Greentech Media: Headlines

California’s Plan: Crowdsource Distributed Energy to Replace Grid Upgrades

info@greentechmedia.com — Fri, 05 Feb 2021 18:34:44 +0000

California regulators are on the cusp of breaking open a long-awaited opportunity to enlist rooftop solar, behind-the-meter batteries and other distributed energy resources (DERs) to substitute for expensive grid upgrades.

It’s called the Partnership Pilot, and according to DER developers, it could be a major step forward in a distribution resources plan effort that’s been underway in California since 2014 and is being duplicated under names like “distribution system planning” and “integrated distribution planning” in many other states.

The goal of these state-by-state efforts is to find ways for utilities, customers and third-party aggregators to capture the grid value of DERs. One clear opportunity is getting them to respond to utility signals to reduce peak loads on local grid circuits.

Utilities have to build and upgrade power lines, transformers and other grid equipment to ensure they can support those peak loads, even when they may only arise for a few hours of the day during the hottest months of the year. DERs that can reliably shift loads in those hours could defer “wires” upgrades for years, or perhaps indefinitely, which is why they’re often called “non-wires alternatives,” or NWAs.

But NWAs haven’t taken off as hoped. Regulated utilities, besides facing the prospect of replacing capital investments that earn a guaranteed rate of return with contracts that don’t, are leery of DER aggregations that may not be as reliable as tried-and-true grid upgrades. That’s led to stringent requirements and complicated procurement rules for those seeking to serve that role, which developers argue have prevented most NWAs from getting past the proposal phase.

”Ratable procurement”: A pay-as-you-go approach to meeting grid needs

The pilot project awaiting a vote by the California Public Utilities Commission would break open many of the barriers in the distribution investment deferral framework that governs these efforts in the state, proponents say.

Most notably, it would replace an existing all-at-once project procurement process with a tariff-based “ratable procurement” structure, one that rewards customer-owned DERs on an individual basis, and scales up its targets from year to year for grid needs likely to arise three to five years in the future.

That will allow developers to gradually build up a critical mass of customers with DERs they’re willing to submit to utility dispatch — and get paid for that incremental growth as it’s completed — rather than be forced to either commit to deliver megawatt-scale blocks of capacity years ahead or forgo the opportunity.

This is a much better fit for DERs since it “allows DERs to meet incremental needs in the distribution system as they occur over time,” instead of forcing “the entire upfront needs to be identified all at once and have one shot at getting it right,” said Rachel McMahon, senior public policy manager at Sunrun.

The leading U.S. residential solar installer has led the rush of rival solar-storage developers like Tesla, sonnen, Generac and others to secure virtual power plant contracts in multiple states to aggregate battery-solar systems for wholesale grid capacity. It has also long advocated for tariff-based structures to do the same for distribution deferral in California.

California’s investor-owned utilities have argued against this approach. In comments filed with the California Public Utilities Commission, Pacific Gas & Electric and San Diego Gas & Electric laid out concerns that open-ended, tariff-based procurements might either fail to subscribe the needed customers in time to relieve stressed grid circuits or lead to oversubscriptions that would end up paying for more DERs than are needed.

To prevent this, the CPUC will require aggregators to fill at least 90 percent of the needs identified for each year before they can initiate contracts with utilities and close subscriptions when they reach 120 percent of the target. The total cost of these contracts will also be set at 85 percent of the cost of the wires upgrade they’re replacing to make sure utility ratepayers aren’t overpaying customers and aggregators.

A win-win for DER developers and utility ratepayers?

Beyond giving DER developers a route to serving grid needs that fits better with the way they do business, this method may well be a more cost-effective way for utilities and regulators to deal with distribution grid changes, said Jin Noh, senior policy manager with the California Energy Storage Association.

That’s because the distribution grid investment needs being targeted are hard to predict and may change between the time they’re forecasted and when they actually arise. Some load increases can be predicted, as with new subdivisions, office parks, factories or even “a new marijuana farm that has a large amount of load,” he said — the latter a novel but growing class of electricity consumer in California.

At the same time, “downstream of a particular circuit or substation, there could be a new development that’s driving a gradual load increase,” he said. Rising installations of electric vehicle chargers, or switching natural-gas-fired furnaces and water heaters to all-electric appliances, are another source of growing strain on California’s grid.

In short, “a lot of these needs grow over time,” Noh said. “In year two, we’ll see a 3-megawatt overload. In year four, we’ll see a 7-megawatt overload.” DER subscriptions can be fine-tuned to match both incremental growth and changes in forecasted growth, which could end up saving even more money compared to a utility project that has to be completed once and last for years.

As for the tariffs that utilities would be tasked with creating to ensure that participating DERs can be relied on to do what the grid needs them to do, “this would all be project- and location-specific,” he said. “There’s a specific planned investment, intending to address an overload from, say, 3 to 6 p.m. They’ll probably structure a capacity and performance payment around that” with “a small portion that’s upfront payments to support new build.”

