Here’s a story on how not to design a pilot project. The point of any pilot is to serve as the basis for larger rollouts. They should also be designed to maximise benefits. Joseph Daniel at the Union of Concerned Scientists describes how a U.S. utility in Michigan tried to create a pilot for behind-the-meter small-scale home storage. They wanted to invite anyone to apply to join. The problem was the likely applicants would be wealthy home owners. But a subsequent big rollout would need pilot data on benefits for all income groups along with multi-occupancy buildings. Secondly, the pilot’s benefits will be maximised if the storage deployment is located where costs and efficiency are optimised. In other words, near peaker plants and planned expensive grid upgrades. After being challenged, the regulator rejected the utility’s plans and ordered it to start afresh and properly engage stakeholders on the design and implementation of the pilot, bearing these essential considerations in mind, explains Daniel.
Fifteen million dollars is a lot of money to you or me. To a utility, it’s practically pocket change. Annually, the industry spends hundreds of billions on capital projects investing in electric infrastructure (not to mention hundreds of billions more on fuel and operating costs). It is also an industry that is notoriously slow-moving. When it wants to try something new, it typically rolls out a “pilot project.”
These “small” projects are important steps forward to helping modernise the electric grid, so they can be important, but they have to be done right.
Piloting home batteries
Last year, Michigan utility Consumers Energy proposed a pilot project that would allow them to operate batteries located at customers’ homes. The pilot project would cover 2,000 residential homes and would come with a price tag of $15 million of ratepayers monies.
If done right, these types of batteries could help integrate renewables, reduce customer outages, avoid dirty peaker plants, and even help avoid more expensive grid investments—all important things worthy of support.
But rather than try to do any of that, the company wanted to haphazardly deploy the batteries, without regard to potential benefits, like the ones listed above. The Company’s plan was to study the benefits after the fact.
Shoot first, aim later.
UCS objected to this and, along with partners, filed testimony opposing the company’s proposal. Then, in December, the Commission agreed with staff and intervenors’ recommendations and rejected the pilot project. They also ordered the company to initiate a stakeholder process to design a better pilot project.
What exactly was the company proposing?
Essentially, the utility was requesting that the Commission pre-approve $15 million of rate-payer monies so they could buy or rent batteries to be installed at customers’ houses. The company would operate the batteries, and the customers would benefit because they would have battery backup power in case of an outage. The program would be available to any residential customer and the batteries would be deployed without regard to who would adopt it or where it would be located.
At first, that might sound fair, because any and every customer can participate and has equal access to the program. We know from past experience how that would turn out.
Piloting the wrong customers
Rooftop solar is, hypothetically speaking, available to any and every customer, but adoption tends to skew towards white and wealthy customers. It is also harder if you live in an apartment, or are a renter, or are part of an HOA (homeowner’s association). Energy efficiency is similarly difficult to deploy equitably, despite it having some of the greatest potential for equitable benefits.
Why would we assume that storage would be different?
Consumers Energy offered no reason to think it would be and relied on a narrow interpretation of regulatory precedents in its application to the commission. The point of pilots, the company argued, is to test things out, and these concerns about access fell outside of the scope.
Pilots should represent the problem scaled-up
Therein lay the problem. We let pilot projects get away with things because of the relatively small budgets, but the point is for those pilot projects to serve as the basis for larger rollouts. Mistakes and oversights in the pilot are likely to get magnified. Better to do it right in the first place.
I filed testimony making several recommendations to improve the pilot. My assessment concluded that the pilot would be inaccessible to low-income customers and that the company should carve out a portion of the budget to install batteries at low-income households for free. The company agreed with that recommendation and revised their proposal during rebuttal testimony. But the rest of my suggestions they didn’t feel needed to be incorporated. Including the most important recommendation: where the batteries were to be located.
Location, location, location
Who would be able to benefit from and adopt storage wasn’t the only concern with Consumers Energy’s proposed pilot. The company also failed to put any thought into WHERE the storage would be deployed.
The company’s plan was irresponsible given that there is already enough information about battery storage to know where potential benefits likely exist and so a pilot should target already known benefits to collect data on the true value or potential of those benefits.
Storage is a lot like real estate: finding the greatest value comes down to location, location, and location.
To be sure, there are a multitude of benefits to storage, regardless of where it is located. But when it comes to behind-the-meter storage, many of its additional benefits are location specific.
Storage near peaker plants, grid upgrades
For example, storage has the potential to help reduce the reliance on polluting peaker plants, but only if the storage is located within the area served by that peaker plant. Behind-the-meter storage can help defer or avoid expensive transmission or distribution upgrades, but only if the storage is located in the right place on the grid.
The company also proposed that the behind-the-meter storage would help serve as a backup if there is a power outage. That benefit isn’t location-specific per se, but the frequency of outages isn’t evenly distributed across Consumers Energy’s territory. Batteries located on the grid with below-average reliability would be more frequently used. These types of benefits will be realised no matter where the battery is located, but the benefits can be maximised if the storage deployment location is optimised.
The company made no effort to target deployment of residential battery storage to maximise benefits let alone target those benefits to people who need it most.
Take the time to get it right
Energy storage is an important part of our clean energy future, and it should be deployed equitably and in ways that maximise its value. While UCS is a strong supporter of energy storage that doesn’t mean we will give storage deployment unconditional support. In fact, UCS has laid out explicit principles for equitable storage policy, principles that we used to write the testimony in this proceeding.
The Michigan Public Service Commission made the right choice when it rejected the battery pilot project and ordered the company to start fresh and engage stakeholders on the design and implementation of the pilot (here is a link to the whole docket).
My dad used to tell me, “Measure twice, cut once.” A common saying, sure, but for good reason— it’s true. And we must approach pilots the same way. We must get them right so when they expand into full-fledged programmes they are set up the best possible way.
Joseph Daniel is a senior energy analyst with the Climate & Energy program at the Union of Concerned Scientists
This article is published with permission