Electric Vehicles and the Future of the Grid

Dec 10, 2019 | POLICY, TECHNOLOGY

Electric Vehicles and the Future of the Grid

When it comes to transportation, the future is electric. By 2025, 7 million electric vehicles are projected to be on the road in the US, with 5 million charge ports to support these vehicles. What will happen to our grid as the motor vehicle industry becomes electrified?

Will Electric Vehicles Kill the Grid?

A number of think pieces have been published in the last few years asserting that mass adoption of electrical vehicles (EVs) might kill the electric grid. These authors have a point; the electric grid wasn’t designed to handle a couple hundred million EVs charging every day. But the way in which the grid will be “killed” may not be what these authors had in mind.

Rather than causing widespread blackouts or increasing the cost of electricity, the actual change may be more of an evolution than an extinction. EVs could usher in several significant changes to the grid that make it more distributed, more flexible, and smarter.

Sales of electric vehicles are growing fast. The Edison Electric Institute reports that up to seven million EVs could be on Americans roads by 2025, up from a little over half a million in 2016, with continued sales of 1.2 million per year. That represents around 3% of the 258 million cars and light trucks expected to be registered in the U.S. in 2025.

According to EEI, approximately 4.4 to 5.5 million charging ports, including Level 1 and Level 2 chargers in homes and workplaces and Level 3 fast chargers in public charging stations, will be needed by 2025.

The increased demand EVs will place on the grid will be enormous. A single electric vehicle can draw as much power as three new houses. Rapid chargers, in particular, draw very large loads. Utilities theoretically have the excess generation capacity to power around 75% of America’s vehicles if they were EVs. But if those EVs charge around the same time, especially during times of overall peak demand, utilities won’t be able to meet the demand.

Utilities’ Response

Utilities need to match the supply of generated power with their customers’ demand for power. Demand isn’t constant, however; it varies depending on what customers are doing. For example, during hot summer afternoons demand is much higher than most other times because of the need for more air conditioning.

To meet high demand utilities either have to activate peaking power plants or buy energy from other utilities. Both options are more expensive than operating base load power plants during times of lower demand.

Demand charges and time-of-use charges are used to pass those costs on to consumers. The concern with EVs – particularly EVs charged with direct current fast chargers (DCFCs) – is that they will create higher peak demands than the grid can provide.

Several utilities, including Pacific Gas & Electric, San Diego Gas & Electric, Southern California Edison, and Hawaiian Electric, are already experimenting with time-of-use charges to send price signals that push drivers to charge during off-peak times. Some other utilities are lobbying their state utility boards to allow them to charge residential customers demand charges to provide similar price signals.

Customers pay for electricity in one of two ways: consumption, measured in kilowatt-hours (kWh); and demand, measured in kilowatts (kW). Consumption, also called usage, is the amount of energy used in each billing cycle. Demand, also called load, refers to the rate at which energy is used at any given moment. Customers on demand charge tariffs pay for the highest rate of energy use they reach – the peak demand ¬– in each billing cycle. Most residential customers only pay for consumption. Most commercial customers pay for both demand and consumption.

However, according to the Rocky Mountain Institute demand charges “are a significant barrier to the development of viable business models to operate public DCFC networks.“

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Solar-Powered, Grid-Connected EVs

The vehicle-to-grid (V2G) concept is a system in which “gridable” electric vehicles interact with the electric grid in more sophisticated ways than just charging. V2G systems could charge intelligently at times of low cost and low demand, provide ancillary grid services like load balancing and frequency regulation, and offer vehicle owners emergency backup power or even a source of income.

These systems reduce the negative impact that large numbers of EVs could have on the grid. They offer demand response capability by reducing their own rate of charge or sending power back to the grid when needed. V2G systems also help integrate intermittent renewable energy sources like solar and wind into the grid by acting as distributed battery energy storage systems.

The National Renewable Energy Laboratory (NREL) is actively conducting research on V2G systems. NREL researches studied plug-in electric and plug-in hybrid vehicles connected to household loads and small microgrids to evaluate their grid-connected capability. The researchers powered real home loads with Nissan Leaf and Via Van vehicles while disconnected from the grid. They evaluated the emergency power capability of these vehicles alone and also integrated real solar PV systems to extend emergency power duration. Their work shows that grid-connected EVs are viable.

V2G systems act like battery energy storage systems. Just like battery energy storage systems such as Tesla’s Powerwall and Powerpack, V2G EVs could store energy from intermittent renewable sources like solar and make that energy available whenever it’s needed.

Owning a grid-connected EV could provide all the benefits of driving an electric car and extend the usefulness of a solar array. Energy storage systems can provide peak shaving to reduce demand charges for customers on-demand charge tariffs. They can allow for greater self-consumption of solar power, which is particularly useful for customers whose utilities don’t allow 100% net metering. They can be used for emergency backup power or in microgrid applications.

How The Grid Benefits

Most vehicles are parked most of the time, but unlike internal combustion powered vehicles, EVs have the potential to provide useful services while parked.

Electric vehicles could act as distributed battery energy storage systems while plugged in, providing “spinning reserves” to the grid to meet sudden demands for power.

V2G systems could offer load balancing capabilities by “valley filling” – charging when demand is low and electricity is cheap, and “peak shaving” – exporting power to the grid when demand is high and electricity is more expensive.

Battery energy storage systems are already capable of providing voltage and frequency regulation – a necessity when integrating distributed generation sources with the grid. V2G systems could do the same.

Like other battery energy storage systems, V2G systems can make intermittent renewable sources like solar and wind fully dispatchable, meaning they can be used at any time. Battery energy storage has the potential to make intermittent renewables a base load power source, possibly replacing much of the coal and nuclear base load currently deployed.

How Drivers Benefit

EV owners may benefit even more.

EVs can store more energy in their batteries than a typical home uses in a day. With smart charge controller technology, an EV could be used for emergency backup power when plugged in at home. NREL researchers demonstrated this capability with a Nissan Leaf in their testing facility.