If the CPUC approves the program, California’s utilities will be under the gun to come up with these tariffs in time to start offering DER developers a chance to compete for a set of pilot grid circuits by late this year. By next year, this approach to meeting grid needs with DERs could be broadened to a wider scope of grid projects in utilities’ annual deferral opportunity processes, he said.

To be clear, it’s likely that projects suitable for DER deferral will make up only a fraction of the hundreds of distribution grid upgrades that California’s utilities spend billions of dollars on every year. Even so, “from what I’ve heard from developers, this is an attractive market,” he said.

A new step in expanding DER grid values

Beyond the short-term market opportunities, however, the Partnership Pilot will also address a long-running thorn for DER developers looking to serve broader grid needs in California, Sunrun’s McMahon said — the issue of incrementality and double payments.

Utilities have largely succeeded in arguing that the CPUC should set limits to DERs that earn state incentives from one program from being allowed to participate in others, on the grounds that this ends up spending ratepayer dollars to pay DERs twice for the same service.

For example, solar-battery systems earning money under California’s net metering regime, or that have been funded from its Self-Generation Incentive Program, have been barred from participating in other state-mandated pilot programs that enlist them as grid assets.

But the CPUC’s proposed decision sets a new standard for this issue: that “distributed energy resources can provide multiple incremental services and should be compensated for each service.” That’s an important step forward for DER aggregators since net metering and other incentives are “still very necessary to deploy solar and storage systems, with grid services laid on top,” McMahon said.

That’s an important first step toward expanding the role of DERs across a wide range of needs facing the state, said Steven Rymsha, Sunrun’s director of grid solutions public policy. For example, last summer’s heat-wave-driven rolling blackouts have prompted the CPUC to seek out new resources that can reduce grid demand on an emergency basis, and its wildfire-prevention grid blackouts are prompting work to develop community microgrids.

At the same time, DER providers are arguing for changes to the state’s resource adequacy program to relieve behind-the-meter resources of market rules that can limit their recognized grid relief value. A program that can give aggregators like Sunrun a chance to prove they can be relied on to ease grid stresses at the local level could bolster confidence in broader applications, he said.

“We’re waiting to see the opportunity, and then go for it, and really prove how this pilot can much more quickly meet the needs of the distribution system more cost-effectively, and with greater customer participation,” he said. “We’re talking about thousands of customers in a tight geography adopting DERs. That’s going to have massive benefits.”

(Why?)

Powin Energy Raises $100M to Compete for Leadership in Grid Storage Market

info@greentechmedia.com — Fri, 05 Feb 2021 18:43:36 +0000

Energy storage startup Powin Energy has raised more than $100 million in equity investment to compete with better-funded rivals in the large-scale grid battery market.

Powin buys battery cells and hooks them up with proprietary software controls and ancillary equipment to produce full-fledged power plants. It competes in the upper echelons of the energy storage integration market with the likes of Tesla, Fluence and Wärtsilä.

But those competitors are storage businesses nestled within billion-dollar, publicly traded enterprises. Powin is a bootstrapped company based amid the evergreens of Tualatin, Oregon that managed to build some 600 megawatt-hours of storage on its own.

”By being a pure-play storage company, our customers know we’re not focused on anything else,” CEO Geoff Brown told Greentech Media Thursday. “We want to build the world’s best batteries.”

Now the U.S. storage market is poised to triple over last year’s volume. Scaling to meet that demand requires money, which Powin secured with its $100 million equity investment announced Thursday. The round was led by private equity firm Trilantic Capital Management and joined by Energy Impact Partners, a utility-backed venture capital firm.

The investment ranks as one of the largest in a grid storage company; the top trophy in that category went to Fluence, with its $125 million investment from the Qatar Investment Authority just weeks ago.

The influx of cash comes at an opportune time. Powin is slated to install 2 gigawatt-hours of storage capacity in 2021, Brown said, which amounts to more than tripling its total installed capacity in the course of this year.

From humble roots

Powin launched in 2010 with funding from founder and Chairman Joseph Lu. It raised $12.5 million in 2014 from Shunfeng International Clean Energy, which also invested in solar company Suntech and other cleantech ventures. It raised another $15 million in mid-2020 from Houston-based Arroyo Energy Investors, which worked with Powin on a microgrid at a car factory in Mexico.

With those limited funds, Powin had to prove to customers that it could be trusted to supply a piece of equipment that’s supposed to last decades. Powin did not have the longevity of a legacy power company or the balance sheet of a major automaker to support its sales pitch.

At first, Powin developed its own projects, starting with a 2-megawatt/8-megawatt-hour battery installed as part of the Aliso Canyon procurement in Southern California. That project helped utility Southern California Edison meet its capacity needs after a major gas facility leak, and Powin also delivered frequency regulation services to the California grid.

