Analysts estimate that around 1 out of every 3 large-scale solar projects contracted today includes energy storage. Adding energy storage to solar increases project revenues through different value drivers depending on the market. Ultimately, energy storage gives solar assets more flexibility, making it possible to use solar generation at the most valuable times, instead of only when the sun is shining.
So when it comes to adding energy storage to your solar project, how do you identify the right resources to help you execute? Energy storage is more complex than solar by a landslide, requiring experience in storage supply chain and hardware, codes and compliance, market analysis and project design, permitting and interconnection, optimization and control software, and operational requirements.
There are different ways that storage can generate project value, from time-shifting to deliver power to the grid during the most valuable times, to wholesale market participation, to incentive compliance, to preventing solar clipping. We call this “value stacking.” Project developers that do not take advantage of value stacking are leaving money on the table, but while value stacking increases project revenue, it also adds to project complexity. Realizing the full value of energy storage projects requires deep expertise in energy storage across all functional groups.
This article will focus on six key areas of expertise that you’ll need to succeed with energy storage:
1. Analysis, sizing, and project design
2. Supply chain management
3. Permitting and interconnection
6. Compliance and policy
Let’s dive into each one.
Analysis, sizing, and project design
For every solar project today, it is prudent to consider whether it is economical to add storage to your project. There are many markets in which adding storage to your project will increase returns and future-proof your project. Determining whether storage will pencil for any given project is handled best by an experienced storage partner. A full-service energy storage partner can help developers quickly understand the different value streams available and costs required for a given project.
At Stem, we analyze projects every day across different markets, taking into account all the different possible value streams, sizing, and product requirements. We work with our developer partners to help them determine whether a project will pencil, or the speed it will take for a project to start turning profits in a certain market. From there, we determine the size, or capacity, required to deliver on those value streams, while minimizing the cost of capital. We can provide new financing options if the developer is interested in an alternative financing vehicle, and we provide pricing, support the sale to the end customer, and lead the contracting process with customers.
As soon as it’s determined that there is a business case to add storage to your project, it’s time to begin scoping the project design. Design is required for interconnection approval. It is critical during this phase to work with someone who is experienced in storage design, and familiar with all the fire code and UL requirements, which differ substantially from the requirements for solar. They will help with system selection, design, site layout, and system configuration prior to interconnection application submission and AHJ permit submission.
Supply chain management
Managing supply chain for energy storage projects is a complex process. For 10 years, Stem been negotiating large supply contracts with hardware vendors, a process that requires non-stop vendor negotiation. Getting the highest quality products at the best value requires deep relationships and ongoing attention. A maturing industry has brought many competitive vendors into this space, giving developers more choice and access to better products, but also creating a more crowded and differentiated vendor landscape. Where five years ago there were three primary vendors to choose from, today there are dozens! This year alone, we engaged over 30 hardware vendors and integrators.
Each product has a different chemistry and unique capabilities, which complicates the process of picking out the best product for your projects. For instance, if you’re doing solar clipping and solar shifting, you may want a different type of product than if you are doing market participation and frequency regulation. A storage partner can help you determine the best product in the market for your project’s specific requirements.
Your storage partner will also ensure all the necessary requirements are in place for technical, warranty, operation and maintenance, commercial terms, performance, and degradation specifications. Buying storage is not easy, and very overwhelming to someone who spends most of their time buying solar panels. Our supply agreements typically range between 100 to 200 pages, including finely-tuned details that can have a major impact on the bottom line of the project. Having a dedicated resource with years of experience executing large energy storage supply agreements is critical. If you don’t have the know-how to negotiate these types of major contracts, it creates a high-risk situation for your organization — especially when you consider liquidated damages associated with performance, capacity, and performance guarantees. The level of expertise and experience Stem brings in negotiating contracts and identifying the right needs for our projects ensures that we deliver the most appropriate product, at the best price, with the lowest risk. Whether you work with a storage partner or bring on experienced resources yourself, having extensive expertise specifically in energy storage supply chain management is an absolute must for succeeding with storage projects.
