NewEnergyNews: TODAY’S STUDY: Detailing The Power Of A Virtual Power Plant

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    Monday, July 22, 2019

    TODAY’S STUDY: Detailing The Power Of A Virtual Power Plant

    2019-2030 – Repowering Clean; Gigawatt-Scale Potential for Residential Solar & Battery Storage in Los Angeles

    May 2019 (Sunrun)

    Executive Summary

    The City of Los Angeles and the Los Angeles Department of Water and Power (LADWP) have taken a leadership position by pursuing a path to 100% clean energy, including retiring aging fossil fuel powered plants in the coming years. This report shows how LADWP can raise its targets for local clean energy with residential solar to create a city-wide clean energy ‘virtual power plant’: rooftop solar and battery storage on as few as 75,000 Los Angeles homes can replace peak capacity of one of LADWP’s retiring gas plants.

    Home solar has grown rapidly across California and nationwide. By 2030, LADWP can build a fleet of roughly 150,000 homes and 5,000 apartment buildings with home solar. This goal is achievable: as of 2018, nearly this much rooftop solar has already been deployed in San Diego Gas & Electric’s territory, along with a rapidly increasing amount of battery storage. Through programs focused on areas with low solar penetration, LADWP can also bring savings and clean energy to 25,000 homes and 2,500 apartment buildings in traditionally underserved and low income communities.

    The cost of advanced batteries has declined rapidly, supporting the rapid growth of energy storage. This means that LADWP could achieve a clean energy virtual power plant for less than the cost of building new gas plants. Sunrun estimates that doing so could save almost $60 million as compared to equivalent new gas plant capacity. Solar and batteries deliver a broad range of benefits to the city of Los Angeles in the form of quality jobs, cleaner air, lower energy costs and more reliable power for communities and businesses. Building clean energy locally eliminates the need for expensive transmission lines to move power into the city and can help strengthen an aging distribution grid - preventing blackouts and providing emergency backup power if outages do occur.

    Across the country, a growing number of utilities and wholesale markets are already incorporating distributed energy resources. By engaging customers to be part of the solution, partnering with clean energy innovators and streamlining permitting and interconnection for local clean energy LADWP can create a more modern, reliable power grid for residents and businesses across the city. LADWP can show the world that a vibrant, growing city can be powered by residential solar generating clean energy, jobs, cost savings, and grid innovation.

    Residential Solar in Los Angeles

    Today Despite the significant expansion of solar as a resource in recent years, the penetration of local rooftop solar in LA is low compared to other areas in Southern California. Today, Los Angeles is home to approximately 182 megawatts of residential rooftop solar installed on 36,000 homes.1 This represents only 2.5% of LADWP’s 1.34 million total residential customers.2

    To put this into perspective, 139,000 homeowners, or fully 11% of San Diego Gas & Electric’s (SDG&E) 1.25 million residential customers, have adopted solar—a total of 740 megawatts of installed capacity. SDG&E customers are also rapidly adopting batteries with home solar. Customers in California’s other utility territories are adopting solar and batteries at nearly the same rates.

    In comparison to utility rates that keep rising, solar can lower electricity costs. As a result, many people are investing in solar to save money. LADWP’s electricity rates are lower than those of other utilities across California, which has dampened demand for home solar. However, the trends are clear: solar costs continue to decline while LADWP’s rates continue to increase.3 In the coming years, the improving economics of home solar and battery systems will increase demand and market potential in Los Angeles. Residential electricity use accounts for 40% of LADWP’s total. If LADWP acts to encourage the adoption of batteries with residential solar and then bundles and coordinates these resources as a virtual power plant, the utility will gain access to a new and innovative energy resource.

    Growth of Residential Solar & Batteries Nationwide

    The adoption of residential batteries is growing nationwide, predominantly in tandem with home solar. In response to utility programs, incentives and “Time of Use” rates, customers are embracing storage to manage their electricity bills and store energy to have backup power in outages. For instance, through Q3 2018, residential battery deployment increased 526% year-over-year. Residential batteries constituted 35% of all energy storage deployed in these first three quarters of 2018.4

    Even as utilities across the United States invest in energy storage, including as replacements for gas peaker plants, the amount of residential storage installed surpassed the amount deployed by utility companies for the first three quarters of 2018.5 The rapid growth of residential storage nationwide illustrates its potential to play a key role in LADWP’s overall approach to energy storage.

    Wood Mackenzie projects residential storage to grow dramatically in coming years across the United States. Specifically, as shown in the graph below, they forecast more than 1,000 megawatt-hours of residential storage will be deployed by 2020 and more than 3,000 megawatt-hours will be deployed by 2023. Sunrun’s analysis projects that LADWP should be able to realize at minimum ~170 megawatt-hours of residential storage by 2024, out of 8,800 megawatt-hours that Wood Mackenzie projects to be deployed nationwide by 2024.

    Challenges for LA Today

    Los Angeles has charted a path to 100% renewable energy.6 LADWP needs new, clean and reliable resources, including local energy resources in key locations on the grid to maintain grid reliability and power quality.

    Los Angeles is a sustainability leader with the largest amount of solar installed of any US city in 2018.7 Despite this, residential rooftop solar remains a largely untapped clean energy resource - especially for Angelenos in the parts of the city that historically have had less access to solar.

    How residential solar-batteries can help

    Home solar and batteries can provide LADWP with a clean, scalable and flexible source of electricity to meet the evolving needs of Los Angeles’ electricity grid when and where it’s needed, without expensive transmission lines.