Self-development gave Powin a chance to show customers a working product. In time, the company worked with more established partners to wrap the storage system and installation into a bankable package. Powin later sold its development pipeline to focus exclusively on supplying product to customers.

In 2018, when Plus Power was developing a battery for Arroyo’s microgrid in Monterrey, Mexico, Powin filled the need with unusual swiftness, said Plus Power General Manager Brandon Keefe.

”These guys went from purchase order to completed system in 10 weeks,” Keefe said. “Never been done before — or, I’m pretty sure, since.”

One thing hasn’t changed over the years: Powin has always used lithium-ferrous-phosphate, or LFP, battery chemistry. That chemistry delivers better fire safety and fuller depth of discharge than nickel-manganese-cobalt, or NMC, which is used by a majority of the world’s grid batteries. LFP cells have historically been more expensive than NMC cells, but those costs have closed in recent years.

Powin keeps its overall costs down by purchasing battery cells and designing the rest of the system, avoiding the costs of outsourcing battery modules or battery management systems. Buying commodity cells allows flexibility in sourcing as manufacturing methods improve over time or as geopolitics interfere with global trade.

”When we lower our cost with our vendors, we push all that savings back to our customer,” said Senior Vice President Danny Lu. The goal, he added, is to combine “affordability and high value.” That’s a different tack than many storage companies, which talk about value as a preamble for justifying higher prices.

The startup has already outlasted some bigger competitors, including NEC Energy Solutions. The Japanese parent company of that respected storage integrator decided to abandon the business in 2020, despite propulsive growth in demand that has only accelerated since.

”Having a billion-dollar balance sheet doesn’t mean you’re going to be around forever,” Brown said. “Fundamentals change at the parent company. There’s a hidden advantage to not being distracted by other priorities.”

The Powin workforce grew last year to 120 employees in the U.S. and 56 overseas, and the company plans to hire 100 more staff members this year, with a focus on project execution.

Investment on the rise

Barely a month in, 2021 is already shaping up to be an investment bonanza for the storage sector.

Powin is the first energy storage investment for Trilantic, a private equity firm that invests in several industries. Prior energy investments typically focused on oil and gas plays, but it made energy transition bets on solar developer Intersect Power and electric vehicle charging company SemaConnect.

Trilantic had been looking for grid-related companies that needed assistance with scaling, execution and capital raises, the kinds of risks private equity is suited to help with, said Glenn Jacobson, a partner at the firm. For a while, he said, grid investment opportunities were bookended on one end by long-lived contracted assets promising single-digit returns, and on the other end by moonshot technology plays more suited to venture capital or research grants.

Then solar, wind and battery prices fell precipitously, and the energy storage market started to really take off. Companies that Trilantic considered investable started to come into focus.

”There is going to be dramatic, dramatic growth in this market,” Jacobson said. “We wanted to get in the middle of the trend.”

Rather than betting on a particular battery chemistry or on a particular business model for battery owner-operators, investing in Powin is a bet on “the lithium-ion value chain,” he added. ”It’s going to be a long time before competing battery technologies have anywhere near that kind of heft.”

Trilantic brings experience helping growing companies with high-level business strategy and oversight. Energy Impact Partners brings a network of legacy utility backers, a valuable network as Powin seeks to connect with future customers. EIP also spends a lot of time tracking the needs of the grid ecosystem and can compare notes on those trends, said EIP partner Sameer Reddy.

”What they’ve done effectively on a bootstrapped basis is nothing short of phenomenal,” he said of the Powin team. “We’re just providing a lot of fuel for the fire.”

(Why?)

There’s a Dirty Secret Behind Many Utility Climate Pledges

info@greentechmedia.com — Fri, 05 Feb 2021 17:27:50 +0000

Net-zero carbon pledges are becoming common for utilities. But a huge number of them are failing to decarbonize within any timeframe that truly matters. They’re not phasing out coal, they’re building lots of new gas plants, and they’re not building enough clean energy.

We’ll talk about a damning new analysis of utility climate goals from The Sierra Club that digs into the actual numbers.

Then, we turn to the urgency of a national clean energy standard. What are the new political pieces needed to get a nationwide target in place? And can we build it to serve marginalized communities? A new analysis maps out the possibilities.

Finally, the bombshell news that General Motors will only sell zero-emissions cars by 2035. How hard is it to turn around a company born and raised on internal combustion? A cautionary tale from Volkswagen offers some answers.

Leah Stokes, professor at UC-Santa Barbara, joins Stephen, Katherine and Jigar this week. Leah is the co-author of the two reports we are discussing.

Leah is also a co-host of A Matter of Degrees, a new podcast that looks at the forces behind climate change — and how “climate-curious” citizens can tackle it.

Resources:

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This podcast is also brought to you by CPower. CPower and its team of energy experts are back with a webinar series aimed to help organizations make sense of the chaos and optimize their energy use and spend in 2021. This hour-long webinar series features market-by-market breakdowns to help energy planners make the right decisions. Register today.

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