Teri: Welcome to Power Plays, a CoBank Knowledge Exchange podcast series, an audio program where we connect you with top energy and environmental innovators and policymakers who share their insights, experience, and market observations. Hello, I'm Teri Viswanath, the lead economist for power, energy, and water at CoBank. I'm joined today by co-host and CoBank managing director, Tamra Reynolds. Hi, Tamra.
Tamra: Hello, Teri. This week is the U.S. Energy Storage Association annual conference being held in Phoenix with the theme, The Storage Decade. In recognition of this key event for storage participants, we thought we would revisit the past decade with Chris Wright, executive director of the energy storage practice for E3 Consulting. Chris has been active in battery energy storage over the past decade with extensive experience in engineering, construction, and operations support for a gigawatt of energy storage projects globally.
Teri: Tamra, to amplify the hands-on technical insights Chris provides, we also invited Dr. Peter Muhoro. He's the chief strategy, technology and innovation officer at Rappahannock Electric Co-op. He sat down with us and provided his guidance on how other co-ops might consider their storage development path but let's begin our conversation with Chris. Hey, Chris, thanks for joining our program to discuss battery storage development.
Chris Wright: Oh, thanks, Teri. Glad to be here today.
Teri: From our perspective, it would be great to hear a little bit more about storage and storage development in the U.S. from a developer's point of view. During the past decade, what I really want to hear, Chris, is how US battery storage projects have evolved.
Chris: Sure, Teri. My experience really dates back to around 2010, and back then grid-connected energy storage was-- We would probably call it nascent at best. I remember back then in different project capacities getting opportunities with battery systems and trying to understand how the battery system would even work or even interact with the power of the volt power system.
Back then a few people actually referred to grid-connected energy storage as a solution without a problem. Ironically, but now it is the enabler for the grid of the future. It's been a great time. In a very short time, we've gone from seeing lead-acid batteries providing UPS back-up to multi-megawatt lithium-ion battery systems providing reliability services to the volt power system. Again, a great time to be in the energy industry. We're seeing a fundamental change in how energy is being generated, distributed, consumed, and how the grid is even being operated.
Teri: Hey, that's great. When did that really begin to change in the timeline? 2015? What do you think?
Chris: What really accelerated grid-connected battery storage was when the PJM ISO introduced their fast-frequency regulation ancillary services market. They created a services market where they had a special frequency, they had a special signal that was designed for what you would call fast-responding systems or fast-responding devices. That frequency regulation signal was designed to request power or to ask the asset to absorb power as a regulation asset.
Really what they were doing was they were trying to evaluate if they're paying for 100 megawatts of ancillary services frequency regulation right now, could they pay for less by having faster-responding devices? Lithium-ion batteries just happened to be this great solution at the time that was a 15 or a 30-minute duration because back then lithium-ion batteries were four times what they are today and at least we did not expect to see them deploy at scale like they are today back then. It was this great niche for lithium-ion where it really started to be connected and it really started taking off.
Tamra: You made some interesting points when we talked with you earlier about the productization of batteries. Can you explain this to our listeners?
Chris: That's a term that was coined a couple of years ago and it really refers to-- The first-generation lithium-ion battery projects that were really going into PJM and things like that, an enclosure like an ISO 40-foot container was taken. It was broken down and stiffened up a little bit on the inside. Then there were racks and batteries installed inside of it. You had some various subsystems like smoke and fire detection and things like that inside the ISO container. That was the way batteries were deployed in 2010 through probably 2013 really.
Of course, there were some limitations to that. You can't really pack a 40-foot container full of batteries and ship it anywhere. There was also limitations where you really didn't want people going inside these containers that had batteries installed in them. They started looking at external garage door roll-ups for the containers. Fundamentally, what you would call the enclosure concept started changing. As those enclosure concepts changed, you saw-- Really, it started what I would say with Tesla and the Megapack.
They really created their first, what I would call, a deliberately designed enclosure system that has all the subsystems like fire detection, suppression, the whole SCADA control system, the thermal management system, and everything with the batteries integrated into a single product enclosure. That really allows the providers to take advantage of the economies of scale.
Then, lastly, I think the evolution of the codes and standards has also driven this because you're seeing things like UL 9540A, it's already on the fourth edition. It was a battery system, a testing evaluation. It's not really a standard, more of a test protocol, but you're seeing codes and standards evolve so quickly in the market that these products allow a provider to really design, certify, provide a warranty, and really sell a global product across the marketplace.