EV batteries may actually last longer when grid-connected. Uddin et al found that “the smart grid is able to extend the life of the EV battery beyond the case in which there is no V2G.” In simulations and a case study these researchers found both capacity fade and power fade were reduced when an EV was grid-connected in a V2G system.ⁱ

Owners may be able to monetize the grid services their EVs offer. Li et al showed that with a smart charge scheduling system, EV owners could earn $318 to $454 per year from the ancillary grid services their vehicles provide, depending on the length of their commute. They found that with a V2G system all of the popular EVs currently on the market could completely pay for the cost of electricity needed to drive 15,000 miles annually and generate a positive net profit. That means that with the right technology in place, EV owner could pay nothing for fuel and actually get paid to leave their cars plugged in to the grid.ⁱⁱ

Electric Cars Can Save the Grid

Electric cars may kill the grid as we know it, but the grid that replaces it will be smarter, cleaner, and quite possibly cheaper. Grid-connected EVs are a win-win.

ⁱUddin, Kotub, Tim Jackson, Widanalage D. Widanage, Gael Chouchelamane, Paul A. Jennings, and James Marco. “On the possibility of extending the lifetime of lithium-ion batteries through optimal V2G facilitated by an integrated vehicle and smart-grid system.” Energy 133 (2017): 710-722.

ⁱⁱLi, Z., M. Chowdhury, P. Bhavsar, and Y. He. “Optimizing the performance of vehicle-to-grid (V2G) enabled battery electric vehicles through a smart charge scheduling model.” International Journal of Automotive Technology 16, no. 5 (2015): 827-837.

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Building Energy Resiliency for the Military with Microgrids

Sep 2, 2019 | CHANGEMAKERS, TECHNOLOGY

Building Resiliency for the Military with Microgrids

Energy security is a critical concern to United States military operations, both nationally and abroad.

Microgrids provide the ultimate emergency backup power source and can function independently from the grid, enhancing the physical security and cybersecurity our nation’s military bases.

By: Troy Van Beek, Former US Navy SEAL & Co-Founder, Ideal Energy

Electric grids are among the largest and most complex infrastructure projects in the history of mankind – and the most vulnerable. Severe weather, natural disasters, and deliberate attacks can cause extraordinarily expensive damage to the grid and the wider economy. Ever-increasing worldwide demand for electricity and booming electric vehicle sales mean grid infrastructure will continue to be stressed. The traditional electric grid may not be able to sustain this increased demand.

Clean energy microgrids can provide the solution.

Microgrids are the ultimate emergency backup power source. They provide reliable power that can guarantee uptime for critical business, government, or healthcare operations.

Because they can operate independently from the grid, they also enhance physical security and cybersecurity – which are significant concerns to the military.

Microgrids can reduce the cost of energy. Microgrids can be configured to optimize for energy price, switching from grid power to microgrid sources when energy costs are high. Solar microgrids are much cheaper to run than diesel generators, making them an excellent option for remote locations.

Although microgrids can use fossil fuel energy sources, they excel when designed around renewable energy sources and battery energy storage. Battery energy storage makes intermittent renewables like solar fully dispatchable, allowing stored solar energy to be used whenever it’s needed, regardless of sunshine.

Microgrid technology also makes the traditional grid more resilient and efficient by improving power quality and reducing transmission and distribution losses.

How Microgrids Work

A microgrid is a localized group of electricity generators and electricity users that can operate independently of the traditional grid when needed.

The Microgrid Exchange Group defines microgrids as “a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.”

According to the Lawrence Berkeley National Laboratory, the key characteristics differentiating microgrids from the traditional grid are that microgrids are locally controlled and that they can operate either connected to the traditional or disconnected from it as an electrical island.

The microgrid concept comes from a 2004 research paper by Robert Lasseter and Paolo Piagi. They proposed that ever-increasing levels of distributed generation could cause problems with the traditional electric grid and that a solution lay in a new approach that views localized generation and associated loads as a subsystem or “microgrid.”ⁱ

Because they are downstream of a single point of common coupling (PCC) and because customers typically have a great degree of control over everything on their side of the meter, these microgrids are self-governed. Their more numerous, smaller generation sources provide higher local reliability than the traditional grid’s large, centralized power plants. With generation sources close by, they could also provide higher efficiency with less transmission loss. (The fuel-to-electricity efficiency of existing power plants, including transmission, is only around 28-32%.)

Lasseter and Piagi envisioned that with a plug-and-play architecture provided by inverters, these systems could be installed with little site-specific engineering required. Modern battery energy storage systems like Tesla’s Powerwall and Powerpack provide both the control to be plug-and-play and the required voltage regulation to integrate multiple generation sources into a microgrid.

Solar + Storage in Microgrids

Above: Ideal energy installed a Tesla Powerpack system which works in tandem with solar at Agri-Industrial Plastics Company (AIP) of Fairfield, IA.

Solar power and battery energy storage are a perfect fit for clean energy microgrids. Solar power is clean, renewable, and scales up and down very well. Unlike backup generators powered by diesel fuel, solar panels require almost no maintenance and are free to operate. Solar panels are immune to supply chain disruption.

Battery energy storage systems make intermittent renewable sources fully dispatchable, meaning stored solar energy can be used anytime, even when insolation is low. Modern battery energy storage systems use predictive algorithms to handle all control operations. These artificial intelligence systems can be configured to optimize for price, automatically switching to the grid when energy is cheapest and using stored solar energy when grid power is more expensive.

Military Microgrids

A sobering 2017 research paper shows that the U.S. electric grid is highly vulnerable to natural disasters, physical attacks, and cyberattacks.ⁱⁱ

GRID VULNERABILITIES
Weather-related power outages cost the United States $18 billion to $33 billion every year in spoiled inventory, delayed production, and damage to grid infrastructure. An average of 700,000 consumers are impacted during each weather-induced power outage annually.

The researchers found that the “traditional power grid infrastructure is incapable of withstanding intentional physical attacks.” Damage caused by sabotage, bombing, or terrorism can be long-lasting and expensive because grid infrastructure components such as large transformers are often custom-built and are difficult to source and move.

A 2013 sniper attack on a PG&E substation near Silicon Valley disabled 17 transformers and cost PG&E approximately $100 million. Repairs took 27 days.

