U.S.-based Sunrun recently won a bid to provide regional transmission organization (RTO) ISO New England (ISO-NE) with energy capacity at wholesale rates by aggregating electrical power produced by home solar-plus-storage systems distributed across the region.
ISO-NE on Feb. 5 awarded Sunrun a contract to provide 20 megawatts (MW) of peak power capacity aggregated from its Brightbox residential solar-plus-storage systems from 2022-2023, about the amount of electrical power used by 5,000 typical New England utility customers, according to the California-based company. The award marks a milestone in grid-wide use of distributed, “behind the meter” solar and other emissions-free renewable energy capacity.
It’s the first time a residential solar-plus-storage power provider won a bid in a U.S. RTO’s wholesale forward capacity market auction, competing against utility-scale coal, natural gas and nuclear power plants in doing so. Adding luster to the accomplishment, preliminary results indicated that the clearing price for the 2022-2023 auction was the lowest for ISO-NE forward capacity auctions in six years. The auction closed at a preliminary clearing price of US$3.80 per kilowatt-month (kW-month) across New England as compared to US$4.63/kW-month in last year’s auction.
“This is a breakthrough moment,” said Sunrun co-founder and CEO Lynn Jurich. “Sunrun is able to deliver clean and reliable electricity to customers at a lower cost than traditional central generation and provide this resource to the wholesale capacity market. This new energy services model is a win-win for everyone. We’re creating a new, cleaner, more affordable and resilient electricity system — powered by local home solar and batteries — for the benefit of all New Englanders. Clean, home solar energy improves the health of our communities and planet, is an efficient use of existing infrastructure, and home batteries provide households with the peace of mind of backup power during outages.”
A validation for home solar-plus-storage reliability and ability to scale
Responsible for ensuring provision of reliable, affordable electricity for one of the largest electricity markets in the U.S., ISO-NE manages a series of interconnected power grids that span six New England states, one of the most populated regions in the country. The standards and criteria power producers need to satisfy in order to qualify and participate in ISO-NE wholesale forward capacity markets are very high, wide-ranging and strictly monitored and enforced. That makes Sunrun’s home solar-plus-storage contract all the more impressive.
“Winning a bid in a forward capacity market validates the ability of home solar and battery storage to bring the benefits of clean, renewable energy to New England residents and throughout the country,” said Sunrun’s Head of Energy Services Audrey Lee. “Sunrun can deploy and manage solar and battery systems that meet the operational requirements of the ISO market, while also delivering energy savings and backup power to families.”
Sunrun is confident in its ability to fulfill all the terms and conditions required, Sunrun’s Director of Policy & Storage Market Strategy Chris Rauscher told Solar Magazine. “Sunrun’s home solar and battery power will be available as another energy resource to New England communities, alongside more traditional electricity resources,” Rauscher said. “We will be providing this capacity service just like a fossil fuel power plant would.”
Sunrun has installed nearly 5,000 of its Brightbox home solar-plus-storage systems nationwide in the U.S. since 2018, according to Rauscher. “We expect Brightbox installations to grow more quickly than solar-only installations,” he said in an interview. “We have already launched the service in eight markets. Demand for back-up power is high, especially in the face of increasingly extreme weather.”
A strategic partnership between Sunrun and the unregulated electricity market arm of utility National Grid launched in 2016 was a key enabler for winning the ISO-NE forward capacity contract. The collaboration includes a jointly staffed team working to develop grid services by aggregating Sunrun’s solar and storage assets and interconnecting them with utility and regional power grids.
“Today’s announcement points to the success of our on-going collaboration with Sunrun,” said Daniel Westerman, president, Distributed Energy & Renewables at National Grid. “ISO New England is the first RTO to enable participation for hybrid resources, which truly unlocks a future for a renewables-powered grid. ISO-NE’s thorough vetting process is a high bar to cross for Sunrun, and we’re excited that our team helped make this happen.”
A pivot point for “behind-the-meter” renewables contributions at the grid-scale?
All told, ISO-NE’s primary 2022-2023 forward capacity auction concluded with commitments to make 34,839 MW of electrical power available, 1,089 MW more than the regional capacity target set by ISO-NE. A total of more than 2,600 MW is to come from new grid resources that won contracts during the RTO’s primary and substitution auctions. Auction rules allow ISO-NE to acquire surplus, or less, capacity than the target in order to afford ISO-NE some flexibility in meeting regional electricity needs at a cost-effective price.
