This blog takes a deep dive into best practices for Community Choice Aggregators (CCAs) to procure battery storage. These best practices, along with additional information on drivers of energy storage value and how to capture that value, are discussed in further detail in Stem’s webinar, How California CCAs Can Leverage Battery Energy Storage Successfully. You can view the webinar on demand here.
Focus on procurement structure
A key recommendation for CCAs is to focus on how to structure the battery procurement process in a way that sets you up for success. There is no one-size-fits-all approach to procurement, so it’s really important to think about this in a targeted way every time you go out to the market seeking solutions. There are many elements necessary for a successful procurement, but below we highlight three that we believe are critical: procurement objectives; battery storage characteristics; and contracting options.
Define procurement objectives
It all starts with defining your objectives when procuring battery storage equipment. For some CCAs, the primary use case might be to derive the maximum financial value possible by having the storage assets participate directly in the CAISO market. Others might seek to balance financial returns with meeting GHG reduction goals and/or delivering benefits directly to customers. There are a range of potential use cases for battery storage and corresponding benefits that a CCA might want to capture, and that’s why it’s really important to define what your objectives are up front.
Determine required battery storage characteristics
The next key step is to figure out what type of battery storage system will best meet your objectives. This is where a focus on attributes is important. For example, if your objectives can be met with both front-of-the-meter (FTM) and behind-the-meter (BTM) batteries or a range of different battery chemistries, then your RFP can be structured in a way that allows bidders to propose a range of options that are all equally capable of meeting your requirements.
One aspect to call out in particular is a focus on longer duration batteries; while there has been some initial progress on long-duration storage procurements in California, this is likely to become a greater focus area as the value of four-hour batteries diminishes with the growing penetration of four-hour batteries on the California grid.
Confirm preferred contracting option
A third critical component is how to actually contract for these services. One key consideration, especially for FTM assets, is whether to execute:
- Full toll agreements whereby the CCA has full operational control over the storage asset.
- A resource adequacy (RA)-only contract where the CCA receives the RA attributes of the battery but the battery owner is responsible for operating the asset and keeps any other revenue earned.
- An energy-only contract where that RA attribute, or credit, isn’t necessarily available immediately but could become available in the future if that asset later goes through the deliverability process with CAISO.
Related to the contract structure is a consideration of the potential benefits of combining forces with other CCAs to jointly procure batteries and obtain more favorable pricing. For example, California Community Power, a joint powers agency of 10 CCAs, has demonstrated the success of this type of approach through two procurements for long-duration storage. These types of joint procurements might become an increasingly beneficial procurement model in the future: not only does it drive cost savings through the collective power of these CCAs, but it also allows CCAs to maintain their local focus.
Finally, it’s important to remember there are a diverse range of customer program options that a CCA can implement to achieve objectives and create deeper customer relationships. For example, there is growing interest in the concept of a distributed power purchase agreement (PPA) whereby the CCA is in the middle of the contract structure and executes one set of PPAs with its customers to provide bill savings and resiliency and a second PPA (or multiple PPAs) with a vendor that is responsible for operating a fleet of distributed assets to deliver CCA benefits.
Use Athena® as a trusted software platform
All of the work on procurement is for naught if there’s no viable pathway to actually capture the value that storage is capable of providing. This is why the software controlling and optimizing the battery storage is essential to a successful procurement. We believe there are four key attributes a CCA should seek when procuring battery storage optimization software, including: adaptability; scalability; compatibility; and proven success.
Since value drivers are constantly changing, you need a platform that can automatically adjust its optimization strategy based on evolving market fundamentals. By staying flexible with new market dynamics, additional incentives that become available, or changes in regulatory requirements, an adaptable intelligence platform will allow you to effectively future-proof your battery storage assets.
Battery storage can be deployed FTM or BTM, on a standalone basis or co-located with renewables, and with the intention of operating on an individual basis or as part of a virtual power plant (VPP). Having a software platform that provides a single pane of glass to manage all these different battery variants across your service territory will become increasingly important to ensure your fleet of resources can act collectively to deliver superior value.
Your software solution needs to be compatible with a diverse set of hardware. By having a software platform that integrates with hardware from a range of tier 1 original equipment manufacturers (OEMs), you avoid a situation of vendor lock-in and maximize your odds of long-term operational success for your entire portfolio of battery storage assets.
Finally, you need a proven software platform. As a global leader in AI-driven energy solutions with an industry-leading position in terms of both number of deployed projects and aggregate runtime hours, our Athena software platform has grown into the preeminent software solution that it is today. Athena thrives on solving complex problems, which will become all the more critical as the grid continues its evolution into a more decentralized and dynamic system.
If you’d like to learn more about how Stem can help you maximize battery storage value, contact us today by completing the below form.