Tesla and SolarCity Partner to Provide
by RP Siegel
It looks like Elon Musk and his friends at Solar City are at it again. First, there was the Tesla electric car. Then came solar energy provider Solar City. Then came the financial innovation of bonds backed by solar power. Now they appear to be combining all of these, with Solar City offering commercial energy storage systems based on batteries produced by Tesla Motors.
The batteries, which are "about the size of a small refrigerator," were originally developed to store solar energy during periods of cloud cover or darkness, which, of course, they certainly can do.
But the leaders at SolarCity saw another, perhaps larger opportunity -- providing short term storage for buildings to reduce their peak power demands at the time of day when power is most expensive. People in the industry call this "load leveling," and it not only benefits customers, but it benefits the utility and the environment as well by reducing the need for inefficient and dirty "peaker plants" that are often used to fill in supply gaps during the busiest times of the day.
SolarCity's new system is called DemandLogic and it combines the battery capacity with a solar array and software that responds to the change in both rates and demand charges throughout the day for commercial customers, balancing those with the array's production and the building's demand for power.
Lyndon Rive, SolarCity's chief executive, says that the systems would also provide backup power and a working solar array during utility outages. The vision of this system is not to provide independence from the grid, though it would help to maintaining grid stability as more customers move into solar.
Even though the system, which uses the same lithium-ion battery technology that is used in Tesla vehicles, is aimed at commercial customers, roughly 300 residential customers have signed up for a pilot program. Tesla CEO, Elon Musk is the chairman of SolarCity and is also Mr. Rive's cousin.
The pilot program will be conducted in parts of California, Connecticut and Massachusetts, markets with particularly high demand charges. Solar systems themselves are inherently well-suited to peak demand operation, since they put out the most power when the sun is hot, which is also the time that air conditioning demand is highest. Demand charges are added to compensate utilities for the capital investment required to provide the additional capacity they require to meet that demand.
However, Sam Jaffe, a senior research analyst at Navigant Research, is skeptical. "It's not a no-brainer," he said. You still have to have the exact right combination of rates and demand charges and the cost of that equipment."
The SolarCity systems, which are designed to be eligible for a 30 percent federal tax credit, will be available to new solar customers signing 10-year service agreements. The systems are made to store about a third of the energy the solar array can produce. At peak times, the system should be able to deliver both incoming solar power in addition to previously stored power. SolarCity will guarantee the demand charge reductions, which are expected to run around 20 percent.
Many companies currently participate in demand response programs, where they voluntarily reduce consumption during periods of peak demand. Systems like this one will allow companies to operate at full capacity during peak times, without incurring exorbitant charges.
Prices have not yet been disclosed, though they are expected to be in the $1000/kW range. That means, that, at least initially, they will only be attractive for businesses in areas with high peak demand charges.
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