    Locally-sited batteries enable customers across Los Angeles to access backup power in the event of a blackout or a power outage.

    By partnering with clean energy developers and software platforms to manage a network of solar and batteries, LADWP can create a virtual power plant.

    The scale achievable

    LADWP has enormous residential solar potential. This report shows how simply by continuing recent growth trends through 2024, Los Angeles could have ~400 megawatts of residential rooftop solar. By 2030, this could be ~860 megawatts. To help meet the critical need for in-basin clean energy, LADWP should raise its local solar goals to include this ~860 megawatts from residential solar.

    LADWP can build on existing programs, like the Self-Generation Incentive Program (SGIP) to encourage customers to adopt storage with solar. By 2024 there could be ~170 megawatthours of residential storage and by 2030 this can reach ~1,200 megawatt-hours. When bundled and coordinated as a virtual power plant, this resource would be equivalent in scale to one of LADWP’s existing gas-fired power plants. LADWP should focus on growing battery deployment to reach this ~1,200 megawatt-hour level or beyond.

    LADWP can specifically target areas of the city with low solar penetration currently, which overlaps with areas where local energy resources can benefit the grid. Sunrun recommends that LADWP could achieve at least 180 megawatts of solar and 260 megawatt-hours of storage through 2030 in these areas.

    How to realize the potential

    Engage customers to be a part of the solution.

    Include residential storage in planning.

    Create a next-gen "Residential Solar & Smart Battery Program."

    Enable residential solar and storage to compete.

    Focus where the grid and communities benefit most.

    Consider the value to the local grid.

    Partner with innovators.

    Today, the all-in cost of a typical battery installed with a solar system for a single family home typically ranges between $8,000-$10,000. Incentives, like the Investment Tax Credit (ITC) and California’s Self Generation Incentive Program (SGIP), together reduce home battery costs by as much as 50%. Battery prices are dropping quickly—falling by 55% between 2014 and 2018.8 This trend is expected to continue, making a battery an increasingly small cost relative to the solar system to which it can be attached. Just as high-quality cameras on mobile phones have evolved from being an expensive addition to a standard feature, batteries will also become a standard feature for solar installations. This promises to provide customers with greater capabilities from their solar systems for their own homes as well as for the grid.

    Targeting Solar Deployment for Grid and Community Benefit

    To address the elevated need for clean energy resources in specific parts of Los Angeles for both grid and community benefit, the recommendations found throughout this report can be focused on addressing the challenges of deploying solar including lower income, more pollution-burdened communities. Based on evaluation of building stock in areas with lower solar penetration, Sunrun recommends a minimum target of 25,000 single family homes and 2,500 multifamily buildings in these areas. If, through LADWP programs, batteries are added to these solar systems at the same rate of uptake as modeled for the city as a whole, this would result in a total of approximately 255 megawatt-hours of battery storage, offsetting the need to build 64 MW of peak power plant capacity. This can be expanded and refined based on more specific knowledge of the areas where the grid can benefit most from local energy resources.

    Jump start multifamily solar growth with an expanded Shared Solar Program

    Multifamily solar in LADWP is limited compared to elsewhere in California, where the Multifamily Affordable Solar Homes (MASH) and SOMAH programs have delivered energy savings to residents in affordable housing. LADWP has launched the Shared Solar Program for renters that utilizes city property for solar installations, but this leaves actual multifamily roofs unaddressed.

    This does not enable the addition of energy storage to provide backup power to the residents of multifamily buildings or support the grid in locations where the grid can benefit most. LADWP can expand the impact of these programs by establishing a Virtual Net Metering program for multifamily homes and by carving out capacity from an expanded Feed-In Tariff program specifically for affordable multifamily properties, including in local areas where solar and batteries can benefit communities and the grid.

    Partner to engage customers in key areas

    The need to target specific parts of the city for clean energy is an example of where LADWP can partner with clean energy developers for the greatest impact. LADWP has customer relationships with properties in these areas as well as historical data on energy usage.

    In the places where local solar and storage is needed most, LADWP can create frameworks to enable property owners to engage clean energy developers qualified to provide solar and storage for an LADWP Virtual Power Plant. This would allow developers to rapidly advance projects with more prospective property owners and drive increased deployment. The property types targeted by LADWP could reflect goals for community impact.

    Enable solar for rental properties

    Rental homes more rarely have solar because there is a split incentive between the property owner, who would invest in solar and, if the tenant pays the utility bill, the party that would benefit from reduced electricity costs. LADWP’s Solar Rooftops Program enables any homeowner to “rent” their roof to LADWP to install solar at no cost to the homeowner in exchange for a $30 per month credit on their electricity bill.

    While limited in scale today, this model has promise to address rental properties if benefit flows to both tenant and property owner. Adding a battery adds more value to the grid and also value to the home by providing new backup power, incentivizing property owners to adopt it. By marketing this program to property owners and partnering with clean energy developers to scale up the program cost efficiently, LADWP could unlock solar for renters across targeted local areas.

    Add economic value for solar and storage in targeted locations

    Particularly where gas plant retirement creates future need for local energy capacity, including energy storage, there is added economic value for energy from local solar and storage. By creating a price signal through Net Metering rates and its Feed-in Tariff, LADWP can drive increased development in these locations. Pricing signals can reward solar development as well as delivery of energy via batteries at specific high-value times of today.

    There are many procurement mechanisms that can be utilized to drive deployment in these areas, but this approach enables the entire market to respond to locational need. LADWP can then directly contract with developers to deploy clean energy where needed, above and beyond these price signals.

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