Updated. Batteries at Green Mountain Power: Beating the Peak

Batteries from Wikipedia
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Beating the Peak

I wrote recently about The Game of Peaks. This game is a business move, not a moral imperative.

Utilities pay a percentage of overall grid costs based on the percentage of power they use during the high-usage peak hour on the grid. Lowering their usage at that time can save significant amounts of money for the utility.

Note that "beating the peak" saves money for one utility, but the fixed costs of the grid remain the same.  If one utility beats the peak, another utility will pay more for the fixed costs of the grid. Beating the Peak has little to do with conservation, a clean grid, etc.  We are talking about cost shifting from one business to another.  It irritates me when utilities wrap themselves in "do-good" rhetoric about this cost shift plan.

I plan a series of posts about Vermont utilities and their various strategies for Beating the Peak.  I start today with the biggest utility (Green Mountain Power) which has the most high-tech strategy (batteries).

Green Mountain Power: We Have the Batteries

In an article in 2016, Green Mountain Power claims to have used batteries to reduce its peak power demand and save its customers $200,000 in an hour. We know that Green Mountain Power plans to use batteries to shave the peak this year, also, as described in their recent press release: During Hot Weather GMP Leveraging Stored Energy to Drive Down Peak Power Demand and Lower Costs for Customers  In the press release, GMP describes the use of solar power and batteries in terms of 5,000 homes powered by battery during the peak, and that GMP's power sources are 90% carbon free.

Complicated and slow

The battery story is a bit more complicated, actually. The press release above claims that Vermonters have installed nearly 500 Powerwall batteries in their homes...GMP can share access to stored energy to pull down power demand at key times... and drive down costs for all customers.

Actually, Green Mountain Power is not deploying its Tesla battery units as fast as it had hoped to do so.  Electrek reported in April that only 200 home Powerwalls had been installed out of 2000 that GMP planned to install. However, the article said that the utility was making some "big deals" (with commercial customers?) that would lead to more deployment.

If there were 200 batteries in April and 500 now, the pace of installation must have increased.  Here's how Electrek describes the arrangement GMP makes with its customers for Powerwalls: Under their agreement with the electric utility, homeowners who receive a Powerwall are able to use it for backup power for “$15 a month or a $1,500 one-time fee”, which is significantly less expensive the ~$7,000 cost of the device with installation, but in return, Green Mountain Power is able to access the energy in the pack to support its grid, like a virtual power plant.

UPDATE: Green Mountain Power has just claimed to have saved $500k during the recent heatwave, deploying "enough batteries to accomplish the equivalent of taking 5000 homes off the grid."  They also said they had deployed 500 Powerwall batteries.  In this case, my estimate of $1000 saved per battery (see below) would be correct.

However, as described in the article, GMP  also has solar storage facilities, access to electric vehicle chargers, and other methods of saving electricity. Because of the other methods of saving electricity, as well  the Powerwalls, my estimate of $1000 saved per battery is too high. Since there is no way for me to correct the estimate, I will stay with that estimate, but note that it is optimistic on the role of batteries.  Vermont Business Magazine: Stored energy helped GMP cave $500 K during heatwave. 


Math on the Batteries

Let's do some math.  If batteries "beat the peak" for Green Mountain Power, they could be cost effective.  Let's say GMP installs 1000 batteries, and each battery costs them $7,000 (true cost) minus $1,500 (cost the homeowner pays.)  So each battery costs Green Mountain Power $5,500.  With 1000 batteries, they will have invested $5.5 million dollars in batteries.

If GMP saves only $200,000 a year by beating-the-peak, it would take GMP about 27 years to make up the $5.5 million cost for the batteries.  Hopefully, they will actually save more, or perhaps they got a better deal on the batteries.

I'll look the calculation a different way, however.  In 2016, Green Mountain Power saved $200,000 a year with less than 200 batteries deployed. If GMP saves $1000 a year per battery, it will only take them 5.5 years to make up the costs of the batteries, which is a more reasonable payback time.


However, if  GMP deploys all 2000 batteries that they plan to use, will they be able to save $1000 per battery?  Will they be able to save $2 million in a year?

