The dominant U.S. residential solar installer is moving beyond the rooftop and fixing its ambitions on transforming the entire bulk power system.
SolarCity, which already owns a third of the distributed solar market, took a step toward rebranding itself as a full energy services company with a new set of offerings announced earlier this month. Alongside its role as a solar installer, SolarCity now wants to be a distributed energy resource (DER) and grid services provider to utilities and grid operators.
“We are trying to collaborate with the utilities and give them capabilities they need and can use,” Ryan Hanley, senior director of grid engineering solutions, told Utility Dive. “This is the beginning of us becoming a provider of services to the grid operator and that will be a core part of our business going forward.”
“Think of it as three distinct offerings,” added Chief Technology Officer Peter Rive. “One is regular utility-scale solar. The second is firm dispatchable solar, which is a solar power system coupled with a battery. The third is services to the distribution and transmission system.”
On top of all of that, he said, is a software platform to organize and control the whole system.
“The Gridlogic software package is the dashboard that allows the control of the three offerings,” he said.
The new offerings attempt to position SolarCity to take advantage of a coming boom in distributed resources, demand-side management and software solutions to control them.
By 2018, the U.S. solar plus storage market is expected to reach at least $1 billion and the U.S. energy storage market alone will hit $1.5 billion or more, according to GTM Research. The North American DER management systems market will be $110 million or more and the U.S. demand response market will be upwards of $1.5 billion.
One of the key trends in utilities’ evolving role in this dynamic marketplace is moving DERs from alternative to core generation status, GTM Research Grid Edge Director Steve Propper said. Supporting that move is what SolarCity's new products are targeting.
Examples of utilities moving to DERs are proliferating. Arizona Public Service and Tucson Electric Power are working on regulator-approved rooftop solar installations. Southern Company subsidiary Georgia Power’s unregulated arm recently moved into rooftop solar. Con Ed has a similar plan in New York. Duke Energy and REC Solar are investing $225 million in DERs on the utility side of the meter.
SolarCity hopes to be a partner for utilities as they continue to develop and advance such programs, but it is far from alone in the emerging market.
“We have a lot of assets in the ground, we anticipate putting a lot more in the ground, and we can add a lot of value for utilities and grid operators because those assets are flexible, dynamic, and they can be built anywhere,” Hanley said.
The new products
For ages, utilities have grouped their systems in three categories — generation, transmission and distribution, Rive said. The SolarCity products are no different.
“By aggregating and shaping solar PV, battery storage, smart inverters and controllable loads, we can reduce the demands on your power distribution and transmission infrastructure,” the SolarCity website tells utilities and grid operators. “This controllable capacity can help you avoid or defer costly grid upgrades.”
In addition to this dynamic capacity and peak shaving, SolarCity’s assets can, through its software dashboard, also provide immediately-available assets “to support system and local ramping needs.”
In addition, the website says, the controller can call on DERs to follow frequency regulation dispatch signals and match system supply and demand.
Smart inverters installed with SolarCity’s arrays can offer voltage support and reactive power to transmission and distribution system operators, the website adds. That would be another way for system operators to defer capital requirements.
The battery backup and aggregated DERs, through the software platform, add reliability and resilience against outages.
With the system visibility obtained through the software platform, operational decisions can be made with greater situational intelligence, it concludes. The same capabilities allow more cost-effective use of the increasingly granular data available to system operators.
“The grid services supplied depends on the utility’s need,” Hanley said. “We are in discussions now with a utility that only needs 500 kW of capacity. We have also had discussions about providing as much as 20 MW of capacity for utility control.”
There are two kinds of objections to SolarCity’s new product suite from system operators and utilities, Hanley said. One is some anxiety about whether this new technology will work.
“This is no different than any other new technology and it will take time to prove it," Hanley said. The company's strategy is to build confidence through data from small pilots like the ones with Connecticut Municipal Electric Energy Cooperative (CMEEC), Kauai Island Utility Cooperative (KIUC), and Southern California Edison (SCE).
“The second objection we hear is another anxiety, not about whether it works but about doing something they are not familiar with,” Hanley said.
