In-Home Storage: The Virtual Power Plant

Rapid Growth

Solar and wind are considered the most popular renewable resources across the world, but due to their intermittent and unpredictable nature, utilities are still relying on natural gas and coal. However, when renewable technologies are combined with energy storage they smooth out load fluctuations and have the potential to significantly impact the generation mix.
Total energy storage deployment has increased dramatically in the past few years because of low-carbon, clean energy policies, and is anticipated to grow even more in the near-term. By 2022, GTM Research expects the U.S. energy storage market to reach 2.5 GW annually, with residential opportunities contributing around 800 MW.


Source: GTM Research

How Does It Work?

Energy storage works as a three-step process that consists of extracting power from the grid, solar panels, or wind turbines, storing it (charging phase) during the off-peak period when power prices are lower, and returning it (discharging period) at a later stage during the on-peak period when the prices are much higher.


For electric vehicles (EV), most of the charging happens at night and during weekends, when the prices are comparatively lower, and vehicles are not used that much. As EVs continue to enter the mainstream market, they would increase the off-peak prices and contribute to load shifting.
Energy storage devices and EVs can complement each other or they may be competitive. But energy storage is the key element for EV charging during on-peak hours.

Different Market Players

Residential energy storage has been a holy grail for companies like Tesla, Panasonic, LG, Sunverge Energy, and Orison with lithium ion (Li-ion) batteries as the leading technology type. Now with plug-in electric and hybrid vehicles on the rise, automobile companies Tesla, Nissan, Mercedes Benz, BMW, Renault and Audi have also joined the residential market to integrate EV charging stations, battery storage and rooftop solar that in essence has a residence operating as a virtual power plant.
Beginning in December of last year, Arizona Public Service Company deployed Sunverge Energy’s energy storage hardware coupled with advanced, intelligent energy management systems that predict future load requirements and solar generation. Additionally, Tesla is enjoying significant market share, shown recently by Vermont-based Green Mountain Power’s launch of a comprehensive solution to reduce customer electricity bills using Tesla’s cutting edge Powerwall 2 and GridLogic software.
A few other utility companies, especially in Florida and California, are also exploring residential energy storage programs, as shown in the figure below.


Source: Hawaii PUC; General Assembly of Maryland

So, what are some other current thoughts about the pros and cons of in-home energy storage?

  • Energy storage reduces load fluctuations by providing localized ramping services for PV and ensuring constant, combined output (PV plus storage).
  • Improves demand response and reduces the peak demand.
  • Extra savings for customers through net metering systems and end-user bill management.
  • Reduces reliance on the grid; the customer can generate and store the energy during severe outages also.
  • Disposal of Li-ion batteries is not easy, and they are difficult to recycle
  • Automakers, like Nissan and BMW, are implementing second-life batteries, thereby reducing the durability and reliability of the product.


Concluding Thoughts

Clearly, a wider acceptance of energy storage resources would be a game changer in the U.S. power sector. Utilities, consumers, and automakers are profiting from this exponential growth of energy storage. With an increasing number of companies using artificial intelligence and machine learning algorithms for energy management systems, the synergy with energy storage creates a perfect, smart, personal power plant which has tremendous potential to change the landscape of the energy industry.

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Evolution of the Mexican Energy Market

The Mexico energy reform began in 2013 with the goals of creating an open, transparent and competitive market to reduce electricity prices, increase reliability, and meet clean energy goals. To meet these goals, the state-ran generation owner, CFE, was split into six companies to ensure fair competition; an independent system operator, CENACE, was formed; and auctions for reliability and clean energy have been conducted. As a part of the broader reform, the Energy Transition Law established the requirement for long-term planning (Program of Development of the National Electric System or PRODESEN) and directly mandated clean energy goals. The latest PRODESEN was published in June 2017 and contains even more evidence towards the rapid evolution of the Mexican Energy Market.

The strong demand growth forecasted in Mexico over the next 15 years has decreased with each of the last three PRODESENs. In the latest PRODESEN (2017) the demand growth averages 2.9%, down from 3.4% in the 2016 PRODESEN and 3.6% in the 2015 PRODESEN. Historically, on average from 2005 to 2015, the demand growth has been 2.8%. Despite the reduction in forecasted demand growth, Mexico represents significant demand growth compared to other markets.


