loads, it makes sense to conserve or find an alternative (such as propane) than to simply add more batteries.
Until battery storage becomes dramatically less expensive, and more power dense, than it is today, off-grid solar will remain a specialty realm for sites that are distant from the grid (such as Malealea, Lesotho, where RE-staffer Fred lead the installation of an off-grid system for a school).
Residential Backup Power
Residential solar + battery backup power or, grid-tied solar systems with battery backup is a hybrid system that offers the best of both worlds of grid-tied and off-grid solar systems – you can benefit from all the advantages of grid-tied solar (the ability to bank solar credits in the summertime, with reliable electrical service at night/during the winter) with the added bonus of being able to power your home from sunshine alone if the grid goes down.
While traditional grid-tied solar arrays deactivate automatically when the power grid goes down (a safety constraint that is required for UL listing of the inverter), solar + battery backup power systems include an automatic transfer switch and the ability to operate in both “grid interactive” and “island” mode, providing automatic and secure backup power in case of a utility outage. Just like a traditional standby generator, when the “solar battery” backup power system senses a utility outage, the transfer switch isolates the whole house (or just a subpanel of critical loads) from the utility entirely. Those loads are then powered by the batteries and/or the solar array for as long as the grid is down and the solar + energy stored in the batteries can meet the demand.
Battery options have been improving rapidly, and a solar-powered battery backup system is increasingly a viable alternative to a home standby generator.
Though most residential electricity consumers pay a fixed cost per kilowatt-hour regardless of time of day, the wholesale spot market price of power varies substantially throughout the day and throughout the year depending on both the mass demand for electricity as well as the available supply. Wholesale power is cheap when demand is low and supply is plentiful but gets very expensive when demand spikes and supply is constrained (the typical coincidence of solar production with these expensive wholesale peaks is one of the reasons that the Value of Solar Study found that solar provides such a substantial benefit to all ratepayers). The lack of pricing signals being passed from the wholesale markets on to the end customers represents a substantial market failure as the consumer is insulated from any price signals from the market which might otherwise encourage them to alter their behavior.
As ratepayer advocates and utility regulators increasingly recognize how expensive peak power demand is for all ratepayers (not just in energy cost, but in the cost of building transmission infrastructure that we all pay for all year long, just to support these short-term worst case peaks), they are increasingly encouraging the adoption of so-called, Time of Use (TOU) rates for some classes of customers. TOU rates are rates that vary throughout the day or throughout the year to encourage those customers who have the ability to do so, to move some of their consumption from periods of high demand to periods of low demand. Not all customers have the ability to shift loads to ‘off-peak’ times, but for those who do, TOU rates may offer an opportunity for substantial savings compared to buying power all year at the “average” price as most of us currently do.
The concept of grid arbitrage using a battery is that you buy power from the utility (to charge the batteries) when it is cheap and then sell it back to the utility (by discharging the battery) when it is expensive. If the rate differential is substantial enough, this can be a lucrative endeavor. While this seems like it is taking advantage of the utility company, it’s really a simple product of supply and demand. Electricity is expensive during the day simply because it’s in more demand, and in this scenario the solar homeowner is actually helping the grid be more efficient by using an underutilized resource (nighttime power generation) and allowing the more valuable solar electricity to reduce load during peak hours, which in turn reduces wear and tear on the grid, as well as the need for expensive, inefficient and dirty “peaker” power plants. If retail electricity rates were rationally set (a big if), then utilities and utility regulators would want people to ‘game’ the system in this way, because it would result in substantial benefit to all ratepayers.
But electricity pricing in most markets is still far from rational and in most cases, this kind of electricity rate arbitrage is explicitly forbidden under utility interconnection rules. So while this is an interesting use for batteries and may well be a viable application as grids (and the people who control them) get smarter, it is still somewhat in the future.
One particular type of grid arbitrage, which has gained popularity in a number of solar markets around the world is known as self-consumption (an awkward translation of the German word ‘Eigenverbrauch‘). Self-consumption is where you try to consume as much of the solar energy you generate “behind the meter” as possible, and minimize the amount of electricity that is backfed into the grid.
This strategy is popular and can be financially viable where solar energy fed into the grid is paid for at something lower than the full retail value, as is the case in some markets with very substantial solar penetration (Germany, Hawaii) where the success of solar adoption has lowered the daytime energy price because of excess availability. In these markets, self-consumption is encouraged through rate design to provide an incentive for individual users to ‘buffer’ some fraction of their solar production for use after the sun sets.
