Last week, a deal between New England's grid operator and residential solar company Sunrun provided insight into how local, clean, renewable energy at customers’ homes can help reliably power the broader electric grid. Specifically, the company announced that it had successfully bid 20 megawatts of solar and storage into ISO-NE’s forward capacity auction beginning in 2022. I’ll unpack that sentence, but this is a big deal.
ISO-NE is the wholesale grid operator in New England. Basically, they tell generators when to operate to be able to meet consumer demand for electricity, and thereby keep the lights on throughout the six New England states. Not surprisingly, one of ISO-NE's responsibilities is planning to make sure there is adequate ability to supply electricity in the future. In order to secure the ability to supply electricity in the future, ISO-NE annually runs forward capacity auctions as part of the Forward Capacity Market. While the details of the Forward Capacity Market can make most peoples’ heads spin, the basis of the Forward Capacity Market lies in economics 101: balance supply and demand. ISO-NE determines how much capacity they need in the future, and they choose the least expensive resources to meet the capacity requirements.
Now that I’ve set the stage a little bit, on to the exciting part of the rooftop solar announcement. Sunrun is taking their retail products (solar and storage on customers’ roofs) and using them to meet the needs of the wholesale grid. This means that there is a reduced need for centralized generation in order to meet the needs of all customers, which lowers costs and speeds the transition to a clean, 21st century energy system. Sunrun’s successful bid is the first time that home solar and battery storage has directly participated alongside centralized generation in a capacity auction. Vote Solar – and many other advocates – have been saying for years that distributed generation benefits all customers whether or not they have those assets on their own rooftops, and with this example we are seeing that promise play out in a real-world wholesale market.
For those interested in numbers, the revenue from the forward capacity auction for Sunrun is approximately $912,000 in 2022/2023 (the capacity year is split between the two years). Since the 20 megawatts of solar and storage represents approximately 5,000 customers, the value of each solar and storage system in the forward capacity auction is approximately $182 in 2022/2023.
Distributed generation and storage is a tremendous asset for everyone. In the not-too-distant future, our electric grid is going to be balanced (at least in part) by distributed generation. I’m excited. Let’s accelerate the transition to a local, clean, and renewable energy electric grid!