Land in any airport, and the view tells the story. Commercial buildings with fresh paint and no solar panels on them yet. Residential customers may commit to solar for a variety of personal and ethical reasons, but nonresidential property owners tend toward the pragmatic.
They make business decisions based on profits.
This historically lagging solar segment is starting to come around though. In the Q3 2017 U.S. Solar Market Insight report from GTM Research, which showed a 22 percent decline for the overall industry year over year, also showed that nonresidential solar grew 22 percent, installing 481 MW.
The business is out there. The installers who present solutions based on a clear understanding of nonresidential energy costs can build momentum in what may turn out to be the largest solar segment of all.
Utility tariff structures
Commercial and industrial customers have complex energy needs that go far beyond a simple “go / no-go” decision for a solar project. In particular, these customers pay much of their electricity bill in the form of demand charges. These charges can be quite complex, featuring “ratchets” and other calculations resulting in very high charges that can last for many months after a simple error in operations. In many utility service territories, demand charges comprise more than one-third of the customer’s electricity bill; in a few, it’s more than one-half.
In addition to rising demand charges, changes in time-of-use (TOU) rate structures in many states have customers scrambling for solutions. While there is no doubt that solar can deliver significant energy savings to a nonresidential customer, a traditional solar installation provides little or no reduction in demand charges for most accounts, nor any control over the time of day when energy is consumed.
A solar installation that delivers big energy savings may result in little or no demand savings. As shown in Figure 1, a single cloud at the wrong time on the wrong day can wipe out a month’s worth of savings. Without appropriate demand management technology, net load can “spike” to create a new monthly peak demand.
Solar providers are increasingly finding that when they propose new projects to their nonresidential customers, these customers are more informed and sophisticated about their energy needs. Odds are good that a storage provider has already come calling to see if a battery system could help with TOU rates and demand charges, but batteries are still very expensive, and in states without significant subsidies, they often don’t pencil out on their own, either.
In our interviews with solar professionals this past summer, we were told over and over that because of changes in the market, “it’s time to get off the roof and come inside.” Until a solar provider has a more complete picture of a customer’s energy needs — their energy usage patterns and the business needs driving those patterns — that provider is competing at a disadvantage. In reality, any solar solution needs to be presented in the context of these usage patterns and needs.
From Tesla cars to Gigafactories, there is a lot of news about battery storage, and as battery costs continue dropping, some smart solar providers are exploring becoming solar-plus-storage providers. In some states with high incentives for batteries (and with some clever use of the Investment Tax Credit), this can be a good combination. In many cases, load flexibility is both more valuable and less expensive than batteries. Simple changes in operation (undetectable to building occupants in commercial buildings and easy to manage in many industrial facilities) can offset the variation in solar output and eliminate spikes that cause high demand charges, but only with the right tools. Such load flexibility can actually complement storage solutions. With the right analysis, taking advantage of flexible loads can help a customer to right-size energy storage subsystems for a more cost-effective total package. The solar triple play — solar plus storage plus load flexibility — can be a potent solution to a variety of customer energy challenges.
Expanding the comfort zone
There are no serious technical impediments to delivering nonresidential solar solutions that bring both energy and demand charge savings. The trends are all in favor of such solutions:
- Storage devices (both batteries and thermal storage) are declining in price quite rapidly; new announcements from both established and new storage vendors appear weekly.
- Building and industrial controls are becoming more sophisticated and more standardized.
- Sensors and data networks are increasingly affordable and more universally deployed.
- Big data analytics are becoming more widespread, powerful and accessible.
- Software solutions taking advantage of machine learning and advanced control algorithms will soon be widely available for application in real-world customer energy solutions.
As with many new major shifts, the technology outlook is bright, but the biggest change required is cultural. Solar providers with a high comfort level matching panels and inverters to customer roofs and electrical systems may face a steep learning curve when moving into the less-familiar world of building and industrial operations. Inside the facility, it’s a whole different world, but one that every complete customer energy solutions provider must understand.
The good news is that many of the initial fact-finding steps are the same as those required for solar installations everywhere. The customer billing data, load profile data and utility tariff information remain the foundation of any good proposed solution. Creating a complete energy solution, however, requires a more complete supplier ecosystem than most current solar providers can deliver alone.
Some of the most fruitful conversations we had last year at Intersolar and Solar Power International were about the development of that bigger ecosystem. Numerous battery vendors, many of whom originally came out of the market for small, off-grid applications, began to describe how their offerings could be adapted for commercial building applications in demand-charge reductions. Software startups, many of whom got their start from DOE SunShot awards, contributed ideas for better data visualization and control. And while control vendors have not even been present at past solar events, a few are starting to recognize the synergies between solar and load flexibility.
The future is promising for innovative solar providers who are willing to broaden their offerings and embrace a total energy solution approach for commercial and industrial customers. We invite feedback and conversation with any solar providers with insights into how the nonresidential market is changing, and how to strengthen the emerging ecosystem of nonresidential energy solution providers.
John T. Powers is founder and CEO of Extensible Energy. An energy economist with more than 30 years of experience in consulting and technology development for the electric utility industry, Powers has worked in energy efficiency, demand response and renewables for most of his career. He currently serves as project officer for the Community Solar Value Project, a DOE SunShot project helping utilities to develop better community solar programs.
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