Winter Season Reveals Value of Next Generation Demand Response
Just a little over a year ago, the underground Aliso Canyon natural gas storage facility began leaking. While the primary concern was how methane emissions might jeopardize public safety, this event also created a crisis in energy supply in southern California. As it turns out, it became the largest methane leak in U.S. history. By some estimates, the leak had the equivalent impact on climate change as burning 1 billion gallons of gasoline. The value of the leaked natural gas has been estimated at more than $21 billion.
The leak from a gas field that supplied fuel for a fleet of fossil fuel plants that served as one of the backbones of the regional power supply also created an ideal market opportunity. The only way to fill in the gaps was through distributed energy resources (DER) that could be mobilized in short order. Among the innovative solutions are virtual power plants enabled by energy storage.
California moved swiftly. The CPUC made a bold decision calling for a wide range of distributed energy resources (DER) in late May. Fortunately, Southern California Edison (SCE) and industry providers were positioned to move fast, since contracts were already in place for over 260 MW of energy storage, five times the amount SCE had been required to purchase.
Last month, Stem was among the first vendors to show it can deliver aggregated behind-the-meter commercial-scale storage services: It was the first to pass SCE’s eligibility tests for SCE’s local capacity requirements (LCR). It has now dispatched the first of many distributed energy storage projects which all contribute to its forthcoming 85 MW fleet for SCE, arguably the largest mixed-asset VPP in the world.
This speed and scale for delivering products such as demand response, energy storage and VPPs are important, because across the country the winter months’ energy demands place an extra burden on utilities for reliable energy supply across the country. Already, independent grid operators such as PJM are revising its demand response products in lieu of the shortage created by the so-called polar vortex two years ago. PJM’s new capacity performance product that has created controversy, but its intent is to make DR a year-round resource. Integrating energy storage into such resources can help make that feasible. (The CPUC this past December also strengthened its commitments to DER as a key solution set for year-round reliability)
Navigant Research released a Leaderboard report late last year ranking VPP software vendors. As an analyst, there is no better way to win friends (and create enemies) when creating reports ranking vendors. Another Navigant analyst wondered why Stem has not on the list. Needless to say, one could make an argument it belonged on the list. Other vendors, among them OATI and Geli also protested about their exclusion.
The truth of the matter is that the overlap is increasing between energy storage, demand response and VPP Leaderboards, so this ranking was limited to four energy storage firms in order to limit eligibility (with quotas also established for large technology vendors and pure play software companies.) Preference was given to those firms whose software managed on-site solar PV with batteries and loads at the distribution level, and then aggregated these nanogrids into VPPs. Stem is clearly a VPP innovator, but its business model had focused more on demand charge abatement for commercial buildings without on-site distributed generation. Thanks to their engagement, Stem is certainly on my radar when it comes to VPPs and energy storage now. These join a growing list of VPP innovators.