The Pentagon spent around $100 million in 2009 to repair cyber-related damage to the electric grid. In 2012 the Department of Homeland Security responded to approximately 200 cyber incidents in critical infrastructure sectors, 41% of which involved the electric grid.

According to senior intelligence officials, adversarial nation states have already made attempts to map critical infrastructure for “navigation and control” of the U.S. electric grid. The estimated economic impact of a successful grid cyberattack is $243 billion to $1 trillion in an extreme case.

SECURING ENERGY MICROGRIDS
The researchers reported that the technical community and energy industry recommend that the military harden itself from these threats with distributed solar + battery energy storage microgrids. This is a belief we at Ideal Energy share.

Solar energy is free to operate, requires almost no maintenance, and is not vulnerable to supply chain disruption. Solar energy savings yield impressive returns on investment over time.

Battery energy storage systems make solar energy fully dispatchable. Stored solar energy can be used at night or other times of low insolation, during grid disturbances, or during times of peak demand or high energy cost. Battery energy storage systems can be configured in a number of ways: to provide peak shaving, to act as an emergency backup system, and to offer microgrid capability.

“

Remote sites and communities have cut costs and increased energy security with solar microgrids. The military can do the same with overseas bases and forward operating bases. Diesel can cost upwards of $400 per gallon by the time it reaches vehicles and aircraft at forward operating bases in Afghanistan or Iraq.”

From left to right: Forward Operating Base, Logar, Afghanistan, Photo Credit: US ARMY, Former US Navy SEAL and Ideal Energy Founder, Troy Van Beek in active duty.

FORWARD OPERATING BASES
Remote sites and communities have cut costs and increased energy security with solar microgrids. The military can do the same with overseas bases and forward operating bases. Diesel can cost upwards of $400 per gallon by the time it reaches vehicles and aircraft at forward operating bases in Afghanistan or Iraq.

The National Park Service installed a 305 kilowatt (kW) solar array with a 1.92 megawatt-hour (MWh) battery energy storage on Alcatraz Island in 2012. The Alcatraz microgrid has reduced the island’s fuel consumption by 45% annually – or 25,000 gallons of diesel.

The island of Ta’u in American Samoa switched from expensive diesel generators to a solar + storage microgrid. The project features a 1.4 megawatt (MW) solar array and a 6 MWh Tesla Powerpack battery energy storage system. The system reduced the island’s energy costs and provides reliable power to the island’s nearly 600 residents. The Ta’u microgrid helped bring American Samoa’s overall renewable energy share to 48%.

COSTS
Meeting military microgrid needs is a large task. Around 80% of all energy consumed by the Federal government goes to Department of Defense operations. The Department of Defense operates over 400 military installation in the continental U.S. Approximately 17 gigawatts (GW) of solar photovoltaics will be needed to power all domestic military sites.

The researchers estimated the cost to outfit all domestic military installations with solar arrays would be approximately $42 billion at a price of $2.50 per installed watt. However, that investment will pay back in several years due to avoided energy expenditures and will provide cheap insurance against extremely expensive vulnerabilities.

A SECURE, SUSTAINABLE MILITARY
The military is already moving in the direction of clean energy microgrids. The military plans to obtain 25% of its energy from renewable sources by 2025. Twenty-seven bases have installed or plan to install solar arrays. Several microgrids involving renewable energy have already been installed.

In 2017 Marine Corps Recruit Depot, Parris Island updated its electrical system with a new microgrid. The 10 MW microgrid, which incorporates a 6.7 MW solar array, an 8 MWh battery energy storage system, and a 3.5 MW natural gas combined heat and power (CHP) plant, allows the base to fully disconnect from the grid and operate in island mode during grid disturbances. The project cut the base’s utility demand by 79%, reduced water use by 27%, and eliminated 37,165 metric tons of CO2 production.

A similar project at the Otis Air National Guard Base on Cape Cod, Massachusetts went online in 2018. That project incorporates a 1.5 MW wind turbine, a 1.6 MW diesel backup generator, and a 1.2 MWh battery energy storage system. The Otis microgrid was the first military microgrid to use a battery energy storage system to form a completely islandable base-wide microgrid that can operate independent from the utility grid. The microgrid will provide all of the base’s power, save $500,000 to $1 million per year, and protect the base from cyber-vulnerabilities.

Microgrid Growth

The growth of microgrids is substantial. According to the Department of Energy, there were around 140 microgrid projects totaling 1.1 GW of capacity worldwide as of 2011. By 2017 there were 216 microgrids in the United States alone with 1.948 GW of renewable energy capacity. The microgrid market is expected to grow to 7.6 GW by 2024, according to Ameresco – a five-fold increase since 2015. Microgrids are ready for primetime.

ⁱLasseter, Robert H., and Paolo Piagi. “Microgrid: A conceptual solution.” In IEEE Power Electronics Specialists Conference, vol. 6, pp. 4285-4291. 2004.
ⁱⁱPrehoda, Emily W., Chelsea Schelly, and Joshua M. Pearce. “US strategic solar photovoltaic-powered microgrid deployment for enhanced national security.” Renewable and Sustainable Energy Reviews 78 (2017): 167-175.

About Ideal Energy

Ideal Energy’s solar + storage expertise makes us the perfect partner for a clean energy microgrid project. Ideal Energy installed the first commercial solar + storage project in Iowa at Stuff Etc’s Coralville location. We also installed the largest solar and storage project in the state at the MUM Solar Power Plant, which is the first project in the Midwest to combine active tracking with battery energy storage. We are currently installing the first Tesla Powerpack deployed in Iowa at Agri-Industrial Plastics Company.

“When I started Ideal Energy, I knew solar power could provide a solution to global energy security,” said Troy Van Beek, former Navy SEAL and founder and CEO of Ideal Energy. “The solar + storage technology we’re working with now takes that concept even further with secure and reliable power, emergency backup capability, and even complete grid independence.”

