By November 18, 2015 Read More →

Banking on batteries: SolarCity’s strategy to profit from the power grid

Customers agree that if markets develop and SolarCity is dispatching the battery, the revenue is shared


Peter Rive, Chief Technology Officer and Founder of SolarCity

By Russell Gold.  Solar panel companies are often portrayed as the enemies of the power grid. Residential solar siphons off a utility’s top customers, leaving it with less revenue to keep the electric grid up and running. That’s what the whole death spiral debate has been about.

Here’s a new twist. SolarCity Corp. is building a battery army and preparing to take on the grid. But it doesn’t want to destroy the power grid, just profit from it.

The California company already installs a but more than one of every three residential solar systems in the United States. And earlier this year, it announced that it would soon begin offering Tesla Powerwall batteries in a solar-and-storage package. The appeal to homeowners is that they’ll have backup power when the lights go out.

But, wait, there’s more. And here’s where it gets interesting.

Company co-founder and chief technology officer Peter Rive said in an interview that “a standard part of the contract” for new solar-and-storage customers is an agreement that allows SolarCity to retain a bit of control over the batteries.

“All the new customers signing up they have a revenue-share agreement as part of the contract. The revenue share agreement is that if the markets develop and we are dispatching the battery, then we’ll share the revenue,” he said.

How would this work? So let’s say that a regional power grid is being pushed toward a brown out. SolarCity could provide demand-response services by ordering homes across an area to run off the battery packs for a time, decreasing demand on the power grid.

Or SolarCity could use customers’ batteries to prevent circuits from overloading and requiring costly infrastructure upgrades. Since this is a valuable service, SolarCity reckons, there may soon be a market for these kind of services. And SolarCity could get paid for that service. The homeowners would get a fifty-fifty cut, said Mr. Rive.

All it takes is a SolarCity computer with “remote-aggregated control of solar battery systems.”

Using batteries to provide all sorts of services to the grid is a growing business. Companies such as Duke Energy and Invenergy have been building utility-scale batteries to provide grid-balancing services to the PJM grid.


Rooftop solar power panels

But so far this has meant building large, centralized battery farms. SolarCity is aggregating lots of smaller battery systems. And this isn’t pie-in-the-sky dreaming. It’s already happening. SolarCity is signing up customers right now and plans to begin installing the solar-and-storage systems in January.

It’s an army of distributed battery systems. And SolarCity is building this army already. It’s not a guerilla force determined to destroy the grid. No, the grid remains – and SolarCity wants to sell it power services.

Late last week, investors clobbered SolarCity when the company said its rate of growth was slowing and it would focus on cutting costs. As this new effort shows, it also has its sights set on developing new sources of revenue. Finding ways to profit from helping keep the grid working, ironically, could turn into a new revenue stream for renewable energy companies.

Russell Gold is an award-winning investigative journalist at The Wall Street Journal and the inaugural Energy Journalism Fellow at the University of Texas. This article first appeared on the University of Texas at Austin website on Nov. 10, 2015.

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