If community solar programs are successful, why not try community storage?

Since the dawn of the solar industry, people have been trying to figure out how to make solar panels accessible to low-income and historically underserved communities. The obvious challenge is the cost barrier, which can be at least partially overcome through subsidies, net-metering programs, leasing arrangements and low-cost financing. But there are other obstacles that cannot be addressed as easily. For example, renters have no ability to install rooftop solar panels because they don’t own their own roof, while landlords may have no incentive to install solar if they are not responsible for paying the utility bills; and if they are, how can tenants share in the cost savings? Even where homes are owner-occupied, aging distribution grid infrastructure and sub-par electrical wiring in buildings may be insufficient to support distributed energy resources.

To address these solar access issues, the “community solar” ownership model was developed, whereby a large solar PV system, ranging in size from 20 kW to more than 1 MW, is owned and operated by an electric co-op or third party on behalf of subscribers, who are credited with a share of the systems electricity output, allowing them to access the financial benefits of solar despite not having solar panels on their individual homes and businesses.

Energy storage faces many of the same challenges as solar, ranging from cost barriers — which, again, can be addressed to some extent through subsidies and incentives — to more difficult problems such as building ownership and infrastructure challenges, and perverse incentives for landlords. It’s worth asking: Could a similar community ownership model make energy storage more accessible?

The intuitive answer is “yes.” However, the question is a bit more complicated when it comes to energy storage. Because while storage, unlike solar PV, is capable of delivering numerous services and providing multiple economic benefits, the specific services and value streams it can offer depend a lot on where the storage resource is located: in front of or behind the utility meter.

Front-of-the-meter (FTM) battery storage systems are normally larger in size and benefit from economies of scale, easier access to wholesale energy markets, such as regional capacity markets, and the ability to execute contracts (tolling agreements) to sell services to utilities. However, FTM systems are not usually able to provide valuable community benefits such as backup power during grid outages or cost savings to specific buildings through demand charge management.

Meanwhile, commercial-scale behind-the-meter (BTM) energy storage can offer resilience and other community benefits, as well as energy cost savings to their host facilities; but these systems are more expensive to build on a per-kilowatt-hour basis and have historically struggled to access wholesale energy markets. BTM systems can be aggregated into virtual power plants (VPPs) to provide grid services, usually through programs administered by electric utilities; but these programs, while becoming more widespread, are still not available in most utility territories across the country.

Recently, three programs have arisen in three states that demonstrate elements of what could become a new resilient community solar + storage model, combining benefits of BTM and FTM energy storage plus solar to create equitable, affordable and community-supporting solar + storage systems.

California

One of these programs is Energy StorageShares, a first-in-the-nation community storage pilot developed by the Sacramento Municipal Utility District (SMUD) in California. It shows how large FTM energy storage projects can be developed using a shareholder model similar to the one commonly used in community solar projects. In this program, eligible commercial customers in SMUD’s service territory may choose to make an up-front payment to SMUD for program participation. SMUD bundles these customer investments with its own capital, procures a battery, installs it in a location that optimizes grid benefits, and operates it to maximize revenues and cost savings. Shareholders then receive a monthly on-bill credit commensurate with the number of shares they hold. The program provides guaranteed savings to the customer without impacting their business operations, imposing maintenance obligations, or requiring physical space at their business for a battery system. Although SMUD’s program is limited to commercial participants, there is no reason a similar program could not allow for residential as well as commercial participation.

Vermont

The second program is Resiliency Zones, a groundbreaking community resilience model developed and demonstrated by Green Mountain Power (GMP) in Vermont. In this model, the utility uses its large, substation-sited batteries to provide backup power to the local community. This is accomplished through the addition of strategically placed switches that allow the local distribution grid circuit to island in case of a widespread outage, providing sustained backup power to all customers on the circuit. GMP’s first resiliency zone project launched in Panton in 2022. The Panton project demonstrates how FTM energy storage can provide resilience benefits, not to a single facility as with BTM batteries, but to all customers on the islandable circuit. However, it lacks the community ownership elements that would allow customers, and especially historically underserved communities, to participate in the revenues and cost savings produced by the project.

New York

The third model was developed by New York as part of its statewide Solar For All program. In this model, community solar, storage or solar + storage projects enroll into the program on a rolling basis, when they apply for grid interconnection. This creates a pool of participating community projects. The electric utility buys electricity and services from the community projects via power purchase or tolling agreements, retains a small administrative fee, and distributes whatever positive value remains among its already-enrolled low-income energy affordability customers. These customers receive bill credits on an opt-out basis, thereby eliminating the considerable cost of marketing the program and enrolling participants, as well as the necessity for customers to purchase shares. However, this model does not offer resiliency benefits to the host community.

Takeaways

A new model combining elements of the California, Vermont and New York programs would be able to provide community benefits, equity and economic optimization. Essential elements of this model would include:

• A large FTM battery and connected solar PV system is owned and operated by a utility, municipal utility, electric cooperative or a third party contractually engaged with the utility or cooperative.
• The project is sited on an existing substation or other favorable location to optimize grid services and allow for participation in wholesale energy markets. (For an example of substation-sited storage and connected PV, see the Sterling, Massachusetts, municipal solar + storage system).
• Low-income utility customers are automatically enrolled on an opt-out basis. Other residential and commercial customers in the surrounding community may also choose to purchase shares of the project. This allows customers who cannot install solar + storage in their own buildings (due to ownership barriers, lack of space, lack of capital, infrastructure limitations or other restrictions) to participate in a resilient, clean energy project in their neighborhood.
• The surrounding distribution grid circuit is made islandable by the addition of switches that can isolate it during a grid outage. This means the solar + storage resource will support customers on the islandable circuit during an outage. This islandable, local circuit could include community or municipal buildings that can provide shelter, essential services such as fueling stations and medical clinics and multifamily affordable housing, as well as other homes and businesses on the circuit.
• Customers that have purchased shares in or are automatically subscribed to the solar + storage system receive on-bill credits during normal operations, based on revenues from grid and market services provided by the solar + storage resource.
• Costs are minimized because the FTM battery benefits from economies of scale, and revenues are maximized because the FTM battery can operate in ways not available to BTM batteries (e.g., provide direct grid and wholesale energy market services or participate in utility tolling agreements if third-party owned). Because the electric utility is the sole off-taker of project services, and low-income customers are automatically enrolled, marketing and enrollment costs are minimized. There is no participant cost barrier for income-eligible customers.

This resilient community solar + storage model would offer equity benefits similar to those offered by community solar models, helping to overcome cost, infrastructure and home ownership barriers to clean energy adoption in low-income and historically underserved communities. It would also capture the economic benefits of larger, FTM storage, while eliminating marketing and enrollment costs. In addition, it could support grid modernization and decarbonization initiatives in numerous states by allowing utilities to defer distribution grid investments and by providing electric capacity during peak demand hours, thereby displacing fossil fuel peakers. Importantly, it could offer a mechanism for utilities to advance energy storage and solar PV economically, in collaboration with communities, aligning utility and community interests.

Clean Energy Group will continue to develop this new model, which we think deserves a real-world demonstration. Interested parties should contact Todd Olinsky-Paul at [email protected].