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Solar as a Strategy

Jun 26, 2019 | CHANGEMAKERS, FINANCE, TECHNOLOGY, Uncategorized

Solar as a Strategy

How Solar Energy Helps Companies Hire & Retain Top Talent, Reduce Operating Costs, and Stay Ahead of the Competition

In his book On Competition, Michael Porter wrote that, “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”

If your company has a strategy, as opposed to what Porter called operational effectiveness, you can build higher barriers to competition by creating a unique position for yourself. This can yield higher profits than operational effectiveness-based approaches.

Solar or solar plus battery energy storage can be a strategic differentiator – and not only because of the energy cost savings. In addition to capitalizing on the hidden opportunity in your operating costs, solar energy can help you stake out a strategic position to attract top employees and win competitive bids.

Attracting Top Talent & Millennial Workers

A 2013 Bain & Company survey discussed in the Harvard Business Review found that two-thirds of workers reported increasing interest in their employers’ commitment to sustainability compared to just a few years before. A majority of respondents said sustainable business was extremely important to them. In fact, employees cared more about the sustainability of actual businesses operations than about a company’s philanthropic activity. Perhaps most importantly, more respondents believed employers should take the lead on sustainability than they did consumers, employees, or even governments.

Sustainability is especially important among Millennial employees, who became the largest generation in the U.S. labor force in 2016. According to Forbes, green technology is among the top four things Millennials seek out from potential employers. Around 90% of Millennials, 84% of Gen Xers, and 77% of Baby Boomers say sustainability is a core value they consider when choosing a job.

We’re really focused on being the employer of choice in the region. This solar array is like a giant billboard that says, ‘Guess what? This is not your old-school manufacturing building.’ It’s not dark, it’s not dingy, it’s not unsafe. It’s technical, it’s looking forward.”

–Lori Schaefer-Weaton, President, Agri-Industrial Plastics Company

This cannot be faked. Employer actions must match the perception of sustainability. Brand credibility on social and environmental initiatives stands at only 19% according to a research study by Weber Shandwick and KRC Research. This likely contributes to the 31% of employees who quit new jobs within the first six months. Employers must walk the talk to not only attract but also retain top talent, especially among younger workers.

Our customer Agri-Industrial Plastics Company (AIP) is using its solar energy and Tesla battery system to attract top hires by staking out a cutting-edge, sustainability-focused position. This is the first solar project in the Midwest to incorporate Tesla Powerpack and the first solar plus battery energy storage system implemented by a large manufacturer in Iowa.

“We’re really focused on being the employer of choice in the region,” said Lori Schaefer-Weaton, president of AIP. “This solar array is like a giant billboard that says, ‘Guess what? This is not your old-school manufacturing building.’ It’s not dark, it’s not dingy, it’s not unsafe. It’s technical, it’s looking forward.”

The solar + storage installation will form the foundation of a comprehensive sustainability policy currently under development at AIP. “I would consider it a strategic investment for our future,” said Schaefer-Weaton.

Above: Agri-Industrial Plastics is using solar as a strategy to attract hires such as Jeff Guttry, Engineering Coordinator.

From Left to Right: Robotics at work on AIP’s manufacturing floor, a student intern gets hands-on experience in the repairshop.

Sustainability Scorecards

Many manufacturers and other suppliers are subject to sustainability evaluations by their customers. Large companies like retailers, tech companies, and OEMs spearheaded these efforts along with environmental NGOs. For example, in 2009 Walmart created a 15 question Sustainability Index and asked nearly 100,000 suppliers to respond. Walmart uses the Sustainability Index to reward high-scoring suppliers.

These sustainability scorecards are spreading throughout industry, including to smaller firms, aided by a growing suite of independent NGO evaluation and certification programs that take the heavy lifting off the buyer. If these evaluations are not yet widespread in your industry, they likely will be soon.

A number of our manufacturing customers are evaluated for their sustainability efforts. Earning top marks on these scorecards is one of the motives behind our customers’ decisions to move forward with renewable energy programs. Sustainability scores usually include some form of carbon reduction or renewable energy component, so solar energy is among the best sustainability interventions a company can make to earn a higher score.

These scorecards can be vitally important in a competitive bidding process or during annual evaluations. Solar energy and other sustainability efforts add points to a supplier’s score, which increases the likelihood of winning – and keeping – valuable contracts. Sustainability scores can be a large component of overall evaluations, along with traditional key performance indicators like price, performance, and quality. In Dell’s supplier evaluation, for example, sustainability performance is weighted at 10 to 15% of the overall score.

Above: Agri-Industrial Plastics Company (AIP) is using solar as part of their sustainability growth strategy to attract hires and clients.

From Left to Right: AIP’s manufacturing process integrates advanced engineering, robotics and skilled labor to create custom blow-mold products.

Operating Cost Opportunities

You want to reduce operating expenses. Every business does. Although this may seem less like a clever strategy than simply good business sense, solar energy can allow you to capitalize on the hidden opportunities in your budget that your competitors may not even be aware. For manufacturers and other large electric users, in particular, demand charges can be a major line item that is difficult to control. Solar installations and solar plus battery energy storage systems can slash demand charges and dramatically reduce utility expenses.

Our customer Steffensmeier Welding & Manufacturing (SWM) knocked over $90,000 per year off of its expense sheet. The 430 kW solar array we built for the company will pay for itself in 4-6 years.

Those savings have allowed Jenny Steffensmeier, president and owner, to invest in her employees, hire new workers, expand production, and give back to the community. The company added coverage for dental, vision, and disability to its benefits package. Several employees are receiving AutoCAD training. SWM added a second shift with new hires. The company plans to purchase additional equipment in the future. Increased community involvement and charitable giving round out the uses for those solar savings. “All of these things potentially could not have happened because the cash flow was not there before,” Steffensmeier said.

Investments in solar energy yield dividends for businesses, communities, and employees that compound year over year. How is your competition answering that?

Above: Steffensmeier Welding & Manufacturing produces 100% of it’s energy needs with solar on a net annual basis, and saves about $92,000 per year in operating costs.

