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Where Does Distributed Storage Fit into the Electric Power Landscape

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Dr. Peter Lilienthal's picture

Dr. Peter Lilienthal has been the CEO of HOMER Energy since 2009.  HOMER Energy has the exclusive license to the HOMER® software that he developed at NREL where he was the Senior Economist from...

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  • Jan 23, 2019

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Distributed generation has been growing but is still a niche player in the electric power industry. This could change rapidly as the cost of storage continues to decline.  Until now distributed generation has been limited to places where solar is particularly attractive due to incentives, industrial facilities with large and constant thermal loads, and remote locations where it is impractical to extend the grid.  Other facilities that have high reliability requirements have backup generators, but only operate them during grid outages.

This is all changing as storage prices drop.  Solar PV prices have already fallen enough that it is cost-effective to install solar in places with high utility tariffs even without incentives and utilities are pushing back on the net metering policies that enable utility customers to be compensated at retail prices for power exported back to the utility.  Instead of exporting that power to the utility, a utility customer can now use that power to charge batteries.  Is this an improvement for the utility? Is it a cost-effective investment for the customer?

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The answer to those questions depends on many factors. In addition to the obvious ones, such as incentives and other policy instruments - and the solar resource - the customer’s load shape makes a huge difference.  Also, small details about the treatment of demand and standby charges within the structure of the utility tariff are crucially important.

The biggest obstacle to rapid growth in distributed power is the complexity of analyzing the value of storage

At HOMER Energy (and previously at NREL) we have been developing modeling capabilities for distributed energy projects with storage for over 25 years. This has made it obvious to us that storage has much greater value as a distributed resource than as a centralized resource.  Although some of the value streams that storage delivers are agnostic as to its location, many other values are only delivered through a distributed deployment.  Frequency regulation, capacity adequacy, and overcoming the “duck curve” have the same value regardless of location.

On the other hand, voltage regulation, demand response, the deferral of upgrades or extensions to transmission and distribution assets, demand charge management, and outage protection are the extra values that distributed storage provide that centralized storage cannot. Protection against outages is also becoming increasingly valuable as resiliency and reliability concerns continue to increase.

As the electric power industry adapts to the changing landscape of clean, distributed power, the planning and analysis process is becoming more complex. Gone are the days when utilities took the load as a given and only had to plan for what new baseload and peaking capacity was needed. Now they have to understand their customers’ options as well.  This has motivated the development of a whole new generation of modeling and analytic software to manage the evolving distributed energy ecosystem.


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Thank Dr. Peter for the Post!
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