Battery storage operation under net billing provides “virtually no grid value”: Berkeley Lab study


Under net billing, a rooftop solar owner is compensated for electricity sent to the grid at an “export rate” below the retail price of electricity, “often tied to the utility’s avoided costs,” says a Berkeley Lab study. Net billing is replacing net metering in many states, the study says, with some version of net billing having been adopted in ten US states as of last year, and proposed in five others.

The net billing structure provides an incentive for customers with rooftop solar to add storage, so they can use more of their solar generation after the sun goes down, rather than sell it to the utility at a lower value.

At current costs of battery storage, installing storage solely for solar self-consumption is “not an economical customer investment,” the researchers found, with annual customer bill savings ranging from $19-33/kWh of storage capacity for a small storage system, and declining steadily with increasing system size. Rather, residential storage adoption has been driven by a multitude of value streams, the study says.

Meanwhile, net billing barely reduces grid costs, primarily because residential batteries are “largely sitting idle on peak days,” the study said.

If residential batteries were instead operated with market-based dispatch, to maximize their value to the grid, their value at a standard system size, across five of the six utilities studied, would equal a combined annual energy value of $16 to $23 per kWh of storage capacity, plus an annual capacity value of $6 to $13 per kWh of storage. (For the sixth utility the energy value would be much lower, because the utility does not participate in a wholesale market with volatile wholesale prices.)

For four of the utilities, the combined energy and capacity value under market-based dispatch would be greater than the upper bound of customer bill savings from solar self-consumption under net billing, said study co-author Galen Barbose in an email. For the remaining two utilities, the grid value under market-based dispatch and the bill savings under solar self-consumption would be very close, and for all utilities the self-consumption values were influenced by an “aggressive assumption” for the price differential between consumption and export prices, yielding high estimated bill savings from self-consumption, Barbose said.

The authors say that replacing “inefficient” net billing structures with market-based dispatch for storage could yield a significant “Pareto improvement”—a solution in which at least one participant gains and no one loses. Utility customers would gain because system costs would be reduced through savings in energy and capacity costs. Owners of residential storage would not lose so long as they were compensated at least at the level of their current annual bill savings under net billing.

Market-based dispatch is possible for storage batteries with smart inverters because smart inverters can receive communications regarding price signals.

The study defined energy value as the reduction in grid operating costs, measured by wholesale energy prices. It defined capacity value (termed “peak value” in the study) based on a $50/kW-year marginal capacity cost, allocated across the top 40 load hours for the bulk-power system. It defined market-based dispatch based on hourly varying prices for both exports and consumption, with batteries allowed to charge from the grid or discharge to the grid at any time.

A sensitivity analysis projected that the relative advantages of market-based storage dispatch would increase through 2050, because its combined energy and capacity value would rise faster than the value of storage operated for solar self-consumption under net billing.

Unconstrained grid discharging of storage batteries could add stress on the distribution grid, the study said, but by limiting grid discharging, 50–70% of the grid value of market-based dispatch could still be achieved.

The researchers conducted their study using metered electricity load data from about 1,800 residential customers across six utilities. The open access article, published in the journal iScience, is titled “Private vs. public value of US residential battery storage operated for solar self-consumption.”

The authors will host a webinar to discuss their study results on August 4 at 1:00 p.m. Eastern time.

As a point of clarification, the Berkeley Labs finding about battery storage under net billing providing “virtually no grid value” is specific to the scenario where: (a) net billing is implemented with flat (non-time-varying) prices and (b) wholesale market prices peak during daytime hours. They said that those two conditions don’t apply to some states where net billing is being implemented, such as California, where solar customers are placed on highly time-varying rates, and where wholesale prices tend to peak in the evening hours. “I suspect that California is probably more of an exception than the rule, at least in the present day,” Barbose noted. “And even for a state like California, our results still show that net billing can significantly degrade the value from storage (even if it is greater than zero).”

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