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Sustainability as a Strategy

In their Harvard Business Review essay, Yes, Sustainability Can Be a Strategy, Ioannis Ioannou and George Serafeim reported on their findings from environmental, social, and governance (ESG) ratings of over 3,000 companies. They found that some sustainability measures are becoming best practices that are more of a necessity than a unique position. They also found that more strategic approaches to sustainability – those that went beyond common sustainability practices and differentiated businesses from their competition – were associated with increased market valuation and higher return on capital.

Ioannou and Serafeim concluded that “some companies are creating real strategic advantage by adopting sustainability measures their competitors can’t easily match.”

If you invest in solar energy before your competition does, you’ll have the upper hand. You can take advantage of higher tax credits (which start stepping down after this year), the recruiting and marketing punch that comes with being an early adopter, and extra months or years of compounding savings that can be reinvested in growth. Every day you have these advantages and your competitor does not, you put more distance between your company and your competition.

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Anatomy of a Utility Bill

Apr 23, 2019 | TECHNOLOGY

Anatomy of a Utility Bill

Having trouble understanding your utility bills? Here’s our helpful guide to demystifying your utility electrical charges.

Utility bills can be complex, especially for large electric users. You may be wondering how utility bills are calculated.

Our guide breaks down the anatomy of a utility bill and covers tariffs, demand charges and more. The key to controlling energy costs starts with understanding your charges. We can help you identify areas where savings are possible and implement a plan that gives you the power to control your energy costs.

In this article we cover:

TARIFFS
CONSUMPTION CHARGES
DEMAND CHARGES
KNOWLEDGE = SAVINGS

Tariffs

Utility bills are built around tariffs. A tariff defines the billing structures, electric rates, and other charges that combine to form a bill.

BILLING STRUCTURES

Consumption and demand are linked, but they don’t increase or decrease in tandem. Let’s say Customer A uses one light bulb 24 hour a day and Customer B uses two light bulbs 12 hours a day. They will both have the same consumption at the end of the month, but Customer B will have twice the peak demand of Customer A.

Most residential customers only pay for consumption. Most commercial customers pay for both demand and consumption.

ELECTRIC RATES

The U.S. Energy Information Administration’s (EIA) Electric Power Annual 2017 lists the average electricity consumption rates in 2017 as $0.1289/kWh for residential customers, $0.1066/kWh for commercial customers, and $0.688/kWh for industrial customers. Those are average rates, however; different billing structures complicate the picture.

The EIA doesn’t collect or publish demand charge data, but the National Renewable Energy Laboratory (NREL) OpenEI Utility Rate Database (URDB) makes it possible to see tariff details, including demand charge rates, for any location in the U.S.

OTHER CHARGES

Other charges consist of taxes, fixed costs like connection fees or delivery fees, and any additional fees, such as for public street lighting.

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Consumption Charges

Consumption-only tariffs usually use flat, tiered, or time-of-use billing structures. With each of those billing structures, the customer pays for the kilowatt-hours of electricity used in each billing cycle.

FLAT BILLING

With flat billing, which is common in residential tariffs, there is only one rate for all consumption, regardless of time of time day or total amount of usage. For example, $0.10/kWh.

Some utilities charge a different flat rate in summer than during the rest of the year, but those seasonal price differences are usually the only variation on top of flat billing.

TIERED BILLING

With tiered billing there are two or more rates for different usage amounts. The first several hundred kWh are billed at one rate, the next several hundred kWh are billed at another rate, and so on. Some utilities charge less as usage increase, while others charge more.

Here’s an example of a typical tiered billing structure with three tiers that decrease in price with increasing usage.

In the example above, price decreases with increasing usage, but some utilities charge more with increasing usage. That might seem counterintuitive because we’re accustomed to paying less when we buy in bulk. The reason rates sometimes go up with increasing usage is because utilities often want to disincentivize usage that exceeds their baseload generation capacity, which would force them to either turn on peaking power plants or buy energy on the spot market.

There may also be seasonal variations overlaid on these tiers. For example, there might be three cheaper tiers during most of the year and one more expensive tier during the summer months.

TIME-OF-USE-BILLING

With time-of-use billing there are two or more rates depending on the time of day when electricity is consumed. The utility will define on-peak and off-peak times based on how much demand occurs during those times. On-peak times usually coincide with high air-conditioning loads from mid-day through late-afternoon, but they may start in the morning or extend into evening. Customer are charged a higher rate during on-peak times.

For example, a utility might define on-peak as 10:00 AM to 8:00 PM and off-peak as the rest of the day. In this example, the electric rates might look like this:

This is an example of a straightforward time-of-use structure, but they can be more complex. Some utilities define additional peak levels, like mid-peak and critical peak. The on peak window may be different during summer and winter, or during weekdays and weekends.

Time-of-use billing is common in commercial and industrial tariffs, but also used by some utilities in residential tariffs. Time-of-use billing is growing increasingly popular among utilities to recover costs as more and more customers use distributed generation solar to reduce their utility expenses.

COMBINATIONS & SEASONAL CHARGES

These billing structures can become much more complicated. Utilities may combine tiered and time-of-use billing, for example. It’s also common to have seasonal variations overlaid on any of these billing systems. Even flat billing could have two different rates for winter and summer.

Demand Charges

Demand charge billing is different. With demand charge billing the customer pays for the highest power load reached – the peak demand. Peak demand is defined as the highest average load during a peak demand interval (usually 15 minutes) in each billing cycle.

The actual demand charge is calculated by multiplying the peak demand rate by the peak demand. For example, if a customer hits a peak load of 150 kW during a particular month, and the demand fee is $10/kW, then the demand charges for that month are $1,500.

CONSUMPTION

Customers with demand charge billing structures pay for consumption, too. Those consumption charges are usually flat or tiered. The consumption electric rate is usually very low compared to the rates in consumption-only tariffs. As noted above, the nationwide average consumption electric rate for industrial customers is about half the average for residential customers.

The demand charge part of the bill can easily overshadow the consumption part. Two customers with the same overall consumption could have very different bills depending on the size of their peak loads and when they occur.

RATCHET CLAUSES

Some demand charge tariffs contain a ratchet clause. Ratchet clauses impose a minimum demand charge throughout the year based upon the highest peak demand reached all year. Ratchet causes can make demand charges even more significant, particularly for customers with seasonal load profiles.

