In Push for Collaboration, Solar and Storage Industries Unveil "Smart Solar" Potential

Pairing solar with energy storage will be integral to cement the future of both emerging sectors, said experts at the Intersolar North America’s annual event held this week in San Francisco.

The three-day event and exhibition was co-located with ees North America, a stand-alone event focused on energy storage technologies and services. But experts from the separate industry events underscored that the sectors’ futures are aligned and should grow in tandem, calling for the backing of a joint, “smart solar” sector.

Solar’s Unique Revenue Catch-22

The solar sector, in particular, has seen a number of hurdles that threaten its widespread adoption, the most cited of which are linked to its non-dispatchable nature.

Though solar penetration has soared, behind-the-meter applications have been hampered by ruthless net energy metering battles between regulators and electric utilities in at least 20 states. Utilities argue that net metering customers don’t pay their fair share of grid expenses, raising costs for non-solar ratepayers, whereas the solar sector says that utilities don’t fully account for distributed solar’s value to the grid, such as capacity value, transmission and distribution deferral, and line loss savings.

Meanwhile, as it takes on an ever-larger share of the total generation mix, the solar sector has run into a unique problem whereby it is apparently sabotaging its own revenue stream.

“Solar is a zero marginal-cost resource, which means it will bid into wholesale power markets at zero dollars and take any price it can receive,” explained GTM Research in a white paper released at Intersolar North America this week. “Add an increasing amount of solar to that market and prices decline overall, leading to lower revenue for each solar project. Since solar is non-dispatchable, project operators cannot strategically sell into the market at higher priced times—solar is purely a price taker (unless paired with energy storage). In fact, the more solar is placed on the grid, the less the grid needs power when solar production is highest—causing solar’s value to decline as its penetration increases.”

This “value deflation” effect—which holds true for distributed solar as well as for large-scale solar—poses a significant threat, especially in states that have lower wholesale prices, the white paper says. A study of California’s grid by the Lawrence Berkeley National Laboratory, for example, suggests that solar value could fall 38% when solar is at 10% penetration compared to zero penetration (Figure 1).

Enter the Storage Solution

According to the GTM Research white paper, the effect could be “masked” by a rate structure like net energy metering, but studies have shown that even with that measure, distributed solar owners could lose 35% of their bill savings from solar at 15% solar penetration on the grid compared to zero penetration.

As its net metering and deflation troubles rage in the background, the solar sector’s growth is pushed forward by more aggressive state renewable goals. Three solutions have been proposed to quell these troubles: market design, which entails expanding the grid and modifying competitive processes; demand management, which would require managing load to align with solar output; and energy storage.

“From a behind-the-meter end-customer’s point of view, dispatchability of solar can be achieved primarily through two technologies—load management (demand side management) and energy storage. Both these technologies have been enabled by distinct advancements in hardware (advanced metering, batteries), and software (customer analytics),” GTM Research suggested. “A confluence of these technology advancements along with appropriate market structures that value services offered by solar-plus-storage, or solar-plus-energy-management are the stepping stones for taking solar to the next level and enhancing solar as a smart renewable energy resource.”

Experts at both Intersolar and ees agreed that pairing solar with energy storage, load control, and other distributed energy resources (DERs) could provide a greater value for the grid. This “DER aggregation” is already underway, with independent system operators looking to open up markets to distributed resources, they noted.

The first wave of “smart solar” projects is being initiated and owned by utilities. Examples include Arizona Public Service’s solar innovation study, Hawaiian Electric’s Molokai pilot project, and ConEdison’s Sunverge/SunPower project. The Department of Energy, too, is backing smart solar projects with $18 million in Sustainable and Holistic Integration of Energy Storage and Solar PV awards.

Meanwhile, the solar-paired-storage market has already taken off. GTM Research estimated that the market grew from 4 MW in 2014 to 18 MW in 2015, mostly in the utility-scale segment. “By 2021, behind-the-meter solar-paired-storage will cross 900 MW,” it projected. Utility-scale solar-paired-storage growth will especially soar, from 64 MW at the end of 2016 to more than 300 MW by 2021.

However, GTM Research noted, while benefits offered by solar-plus-storage go across the meter, front-of-meter benefits have not been monetized except in a few markets on pilot scale. “Market rules and policies are still evolving in reaction to distributed energy resources proliferation,” it said.

—Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)