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Power Couple: Tie-Up Shows How Batteries and Solar May Link

Power Couple: Tie-Up Shows How Batteries and Solar May Link


The solar panels — 15,000 of them — sweep down the hill from a former dairy farm here, gleaming rows of silver and blue nestled between fields of recently harvested corn. The installation, a project developed in partnership with SolarCity, the leading rooftop solar provider in the United States, and the local electric cooperative, is meant to help create more green energy options for customers, mainly a handful of utilities operating in the state. But it is what lies toward the bottom of the array that gives the project its distinction: about 30 white refrigerator-size battery banks courtesy of Tesla, the electric carmaker

The facility, the Mountain Ash Solar Farm, is not running yet, but, along with a similar, larger project under development in Hawaii, it offers a steel-and-glass example of what Elon Musk, the chief executive of Tesla, and his cousins, Lyndon and Peter Rive, founders of SolarCity, have in mind for their merger planned for this year. Solar energy has long been seen as an important weapon in the fight against climate change, but its usefulness is limited because the sun sets — and is temporarily blocked by passing clouds — which can create a mismatch between supply and demand or lead to complications on the grid. Adding batteries to the mix not only solves those problems, but allows solar power plant operators to sell new services to system operators.

“It’s the blueprint for how we want to operate in the future,” said John Conley, vice president of project development at SolarCity. Indeed, the project on the Hawaiian island of Kauai — where the companies are installing batteries at a solar farm to help fuel the grid during the evening — was the impetus for the proposed merger, according to Mr. Musk. As constituted, each joint deal is subject to special approval from independent board committees at both companies, making the process too burdensome. “If we’re going to do dozens and then hundreds and maybe thousands of these deals, there’s no way we can keep having” such an unwieldy process, he said on a conference call with financial analysts this summer. Under the proposal, set for a shareholder vote on Nov. 17, Tesla would acquire SolarCity. “It’s very limited what we can do until we have actually one company.”

There are plenty of reasons for skepticism that the Musk-Rive vision will come to pass. Both companies, which lost more than $1.6 billion, or 1.45 billion euros, last year between them, face financial pressures from rising debt and a continual flurry of spending. Some energy analysts say the proposed acquisition is at least as much about helping Mr. Musk’s personal investments as furthering his green agenda, while others have questioned the wisdom of taking on a complicated transaction just as Tesla is beginning production at its huge battery factory in Nevada and preparing to bring its first moderately priced car to market. Still others say it is not necessary to own the solar provider to sell batteries to go with solar power systems. While the combination can reduce prices, it can still be too expensive to compete with cheap electricity from other sources. The key would be to lower the cost of the batteries. However, driving down that price depends heavily on the battery factory meeting its targets as it increases production, which will take years, even if everything goes smoothly.

Nonetheless, the companies are already moving forward as one in some ways and have been since 2010. In a filing in April with the Securities and Exchange Commission, Tesla anticipated recognizing $44 million in revenue this year from SolarCity for energy storage product sales, up from $8 million from SolarCity last year. That means, according to an analysis by GTM Research, which tracks certain clean technologies, Tesla could sell almost 60 percent more batteries for on-site storage at single buildings or facilities to SolarCity over 2016 than was installed for that segment of the United States storage market last year.

Bob Rudd, vice president of development, energy storage and microgrids at SolarCity, declined to give specifics, but said he was in talks for a number of large installations, any one of which could double what the company had installed. But interest in these kinds of projects is growing, and SolarCity and Tesla have plenty of competition to build them. Massachusetts, for instance, approved a storage mandate earlier this year, joining California and Oregon, and other states are weighing storage targets. New Jersey has an incentive program, and New York City recently set a target for its utilities to install 100 megawatt hours of storage by 2020.

The project here could produce enough energy to run 725 average Connecticut homes each year over its 20-year life. But the batteries can also act as a bulwark against outages during storms, said Drew A. Rankin, chief executive of the Connecticut Municipal Electric Energy Cooperative, which mainly supplies wholesale power to a consortium of utilities in the state.

“We see it as a huge benefit,” he said.

The Kauai project, among the largest storage installations in the nation, is a way for the island to better use its abundance of solar energy to meet aggressive renewable goals, said David Bissell, chief executive of the electric cooperative there. The state, which relies heavily on diesel fuel for electricity and pays some of the highest rates in the country, has a mandate to use 100 percent renewable fuel by 2045. Kauai has already come close — as high as 98 percent — but only for minutes at a time, Mr. Bissell said, and is at 40 percent renewable in its generation mix overall. Not allowed to use wind because of the island’s endangered seabird population, they need to add more solar, which is their lowest-cost source of new generation, but they already have more power coming into the grid during the prime daylight hours than the system needs. Hence, they turned to storage.

A request for proposals a few years ago yielded several applications, but no one came in with a price low enough, including SolarCity. But the company kept trying and eventually came up with a price that made sense for the utility, Mr. Bissell said. The solar panels will sit on about 50 acres and fill the batteries during the day with enough energy to power 5,000 homes through the evening peak. It is due to come into service in the first quarter of next year. “It’s pretty cool,” Mr. Bissell said, adding that they were already looking to develop an even bigger project. “We’re very bullish on solar and storage.”

Anand Gupta Editor - EQ Int'l Media Network


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