Energy storage net energy metering (aka NEM paired storage) allows a customer with a behind-the-meter solar + storage system to discharge their battery, exporting stored energy back to the grid and receive a net energy metering credit, if the battery can verifiably charge 100% from solar. In certain cases, NEM paired storage can meaningfully increase the amount of savings an energy storage system (ESS) can capture. As illustrated in the graphic below, energy storage net metering effectively enables a battery to utilize its full capacity by discharging fully when a strong price signal exists, regardless of customer usage.

Policy background
NEM paired storage was codified into law in California in February of 2019 when the California Public Utilities Commission (CPUC) finalized a decision permitting customers with ESS to receive credits for storage energy sent back to the grid if the storage system verifiably charged entirely from solar. The policy change was initiated by the California Solar and Storage Association (CALSSA) who filed a petition for modification (PFM) to grant the permissibility of NEM paired storage. CALSSA’s PFM drew support from California’s big three investor-owned utilities who filed a statement of support, which helped pave the way to the CPUC decision. Energy Toolbase published a blog “CPUC Approves Energy Storage Net Metering” summarizing the eligibility requirements laid out in that CPUC ruling.

Several months later the IOUs began allowing NEM paired storage systems to be interconnected to their grid. Energy Toolbase published another blog in December of 2019 entitled “California Utilities now Accepting Applications for Net Energy Metering (NEM) – Paired Storage,” which summarized many of the new metering and verification requirements, including the newly created Certification Requirements Decision (CRD) standard, which allowed utilities to verify the ESS charges entirely from PV. Previously, for ESS systems larger than 10 kW, customers were required to install additional metering hardware, which could be time-consuming and prohibitively expensive.

Case Study: NEM Paired Storage
To illustrate the value of energy storage net metering, we compared two identical solar + storage systems operating in time-of-use (TOU) arbitrage mode. We held all project inputs and assumptions constant, except in Case No. 1 we ran the ESS dispatch simulation assuming ESS cannot export to grid, and in Case No. 2 we ran the simulation assuming NEM paired storage: ESS can export to grid, but it must charge entirely from PV.

In Q1 2020, $252 million was raised by battery storage, smart grid, and energy efficiency companies, a 20% increase from the $210 million raised in Q1 2019. This is according to a new report by Mercom Capital Group.

Battery Storage
Total corporate funding (including venture capital, debt, and public market financing) in battery storage came to $244 million in nine deals compared to $635 million in 10 deals in Q4 2019. Funding was up 88% year-over-year (YoY) compared to $130 million in nine deals in Q1 2019.

VC funding (including private equity and corporate venture capital) raised by battery storage companies in Q1 2020 came to $164 million in six deals compared to $78 million in seven deals in Q1 2019. Quarter-over-quarter funding was also higher compared to $126 million in seven deals in Q4 2019.

According to the report, the top VC funded battery storage companies this quarter were:

• Demand Power Group, which raised $71 million from Star America;
• Highview Power raised $46 million from Sumitomo Heavy Industries;
• Advano raised $19 million from Mitsui Kinzoku SBI Material Innovation Fund, Future Shape, PeopleFund, Thiel Capital, DCVC, Y Combinator;
• ZincFive raised $13 million from 40 North Ventures, and
• TWAICE raised $12 million from Creandum.

A total of 14 investors participated in battery storage funding this quarter. In Q1 2020, announced debt and public market financing for Battery Storage technologies was 54% higher YoY compared to $52 million in two deals in Q1 2019. One battery storage project fund of $140 million was also announced in the quarter.

There were four M&A transactions involving battery storage companies in Q1 2020 (no transaction amounts disclosed). There were no M&A transactions in Q4 2019. There were four M&A transactions in Q1 2019, of which only one disclosed the transaction amount.

While the renewable energy industry has suffered significant blows such as loss of employment during the COVID-19 crisis, venture capital (VC) funding into the battery energy storage sector in the first quarter of this year nonetheless saw a significant increase over the previous year’s equivalent period.

Corporate funding overall was in fact up 88% year-over-year in Q1 2020 to US$244 million over nine deals, from US$130 million in the first quarter of 2019 from the same number of deals, according to the latest funding and mergers and acquisitions (M&A) report from Mercom Capital Group. The company tallies up and publishes its quarterly report into funding and M&A activities in the battery storage, smart grid and energy efficiency sectors, including VC funds and their investments.

While it shows a big increase since the beginning of last year, momentum has dropped from the previous quarter when a massive US$635 million of funding went into the battery storage sector. That said, VC funding appears to be trending upwards: in Q1 2019, seven VC funding deals totalled US$78 million, in Q4 2019 seven VC deals netted companies in the sector US$126 million, whereas in the Q1 period of 2020, US$164 million was raised across just six deals by battery storage companies.

Energy-Storage.news reported in February that US developer EsVolta had secured a US$140 million credit facility for a project portfolio with industry debt financing specialist CIT the Mandated Lead in arranging it, and Mercom Capital noted that that amount raised made it the most noteworthy project financing transaction to close in the quarter. That said, this site also reported that AES Distributed Energy raised a much larger amount – US$341 million – in a transaction announced at around the same time as EsVolta’s, although the AES Distributed Energy deal was for debt financing.

Mercom Capital also noted that some significant M&A deals were announced in the sector, the most notable being the acquisition of the commercial and industrial (C&I) arm of Canadian developer NRStor by Blackstone Energy Partners.