Permitting and interconnection
So you have an energy storage project scoped, you know the economics are there, you’ve started project design, and you’ve got your supply agreement in place. The next area of expertise required is permitting and interconnection.
Permitting is done through the local Authority Having Jurisdiction (AHJ), the city planner in charge of approving the project. The AHJ will ensure the appropriate safety requirements are in place including fire code rules, UL certification, and third party lab tests on equipment. It’s helpful to work with a storage expert that has preliminary plan sets and templatized design layouts that already have those requirements built in. Battery suppliers do not include this service in their agreements. Stem has a documentation library of preconfigured designs that meet the permitting requirements across different markets. With over 600 projects operating across more than 75 AHJs, we have more experience permitting and deploying projects than any other storage service provider. We can leverage our documentation database to speed up the permitting process and give your project a running start.
Now how hard can it be to build a storage system if you’re a solar developer? It can’t be that different, right? Well, like everything else, you don’t know what you don’t know until you find out, but it IS different. There are about 70 different OEM specific construction requirements and 20 commissioning and provisioning requirements. Each vendor has checklists outlining what has to be done before you can commission the system. Stem maintains the most comprehensive resource library of installation procedures, templates, checklists, training tools, OEM data sheets and O&M manuals in the industry. We help our partners jump the learning curve and mitigate risk.
Scheduling is another consideration. Most developers have a detailed schedule for solar, but often have less understanding of the schedule for storage. Having an experienced storage project manager is important for being able to integrate the storage schedule with the schedule for solar. That resource will also need to oversee and support onsite construction. They should be able to manage site preparation, positioning, coordination with supply chain, onsite offloading, wireway and battery cables, AC conductor installation, and commissioning.
Energy storage operation is far and away more complex than operating solar. Solar produces power when the sun shines. Battery storage gives you the ability to manage when that power gets stored, and when it gets used. The level of management required is why energy storage controls software is so important. Storage relies on sophisticated software and analytics to perform real-time decision-making, so that the battery charges and deploys power at the most opportune times. An intelligent control system is necessary for realizing the full value of a storage asset through value stacking.
In addition to value stacking, software is also critical for keeping the battery healthy so its lifecycle is maximized. It is responsible for controlling the state of charge of the battery, how many times it cycles, how fast or slow it charges and discharges, at what state-of-charge the system should rest, temperature management, and degradation tracking. All of these factors influence the lifecycle of the battery, so they are critical for maximizing project revenues over time. Continuous improvement is also important for program compliance, system performance, warranty compliance, and overall customer satisfaction. Batteries do not come out of the box from suppliers with this software in place, making it critical to work with a storage service provider with energy storage optimization software expertise.
In a storage team, you also want to ensure you have experienced resources available to develop market participation strategies for your storage assets. Markets suitable to storage already exist in New England, New York, and California and will soon open up in other states as a result of FERC Order 841, which was issued in 2018 and directs grid operators to remove barriers to the participation of storage in wholesale markets. Wholesale markets add significant economic value to storage markets, so developers benefit from working with a storage service partner who can provide guidance on wholesale market participation strategies, along with software that can manage participation and be updated when markets change.
Compliance and policy
Last but not least, is compliance and policy. Policy and program managers with experience managing storage programs are key to handling incentive application and enrollment. They also ensure projects are operated within the confines of incentive programs such as the storage ITC, MA SMART, NY VDER, or CA SGIP. Each program has detailed requirements that system operation must comply with. These requirements should be configured into the software, and as program requirements change, software updates must be made. These configurations and software updates are not included in the products delivered by OEM. In addition to ensuring compliance, ongoing data reporting is required throughout the project lifecycle.
Energy storage adds significant value to storage projects, but it’s a whole different ballgame than solar. A lot of project developers realize the complexity once they get into the process, at which point they may step back to determine how to resource these projects. For some, that means hiring the expertise in house; for others it means working with a storage service partner that brings the necessary expertise to the table. Either way, having deep expertise in energy storage across each functional group is absolutely critical for succeeding with energy storage projects.
Contact Stem to learn about how we partner with solar developers.