Community solar gardens are being primed as a major niche for energy storage, as more businesses seek control over their relationship with the local grid. Leading community solar (CS) states like Minnesota are becoming the test beds for the anticipated energy storage adoption boom, as utilities and commissions scramble to catch up with market forces. Minnesota alone projects a doubling of its community solar capacity from over 800 MW today to 1.7 GW by 2030.
New technology roll-outs, like two-way EV charging/discharging also will help bolster the value of storage to system owners ahead of government reforms.
Community solar is booming
The community solar market is huge, at 3 GW, and booming. Community solar projects represent 3,005 MWac of total installed capacity, calculates the National Renewable Energy Laboratory, in a July study.
Community solar projects are located in 39 states, plus Washington, D.C. Of those, 22 states, plus Washington, D.C., have policies that support community solar, NREL reports. About 74% of the total market is concentrated in the top four states: Minnesota (663 MWac), Florida (593 MWac), Massachusetts (555 MWac), and New York (410 MWac), NERL counts. But more states are gaining steam. New Jersey just approved 164 MW of community solar projects as part of the Community Solar Energy Pilot Program and announced that it will transition from its pilot program to a permanent community solar program after only two years.
Out of the 800-plus MW of community storage in Minnesota, I doubt if any have storage now. But all of them would have storage if it were valued reasonably.
The DOE also has rolled out a goal of expanding community solar over the next four years to 5 million homes, calculated to save around $1 billion in energy costs. “There is enough community solar installed in the U.S. today to power 600,000 households — achieving DOE’s new National Community Solar Partnership (NCSP) target would mean an increase of more than 700% in the next four years,” said the agency in October.
“Community solar is one of the most powerful tools we have to provide affordable solar energy to all American households, regardless of whether they own a home or have a roof suitable for solar panels,” said Energy Secretary Jennifer Granholm.
Why community solar design is ideal for storage
Energy storage is still a bit of an economic stretch for most residential and many commercial customers as stand-alone projects. But pooling the solar resources and energy demand of dozens of such customers, spread over an entire county or two, makes storage far more attractive.
“Community solar projects are bigger than individual residential and commercial installs, and can integrate into a utility’s needs more cost effectively,” observes David Amster-Olszewski, the CEO of SunShare, which has developed 46 community solar projects totaling 63 MW across Minnesota and Colorado.
Community solar gardens can range in size widely, from a few kW to over 100 MW. Many are in the range of 1 MW, like the portfolio of Northern States Power, a utility in Minnesota, where the regulatory cap on community solar project size has dropped from 5 MW to 1 MW.
The larger of these can be operated as virtual power plants, including the ability to engage in energy arbitrage, where there is competition in the retail market, as in bellwether states like Massachusetts, Texas with another dozen states following.
Legislative vacuum for storage valuation
The greatest limit to the sweeping adoption of energy storage by community solar projects is the lack of coherent valuation of the benefits of energy storage by a state regulatory body. “Out of the 800-plus MW of community storage in Minnesota, I doubt if any have storage now. But all of them would have storage if it were valued reasonably,” says Amster-Olszewski.
Thanks to a recent $30 million equity infusion, his company is developing a storage business for community solar projects, which soon will encompass several more mid-western and south-western states, says Amster-Olszewski. “I’d like to see storage generate 20% of what we do in two years and 40% to 50% in four or five years,” he says.
Once energy storage valuation has been established in state regulations, utility procurement targets for energy storage will emerge. “Procurement targets could be in place within two years,” suggests Logan O’Grady, executive director of the Minnesota Solar Energy Industries Association.
One regulatory arena that should help establish storage valuation norms are utility Integrated Resource Plans (IRP), like the one that Xcel is preparing for 2022. A group of renewables advocates — including Clean Grid Alliance — has challenged the utility’s first draft plan including a set of gas peakers, advocating rather, that a mix of renewables, including over 500 MW of energy storage should be adopted in place of the peakers.
Like other regional ISO associations, MISO “has indicated a preference towards single-node aggregation for DERs,” reports the Energy Storage Association.
National storage valuation plays
On a national level, two recent Federal Energy Regulatory Commission (FERC) rulings will help value storage. “In Minnesota and the mid-west MISO region, storage is now being adopted for more niche applications, but we are on the cusp of some compliance filings around FERC 2222 and 841 that will kick off what the state will have to do to incorporate storage into the market,” says Beth Soholt, the executive director of Clean Grid Alliance.
FERC Order No. 2222-A, issued March 18 of this year, asks regulators to remove barriers for aggregated distributed energy resources (DERs) in wholesale markets. Order 841 seeks to remove barriers to distributed and behind-the-meter energy storage participating in wholesale electricity markets.
Of course, several other states are forging ahead with energy storage valuation formulas, like California, which leads among U.S. states for battery energy storage at 1.4 GW as of the end of Q2 this year, up 50% from Q1, according to the American Clean Power Association’s Q2 Market Report.
Massachusetts also has honed its energy storage valuation position: “The average community shared solar subscription in Massachusetts has a net present value (NPV) of $0.15/W. Translated to an annuity equivalent, the average subscription yields a benefit of ~$14/kw/yr, NREL reports.
Interconnection wait times holding market back
Another limit to the growth of energy storage adoption by community solar projects is the long interconnection wait time that utilities foist on developers, especially in urban areas where distributed energy resources have saturated the grid. Such is the case with Xcel in Minnesota, which has 483 MW of community solar applications in its queue, compared to 784 MW approved over the past five years, according to NREL.
“The explosive CSG [community solar garden] growth alongside policy development led to several of the company’s feeders that ring the Twin Cities Metropolitan Area to become saturated with DER [distributed energy resources] such that many projects now have been placed on hold and smaller systems have encountered their own challenges,” the utility recently reported.
To be relatively fair with Xcel’s backlog plight, there are over 1,500 MW of community solar projects awaiting interconnection in Illinois, NREL reports.
New technology will lead community storage growth
Apart from the falling price of solar and batteries, new technologies also will boost energy storage adoption in community solar situations as legislation struggles to catch up with the market.
New utility pilot installations that test emerging storage technology will be a key to establishing storage valuation. “We’ve seen several pilot storage projects deployed in Minnesota recently, and now that they are operational, can use them as examples,” says O’Grady.
On the smaller scale, residential and commercial use of EV batteries will also boost storage adoption. “The vehicle-to-grid market will become impactful, as more car companies allow bi-directional flow from now-standard 100 kWh battery packs,” says Amster-Olszewski. “The Nissan Leaf and the new Ford 150 Lightning, for example, allow you to plug into the vehicles and draw power; that’s a revenue stream,” he says.
VPP software advances will also play part in expanding the concept of energy storage as a community asset. For example, Utah solar contractor ES Solar and sonnen are working with Rocky Mountain Power to transform thousands of intermittent rooftop solar systems into dispatchable grid assets by retrofitting every home with a sonnen battery as part of the Wattsmart Battery Program, Solar Builder reported in October.
From a small base, the VPP software market is growing at double-digit rates. “The global Distributed Energy Resource Management System Market size will grow to $750 million by 2026 (forecast year) from $286 million in 2021 (estimated year), at a CAGR of 21.2% during the forecast period,” according to MarketsandMarkets.
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