Renewable energy such as solar and wind, plus battery energy storage, can offer owners and tenants price stability and power supply security – with the potential to offer large savings on energy bills.
Solar PV System Basics
The mechanisms of solar PV (photovoltaics) are simple. Solar panels on the roof are hit by sunlight and send Direct Current (DC) electrical power down a line into the inverter, which converts the DC electrical power to Alternating Current (AC) power usable by regular appliances. In a grid-tied solar system, any unused power from the solar panels can be sent back out to the grid after passing through the inverter, and the utility will pay wholesale or at-cost rates for it, while you are also able to draw from the grid during times where your panels don’t generate power (eg night).
Video: How do grid-tied solar systems work?
PV systems are basically the same for residences or businesses, but as we discussed, the business model of commercial installation has to take into account that many Commercial Real Estate owners don’t directly pay for rates, passing costs on to tenants. See pages 5 and 6 of this guide to Solar Energy for Commercial Real Estate for common ways that CRE operators use to overcome this hurdle. Financing mechanisms such as Power Purchase Agreements (PPA’s) and PACE loans can allow for solar systems to be installed with no up-front cost to the user.
Solar PV systems to date rely heavily on utility, State, and Federal rate programs or credits to make them more attractive, by lowering net energy costs to the consumer & reducing payoff periods. The 2 main methods for recovering solar costs are:
- Utility: Net Energy Metering (NEM): The utility pays users of grid-tied solar PV systems for energy they put back into the grid. The California Public Utilities Commission (CPUC) is currently working on NEM 3.0 rules to supersede prior rules. Draft rules are in the public comment period, and indicate that rates paid for power from DER’s (Distributed Energy Resources) such as residential solar PV will be cut sharply. This rate cut, along with some other new fees assigned to DER users, could lengthen typical payoff periods for typical installations from 5 to 10 years.
- Federal: Investment Tax Credit (ITC): A 26% tax credit for commercial and residential installations. More info. Credit rates from the ITC are set to slightly decrease in 2023 and sharply decrease in 2024, but it appears legislation will be passed soon to breathe new life into this program.
Battery Storage Systems
Battery storage systems are becoming increasingly common, affordable, and modular. Major manufacturers now offer 5-15 kWh systems allowing for banking of solar energy during high-production periods (eg during the day) for use during low-production periods (eg at night). Batteries also offer the ability to keep building systems running even during grid failures – whereas grid-tied solar panels without storage are unable to offer this.
Solar plus battery storage: How hybrid systems work
These battery backup systems rely on computerized load management systems for charging and discharging the battery. Often this is coupled with the inverter. All of the system components (solar panels, inverter, battery) are placed behind the meter, like in a grid-tied system, but the power actually going across that meter, to and from the grid, can be greatly reduced.
California regulators are pushing hard for batteries for the obvious safety and grid-down reasons, but also because battery systems help solve a big problem of integrating solar into the grid – solar systems produce their peak power in the middle of the day, but don’t produce anything in the evening, when power demand peaks. Battery systems help solve this problem in a couple ways – they provide “demand shaving” by reducing consumption at critical times, and with new technologies, they can also help provide “demand response” by dispatching power to the grid when needed, serving as small power plants.
There’s a significant cost premium to incorporate batteries into solar PV systems, almost as much as the panel systems themselves. “In the United States, most homes can be powered with a 6kW solar system and the average cost as of January 2022 is $13,320 after the federal tax credit is applied… Batteries typically cost around $8,000 or more and will need to be replaced about every 10 years.”
California launched the Self-Generation Incentive Program (SGIP) to boost battery adoption. The program offers $200-$1000 rebate per battery kWh and is geared towards low-income homeowners and residential / commercial entities in areas affected by Public Safety Power Shutoffs, or in Tier 2/3 Fire Hazard areas (see map). At the upper range of $1000/kWh it basically pays for the whole battery, so it’s a pretty nifty deal. SGIP does not require people to have a solar system installed to take advantage of this rebate. More information on the SGIP program.
Battery systems can also see cost recovery through the concept of the “Virtual Power Plant,” which is similar to the earlier Net Energy Metering concept, but more sophisticated.
Microgrids
Getting back to the earlier point about demand response – power grid operators are trying to find a way to rationally incorporate renewable energy resources into the grid. Microgrids are a way of creating sectionalized local power networks that can “island” themselves in case of grid failure, and keep the local grid functioning with DER’s until grid connection can be restored. See this Vox article for a good depiction of the topology of the grid and where DER’s fit into this new paradigm.
Solar microgrids are still in their infancy, with only one real multi-user project online (Redwood Coast Airport project, PG&E). However, many site-specific microgrids are already active (think, multiple buildings on a single-owner campus), and the pipeline is rapidly expanding. There is a lot of work still to be done to figure out how to incorporate these “island-able” local networks into the wider grid, and how to configure things at the individual DER / building level to make them function within these microgrids. See the attached PDF for the SBUSD / Goleta Load Pocket microgrid project to get an idea of how they’re looking to make these systems work.
References:
Grid-Tied Solar Systems Explained – SolarReviews
What Is A Hybrid Solar System? – SolarReviews
How to Choose the Right Inverter for Your Solar System – SolarReviews
