summary.

Excess Solar Power

‘Virtual power plants’ would store renewable energy in

batteries by day and redistribute it when demand surges

after sunset

As California ramps up renewable energy, utility companies are looking to batteries to solve a

supply-demand mismatch, storing excess solar power and feeding it as needed to the grid. Here,

a solar farm and wind turbines in Palm Springs Calif. Photo: Moment Editorial/Getty Images

By

Cassandra Sweet

March 4, 2017 7:00 a.m. ET

California utilities including PG&E Corp., Edison International and Sempra Energy are testing

new ways to network solar panels, battery storage, two-way communication devices and

software to create “virtual power plants” that manage green power and feed it into the power grid

as needed.

The Golden State is ramping up renewable energy as it pledges to be a bulwark against the

Trump administration’s pro-fossil fuel policies. But first, it has to figure out what to do with all

the excess power it generates when the sun is shining and the wind is blowing.

California’s solar farms create so much power during daylight hours that they often drive real-

time wholesale prices in the state to zero. Meanwhile, the need for electricity can spike after

sunset, sometimes sending real-time prices as high as $1,000 a megawatt-hour.

Utility companies are looking to correct that supply-demand mismatch and ease the strain on the

electric grid as California considers retiring its last nuclear plant in 2025 while nearly doubling

the power it gets from renewable sources to 50% by 2030.

Last month, power company AES Corp. flipped the switch on a bank of 400,000 lithium-ion

batteries it installed in Escondido, Calif., for Sempra Energy. Sempra’s San Diego utility plans to

use the batteries, made by Samsung SDI Co. Ltd., to smooth out power flows on its grid.

Tesla Inc. is supplying batteries to a Los Angeles-area network that would serve Edison

International, which would be the world’s largest of its kind when finished in 2020, according to

the developer, Advanced Microgrid Solutions. The network would spread across more than 100

office buildings and industrial properties.

When the Edison utility needs more electricity on its system, the batteries would be able to

deliver 360 megawatt-hours of extra power to the buildings and the grid, enough to power

20,000 homes for a day, on short notice. At other times, the batteries would help firms hosting

the arrays to cut their utility bills, said Susan Kennedy, chief executive of Advanced Microgrid

Solutions, which is developing the project.

“It will show how you can use communication and control technology to make a bunch of

distributed energy assets act like one big one,” said J.B. Straubel, Tesla’s chief technical officer.

The companies declined to say how much the project would cost.

PG&E plans to use clean energy to replace the 2,200-megawatt Diablo Canyon nuclear power

plant, which it is proposing to shut down in 2025. The San Francisco utility, which plans to

invest about $1 billion through 2020 to modernize its grid, is testing batteries, software and other

technologies.

An array of solar panels in Oakland, Calif. The Golden State often sells excess power at low

prices or gives it away to other states. Photo: Lucy Nicholson/REUTERS

“We are rethinking the grid and how it operates,” said Steve Malnight, PG&E’s senior vice

president of strategy and policy.

Virtual power plants remain a considerably more expensive option than building a traditional

power plant to meet peak demand.

Stored power from lithium-ion batteries can do the work of a natural-gas peaker plant at an

average cost of between $285 and $581 a megawatt-hour, according to a December report by

Lazard Ltd. In contrast, electricity from a new gas peaker plant costs between $155 and $227 a

megawatt-hour, according to Lazard.

But some of the equipment barely existed five years ago: As prices for technologies such as

battery storage fall, utilities should be able to adopt more of them, said Michael Picker, president

of the state Public Utilities Commission.

California currently has to sell excess solar power at low prices or give it away to utilities in

Arizona and other states, through a real-time power market run by California’s Independent

System Operator, which oversees the state grid.

Sometimes, offering the excess power at low prices isn’t enough and prices go negative, as a way

for power suppliers to encourage other utilities to take power they can’t use. That happened on

178 days last year.

Utilities in Colorado, New York and other states that plan to get a higher percentage of their

power from renewables are also experimenting with virtual power-plant technology.

Consolidated Edison Inc. is using solar panels, batteries and power conservation technologies at

several dozen New York City buildings to reduce peak demand by as much as 52 megawatts.

Because of the $200 million project, the utility can postpone installing more than $1 billion of

conventional power equipment for another 20 years, said Matthew Ketschke, a Con Edison vice

president.

Virtual power plants alone, however, may not solve problems created by boosting intermittent

renewable energy.

In Arizona, regulators want to double the state’s renewable energy target to 30% by 2030. But

some utilities worry that adding more solar power on top of California’s already-robust supply

could be costly and wasteful, even with battery storage.

Tesla Inc. batteries, installed at office buildings in Los Angeles, are part of a virtual power plant

providing electricity to the grid. Photo: Advanced Microgrid Solutions

“Storage may help you within the day, but a battery isn’t designed to store energy from March

until it’s needed in June,” said Jeff Guldner, senior vice president of public policy at Arizona

Public Service Co. in Phoenix.

Write to Cassandra Sweet at cassandra.sweet@wsj.com

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