Overcoming Economic and Technical Barriers to Clean Backup Power

As increasingly large and intense California wildfires cause power outages or pre-emptive shutdowns for safety, affected communities are looking for more options to keep the lights on.

Instead of gasoline or diesel backup generators, communities are exploring storing renewable energy for use during outages. The California Public Utilities Commission is also seeking ways to address this need, and is accepting comments this month on a Proposed Decision on Microgrids and Resiliency Strategies (R.19-09-009).

In exploring this issue for Sonoma Clean Power (SCP), a community choice aggregator (CCA) providing clean energy in Sonoma and Mendocino counties, the Center for Sustainable Energy (CSE) found that battery energy storage systems are not a cost-effective solution for its commercial customers at this time. However, we do see a path forward to make battery energy storage an economical and emission-free solution.

We outline ways to address economic and technical barriers below, and options for overcoming regulatory barriers in a companion article.

Overcoming economic obstacles

Currently, battery energy storage systems (BESS) are expensive. They need to be very large to serve utility customers’ needs during an emergency or pre-emptive outage, making them even more expensive when installed for this purpose.

BESS are typically installed to perform energy arbitrage – storing energy to use or sell when time-of-use prices peak – and to reduce demand costs. To do arbitrage effectively, a favorable rate tariff environment is required, and the facility needs a daily energy load profile that allows it to purchase more energy during the cheapest hours of the day and strategically discharge the BESS during the most expensive hours. Most of the utility customers we have screened in SCP’s territory have neither of those features working for them. Some customers don’t even have a time-of-use component to their billing.

When daily energy load profiles combined with available rate tariffs aren’t effective for energy arbitrage, reducing demand charges during peak times of day (demand mitigation) is another avenue for a BESS to pay for itself. Unfortunately, SCP customers we have screened so far do not have a high cost of demand and the cost of demand does not fluctuate throughout the day. Although this benefits them throughout the year, it is a challenge for economically justifying BESS for resilience.

For a BESS to be an effective bulwark against power outages and allow a business to keep operating, there needs to be a way to recharge the batteries when the grid is unavailable. This is usually going to be solar electric. The solar electric installation needs to be sized so that it can produce the energy required by the business throughout the day plus the additional energy needed to charge a BESS big enough to provide energy when the solar electric array is not charging. For the customers we screened, this is either not feasible because of physical space constraints or is very costly when compared to the alternative of purchasing a backup generator fueled by diesel, natural gas or even gasoline. This doesn’t even take into account that solar electric produces less output during a scorched sky scenario like California’s wildfires.

Overcoming engineering obstacles

To overcome the engineering obstacles to using BESS for resilience, we should think beyond the property line for commercial customers. Small blocks of commercial customers working together could provide enough physical space for more solar electric production. An engineered approach to these cooperating properties could result in a block- or association-owned microgrid that could meet critical needs.

Consider the hypothetical example of a clinic, a food market and a community center in a small rural community. They all may need to island during a grid outage to keep operating and support their community in a time of need. The community center may have the space to install a large solar electric array. However, if it doesn’t have a legislative mandate to install battery energy storage or other on-site generation, it’s difficult to justify the cost with energy arbitrage and demand cost mitigation alone. While the clinic and the market may have an easier economic case to make by adding a known opportunity cost of being shut down to energy arbitrage and demand mitigation, they may lack the  space to install the necessary equipment. By working together under a novel energy sharing agreement with a shared microgrid, these three separate properties could cost-effectively support their community during a prolonged grid outage.

Such cooperative approaches provide a viable path forward to make battery energy storage an economical and emission-free solution. However, current rules in California create barriers for projects like the one outlined above and need to be revised to open opportunities for innovative solutions.