For example, a ratchet clause might charge a customer 75% of their overall annual peak every month of the year. If that customer hit 100 kW peak demand in July, they would be charged for at least 75 kW of demand during the other 11 months of the year regardless of how high their peaks actually are during those months.

VARIATIONS

To further complicate matters, some demand charges are themselves structured as tiered or time-of-use charges. So a demand charge tariff could contain, for example, a tiered consumption billing structure and a tiered demand billing structure.

Controlling Your Electrical Costs

Understanding how utility bills are put together can allow customers to make informed decisions about how best to control costs.

In some cases, this can be quite straightforward. If a household is on a flat billing structure with a higher price in summer, than perhaps something as simple as a smart thermostat to control the air conditioner would have a substantial impact on that household’s utility bills.

Some utility bills can be surprisingly complex, however, particularly for commercial or industrial customers. If a demand charge tariff contains tiered consumption charges with multiple levels, as well as tiered demand charges with a ratchet clause, it would be extremely difficult for a business to verify the measurements and calculations behind its bill, let alone identify strategies to control costs.

That expertise – measuring consumption and demand, studying the structure of tariffs, and matching solutions to business problems – is exactly what Ideal Energy offers. We identify areas where savings are possible and design and implement solar or solar + storage systems to maximize return on investment.

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Peak Shaving with Solar & Storage

Feb 14, 2019 | TECHNOLOGY

Peak Shaving with Solar & Storage

Do you use a lot of electricity? You might need peak shaving for more affordable energy.

Peak demand charges make up the most expensive part of your energy bill.

Advanced technologies to include AI-optimized solar and storage systems now allow you to manage these excessive energy costs and gain a competitive advantage by significantly reducing your business’s operating expenses.

This article is part of our on-going series exploring the powerful dynamics at play in our current energy paradigm, and what technologies are revolutionizing the way we generate and consume energy.

In this article we cover:

WHAT ARE DEMAND CHARGES?
WHY DO DEMAND CHARGES EXIST?
LOAD PROFILES
PEAK SHAVING
THE NEW ENERGY FRONTIER: PEAK SHAVING WITH SOLAR & ENERGY STORAGE

What Are Demand Charges?

Demand charges are expensive. Not all utility customers are on demand charge tariffs, but for large consumers of electricity to include businesses, manufacturing and industrial operations, educational institutions and faith-based organizations, those charges can be a significant part of a monthly utility bill. Customers with spiky or seasonal load profiles can be particularly hard hit. According to the National Renewable Energy Laboratory (NREL), demand charges often account for 30% to 70% of a customer’s utility bill.

The most effective way to manage utility costs for customers with demand charges is a practice called peak shaving. Peak shaving involves proactively managing overall demand to eliminate short-term demand spikes, which set a higher peak. This process lowers and smooths out peak loads, which reduces the overall cost of demand charges.

We believe solar + battery energy storage is the best way to peak shave. Other methods – diesel generators, manually turning off equipment, etc. – all present significant downsides. Battery energy storage systems do not generate pollution or noise, require no employee time to operate, and do not impact business operations. They make solar viable for more customers, which in turn generates additional savings.

Key Points

WHAT ARE DEMAND CHARGES?

For large electric users, monthly energy bills consist of two parts: 1) Basic energy charges for the total amount of electricity used throughout the billing period and 2) Demand charges for the highest electric usage or “peak demand.”

WHY WORRY ABOUT DEMAND CHARGES?

Demand billing can account for 30-70% for a large electric user’s utility bill. Many Midwestern states like Iowa pay some of the highest peak demand rates in the nation, seriously impacting the operating costs of your business.

CAN I ELIMINATE DEMAND CHARGES?

You can reduce or eliminate expensive peak demand charges with a combination of solar and AI-powered energy storage, which charges batteries when the sun is shining, and discharges the stored energy during times of peak energy use.

How Do Demand Charges Work?

Customers pay for electricity in one of two ways: consumption, measured in kilowatt-hours (kWh); and demand, measured in kilowatts (kW). Most residential customers only pay for consumption. Most commercial customers are on demand charge tariffs and they pay for both demand and consumption.

Types of Charges

CONSUMPTION CHARGES
Flat, tiered, and time-of-use structures all charge for consumption only. With each of those billing structures, the customer pays for the kilowatt-hours of electricity used in each billing cycle.

FLAT BILLING
With flat billing there is only one rate for all consumption, regardless of time of time day or total amount of usage. For example, $0.10/kWh.

TIERED BILLING
With tiered billing there are two or more rates for different usage amounts. The first several hundred kWh are billed at one rate, the next several hundred kWh are billed at another rate, and so on. Some utilities charge less as usage increase, while others charge more. For example, $0.10/kWh for the first 500 kWh and $0.08/kWh for all usage beyond the first 500 kWh.

TIME-OF-USE BILLING
With time-of-use billing there are two or more rates depending on the time of day when electricity is consumed. The utility will define on-peak and off-peak times of day based on how much demand occurs during those times. Customers are charged a higher rate during on-peak times. For example, $0.10/kWh from 10:00 AM to 8:00 PM and $0.08/kWh the rest of the day.

These billing structures can become much more complicated. Utilities may combine tiered and time-of-use billing, for example. Some utilities define additional peak levels, like mid-peak and critical peak. The on-peak window may be different during summer and winter, or during weekdays and weekends. Seasonal rates may be overlaid over any of these systems.

DEMAND CHARGE BILLING
Demand charge billing is different. With demand charge billing the customer pays for the highest power load reached – the peak demand. Peak demand is defined as the highest average load during a peak demand interval (usually 15 minutes) in each billing cycle.

Two customers with similar overall consumption could have very different bills depending on the size of their peak loads and when they occur.

RATCHET CLAUSES
Some demand charge tariffs contain a characteristic known as a ratchet clause. Ratchet clauses impose a minimum demand charge throughout the year based upon a fraction of the highest peak demand. Ratchet causes can make demand charges even more significant, particularly for customers with seasonal load profiles.

