AI-Driven Storage: How solar developers can ensure incentive program compliance

15 Nov 2018

By Alan Russo

Artificial Intelligence (AI)-powered energy storage is enabling the rise of “intelligent” solar, where solar deployed with storage will soon dominate the market.  

The reasons are myriad: energy markets are shifting, supply chains are becoming more competitive, and electric rates and solar remuneration rules are changing. As a result, the economics of distributed solar projects are getting skinnier, and riskier, for solar developers. Adding energy storage to solar projects allows solar developers to maximize project value and returns, reduce the impact of rate changes, and expand sales opportunities. 

At the same time, renewable energy on the grid is increasing, coupled with increasing customer demand to control their decisions on energy sources and costs. 

Both are necessitating new tools for utilities and grid operators to manage variable generation and distribution grid congestion, without building costly infrastructure. 

These two changes are opening up new utility contracts and market revenue opportunities, for non-residential customers who invest in network-integrated energy storage; note the 13 different servicesfrom distributed energy storage for the customer, the utility, and the grid.

What AI Means

Battery hardware alone does little to unlock the value of energy storage. The fundamental key to transforming the returns of a solar investment is artificial intelligence.  

In order to size the system correctly and maximize the returns from a solar plus storage system for the customer, AI is needed to perform the predictive analytics, machine learning, and grid-edge computing. 

Data is captured every second on customer load, solar generation, weather, nearby grid congestion, electricity rate options, and more. That data feeds the AI to make the best decisions about when to buy, generate, or store energy.

Artificial intelligence delivers value by accurately predicting the customer’s solar-affected load. Then it optimizes numerous related variables and makes real-time economic decisions that maximize the benefits for the customer, the project owner, and the grid.

Value, Value, Value…

There’s already widespread agreement that, in addition to capturing more value from the Investment Tax Credit (ITC), adding AI-powered energy storage will maximize value and returns for the solar customer. It also gives them greater control and flexibility throughout the 20-year project lifetime. During the life of a solar project, most customers will face between five to six rate changes, in addition to regulatory and financial changes, that could affect the value of their investment. Adding AI-powered storage to solar projects early on can hedge against these changes.  

Unfortunately, not enough solar developers realize that AI-based storage enables the customer to access new value streams and market opportunities - turning the solar system into a dispatchable grid-facing asset. AI-driven storage can deliver these other services, and “value stack” the additional contracted revenue. For example, the customer could access additional capacity payments from a utility, or receive grid services payments in the wholesale market by contributing the unused stored energy to aggregated load reduction.

Depending on a variety of factors, energy storage can potentially contribute between five and 30 percent additional returns for the solar customer; these come from demand charge reduction, load shift, and grid revenue opportunities—and that’s not even counting the additional future value of decreased risk from rate changes. For the solar developer, AI-driven energy storage typically offers 40 to 50 percent higher margins

…And Resulting Optionality for the Customer

Whether it’s a wholesale market, utility program, demand charge management, or a tariff-based savings opportunity, the real gamechanger surrounding AI is its ability to optimize within a minute, based on varying value streams. It’s also making these calculations while considering ITC charging and market participation rules; the AI prioritizes between competing value streams to maximize the economic results, while reconfiguring the dispatch of the system and the aggregated network in real-time.

In other words, when the solar economics are suboptimal (such as the tilt, orientation, insolation, load shape, or local tariffs), the customer has additional savings and market opportunities via the energy storage network.  

Utilities and grid operators can contract services from the network to provide firm, reliable, and cost-effective energy precisely where and when it’s needed, avoiding the need for new peaking power plants or other costly infrastructure.

Therefore, AI-powered energy storage can make projects that otherwise would not pencil, both possible and profitable.

Bottom line: everyone wins. 

But, You’d Better Get the Compliance Right

As new incentives and value streams emerge, it becomes increasingly complex to maximize returns while ensuring program compliance. ITC benefits come with charging requirements; state incentive programs have their own charging rules, along with cycling and throughput requirements, operational rules, warranty obligations, and so on. Wholesale market bids and utility contracts have even more performance metrics. 

Compliance becomes so complex, in fact, that realizing the full value of solar plus storage is only possible with AI. Solar developers and their financiers that are unfamiliar with storage programs and their policies, will need to work with the best AI and most experienced storage operators to ensure compliance. 

Many factors will change over the life of the solar investment: load behavior, incentive program rules, hardware degradation, and new market opportunities. AI enables the developer and financier to nimbly alter algorithms as those factors change, to ensure projected or greater returns. As more solar financiers recognize the potential residual value of energy storage from future contract revenue streams, AI-backed solar plus storage will be able to access that added value today, and tomorrow.

 

Alan Russo is the Senior Vice President of Global Marketing and Sales at Stem, Inc. 

Stem, Inc. | http://www.stem.com


Author: Alan Russo
Volume: 2018 November/December