To answer this question, I would have to look at what they would pay for transmission without using the batteries. First, we need to know the overall grid costs for transmission.  That part is easy: ISO-NE expects to spend $700 million dollars on transmission this year.

Then comes the hard part: estimating Green Mountain Power's peak use compared to grid peak use.  I fear this would be a lot of speculation on my part. I don't know how much GMP would pay without the batteries. And by what percentage would the batteries cut demand?  Perhaps GMP could save $2 million a year on transmission costs, by using the batteries.  Perhaps they couldn't.  I will just leave the question out there.

Note: It is not clear how quickly the homeowner will make back their share ($1500) of the costs of the batteries.

My opinion of the GMP Strategy: Not very cost-effective. Not straightforward.

Cost: Batteries are an innovative way to shave a peak, but they don't look particularly cost-effective. They are okay, but even a six year payback is long, in terms of business calculations. And a six year payback was my most optimistic calculation.

Rhetoric: In my opinion, GMP's rhetoric about the batteries and the peak is misleading. Their press release is full of feel-good words about the environment, and nothing about how the money is saved --the "savings" is really a transfer of grid costs to other utilities.

The Game of Peaks

Weapons used as props in the Game of Thrones
Wikimedia
By Benjamin Skinstad [CC BY 3.0 ]

The Game of Peaks

Cutting back on electricity use on the hottest day of  the summer is not a moral imperative. It is merely part of The Game of Peaks. This game allows large utilities to shift costs to smaller utilities and co-operatives.

Luckily Game of Peaks is all about accountants, not swords.  The Game of Peaks is nowhere near as brutal as the Game of Thrones. Nobody gets killed in the Game of Peaks, but lots of people get misled about the situation on the grid.  And lots of people end up paying more than their fair share of grid costs.  There are losers in the Game of Peaks.  You may be one of them.

Rules for the Game of Peaks

ISO-NE must charge utilities their "fair share" of system costs, particularly transmission costs. But what is their fair share?  ISO determines a utility's share of the grid-wide transmission costs by determining the power used by that utility during the peak-usage hour on the grid.  The percentage of power used during the peak is the percentage of transmission costs that the utility has to pay.

Of course, this percentage calculation is an opportunity for utilities to shift costs elsewhere. Utilities campaign about "shaving the peak." Announcements state that "we saved hundreds of thousands of dollars by shaving the peak."  For example, in this Burlington Free Press article from 2016, Green Mountain Power claims to have used batteries to reduce its peak power demand, saving customers $200,000 in an hour.

Conservation Now?

The statement about saving $200,000 in an hour is a bit misleading.  It looks like it is about energy conservation, sparing the grid, etc.  It isn't.

That $200,000 wasn't some excess cost of electricity in that single  hour.  The savings comes from the fact that Green Mountain Power used its predictive power and its batteries to reduce its demand at the time of peak demand.  Therefore, it will  reduce the amount it pays for grid-level transmission. Somebody is still paying that $200K for transmission: the overall cost of grid transmission hasn't changed. Some other utility is paying that cost.

According to an article yesterday in Electrek, Green Mountain Power has now has 5,000 kWh of battery storage at this time.  This 5 MWh of storage will not make much difference to expense of transmission on the grid. However, Green Mountain Power hopes it will make a major difference to their own bottom line, as it did in 2016.

Saving Electricity in Summer: The Game as Played

As I wrote in an earlier post, The Not-Stressed Grid in Summer, "beating the peak" is not about

• saving money while the grid power is expensive, (it is not that expensive in summer) or
• diminishing pollution (coal and oil are not in use much during the summer), or
• keeping the grid from failing (there's plenty of reserve capacity). 

 The local grid is doing well in very hot weather.

I am writing this post because utilities only seem to talk about the grid when they are pushing "beat the peak." If the peak is beaten, the peak-beating utilities save money, and the other utilities have to pay more.  It's a zero-sum game, not a moral imperative.

Unfortunately,  people know very little about the grid, except that you "shouldn't" (whatever that means) use as much electricity on a hot day in summer.  If I write about the grid, I need to debunk that fallacy.  I feel that if I am going to write about the problems the local grid faces in winter, I also needed to write about the problems of summer. Or rather, about the non-problems of summer, and the misleading rhetoric of some utilities.