Teri: As we think about who's providing this battery and how it's going to be deployed, I think that's going to continue to evolve, but we're seeing some important changes, cell suppliers, the power conditioning system supplier, the integrator, and the project developer, all of used to play a really important role and some of that role is changing. Our field of participants is changing. Let's talk a little bit about that and why it's important for co-ops to understand those changes.
Chris: What we saw 10 years ago really was the advent of what we call, in the battery storage world, the system integrator model. The system integrator model really were the companies that had some battery relationships with battery players and oftentimes, they brought what you would call the energy management system or the site controller or the control system that they had developed in-house. The interesting part I felt like I've seen in the battery storage world is that we quickly have seen various developers and project owners move beyond the system integrator model very quickly and start buying these systems themselves, the products themselves, and you're integrating them on a project site and even maybe having their own control system.
We're seeing a lot of project owners move there much quicker than I would've personally expected compared to the PV market. Really because of that, you've seen a lot of these system integrators' business models have evolved.
Teri: The complexity is probably that market complexity, right?
Chris: Right.
Teri: We're saying that part is being the real moving piece that they have to manage.
Chris: Yes, absolutely. A lot of project developers and owners want to hold that battery supplier relationship directly, but what we're seeing a lot of integrators do is they're having them move up the chain. A lot of what they're doing is they have a lot more advanced control systems where they're actually providing, and part of their value add is battery analytics where they're actually providing advanced battery analytics to the project owners. They're also have a big move into the space where we see Tesla has their market participation platform. Some other companies have them like SmartBidder. We're seeing where these integrators and these control providers are actually providing the front end of the system that interacts with the market that essentially helps generate and back up revenue projections.
Teri: It's helpful because I think something we talked about, and Tamra, remember we spoke to Dr. Gary Dorris over at Ascend Analytics just for that market piece. When do we dispatch?
Chris: Yes. I think Ascend is a SmartBidder platform, it's one I'm familiar with too. We're seeing a lot of that in the marketplace because the old system integrator model had to advance. They provide what you might even call energy as a service where it says, "I want a 200-megawatt hour system for 10 years," and the system integrator provides you that system and provides you a guarantee and you may pay an annual fee, you may not, but you're getting battery storage as a service too on some of these companies.
We're really seeing how the integrated model had to move upstream. Then the big push or another big area is just the vertical integration. The productization is the big push. Everybody from Tesla's Megapack, Fluence has their product, Wartsila does, BYD has Cube Pro. The vertical integration of the providers also where they're controlling the equipment, they can characterize the equipment, have it manufactured, et cetera, it's another big push in the market. It'll be interesting to see some of the players that provide control systems and market participation without much vertical integration, what happens in that market going forward?
Teri: It's interesting. Tamra and I have been talking quite a bit about with our cooperatives as we think about what's ahead, and they're thinking about do we build this project on our own or do we contract it, if you will, if we go out and contract with a developer for our storage. I'd love to hear, from your perspective, from the storage development standpoint point, the build versus contract and how we think about and navigate the pros and cons of this for our co-ops.
Chris: That's another good area. You just really need to have some pretty significant knowledge and understanding of how the system will perform, how you contract to the market, how you negotiate the warranties and the performance guarantees. There are projects being built where a project owner doesn't always control the dispatch of the battery and in a situation like that, the dispatch could go twice as fast if you don't have contractual boundaries as somebody could dispatch the battery twice as fast as you expected and your 10-year battery life turns into five years.
If you're going to own the asset, you're going to look for some of the more basic questions that would go along with any power plant project. Understanding the technology provider, what level of vertical integration they have. If I was going to own a project, I probably would want to work with somebody right away that has their own product, that builds their own battery system enclosures, et cetera, has experience on the project size that's being considered, and really service after the sale. You wouldn't want to have a supplier that's never either is not going to have service capabilities near you or doesn't have any in that region, to begin with.
Those are key areas I think you would think of if you're going to own the project. Really if you're going to buy, I think you just really need to understand a lot of contracts, if they're providing ancillary services, unless there's a market that's been developed for battery specifically, you see a lot of traditional thermal power plant agreements just being modified and redlined and tailored for a battery system.
Teri: In contracting, it may just seem like a normal ancillary service agreement. It's a plug-and-play where if you want real hands, real operating experience, understanding how we dispatch and utilize the battery. I think those were good points, Chris.
