Technology Tuesdays: Solar Plus Storage, but WHY do I need the plus storage?!
This month, we are all about solar plus storage. I know that most people are aware of solar energy, but I thought I would take a quick moment to zero in on the storage part and explain why new solar projects need it to be financially viable.
When I looked into starting a solar project on my home, I was told I had to incorporate storage to make the project financially viable, or “pencil out.” My first question was, why must I purchase additional equipment to save money on my energy bill?
One primary factor that comes into play is electric rates. Once we understand what goes into those rates, it is easier to understand how and why they impact our project-related decisions.
What exactly goes into those electric rates? You can visit your utility provider’s webpage and find an explanation of what their rates pay for. PG&E has a straightforward list on their website that explains what factors are included in the rates paid by their customers:
Distribution: this is the utility’s cost to send electricity where it needs to be used
Transmission: this is the utility’s cost to receive the electricity from where it is generated so that it can be distributed
The cost of buying power: the type of power the utility needs to procure and what is available. This is heavily dependent on demand and the time of year.
The cost of operating power plants: these include the cost to pay employees and maintain the facility
In addition to the list above, your utility rates support several items that we, as a community, benefit from. Some examples include:
Public low-income programs: these programs include the C.A.R.E program, which provides a 20% discount on your bill if you fall within a specific income guideline
Public energy efficiency programs: these programs include the Energy Savings Assistance Program and Local Government Partnerships (LGPs) like the Central California Energy Watch (CCEW). It also includes other energy efficiency programs such as Net Energy Metering (NEM); stick a pin in this one, we will return to it.
The infrastructure improvement needed to serve customers: Infrastructure includes power distribution, natural gas, vegetation management, hydroelectric, and electric vehicle infrastructure.
Now that we understand the elements that make up your electricity cost let's talk about what this has to do with solar plus storage. I mentioned Net Energy Metering (NEM) before. NEM is the rate option you elect when you install solar panels on your home or office. It allows you to offset your electricity cost with the electricity you generate on-site. NEM is also a tariff that allows the customer to receive bill credits for the excess electricity they export back to the grid. There have been 3 iterations of NEM; however, the last one (NEM 3.0) is the cause behind the need for battery storage.
Let’s recall our conversation about Distributed Energy Resources (DERs). We learned that DERs “help support the delivery of clean, reliable power to additional customers and reduce electricity losses along transmission and distribution lines.” Solar plus storage is one type of DER.
We should also recall our conversation, "What the Duck?!", in which we discussed the steep increase in demand on the electricity grid between 4 PM and 9 PM. This is the time of day when clean, renewable energy is not as abundantly available as it is between Noon and 2 PM when solar production is at its peak. To meet this sharp increase in demand, utilities must purchase energy generated from less environmentally friendly sources, which increases our carbon footprint.
What does this all have to do with battery storage?
NEM 3.0 incentivizes the purchase of battery storage by significantly reducing the incentive for selling electricity back to the grid during off-peak hours when renewable energy is abundant. Instead, it encourages customers to store electricity in their batteries for use during those crucial peak hours, which generates major savings on their energy bills. This reduces peak-time demand on the grid and increases the use of clean renewable energy and grid resilience.
People scrambled to get their solar projects completed before NEM 3.0 took effect in April 2023. Customers who had completed their projects prior to that date were able to keep the old rates for a period of 20 years. There was a lot of panic around the change and many attitudes that solar projects were no longer “worth it” financially. Solar projects can still generate great energy savings. Additionally, people who live in regions that are prone to power outages have an incentive to purchase battery backups to reduce the likelihood they will lose power for longer periods of time.
Change can be a good thing, and I believe this step toward resilience is a good one!