Yes.  Saving electricity is always good

Don't get me wrong. Being thrifty and not using excess power is always a very good thing.  Still,  it helps the environment more if you are thrifty with electric usage in winter (with all that oil and coal-burning) than in midsummer.  It helps your local utility's bottom line more if you are thrifty with electric use in summer.

My voice is rather muted,  compared to utility advertising campaigns, but I felt that I must speak up.

The Not-Stressed Grid in Summer

The grid is not stressed

The Northeast is using a lot of power, but the grid is not particularly stressed.  "Using a lot of power" and "stressed grid" are not the same thing.  Many local utilities are urging conservation...but this is not because the grid is stressed.  More about conservation in the next post.

How can I say the grid is not stressed? We're having a major heat wave! For days, Vermont temperatures have been in the high nineties. A number of communities opened "Cooling Stations" in public building such as fire departments. People were encouraged to go to air-conditioned malls, drink water, check in on elderly people who may need assistance, etc.

Okay, it's hot.  But I will start by comparing the grid situation on this heat wave with the grid  situation in the cold snap in December-January.

Hot weather electricity use and prices

Let's look at the ISO-NE electricity usage  chart for July 3.  The peak is near 25,000 MW. The LMP (local marginal price) prices for electricity were between about $25 and $80 per MWh, or about 3 cents to 8 cents per kWh.

Cold weather electricity use and prices

In contrast, during the cold snap at the beginning of this year, electricity use never got much higher than 22,000 MW, as shown in this graph from the ISO report on cold weather operations.

However, in  the cold snap, the LMP prices spent a lot of time between $150 and $300 per MWh (15 cents to 30 cents per kWh). The circled area on the graph below, from the same ISO report.

In short, during the cold snap we used less electricity and paid higher prices than we do now.

Conservation and fuel usage

Using more electricity in New England means making more carbon dioxide and burning more fossil fuels.  So conservation is always good. But is conservation in summer particularly wonderful? Not really.

Right now, we have a fairly clean grid. The fuel mix is mostly natural gas, nuclear,  hydro and renewables.  The grid was running 60% gas, 20% nuclear 16% hydro and renewables.  Pretty good, in terms of emissions!  Here's a recent fuel mix graph.

A fuel mix chart for the grid on July 4

In contrast, in the winter, when natural gas was not available, oil and coal were in heavy use (Oil Kept the Power Grid Running op-ed). During the cold snap, the mix was 30% oil, not "less than 1%" oil, as it is now.  Coal use was higher, also, up around 5%. 

Surplus Capacity

So far, there's no particular reason to conserve right now instead of conserving some other time.  But let's look at something else.  Perhaps, even with natural gas available, the grid is close to maximum capacity in hot weather? Perhaps, if we don't conserve, the grid will fail?

Nope. The grid is doing well.  If you look at the ISO-NE website,  it lists "surplus capacity" right on the front page.  At this moment, as I am writing this, on a very hot day, surplus capacity on the grid is 1,180 MW.  That is the capacity available above the maximum predicted peak power use for today (23, 000MW) and above the grid's operating reserve requirement for today (2,492 MW). You can always check these types of figures in the ISO-NE morning report. 

Or, you can simply remember that when ISO-NE predicted the possibility of rolling blackouts in the future, ISO was concerned with winter stress on the grid leading to blackouts. They were not concerned with high summer electricity usage. 

 In short, conserving electricity this summer doesn't save more money or more carbon dioxide then it would save at many other times. As a matter of fact, it saves less of both than it would save in a winter cold snap.  Conserving now also doesn't "save the grid" from blackouts.  The grid is operating at high capacity, but nowhere near its capacity limits.

 So why are the utilities pushing conservation right now?

Game of Peaks

The utilities are urging conservation right now because they are playing the Game of Peaks.  It's  a utility game about money. If they play the Game of Peaks well, they can shift some costs from themselves over to neighboring utilities.  Yeah, it's a zero-sum game.  ("I win" can only happen if "you lose.")

 Learn the rules for the Game of Peaks in the next post.