Today, SolarCity—a
company that’s grown quickly by installing solar panels for free and
charging customers for the solar power—announced a new business that
will extend that model to providing batteries for free, too. SolarCity
is a rare success story for investors in clean technology, and its
business model has sped the adoption of solar panels.
The
batteries could help businesses lower their utility bills by reducing
the amount of power they draw from the grid. They could also help
address solar power’s intermittency, which could prevent it from
becoming a significant source of electricity. The batteries are being
supplied by Tesla Motors, whose CEO, Elon Musk, is SolarCity’s chairman.
Other
solar companies have failed in recent years. But SolarCity’s business
model has helped it grow quickly. It had a successful IPO a year ago,
and its stock price has risen from its IPO price of $8 to over $50 today
(see “SolarCity IPO Tests Business Model Innovations in Energy”).
CEO
Lyndon Rive says that eight years from now, the company might not be
able to continue selling solar panel systems unless it packages them
with batteries, because of the strain on the grid that solar power can
cause. “It could be that, without storage, you won’t be able to connect
solar systems to the grid,” he says.
Solar power intermittency isn’t currently a big
problem for utilities, since solar panels generate just a tiny fraction
of the total electricity supply. But solar power will become a strain on
the power grid as it grows. Power from solar panels can drop in less
than a second as clouds pass overhead, before surging back again just as
fast. The tools that utilities use now to match supply and demand
typically can’t respond that fast. Batteries could be a solution, but
they’re too expensive to be used widely now. Rive thinks SolarCity can
help drive down their costs by scaling up its use of batteries with the
new business model.
Utilities charge companies for their electricity based on two things.
The first is the total amount of electricity they use (measured in
kilowatt-hours). The second has to do with their peak demand—a company
that needs to draw huge amounts of power for industrial equipment will
pay more than one that only needs to charge a couple of laptops, since
it will need bigger transformers and other equipment. The fee based on
that peak electricity demand can be a big chunk of the total bill,
typically between 20 and 60 percent, Rive says.
The battery
systems—and the software that controls them—are designed to reduce the
peak draw from the grid. Batteries charge up using power from solar
panels and supplement with power from the grid when a company needs to
draw its highest levels of power—such as during summer afternoons, when
air conditioners are running hard.
SolarCity is also testing
battery systems with residential customers, who typically don’t pay
demand charges. The main draw for homeowners would be the batteries’
ability to provide backup power if the grid fails. But eventually
regulators could adopt rules that allow homeowners to reap profits from
allowing utilities to use their batteries to help manage electricity
load on the grid.
Rive says SolarCity spent three and a half years developing the
battery system and the last year testing it. Because batteries are
expensive, it’s ideal to use ones as small as possible. Algorithms try
to predict when to charge and discharge the batteries, a decision based
partly on forecasts of how much solar power is going to be available and
when demand will be greatest.
The batteries use the same
technology Tesla uses in its electric cars. But the size of the packs
could be far larger, depending on the size of the solar panel system
it’s paired with.
SolarCity isn’t the only company looking to use batteries to reduce electricity costs (see “A Startup’s Smart Batteries Reduce Buildings’ Electricity Bills”). Nissan recently announced
that it had used the batteries inside several plugged-in Nissan Leaf
electric vehicles to reduce electricity costs for one building in Japan,
as part of a test of a concept called vehicle to grid (see “Recharging the Grid with Electric Cars”).
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