Why Do Demand Charges Exist?

Utilities use demand charges to help recover costs associated with running peaking power plants or buying power from other utilities on the energy spot market. Demand charges also help utilities recover transmission costs to customers with large energy needs.

Supply and Demand: Matching Generation with Base Load and Peak Load

Utilities need to balance their generation capacity with their customers’ demand for electricity at all times. However, customer demand isn’t constant; it varies from the peak load down to the base load.

The peak load is the highest overall system load the utility reaches. The base load is the lowest level of load. Utilities use several strategies to balance supply with these different levels of load. The traditional approach is a combination of unvarying power plants and dispatchable generation. Other options include buying and selling electricity with long-term contracts, buying and selling electricity on the energy spot market, and curtailment.

DOWNLOAD THE DEMAND PRIMER

How Demand Charges Fit In

Demand charges pass the higher marginal cost of peaker plants and load following plants on to consumers. In theory, they also mitigate the need for more of these plants by sending price signals to customers to reduce their demand during peak times.

Utility Methods of Power Supply for Peak Demand

UNVARYING POWER PLANTS
Unvarying power plants provide base load generation. These plants typically run at full capacity all the time. They usually only power down for maintenance. They therefore tend to have a high capacity factor, which is the ratio of actual output to theoretically possible output. They also tend to have low marginal operating costs, but high fixed costs and construction costs. They usually can’t be modulated much, if at all, in response to demand.

Nuclear plants and coal-fired plants are often used as unvarying power plants. Nuclear plants have the highest capacity factor of any generation modality and among the lowest marginal costs. Coal plants also have low marginal costs. Both are difficult to start, stop, and modulate, so it makes sense to run them continuously. Hydroelectric, geothermal, fuel oil, combined cycle, and other types of power plants can also be used for base load. Solar and wind can be used for base load if paired with energy storage.

DISPATCHABLE GENERATION
The chief characteristic of dispatchable generation is the ability to modulate generation in response to changes in demand.

PEAKING POWER PLANTS
Peaking power plants, or peaker plants, operate in conjunction with unvarying base load power plants. They are relatively cheap to build and have short start up and shut down times, but they have higher marginal costs than unvarying power plants. Because peaker plants sit idle some of the time yet need to be staffed and ready to power up on short notice, they are costlier to operate than unvarying plants. Natural gas turbine plants and hydroelectric plants are often used as peaker plants.

LOAD FOLLOWING POWER PLANTS
Load following plants fall in between base load plant and peaker plants in terms of capacity factor, fixed costs, marginal costs, and startup and shutdown times. They are still considered dispatchable, they just aren’t quite as responsive as peaker plants.

Load Profiles

A load profile describes the cycles of load, or demand, over time. It can be visualized as a graph showing the ups the downs of demand throughout a day, or a week, or a year. There are several different types of load profiles. The area under the demand line represents consumption, or the total amount of electricity used.

Types of Load Profiles

DAILY LOAD PROFILE
Daily load profiles have variations in demand within each day, but most days are similar to one another. A grocery store that operates seven days a week, but shuts down at night, would likely have a daily load profile.

SEASONAL LOAD PROFILE
A seasonal load profile has variations in demand from season to season that overshadow any daily or weekly differences. Customers with heavy air conditioning loads have seasonal load profiles. A university or office that air conditions lots of space would likely have a seasonal load profile.

WEEKLY LOAD PROFILE
A weekly load profile has little variation in demand throughout a single day, but more variation from one day to another. A manufacturer that operates 24 hours a day, but closes on the weekend, would have a weekly load profile.

Get specific answers about how peak shaving can impact your utility bills.

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Peak Shaving

Now that we know what demand charges are and why they exist, let’s move on to what businesses can do to mitigate them. As stated above, peak shaving is the most effective way to manage utility costs for customers with demand charges. Peak shaving lowers and smooths peak loads, reducing or eliminating the short-term demand spikes responsible for high demand charges. There are a number of ways to peak shave, but some are better than others, and the method used should match the load profile and electrical needs of the business.

Traditional Methods of Peak Shaving

MANUAL INTERVENTION
The most straightforward and least reliable method is to manually manage demand. For example, a plant manager could power down certain machines during the on-peak window. These techniques can work, but they’re not foolproof. A single mistake on one day could bring about a very expensive power bill for the month.

CONTROLLERS
A similar, but more reliable method is to use controllers programmed to prevent certain machines from turning on when power demand is already high during the on-peak window. The downside to controllers is that they may require customers to choose between expensive demand charges and running machinery when it makes business sense to do so.

DIESEL GENERATORS
Diesel generators can be used to manage demand charges by providing additional energy during on-peak times, reducing the need to draw from the grid. However, generators have several significant downsides. They are costly to operate if used frequently, both in terms of fuel and in terms of wear and tear. Generators also pollute and they are loud.

STANDALONE SOLAR
Standalone solar arrays reduce electricity consumption very well and they can be used to mitigate demand charges to an extent, but they can’t provide guaranteed peak shaving. Cloud cover or shading can temporarily reduce solar generation and hamper the effectiveness of peak shaving.

The New Energy Frontier: Peak Shaving With Solar & Battery Energy Storage

Solar with a battery energy storage system is the best way to peak shave. Battery energy storage systems are dispatchable; they can be configured to strategically charge and discharge at the optimal times to reduce demand charges.

Sophisticated control software with learning algorithms differentiates battery energy storage systems from regular batteries. These algorithms learn a customer’s load profile, anticipate peak demand, and switch from the grid to batteries when needed most.

Battery energy storage systems can guarantee that no power above a predetermined threshold will be drawn from the grid during peak times. They can automatically detect when power usage exceeds a pre-determined threshold and switch from the grid or solar panels to batteries until the additional demand is over. When demand goes back down the batteries recharge. For a deeper explanation of these systems see our previous article in this series, How Battery Energy Storage Systems Work.

Solar + storage doesn’t have the downsides found with alternative peak shaving methods. These systems are clean and quiet, require no employee time or active management to operate, and don’t force businesses to choose between high demand charges and running critical equipment. Solar + storage also makes solar viable for more customers, which in turn generates electric consumption savings not related to demand charges.

