Sunrun Wins Big in New England Capacity Auction With Home Solar and Batteries

Sunrun will get its chance to prove that home batteries and
solar panels can stack up against traditional power plants.

The San Francisco-based company won a 20 megawatt bid in the
forward capacity auction for ISO New England, which operates the
electric grid in six northeastern states. That auction ensures that
enough grid capacity will be online in 2022.

Unlike previous winners, Sunrun did not bid a traditional power
plant. Its product is a network of small solar and battery
installations that will go into roughly 5,000 customer homes across
the region. The company is promising to aggregate across those
systems to deliver the necessary power to the grid, while also
keeping the host customers happy.

Sunrun has vocally promoted this vision, as it expanded from
simply installing solar panels into battery storage and grid
services business lines. Many other companies and analysts share
the belief that distributed resources, acting in concert, can
provide a cleaner, more resilient and cheaper alternative to
centralized grid architectures.

Real world implementation of this model, sometimes referred to
as a “virtual power plant,” has lagged behind its invocations
in cleantech conferences and white papers.

In regulated states, small-scale pilots have begun. Some
distributed batteries participate in wholesale markets through
demand reduction mechanisms, which are less lucrative than capacity
products. Swell Energy won a contract with utility Southern
California Edison to put batteries in 3,000 homes; that was through
a
Preferred Resources Pilot
designed to try out new, cleaner grid
technologies.

With this win, Sunrun showed it could compete in an open auction
alongside conventional resources like gas plants and
hydropower.

“Definitionally, we can provide these services at lower costs
than others,” Sunrun Executive Chairman Ed Fenster said of the
successful bid.

A groundbreaking moment for virtual power plants

By power plant standards, 20 megawatts is small. But it’s
groundbreaking for virtual power plants to date. Sunrun completed

5,000 installations
of its BrightBox home solar and battery
system across the country by the end of 2018; now it must match
that number in the six New England states in three years.

To accomplish this, Sunrun first has to sell customers on the
core product: clean solar power and backup power from the battery.
Going forward, customers will have the option of participating in
the capacity service.

How exactly Sunrun explains the complexities of wholesale market
participation remains to be seen. However, the company says it can
use the expected revenue to lower the upfront price for customers,
and that may be all the explanation that consumers need.

Winning the capacity revenue, and potentially lowering prices as
a result, gives Sunrun new ammo for its sales pitch.

“We don’t have competitors who have done that yet, so
we’re extending our competitive lead in the process,” Fenster
said.

The first proof point will be whether Sunrun can sign up enough
customers in the required region. Fenster is confident that this
will happen, based on the company’s decade of experience
identifying and acquiring customers.

“We feel very good about our forecasting abilities,” he
noted.

The next proof point will come in 2022, when the obligation
kicks in. Sunrun will have to control its fleet of thousands of
batteries such that it reliably discharges the required amount of
power within designated peak hours in winter and summer.

The company hired Audrey Lee to build out that algorithmic
capability, which must balance customer use and grid participation
across a vast number of devices in as many different locations. It
has never been tested at so large a scale.

A leap forward in the business model

By 2022, though, Sunrun will have several years of experience
overseeing thousands of batteries in the field. The fleet will also
benefit from the law of large numbers, Fenster pointed out; a local
disruption won’t affect the thousands of systems in other
counties and states.

If it works as planned, this system will deliver benefits to
three different groups. Homeowners get clean energy and backup
power for a lower price; Sunrun makes money and gains a competitive
edge; New Englanders as a whole pay a little less for capacity.

“It’s a real leap forward in the business model and we’re
excited to pursue more of it,” Fenster said. “There’s no
reason other grid operators wouldn’t want to pursue a similar
strategy.”

Becoming eligible to bid into the market took some procedural
work, which will have to be replicated at other regional grid
operators for the model to spread. States with vertically
integrated utilities don’t offer this kind of market
participation for third parties like Sunrun.

If the new model proves reliable at scale, other regions will
have to take notice. The bullish view amounts to nothing less than
structural change in how the U.S. supplies its electrical system: a
shift away from the primacy of centralized power production.

Source: FS – GreenTech Media
Sunrun Wins Big in New England Capacity Auction With Home Solar and Batteries