Chris: Absolutely.
Tamra: Chris, we'd like to get your final thoughts on where you think the state of battery source development will head in the next decade.
Chris: When it comes to battery storage now, I don't think you could argue the technology's been settled. Most economics lithium-ion, when you reach about four-hour duration, they start going down pretty quickly, but we've already seen some RFPs out in California where some longer duration energy storage RFPs are going on out there 8 hours to 12 hours.
Those will be very interesting to see what happens and to see what technology ends up being the one that solves the long-duration energy storage question and need that we're seeing out there. I think we'll see other battery chemistries and other technologies come online for longer-duration projects going forward.
Tamra: Chris, I think it's been a really interesting conversation with you. Obviously, tons of knowledge about the industry. We really appreciate your time and sharing your knowledge with us, so thank you very much.
Chris: Thank you very much for inviting me.
Tamra: Chris makes this interesting observation that when he began developing storage a decade ago, many referred to the grid-connected energy storage as a solution without a problem. Now we know it's the enabler of the grid of the future. First providing critical agility for frequency regulation, and now the needed flexibility for resource and load following.
Teri: When I caught up with Peter, it was really interesting to hear him amplify some of the key themes highlighted in our conversation with Chris, differentiating, say, the solar projects, which are passive by nature, to very actively managed storage systems that required advanced controls.
Tamra: In your interview with Peter, he goes into terrific detail on how Rappahannock is currently deploying their storage resource and the importance of the hands-on experience they're receiving by owning this project. Here is Teri's discussion with Peter.
Teri: Hey, Peter, thanks for joining our program to discuss battery storage development.
Peter Muhoro: Thank you and I appreciate CoBank for having me in this exciting conversation. I'm looking forward to it.
Teri: Hey, so this year, I think it was earlier in the year, Rappahannock completed a two-megawatt four-hour utility-scale battery storage project. I think it'd be really great to hear a little bit more about that project.
Peter: Sure, absolutely. I'm proud to say, obviously, for those who may not know, we're a large distribution co-op in Virginia covering about parts of 22 counties with about 4,000 square mile territory, 17,000 miles of line, 170,000-plus meters that we serve. A great co-op. I'm proud to say we were the first co-op in the Commonwealth of Virginia to roll out a utility-scale battery. What makes a battery interesting, for example, is that you could use it for many different things, and in some cases, you could use two or three different use cases for one battery unlike, for example, just a solar panel generates electricity, and that's about it.
This can be used for many different things. That's how we came about this. We did some evaluations, some economics, we knew that we needed to look into this and see what it means for our system, and just turns out that it ended up having so many different advantages for what a battery could be used for.
Teri: There were some very specific areas or use cases that you highlight, which were the reasons going in. Let's talk a little bit about that resiliency and then the substation upgrades that you might be able to avoid or postpone maybe.
Peter: I would say defer is probably a better word to use for that. Let me begin by saying, and I've been known for using this phrase, what got you here will not get you there. System planning in today's world has to look very different. It's because you can't just do system planning without thinking of what role with other technologies play. It's just no longer just a conversation reliability on how soon can you bounce back, but it's a question of how do you ensure that you don't even ever go off. This battery is designed essentially to be able to power about 1,000 homes for 8 hours if we were in an outage.
That's the whole idea. We said if, for example, the transmission line was to go out or something like that, this could help in addressing that. That was one piece of it. Then we began to look at an area that actually is experiencing some growth and what we realize is so one substation that's fed by another and we realize all of a sudden we're going to be looking at the cost of upgrading not only just one substation but another substation as well and you say, well, beyond that, what else do I need to think about?
When you begin to compare some of those costs and what it means for your system, we're recognized that maybe here is another piece of it in addition to this resiliency side of how we ensure that we just never go down at all. Here's another piece of it that we could lay around to say let's address the need for this upgrade. It's an area that's growing. There's a reason I use that one word defer because there comes a certain point where you're just buying yourself some time, but you're buying yourself some time in an environment that still allows you to have some opportunities. We probably believe that we can defer that upgrade for years maybe 10, maybe 15, 20 years.
If the growth continues as it is, we know we need to think about building a little bit different, but in the meantime, here we are now addressing the issues of resiliency, here we're also addressing the issue of deferral of upgrades to essentially a T and D and substation upgrade. Let me throw another piece in there. Here's another opportunity of looking at peak times and looking at how do we say when that is as well. This is what I was going from the very beginning is that batteries will play that kind of role of allowing certain use cases to be used.