There are many types of energy storage systems commercially available including lithuium-ion, lithium-iron, and flow batteries. The Ideal Energy design and engineering team specialize in analyzing load profiles, energy needs, and designs custom peak-shaving solar + energy storage solutions.

According to the NREL and Clean Energy Group, solar + storage makes economic sense for millions of customers in dozens of states.

Above: Agri-Industrial Plastics Company of Fairfield is Iowa’s first advanced manufacturing operation to implement a demand reduction plan by peak saving with solar enesgy and Tesla Powerpack energy storage.

Here in Iowa, demand charges are above average, and manufacturing is the largest economic sector. The NREL estimates that around 23,000 commercial customers in Iowa face demand charges over $20/kW. Solar + storage is the perfect solution to help Iowa manufacturers manage their demand charges and control costs.

Is solar and storage the right solution for you?

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Battery Energy Storage FAQ

Does Battery Energy Storage Work Without Solar?

Yes. You don’t need a solar array to take advantage of many of the benefits that these systems offer. Peak shaving, load shifting, and emergency backup are examples of applications that work just fine without a solar array. Of course, solar is required for off-grid homes, solar self-consumption, and renewable energy microgrids.

Is Battery Energy Storage Safe?

Yes. Modern battery energy storage systems are incredibly safe. They’re accredited to international safety standards and will operate safely even in extreme conditions. Unlike old flooded lead-acid batteries, these batteries don’t vent explosive hydrogen into the air. They’re designed to be water-resistant, dustproof, and tolerant of a wide range of temperatures. They can be mounted indoors or outside. There are no exposed wires or hot vents. They’re touch-safe and pet and kid friendly.

Women Empowered

Oct 10, 2018 | CHANGEMAKERS, TECHNOLOGY

Women Empowered

A short film about the leaders driving Iowa’s energy future.

About the Film

Over the past several years, some of the most monumental and groundbreaking solar projects that we’ve designed and implemented here at Ideal Energy have been led by women business leaders.

I’ve had the honor of working with Iowa’s most dynamic female entrepreneurs on these projects and seen firsthand the role that women are playing in reshaping Iowa’s energy future.

Though their industries and paths to success differ, all of these entrepreneurs are creating an energy paradigm that is both highly profitable and environmentally responsible. Because of their projects, we’re all moving closer to a clean, abundant energy future.

This film is a tribute to these leaders, and a way to share their story. I hope that you will join me in celebrating the accomplishments of these trailblazing Iowa women.

Amy Van Beek

Co-Founder & CMO, Ideal Energy

Jenny Steffensmeier
Owner & President, Steffensmeier Welding & Manufacturing

Jenny took over as president of Steffensmeier Welding & Manufacturing (SWM) after the untimely passing of her husband Ben, the company’s founder. One of her first major decisions after taking the reins was implementing a solar energy installation.

Jenny assembled a leadership team to study the pros and cons of solar power. The team’s research showed solar was well worth pursuing. Ideal Energy was chosen to design and build the array. The two companies developed an ambitious ‘net-zero’ design, meaning the array provides 100% of Steffensmeier’s energy needs.

Jenny’s decision is saving SWM over $90,000 a year and has allowed her to invest in her employees by improving benefits and offering additional training, hire new workers, expand production, and give back to the community.

Jenny’s dynamism as president of SWM, and the success of the company’s solar project, have garnered extensive press coverage, visits from Governor Reynolds and former Governor Branstad, and a 1000 Friends of Iowa Best Development Award in the Renewable Energy category. “The coverage has been nothing but positive,” Jenny said. “It has catapulted us into view.”

www.steffweld.com

Mary Sundblad
Owner, Stuff Etc Quality Consignment Stores

Originally trained as an X-ray technician, Mary launched her business in Iowa City in 1985. Then called Kids Stuff and Kountry Krafts, it was housed in a rented 750-square-foot building behind a bar in an industrial neighborhood. Despite modest beginnings, the business’s mix of secondhand kids clothing and new country-themed goods drew a loyal fan base. Within a year the business moved into a 3,000-square-foot building. More – and larger – stores would follow.

In the last 33 years Stuff Etc’s growth has been explosive. Community-oriented values and cutting edge solutions helped Mary grow Stuff Etc from a small craft and second-hand clothing shop into the largest consignment service operation in the nation.

One of Mary’s innovations was her decision to adopt solar energy at her company’s Coralville and Cedar Rapids locations. At Stuff Etc’s flagship Coralville store, Mary chose to build a cutting edge solar and battery energy storage system – the first of its kind in Iowa. Solar energy allowed Mary to control utility costs while reinforcing her company’s commitment to sustainable values.

www.shopstuffetc.com

Lori Weaton-Schaefer
Owner & President, Agri-Industrial Plastics

After a 15-year career working for a publicly traded technology services company as a staff accountant and strategic planner, Lori returned to her hometown of Fairfield to work for Agri-Industrial Plastics Company (AIP), the company her father founded in 1978. She brought her accounting and strategic planning experience into her new role in marketing, before advancing to the position of director of business development. After several years spent building a strong senior management team, Lori became president of the company in 2013.

AIP is now among the largest employers in Fairfield and a dominant player in the field of industrial blow molded plastic parts. The company produces over 800 different products, including plastic fuel tanks for many large, well-known OEMs in the lawn & garden, off-road, and marine industries.

One of Lori’s primary goals as president is positioning AIP as the employer of choice in the region. She believes that, in addition to saving the company a substantial amount of money on its utility bills, her company’s cutting-edge solar + Tesla battery energy storage system will send a message that AIP is a next-generation manufacturer. The state-of-the-art solar project will fit in with AIP’s high-tech robotic automation, sophisticated engineering techniques, and community-oriented culture.

“This solar array is like a giant billboard that says, ‘Guess what? This is not your old-school manufacturing building.’ It’s not dark, it’s not dingy, it’s not unsafe. It’s technical, it’s looking forward,” Lori said. She continued, “I would consider it a strategic investment for our future.”

www.agriindustrialplastics.com

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