Sunrun’s ISO-NE forward capacity award could mark a pivot-point and set a precedent for other power providers able to tap into, aggregate and provide grid operators wholesale power capacity from distributed, “behind the meter” solar and renewable energy systems across their territories.
Sunrun’s participation in the auction signifies the growing importance of home solar and batteries, and will lower electricity costs for all New England ratepayers.
Equally impressive, Vineyard Wind, an offshore wind project under development off the coast of Massachusetts, won a substitution auction contract to make 54 MW of emissions-free electrical power available to the regional grid in 2022-2023.
“Sunrun participated in the auction with a low bid compared to other generation sources,” Rauscher pointed out. “This helps drive down retail energy rates for everyone.”
The decentralized nature of the home solar-plus-storage systems also makes them less vulnerable to system-wide threats and failure, he added.
At times when electricity is needed most, like during a polar vortex or other extreme weather events, home solar and batteries can help provide peak energy both to the grid and to households. And, if the grid goes down, solar and batteries will keep powering the homes.
Added to that are the benefits to human and environmental health. “Sunrun can further reduce the need for expensive and dirty power, and allow New England’s grid operator, ISO New England, to shift towards a system powered by more affordable, reliable, locally-generated energy,” he noted.
Winning the ISO-NE forward capacity contract also opens up a new revenue stream for Sunrun, one that it’s looking towards to help reduce the all-in costs of its Brightbox home solar-plus-storage systems. “Receiving additional revenue streams, such as capacity payments, could allow Sunrun to offer an even more attractive price for customers — less expensive batteries for example — while still providing for various levels of back-up power capabilities and more predictable pricing. This will all depend on specific market dynamics. No one-size-fits-all answer here,” Rauscher elaborated.
Grid-scale use of distributed renewables and battery-based energy storage
“In California, aggregated battery and solar-plus-battery resources have been selected in pilots to use new preferred resources for local capacity, as well as for demand-response programs like the pilot Demand Response Auction Mechanism. There have been other distributed resources, like EVs (electric vehicles), also making inroads…Sunrun’s aggregation is the first of its kind to deliver capacity in an RTO forward capacity auction from home solar and battery storage systems. This means it is playing a more fundamental role in the planning for reliability of the grid for an entire region,” Rauscher said.
Distributed renewable energy and energy storage policies, incentives, support and regulatory reforms are paving the way for further declines in the cost of and growth in use of emissions-free, behind-the-meter energy resources at the utility and regional grid scales across New England and the U.S.. Massachusetts recently became the first state to incorporate behind-the-meter energy storage as an energy-efficiency measure in its three-year energy efficiency plan, a major step forward both for storage and for efficiency, according to Clean Energy Group.
Massachusetts will offer performance incentives for energy storage capacity installed behind-the-meter on utility-customer sites that can be dispatched to reduce customer load in response to signals from the utility, Clean Energy Group explains.
This will lower peak demand and thereby save money (the top 10% of demand hours account for 40% of the state’s annual electricity spend). Other states should take note and begin to look at including storage in their own energy efficiency plans.
Sunrun CEO Jurich applauded ISO-NE and state policymakers for demonstrating national leadership aimed at incorporating home solar-plus-storage into state energy markets.
Smart, forward-thinking energy policy will always be key to progress. We need to ensure solar and battery customers are given fair compensation for solar energy they share with the grid, faster and less costly interconnection and permitting processes, and opportunities to provide grid services.
Sunrun expects aggregation of distributed solar-plus-storage “will continue to participate in the market in subsequent years, with the potential to do so for the duration of the 25-plus year lifetime of the assets and customer relationship,” Rauscher said. “Home solar and batteries are valuable for individual customers and can participate in markets head-to-head with centralized generation and traditional infrastructure.”
Looking out over the longer-term, Sunrun’s business will be based on much more than enabling households to better manage their energy bills, he continued.
With home solar and batteries we can help control when and how the energy is used, provide value to customers in the form of savings, resiliency, and predictable pricing while also providing valuable resources to the broader electric grid through grid services — participation in wholesale markets, demand response, etc.