In fact, we've operated it during some peak times and it's been very beneficial and discharging it for a few hours and helping to reduce that load that we would be buying during that time and we could discharge this battery. That added another layer to it. Then finally the last layer to all of that is that it actually helps us understand how batteries work, it's an educational perspective both for us as well as our members.
Teri: You've brought up some really good points. We had a conversation with Chris Wright and I think he really stressed the idea of that you don't know how it's going to work until you know how it's going to work. You've gone through a low-demand shoulder period and you've gone through your peak cooling season, so in practice how do you find yourself operating your storage facility at this point?
Peter: One of the beautiful things of being able to go with this especially as we got into a peak season, we included it as part of our typical demand response. Today we controlled somewhere in the order of about 8,000 air conditioning switches, for example. We have a special program where we just send a notice to members for them to reduce their load themselves. We put it as part of our demand response.
When we sent out an email of what we're doing today to the folks at the co-op who we notify, we just included we're going to run the battery, we'll discharge the battery between 4:00 PM and 6:00 PM. It provided some really great benefits for us during those peak times and we continue to see the value that it will give us beyond that. Beyond that, we really have just been watching and learning what else we could do with it and truly understanding the cycling side of it and understanding what other factors can we play around with this.
Just looking at the data and studying especially as we've gone into the shoulder months and now as we enter into the colder months it begins the question of, is it a 5:00 AM discharge on this one versus a 4:00 PM that we have to deal with in the summertime?
Those are the conversations now we're beginning to have to say as we look at, now that we're getting into the heating season and what that means, how do we transition the dynamics of that? It's been a great experience to see people who are sending the message that they're operating this and have actually not even been on the site.
Teri: I liked your story a little bit about the demand response. It almost was offering up a wrapper around your demand response program, which really brings a complete package, brings certainty to the forefront in making decisions around controlling those costs.
Peter: In fact, let me build on that to say one of the things we're looking at is adding now, on the residential, or I should say, the behind the meter batteries, and bringing them that into that pool of demand response. Essentially, all we're saying is it's really controlling load, and we're ensuring that we can look at load and see the benefits of all of these packages. It just doesn't stop at this one battery, that utility-scale, we're looking at how do we do it too on the residential side and also at the commercial side of it and how do we send that signal as well?
Teri: That's amazing. Now that you've gone through this experience I think, is there something you wish you would have known before you undertook this project, from a planning or an execution standpoint, that you would sort of say, " Here's what you really need to be aware of"?
Peter: Well, I would say this, first of all, make sure you don't have too much hair because you might lose your hair now. I'm kidding. It's not that bad. A few things that I would say are important is really bringing a full team into this. This is just not purely engineering. This is not just purely operations, or just the finance group, or just the power supply group. It has to be a team effort. It has to be a team that looks at this collectively to say, how do we do this together?
That's the first step. The second step is you've got to talk to the right entities and you've got to be able to benchmark it based on your numbers specifically. This is where, for example, hopefully, your distribution co-op have a good relationship with the G&T, and really, because part of it you've got a forecast on what does the next 10 years look like if you're looking at a battery and what does my, potentially, power supply needs look like, for example? You've got to think about those dynamics. The other piece of it that's extremely difficult is, really, how do you map out what is the best use case for you?
There are two ways you can approach it, right? You can approach the, "I've got a tool, let me go find a problem," or you've got a problem, let me find the tool. In some ways, we took the whole, we know there's a tool and we also know there's some problems. Let's marry them all together and figure out how they work together. You've got to figure out, and that's really the hardest piece. It goes back to tying in where you can't do it alone as engineering. You've got to bring your finance team from the very beginning to look and say, how does this pencil out, and how do we look at it long term, and what's the ownership structure that makes sense?
Teri: Let's talk a little bit about the education, the execution, and the management. Three parts I'd love to hear from. Talk about the education with Rappahannock.
Peter: You have to truly find the generalized education and I think there's a lot of information out there. I know CoBank puts a lot of things out there in terms of batteries as well. That's the first step. The second step is really educating your board and finding out-- helping your board understand the dynamics of this and the opportunity that exists. In many cases, we look at some of these things as challenges, and they do have challenges and risks, but the opportunity can be greater than those. I think that's the first step when you look for from an education standpoint.