SolarCity’s response to that objection is through design.
“Our interface is modeled on the control systems the utilities already use and looks almost exactly like theirs,” Hanley said. “That makes the 'change management' process easier.”
SolarCity's business support team walks system operators through a training process. “Once we show the utility the product, there is a lot of excitement about its potential. That’s why we are getting the opportunity to do these pilots.”
One pilot offering grid services is currently operational, Hanley said, but he could not disclose the utility. Data from it are expected later this year.
The Kauai Island Utility Cooperative is already using the SolarCity platform — minus the advanced grid services — to operate a 12 MW utility-scale solar array. It is also deploying a 13 MW solar array with a 52 MWh battery system that will apply more of the software platform’s capabilities and make it the first fully-dispatchable solar PV plant in the nation.
Connecticut Municipal Electric Energy Cooperative (CMEEC) also announced a recent partnership with SolarCity. The co-op will be the off-taker and beneficiary capacity services in a set of solar projects totaling 13 MW. They will be deployed in combination with 1.5 MW (6 MWh) of storage. SolarCity will finance and develop in partnership with Brightfields Development.
The SCE pilot will be in the ground shortly, Hanley said. In one SCE territory, 50 homes will be fitted with rooftop solar installations of 4 kW to 6 kW, smart inverters, 3.3 kW (6.4 kWh) batteries, and controllable thermostats.
The pilot “will help us determine how smart inverters will perform,” Southern California Edison Spokesperson Paul Griffo emailed Utility Dive. It is expected to run through 2018.
At 165 kW of battery storage, the SCE pilot exceeds the California Independent System Operator (CAISO) 100 kW minimum for aggregated DERs to be bid into its wholesale market, Hanley said.
The “inverter standardization” SCE expects to see in the pilot will be critical “as surplus energy from solar customers is aggregated and becomes a resource to the grid,” Griffo added. SCE expects the pilot to increase its system's reliability and stability "while building the grid of the future.”
The assets SolarCity already has in place can be of great value to utilities, Hanley said. “When selling into wholesale markets becomes more widely available, the residential and commercial customer assets we deploy for use cases can earn another revenue stream. That will make them more cost-effective and allow us to deploy more.”
The one-third of U.S. distributed solar capacity SolarCity has installed gives it a big competitive advantage over other DER aggregators, both Rive and Hanley stressed.
"The services are only of interest to utilities if they are cheaper than the alternative,” Rive added. “But we would not be announcing these services unless we knew they are cost-effective for utilities.”
The importance of software
While SolarCity may be the highest-profile company to announce a foray into a full suite of grid services, it is not alone. A number of other companies also offer similar DER aggregation and control services to utilities.
Storage provider Stem is one of the few DER aggregators already selling services into wholesale market through a two-year long pilot with Pacific Gas and Electric (PG&E), said Policy Director Ted Ko.
Stem has been working for some time toward aggregating DERs and making them dispatchable resources to support grid operations, Ko said. “It is where the industry is going and where it needs to go.”
Stem has built “what is probably the biggest fleet of distributed storage in the country,” Ko said. “Not just for the end customer but to be an aggregated resource for the grid.”
In a sense, the new SolarCity offering puts it in direct competition with Stem, Ko said. But while SolarCity is working on a 165 kW pilot with SCE, Stem already won an 85 MW contract, in late 2014, to provide the utility with aggregated demand response services.
“Their focus is building solar first and adding storage to make the solar a more dispatchable and useful resource,” Ko said. “Our focus has been storage and any kind of DERs and software that makes them dispatchable in a way that helps both the end customer and the grid at the same time.”
In partnership with SunPower, Stem is beginning to incorporate distributed solar, Ko said. But most of its battery fleet is charged with grid electricity.
The company has been working for the last year with SCE to build software that gives the utility an interface that will make its 85 MW of storage visible and controllable, Ko said. “Ultimately, ours is a software business and the software will manage a whole range of DERs.”
SolarCity's software package is similar in that it "allows control of the three offerings,” Rive said. “It is used to control the battery or manage the distribution system services and realize benefits like lowering the load on the distribution system circuits and increasing the capacity of the distribution system circuits.”
