Electric cooperatives have embraced the wave of clean energy growth in the U.S., with nearly 500 co-ops in 43 states now using solar energy, according to the National Rural Electric Cooperative Association (NRECA). That’s over half of NRECA’s member base, and more co-op solar projects are in the works.
Now, co-ops are increasingly turning to energy storage. In addition to Stem’s own projects underway in Arkansas, Colorado and Massachusetts, notable battery storage projects have been announced in New Hampshire, New Mexico, North Carolina and South Dakota, among other states.
Battery storage can help co-ops realize a number of important goals for their members, including reducing costs, building resilience, integrating more renewable energy, and supporting local economic growth. But storage is a fundamentally unique resource. It has similarities with traditional dispatchable technologies but is far more suited to maximizing variable renewable energy. And its value lies entirely in when and how it is operated.
To help electric cooperatives maximize energy storage benefits for their members, Stem recently published a white paper with insights and recommendations based on our decade-plus history as a leading energy storage provider. Adapted from that resource, here are Stem’s 7 Best Practices for Realizing Successful Energy Storage Projects for Co-ops.
- Right-size energy storage systems (ESS). Reducing demand charges via coincident peak management is probably the primary use case that distribution co-ops are interested in today. When considering energy storage, it is important to know how peak rates are set, the characteristics of expected peaks, and the amount of energy needed to shoulder them. Selecting a battery with the right duration (MW / MWh ratio) is essential to balancing ESS size with its costs and benefits.
- Consider multiple value streams. Battery energy storage can provide several value streams beyond coincident peak management. A “value stream” is simply the ability to realize economic value from any ESS use case, at any point over a project’s lifetime. Near-term value streams for co-ops may include resilience and grid stabilization services.
- Develop a clear financial and operating model for the project. It’s essential to understand the financial benefits that the energy storage facility will provide over time. This requires modeling avoided costs as well as revenues from all current and future value streams, including any “value stacking” that may occur to extract more value from the battery.
- Minimize ESS procurement risks. Battery purchasing contracts are complex and can affect the long-term value of the asset. Consequently, Terms and Conditions must be reviewed and negotiated carefully, and buyer protection mechanisms must be fully utilized. Efforts to reallocate risk back onto battery manufacturers can be aided by an expert storage partner with significant contractual expertise and buying power.
- Prioritize seamless ESS integration and operating visibility. This and the remaining three best practices are handled by smart storage software. Although energy storage may be a new technology for many co-ops, it doesn’t have to be a black box. Utility operators should have the ability to dispatch the ESS, view operating status in real time, and easily report on system performance.
- Ensure compliance with solar ITC charging and battery warranty requirements. For batteries paired and charged from solar, software must comply with solar investment tax credit (ITC) charging requirements and prevent manual dispatches from unintentionally compromising compliance. The software must also ensure the battery is operated within warranty throughput specifications, which protect the asset from undue degradation and support the co-op in any warranty claims.
- Optimize storage operations to get the most value from the ESS. This is “first among equals” of all best practices. A battery’s ability to realize economic benefits for co-op members is wholly dependent on the software that operates it. Ultimately, the value a battery creates will be determined by thousands of software decisions over a 10- to 20-year timeframe. Energy storage providers should therefore be scrutinized for their software excellence and the real-world results they have achieved for customers.
Now is a great time for co-ops to be exploring energy storage, and from speaking with them, I know they’re already thinking creatively about how storage can benefit their members – not just in utility-sited projects, but also in customer-sited ones. Finding, sourcing, and installing the right product and maximizing lifetime value streams can challenge even experienced utilities and developers. Partnering with an expert energy storage provider can help.