Teri: How about execution? I think it's also the battery itself, the developer, the project. In terms of execution, you go out with an RFP, how did that work for you guys? I mean, what did you find from execution?
Peter: Absolutely. I'll do it from two perspectives. One, I'll do it from what we did here, but also do it from wearing a different hat previously at a different co-op where at that different co-op we issued an RFI, and it helped us learn a lot from the different vendors and understand who the true players were. We didn't really go the RFP route.
Teri: That's interesting. Initial route to just find out the information, data collection.
Peter: We kept it a little bit simpler but wanted a little bit more detail on what we can learn from, and that allowed us to really learn who the players in the game were. Now, that's a few years ago. Today, the market has evolved quite a bit that you could actually put out an RFP and you're really able to assess and understand what the true dynamics are of what you're looking for. That's the next step. Now I will say this, there's a challenge sometimes with especially a smaller distribution co-op that you may not have the resources to even be able to evaluate that. That's where I would recommend leaning or maybe a consultant to help drive the RFP process.
I know that's been done. In fact, some co-ops collectively put together an RFP for energy storage and were able to learn as much as they can from it. That's the first step. You look at the RFP. Now I'll go back to the teaming side of it. Your teaming has to be who evaluates the RFP. You can't just have the engineering folks evaluating the RFP. No offense to engineers. I'm a physicist. I'll always make fun of engineers, but you've got to bring in the whole team. In fact, I will be one to say even bringing your communications team at the forefront of it, the teams that you don't even expect because that creates an ecosystem of everyone. That's what a battery does.
A battery really does touch a whole ecosystem. It touches everyone. Bringing a dynamic team to evaluate the RFP and then look at those. A few things when you look at those integrators developers and the like, there are various things that you want to look at is, for example, what tier level of equipment do they use? Are they using tier one, tier two, tier three? It's a little bit of a different conversation today due to supply chain issues. You looks at the longevity of these folks. You want someone that maybe has some teeth in the game, especially with your first one, can stand by what they have.
Thirdly, you want to look at, and I'm big on this, look on the warranty side of it and the insurance side of it because those are critical if something goes wrong. That to me is if you look at those three things, and of course, you need your financial and your financial entities to be able to understand how you're doing this depending on the scale you're doing it. I think combining those things helps to execute. Getting it done, definitely, if you could get a project manager and get the earlier processes done and the permitting-- Getting the actual battery up and running is just a few months.
It's the whole permitting and all the other things that come with it. Then the testing after that, it could be two to three months and the thing is up and running pretty quick. Once you have those other things, but the permitting, for example, is one that can take a long time. Remember that in many jurisdictions, your EMS they may not have all the knowledge they need on batteries. Some of the counties, for example, may take a little bit longer in permitting this because they want to know if there's a fire, how is that addressed? Account for that time of those things because those things become very critical in making sure you can execute the project.
Teri: Oh, that's great advice. Well, we're really excited. Love to be able to re-check in with you on how this project has gone after we make it through another season, winter season, see how it works. I would really like to pick up the same thread of conversation. Peter, thank you so much for your time today, sharing your knowledge and insights with the rest of our cooperative universe. Appreciate that.
Peter: Absolutely looking forward to it. Who knows, maybe when we're doing the next conversation, we're also talking about our next battery.
Teri: Tamra, it was a real pleasure sitting down with Peter. He's incredibly generous with his insights and market observations. I think I was struck by how versatile battery energy storage can be on a system and the agility the resource can offer up our co-op managers.
Tamra: In addition to Rappahannock's stated use cases, it was interesting to note that Peter mentioned how they use storage to support their demand response program to provide more certainty. I know that Rappahannock CEO, John Hewa, will be on a panel at the energy storage conference later this week sharing the perspective of storage ownership from the electric distribution co-op side of the industry. Practically speaking, the greatest return from storage might actually be found closest to the consumer from the traditional standpoint of backup generation, but also to keep bills affordable through peak shaving.
Teri: I've really enjoyed this conversation and I hope our audience has as well. I'm looking forward to our final podcast of the year. In December, we're going to be hosting Nate Adams. He's also known as Nate, The House Whisper. When he talks to us about the residential side of the industry, particularly energy performance and home heating. He published The Home Comfort Book: An Ultimate Guide to Creating a Comfortable, Healthy, Long-lasting, and Efficient Home. We'll share his insights.
Tamra: I hope you'll join us then.
