If you install solar unfriendly state, you may think yourself limited to a small number of luxury-oriented residential customers willing to prioritize environmental values above financial reward. But the battery market is changing everything we know about solar economics, forcing us to re-examine our design philosophy and project strategies.
I recently sent out the following marketing email to announce the registration of my Glass-Slapper program for NABCEP recertification / engineer + architect continuing education: “[YOUR STATE] is a great market for batteries and last year the USA battery industry grew over 275%. Is [YOUR COMPANY] prepared for this growth?…” To which I received the following response from a NABCEP-certified PV Installation Professional:
“Just curious, why do you think MO is a great market for batteries? The cost of power is relatively low and we don’t have time of use rate schedules.”
This forced me to put my money where my mouth is. I feel that batteries offer the most economic solar array in MOST of the United States, but what do the actual economics say?
Next, let’s explore Ameren’s default rate structure for general electric service, typical for small and mid-sized businesses. In this model, we take the same 8kW solar array and add a 25kW, 25kwh battery bank at $1/W. Without storage, this solar array would generate at around 10 cents per kilowatt hour, providing less of a return for our client. But Ameren is using a “block” rate structure, with the kwh price of electricity increasing as kW demand rises. It looks something like this:
Even though Ameren’s demand rate is relatively low, the true demand cost is hidden by this structure. By lowering the demand of the building, we push more electricity consumption into the cheaper rate, so that the client purchases more electricity at 5 cents vs. 10 cents. The solar payback drops from 16 years to 11 years – a 30% improvement in project economics!
Finally, let’s look at even larger commercial customers on a primary electric service. Ameren’s primary rate structure is a typical demand-based rate structure with high demand charges and low energy costs. In this case, we want a solar array that is just large enough to fill the batteries (which qualifies the batteries for the 30% tax credit). You may even consider not filling the batteries all the way up with renewables. The tax credit is taken proportionally, provided that a minimum charge of 80% renewable is met. So charging the batteries with 90% renewable would only devalue the tax credit on the batteries by 3%.
Now we combine a 16kW solar array with a 80kwh battery… 2x the size of the previous example. However, demand management is even more likely, because the customer would be using roughly 10x the energy. As we learn in the battery portion of class, the deeper you reduce a building’s demand, the more storage capacity is necessary, reaching a point of diminishing returns. Because a smaller system is more likely to be successful, a strategy would be to install a smaller system to demonstrate functionality ahead of a larger expansion.
The math doesn’t lie. A solar battery on a demand-rate structure in on Ameren’s grid in Missouri can reduce system payback by 60% as compared to a residential “energy only” rate structure. This is a phenomenal milestone in the solar + storage industry, as only a few years back, residents in solar-friendly Arizona were involved in a lawsuit to prevent mandatory demand rate structures from coming to market. Furthermore, many large corporations do not have adequate rooftops for large solar arrays. But a solar “peaker” array can have a much smaller footprint, as the solar array need only be large enough to charge the batteries.
So if you are a Glass-Slapper in a less-developed solar market, take a fresh look at your utility demand-rate structures. You (and your utility) may be surprised to learn they can offer the best solar economics in your area.
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Author: John Cromer, instructor
We’re on a mission to reduce system cost and increase production value.