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Virtual Power Plants and Home Batteries May Shape the Future of Net Metering in the United States

Avatar for Dan Hahn
Published on 10/22/2019 in
Updated 10/22/2019
Batteries like the one pictured above may soon be a common site in many homes

In short: Got home solar and a battery backup system? Your utility company would love to draw power from batteries like yours to respond to increased demand at will, but they aren’t able to cut you a check, yet. Virtual Power Plants (VPPs) are comprised of solar installations coupled to battery storage and software which allows utilities to pull power at will, and credits to flow back to the system owners. We show you how this arrangement is starting to take shape between solar installers, developers, utilities, and ratepayers like you.

In the last several years, we’ve seen how technology advances have empowered a disruptive sharing economy. Tauro allows vehicle owners to rent their cars out to the community. Airbnb allows people to rent out their homes. Uber and Lyft allow people with their own cars to be taxi drivers for other people in the community. We ran across another company you might be interested in learning about, called Sonnen.

In addition to being a leading home and business battery backup provider, Sonnen has created a program in Germany which allows utility customers to trade their excess solar power with one another. The company has just begun operations in the US, and as you can see from the photo above, their technology looks polished, remarkable and may soon be part of many residences. Sonnen has launched a production facility in Atlanta and was acquired by Shell Oil this February for an undisclosed large amount.

While there are strong regulations in place in the United States which make peer to peer electricity sales difficult to deploy, another business model, called a Virtual Power Plant (VPP) is starting to gain traction. In a VPP arrangement, a meaningful amount of solar energy keeps a large bank of batteries charged on site, and the battery owners get credited by from the utility company anytime they need to pull loads to help balance out the grid. We’re not sure why it is called, “virtual” since it’s actually a physical source of electricity that utilities have access to, maybe some engineer was really into the internet and the Matrix and just went for it.

Nonetheless, a big part of Sonnen’s US strategy with VPPs is to partner with solar and real estate developers, tenants, and utility companies to provide resiliency during peak demand and to provide backup electricity for residents during blackouts. The utility company benefits, since they are able to pull electricity from the battery pool at will, so they can avoid the higher costs of firing up additional power or purchasing it from other utilities when demand is high.

Sonnen recently showed off their first VPP installation in Herriman, Utah. For this project, Sonnen worked hand in hand with a big utility, Rocky Mountain Power, to deploy a massive solar installation connected to batteries on-site. Batteries like the ones pictured above are now deployed in 600 units of a new housing development called the Soleil Lofts. This community is the largest operating VPP using residential batteries and has 13MWh of solar energy storage. Sonnen is just getting started here in the US and also has its eyes on key markets in Asia, after successful VPP deployments in Australia and Germany.

An overhead shot of the Soleil Lofts in Utah, one of the first deployments of a Virtual Power Plant (VPP)

How to Pay for This, aka The Net Metering Paradox

Utilities built the US power grid by modeling peak demand conditions, and allocating budget to expand grid capacity as the population grows. However, usage is on the rise per capita and a lot of grid infrastructure is starting to age and become less reliable. Even though renewable energy is widely considered a “good thing”, it can create problems for utility companies on sunny days, since solar electricity flows freely from solar farms and rooftops into the grid, creating overload.

Sometimes, utilities need to ask larger solar farms to temporarily disconnect from the grid, since their equipment cannot handle this excess generation. During these times, it would make a lot of sense for homeowners and solar farm operators alike to bank this electricity and sell it back to the utility company at a different time. You need batteries for that, however there is no incentive for people to invest in batteries, since in many solar friendly states, net metering policy allows people to use the grid as a battery instead and get credited for the full retail rates of power.

Instead, utilities could be partnering with legislators and the community to change the way net metering credits are handled during peak load conditions. While some advocate for reducing net metering rates to increase battery demand, it could be more sensible to strengthen net metering further AND organize people together into wider, more distributed VPPs in partnership with battery manufacturers, solar installers, and utility companies. In this way, more utilities would have access to pull valuable power at other times as part of new net metering agreements, homeowners would have access to backup power, and installers can add more value to their installations.

While admittedly, such an arrangement would be less easy to administer than one where all the batteries are at a single location, as in the Soleil Lofts in Utah, it’s entirely possible, and worthy of further exploration. Utilities should also love the software most home battery backup equipment comes with, as it helps to reduce demand during peak hours by ensuring high demand activities like EV charging or home air conditioning occur at times when fewer people use power.

Hopefully, a new net metering model which incorporates battery storage, technology allowing utilities to draw from that power at will, and a system of credits to flow back to whoever owns the batteries will gain some traction. There are many regional and local power co-ops in the United States who might be willing to take a closer look at implementing a model like this. It’s something to look forward to, and we’ll be here to inform you all about it when it happens at wider scale.

Last modified: October 22, 2019

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Marty Mays
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Marty Mays

Interesting. I was just informed by my electric coop that should I install a battery system, I would receive an additional charge from them. I was “grandfathered in” earlier, but if I wanted to upgrade, then I would be charged, and a battery system would be considered an upgrade…

John
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While net metering is great, I would love to see the ability for the utility companies to actually purchase excess power from homeowners that generate more than they use. Currently, we are paid only in credits for the excess generation. Any unused credits at the end of the “fiscal year” are essentially donated to the utility with our February power bill. If the utility had the ability (permission) to actually cash out those excess credits, we could all basically become independent producers and receive a 1099 from them each year for tax purposes. To provide further incentive, Congress could make… Read more »

Ben Zientara
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This is where we’re hopefully headed, along with a time-based pricing profile that allows homeowners with the batteries to make more money by selling electricity to the utility company at times of peak need. Peak pricing can become insane quite quickly, with the most extreme examples showing how on-demand power at high peaks can cost as much as $9/kWh, while normally costing just about $.03/kWh.

If utilities could pull on-demand power from customer-sited batteries—and pay those customers the going rate for that power—the economics of solar+batteries would be 100% favorable today.

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