Solar Energy Company Swell Energy Turns To “Virtual Power Plants”


A residential battery storage facility.

Solar and battery storage company Swell Energy Inc. is trying a new idea to alleviate Southern California’s energy crisis.

The Santa Monica-based company networks thousands of battery storage customers in giant “virtual power plants” that can be brought into service when power supplies are stretched.

Last month, Swell Energy launched an ambitious effort to enroll residential and commercial customers in Orange, Santa Barbara and Ventura counties to participate in these power plant arrays.

Customers get a combination of solar panels and battery storage units installed by the company; if they already have solar panels or don’t want solar power, they can only get the battery storage units. Swell Energy battery packs allow customers to reduce their consumption of electricity from the grid or even put electricity back into the grid.

This in turn allows utilities such as Southern California Edison, a unit of Edison International based in Rosemead, to send electricity from their grid to other customers who need it, reducing the risk of outages. current.

“We call it a virtual power plant in a box,” said Swell Energy chief executive Suleman Khan. “Utilities are now looking at their customers behind the meter as part of their electricity portfolio, and that’s where we come in. “

Khan founded Swell Energy with Andrew Meyer and Matthew Rising almost seven years ago. Meyer and Rising have since left, but the company’s approach remains intact.

The founders decided to take a different approach to solar power with battery storage.
Instead of treating batteries as a supplement to the solar panel installation side of the business, Swell Energy made battery storage the centerpiece of the business from the start.

Around this time – 2014 and 2015 – battery prices were dropping, making them more affordable to install.

Swell does not manufacture the batteries. Instead, it sources battery storage units from manufacturers – primarily Tesla Inc. based in Palo Alto – and then installs them. In most cases, the batteries are connected to solar panels. They store energy as it is generated during sunny hours when energy prices are low, and then release energy on demand after sunset, either for the residential customer or for the network during peak demand periods.

This is the classic time lag strategy: store energy when prices are low and release it when energy prices are high. This can save a lot of money on utility bills, much more than just having solar power, without the battery.

But very quickly, a second use of the batteries appeared as a backup power source when the power supply was cut off. Utility power outages have become much more common in recent years, especially in areas of forest fires, to reduce the risk of transmission lines or utility equipment sparking and causing disruption. forest fires.

That’s what drew home owner Katie Davis in Goleta to Swell Energy in early 2020.
“We moved into a house in 2018 that already had solar panels,” Davis said. “But we are in an area prone to power outages under conditions of high fire danger, so we were looking for a back-up solution in the event of a power outage. That’s when we discovered Swell Energy.

Davis and her husband bought the Tesla battery from Swell Energy. The cost was around $ 8,000 after two government reimbursement programs. Most customers add the battery to the overall solar installation rental package.

Davis and his family were recently hit by a power outage, straining the year-old battery.

“It worked really well – pretty seamlessly actually,” Davis said.

Virtual power plants
Swell Energy’s mission goes beyond helping individual customers save on their utility bills and keep the lights on in the event of a power outage. From the start, the company set out to change the often acrimonious relationship between solar panel installers and electric utilities.

Over the past two decades, solar panel installers and utilities have waged repeated battles within the state legislature and the State Utilities Commission over who is paying for the impact of climate change. growing number of solar energy customers.

Utilities have sought to impose exit charges on customers who have solar panels installed and thus seek to reduce their dependence on the grid. Utilities, fearing a decline in customer base, claim the charges are necessary to offset the fixed costs of maintaining the network.

Solar energy companies have fought back, saying utilities are trying to stifle competition from green energy providers.

“Rather than engage in this battle, we went to the utilities to figure out how best to use this battery behind the meter,” Khan said. “The idea was to get the energy stored in mass to the grid when the utility needed it most, and not just when it was being generated. In the process, the utility would work with us to find solar customers, not to fight over metering costs. “

This collaborative effort led to the Virtual Power Plant initiative. Edison has identified portions of its network that need additional battery storage the most.

In Santa Barbara and Ventura counties, Edison must obtain additional megawatts to compensate for the loss of natural gas from the Aliso Canyon natural gas storage facility, which experienced the largest natural gas leak in 2015. the history of the United States.
In Orange County, Edison needs additional power for new residential and commercial developments that have recently come online or are underway.

Edison relies on the Swell Virtual Power Plant to deliver these additional megawatts, both for these two areas and for its overall grid. Swell has set a goal of enrolling 6,000 clients in Santa Barbara and Ventura counties and 2,000 more clients in Orange County.

“This is part of our effort to save 830 megawatts of electricity this summer through a range of customer programs to reduce grid energy use,” said Bill Walsh, vice president of procurement and marketing. energy management for Southern California Edison.

Overcome customer reluctance
To set up these virtual power plants, Swell Energy needs additional capital. In December, Century City-based Ares Management Corp. and New York-based Aligned Climate Capital entered into a partnership agreement with Swell Energy to manage a $ 450 million fund specifically for the deployment of up to 14 000 units of battery to form these virtual electrical networks.

In addition to the two virtual power plants in Edison’s territory, Swell Energy this year announced similar projects in Hawaii and in the New York district of Queens.
But will these virtual power plants work? Can Swell Energy supply enough battery customers to save enough energy for Edison and other utilities to make a difference in energy crisis situations?

“Batteries are always an expensive addition to a solar installation, so it’s not always a choice customers want to make when considering their options,” said Yayoi Sekine, head of decentralized energy for BloombergNEF, a strategic research provider covering global commodity markets, in an email. “But residential energy storage is seeing a significant increase in demand, especially in California. This is driven considerably by households wishing to avoid blackouts, which have become more common as utilities deal with wildfire risks. “

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