While the full Mercom report includes more details and provides more depth on the quarter’s activities, a release seen by Energy-Storage.news did rank the top five battery storage sector deals by amount raised. These are as follows:

Independent power producer Neoen Australia said an expansion of the world’s largest lithium-ion battery system has completed its network connection, bringing the Tesla-supported Hornsdale Power Reserve, adjacent to a wind farm in South Australia, to a rated size of 150 MW/193.5 MWh.

It’s the latest in a series of projects being developed worldwide to add energy storage to solar arrays, at wind farms, and even thermal power plants as growth in battery energy storage systems (BESS) continues. The industry is moving forward, even though growth will likely be slowed by the coronavirus pandemic.

“This was expected to be a banner year,” said Kelly Speakes-Backman, CEO of the Energy Storage Association, in an April 17 interview with POWER. “We’re going to see a real hit on that, especially with behind-the-meter projects. People don’t want workers coming to their home, and businesses are closed.”

Speakes-Backman acknowledged the problems that storage and other energy industry sectors are facing from COVID-19, with equipment shortages and supply chain issues, along with a struggling economy, impacting project financing and construction. But she said the pandemic is highlighting some of the issues that make energy storage so important.

“The things that are pushing us forward have to do with resilience and making the grid stronger,” she said. “A lot of people that are going in for solar, are also going in for storage. On the commercial and industrial side, as opposed to a diesel backup generator, now they’re looking at providing for resiliency with storage. We certainly can see the importance of adding resiliency to hospitals and other critical facilities.”

Hornsdale Is Largest, but Not for Long
The Hornsdale project (Figure 1), adjacent to the 315-MW Hornsdale Wind Farm in Jamestown, South Australia (a POWER Top Plant in 2018), is an example of a storage project with several benefits. Neoen Australia reported work on the Hornsdale expansion network connection was completed earlier this month.

Utility PG&E finalized its contract with a battery project slated to displace a jet-fuel-burning power plant in downtown Oakland, California.

The Oakland Clean Energy Initiative models a pathway for removing decades-old power plants in dense urban settings while keeping the lights on with new lithium-ion batteries. But the project’s collaborative business model also makes it potentially groundbreaking for energy storage development, by formalizing the use of the battery for discrete grid services on behalf of two different clients.

PG&E, which is working to emerge from bankruptcy by the end of June, has experience building batteries and contracting with third parties for the use of their batteries. Battery owners often contract services to an offtaker while playing in merchant markets themselves. But the Oakland project marks a new foray into an owner sharing a front-of-meter battery plant with multiple customers.

Independent power producer Vistra Energy, which owns the 165-megawatt jet-fueled plant in question, signed a deal with PG&E to build a 36.25-megawatt/145-megawatt-hour battery at the existing site in Jack London Square. The facility will provide “local area reliability service,” helping the utility with its job of transmitting power to residents in Oakland. Doing so avoids a far costlier investment, like running new wires over the hills from the Moraga substation.

But those consumers now buy their power from a community-choice aggregator called East Bay Community Energy, a locally administered group dedicated to rapidly scaling up clean energy. EBCE contracted with Vistra last year to use the same battery as a capacity source to fulfill its resource adequacy requirements, which provide power to ride out extreme peak events. The battery originally was going to deliver 20 megawatts/80 megawatt-hours, but the planned capacity has expanded since then.

The double-dipping addresses a structural challenge facing the rise of storage technology on the grid: Batteries can do all sorts of useful things, but it’s often hard to find one customer that needs all of those capabilities. A world that constrained batteries to single uses for single customers would result in redundancy and inefficiency compared to a system where multiple stakeholders use the same equipment for different purposes.

Among states with established climate change mitigation and carbon reduction goals, one of the first issues addressed is peak energy demand, with New Jersey being no exception to this trend. In this pursuit, the New jersey Board of Public Utilities (BPU) has developed a straw proposal on energy efficiency and peak demand reduction programs.

In short, the proposal looks to reduce statewide energy costs, give all residents access to energy efficiency upgrades and create jobs through programs administered by the state and the state’s utilities.

Yet with these goals laid out, there’s one glaring omission, one that Luis Davila, a consultant with the Distributed Generation Advocacy Coalition claims could set the state back nationally: there’s no mention of the benefits of storage technologies for peak reduction and efficiency in the entire proposal.

“It’s baffling that Jersey hasn’t taken advantage of [storage], even though others have done the analytical studies and have started to implement the non-energy benefits of battery storage – the efficiency benefits.”

Industry responses

Davila is not alone in this opinion, as during the proposal’s comment period, Sunrun issued twofold recommendations, with one calling on the BPU to establish “bring-your-own-device (BYOD) programs that leverage customer sited energy storage assets” as a core peak reduction program offering.

The company went on to outline how Green Mountain Power, Public Service Enterprise Group of Long Island and the state of Massachusetts have all established BYOD programs and how such programs could be used to evaluate New Jersey’s proposed peak demand reduction strategy.

The Energy Storage Association (ESA) also filed comments, focusing on how the state already has an energy storage target of 600 MW by 2021 and 2,000 MW by 2030. With such a goal already laid out and with storage’s proven ability to provide overall system reliability and drive down the peak — the strange exclusion of storage from the straw proposal is magnified.