Figure 1. Historical and forecasted annual demand growth rates in each PRODESEN. Source

Historical generation is dominated by natural gas and oil which accounts for nearly 68% of all generation, and will remain a significant source of generation in the future. Based on a recent Mexico Energy Outlook by the International Energy Agency (IEA), Mexico has plenty of domestic fuel production capability but the competitive gas prices in the U.S. has led to rapid growth in gas imports from the U.S. (26% average annual increase in recent years) and account for 40% of demand. Future import growth estimates are supported by numerous pipeline projects between the U.S. and Mexico outlined in the PRODESEN. This increasing linkage between U.S. and Mexico markets suggests Henry Hub will be a good predictor in Mexico natural gas prices. With that said, Mexico is taking steps to attempt to boost domestic production and compete with imports by removing price caps on domestic supply. Forecasting these prices given market changes, such as removing price caps, will be a major challenge and have a significant impact on electric market forecasting.


Figure 2. Historical generation by fuel type from 2014 to 2016. Source

Large changes in fifteen-year forecasted capacity expansions have also occurred since the 2015 PRODESEN. The forecasted amount of combined cycle additions has decreased substantially, while wind and solar have increased. Particularly, solar capacity has dramatically increased most likely driven by record low solar prices. Expectations for hydro power have also fallen in each subsequent planning scenario as recent hydro forecasts have softened.


Figure 3. Total projected capacity additions over the fifteen-year PRODESEN forecast. Source

The Mexican energy market has made tremendous strides in a very short time frame from the enactment of laws in 2013 to long-term auctions spurring substantial investment in clean energy. It will be important to capture the changing natural gas market and renewable energy growth for power market forecasting. This can be accomplished through a combination of scenarios and stochastic simulations using a well vetted simulation tool and database. If you would like to schedule a demonstration of our Mexico database please contact

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Total Solar Eclipse and Its Impact on Solar Power

On August 21, 2017 a rare total solar eclipse will sweep across the United States, starting in western Oregon and passing southeast across the country to South Carolina. During this time, the sun will appear either partially or completely blocked by the moon, depending on your location. The “Great American Total Solar Eclipse” will be the first total solar eclipse to span across the United States since 1918. This event also marks the first time where the U.S. electric grid will be significantly impacted by a solar eclipse.


Figure 1. The path of August’s total solar eclipse. Source.

The eclipse is expected to cause a major dip in solar production for a period of hours on this day, especially on the west coast. California, for example, is expecting to lose about 6,000 MW from the grid due to the lack of sunlight, which California ISO (CAISO) is planning to make up for via natural gas and hydro generation. The Washington Post article goes on to discuss how another challenge for CAISO is ensuring the substitute generators are able to ramp up and down quick enough to handle the changes in solar generation. For instance, as the moon begins to block the sun, solar energy collection is expected to decrease at a rate of 70 MW/minute. Similarly, ramp up rates of around 90 MW/minute are expected once the sunlight begins to come back.

This total solar eclipse will mark the first one to be visible on any part of the contiguous United States since 1979, long before solar power held any share of market generation. It will also be the first solar eclipse of any kind in the United States since May 2012, and solar has grown at record rates since then. Luckily, Europe witnessed a similar total solar eclipse in March 2015 to give us a better context of what to expect. Germany, who alone accounts for ~40% of European solar capacity, saw a drop of solar output from 21.7 GW to 6.2 GW during the eclipse. Reuters also reported that to make up the loss of generation, they looked to gas, coal, nuclear and hydroelectric pumped storage energy, and that overall, Europe experienced a reduction of 17 GW of solar power during the eclipse and did an excellent job of successfully weathering the event through proper planning ahead of time.

Back in the U.S., solar power accounted for 9% of California’s generation in 2016 and the state is home to nearly half of the nation’s total solar capacity.  On August 21, California is expected to lose 50 to 75% of its solar production during the five or so hours. We will then see for the first time how the United States electric grid as a whole will adapt to its first significant dip in solar energy caused by a natural phenomenon.

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