The idea is to charge the battery bank during the day when there is excess solar generation beyond what is being consumed at that time, rather than sending power back to the grid. When loads at the home exceed the energy production of the solar array energy is discharged from the battery rather than being pulled from the grid. This is especially important at the end of the day and at night when there is no instantaneous solar power available, but your home is consuming plenty of electricity. This functionality allows you to consume your solar energy at the full retail value compared to what you would have had to pay the utility. Optimizing self-consumption often also includes a strategy of active load shifting, by automatically turning on electric loads (like a water heater or washing machine) when the solar system is producing excess power, or turning them off during periods of low solar availability.
There is no economic incentive to optimize self-consumption in markets with fixed retail pricing and net metering, as is the case in all the New England markets, as exporting excess electricity out to the grid (for a credit against future use) is both simpler and more efficient than storing it in a battery for your own later use. In addition, because solar penetration in New England is still so modest compared to overall demand, solar production peaks tend to coincide with periods of high grid stress and high costs, so the utility (and other ratepayers) ought to be very grateful to get your excess electricity at those peak times and sell it back to you at an off-peak time (though if you are waiting for a thank you note, I wouldn’t hold my breath).
Read more on this interesting area of development, heating up especially quickly in Australia.
Commercial Demand Charge Management
One of the most likely near-term applications for a solar + battery energy storage system is for demand charge management, by commercial electricity customers. Unlike residential or small commercial customers, who typically pay for their electricity and delivery strictly on a per kilowatt-hour (kWhr) basis, medium and large businesses are typically billed not just for kilowatt-hour use of electricity, but also an additional monthly fee based on their monthly peak power demand (often based on the highest 15 minute interval in any given month). Though individual demand charges are known to be a poor proxy for the actual costs imposed on the grid by a particular customer (those costs are much more strongly correlated to the customer’s individual demand at the time of the system peak rather than the individual customer peak), utility rate makers in many jurisdictions continue to charge commercial customers in this way in part because it is easy for them to measure, even using antiquated “dumb” meters.
The concept behind demand charge management is that if a business can generate some of its own electricity using a combination of solar + batteries, they can smooth some of the short-term power spikes to the utility and thus reduce their demand charges. Like optimized self-consumption, demand charge management often involves the combination of solar, batteries and some actively controlled loads to maximize the benefit to the customer. Demand charge management is already a viable application in areas with high “demand” rates or states that provide an incentive for installing battery systems and is surely a reason Tesla announced the 100kWh Powerpack alongside the PowerWall. Many other mature products that combine batteries and load control and can integrate with a grid-tied solar electric system are also already on the market.
Ancillary Grid Services
The last major category of solar + batteries is in the area of ancillary grid services, such as regulating voltage and frequency. This is a rather technical way of saying: solar + batteries can help out the grid.
While we, as energy consumers, are accustomed to a grid where you turn on a plug, or plug in a computer, and bingo! the device works, behind the scenes, things are much more complicated. The utility company and regional grid operators must maintain a delicate balance of electrical inputs into the grid in order to maintain a stable environment. Too much power and you risk fires and damage to end user equipment. Too little power and you risk brownouts and blackouts. With energy use fluctuating throughout the day as users activate and deactivate electronics, air conditioners, water heaters, space heaters, plug-in electric cars, etc. this is a fine balancing act.
Solar + batteries can help all of this. In fact, that is one of the principle tenets of a “smart” grid. A smarter grid is able to more intelligently understand what distributed generation assets exist on its network, and then deploy on-demand resources as necessary to supplement baseload and intermittent renewable resources. In the mid-Atlantic states, the regional grid operator, PJM, has already integrated a number of large solar + battery systems which are controlled remotely and provide enhanced grid stability (and a solid revenue stream for their owners).
Closer to home, the Boothbay Harbor Pilot Project provides an example of how a mix of efficiency, renewable generation, and batteries can cost ratepayers 1/3 of what the utility would otherwise spend on an infrastructure improvement, while significantly reducing the environmental impact of new energy.
Distributed grid projects are a fantastic example of what the future holds for us if we are wise enough to embrace it, rather than continuing to hold onto outdated notions that natural gas pipelines or even big hydro from Quebec will save us.
Read on in our battery storage series! Part 3 (Solar + Batteries: Technologies on the Bleeding Edge) or go back to Part 1 (Solar + Batteries: Is Tesla’s PowerWall the iPhone of Battery Storage?)