The advantage SolarCity gets from its fleet of deployed solar could allow it to eventually compete with Stem more advanced software, Ko acknowledged.
But for the time being SolarCity's solar fleet will not match up with Stem’s five-year-long work with software algorithms that balance the needs of the customer and the needs of the grid, he said. “Our experience and refined software will be hard to replicate.”
Beyond SolarCity and Stem, there is a growing number of other providers looking to serve utilities’ DER needs. German storage provider Sonnen, for instance, was at the Maui Energy Conference this year meeting with utility executives about its DER offerings and and software platform. CEO Boris von Bormann told Utility Dive its experience with storage in its home country and elsewhere will give it a leg up on its American competitors.
“No one has ever installed as many batteries as we have on the energy storage side and we have historical data on them,” von Bormann told said. “ So all of the systems online, we monitor them, we data-mine, we understand what the customer needs, we understand how they drive them.”
The Aliso Canyon shutdown and meeting real grid needs
Back in California, both Stem and SolarCity are looking to move beyond pilots and meet real grid needs stemming from a potential natural gas shortage to Southern California power plants.
Due to a massive gas leak, peak electricity supply for the Los Angeles region is in jeopardy this summer and again next winter, according to a joint assessment from California utility regulators, the grid operator, the state energy office and the city's municipal utility.
The worst methane leak in U.S. history reduced the region’s Aliso Canyon natural gas storage facility to less than 20% capacity, threatening 17 natural gas generators it serves if electricity demand spikes, the "Aliso Canyon Risk Assessment Technical Report" found.
Los Angeles Department of Water and Power (LADWP) plants have long relied on Aliso Canyon gas supplies for fast ramping response to demand spikes, General Manager Marcie Edwards said in a statement.
Being without those supplies “introduces the possibility that our power plants will be curtailed from receiving gas — in other words not getting gas when it is needed to create electricity,” she said. “If there is insufficient gas to operate our power plants, electric service interruptions could indeed result.”
An Action Plan to preserve reliability in the Los Angeles area from the California Public Utilities Commission, California Energy Commission, CAISO, and LADWP highlighted the value of DERs among its prescribed mitigations.
New natural gas reserves or pipelines or transmission aren’t a short term option, Hanley said. “DERs is not only a good answer but may be the best solution.”
All SolarCity’s deployed LA area assets could be immediately available to local utilities through the new software platform, he said. SolarCity could also immediately begin building solar-plus-storage systems at utility-owned sites.
At the same time, the company could “descend” on the region, acquire new residential and commercial customers, finance and build solar and battery storage, and add the new capacity to the utilities’ software interface, Hanley said.
“This is part of SolarCity’s unique value proposition,” he said. “We don’t need the utility to find sites. We can go out with our customer acquisition apparatus and find sites ourselves.”
The new and existing assets would be controllable through the software platform. “If a utility needs peak capacity support, it can go to the platform and arrange for a specific amount at a specific day and time. At that day and time, all the SolarCity batteries would discharge power and all its customer loads would drop, and the effect would be equal to a power plant generating dispatchable power.”
Stem is already talking to SCE about making a similar contribution, Ko said. One of its solar plus storage projects with SunPower is in Southern California and will certainly be online by next winter, if not by this summer. “We have installed storage and we can make those assets useful if there are peak demand electricity shortfalls.”
Aggregated DERs can serve the utilities needs because they can respond on a moment’s notice to avoid a blackout, Ko said. “This is not a day-ahead challenge, it is a day-of challenge.”
The idea of aggregating DERs could not be more timely but, no matter what kind of hardware is built, the software must be capable of integrating with the utilities and the grid operator, Ko stressed.
“The utilities are doing everything they can but they need to accelerate deployment of mitigations,” he said. “Those mitigations should include DERs, storage, and software that allows utility control.”
SolarCity, for its part, is ready to take advantage of the situation.
“We have been advocating on the policy side for quite a while for opportunities like this,” Hanley said. “We have a lot of confidence that our distributed assets can meet the need faster and be more cost-effective than traditional solutions and we want an opportunity to prove it.”