Woodlawn Associates

Management Consulting

Micah Sussman

About Micah Sussman

Dr. Sussman is a consultant at Woodlawn Associates.

Tax Equity 201: Partnership Flips in Detail

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Our primer on tax equity investments (Tax Equity 101: Structures) explains that renewable energy project developers often use structures such as the partnership flip, sale-leaseback, and inverted lease to monetize the federal tax benefits for such assets.

Here, we dive deeper into the actual mechanics of and accounting for partnership flips. As we will see, the structure has several built-in inefficiencies relative to a single owner that can monetize all of the tax benefits internally. This is not an indication the structure is undesirable, but an acknowledgement of the imperfections in what is often the best available alternative for an owner without its own tax liability. [Read more…]

Energy Storage 301: Solar + Storage Economics

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In this post we examine the economics of solar + storage.  We examine the value of solar and storage for two commercial buildings in each of three markets: California, New York, and Hawaii.  We find solar and storage are strongly synergistic in all three markets.

The NPVs of solar + storage investments are greater than the sum of the NPVs of solar investments and storage investments alone because, among other reasons:

  • The combination allows for much larger demand charge reductions than either technology can achieve on its own
  • Pairing storage with solar allows the owner of the storage system to claim the federal Investment Tax Credit on the storage system, subject to certain constraints on how it is charged

(We looked at the returns to storage alone in an earlier post.)

We are grateful to Geli, a provider of intelligent energy storage software solutions, which provided the building load profiles, solar production estimates, and storage system operating profiles for the analysis. Thanks to this cooperation we were also able to validate the economic calculations in our model versus those in an independently developed model.
[Read more…]

Energy Storage 201: Commercial BTM Energy Storage

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This is the third in a series of posts on grid energy storage. Earlier, in Energy Storage 101 and 102, we attempted to elucidate the applications of energy storage for various customer types and discussed the technologies and value chain. In this post, we examine the economics of behind-the-meter (BTM) storage for commercial customers. We model the returns to a hypothetical commercial BTM storage customer in New York City, San Diego, Honolulu, and Des Moines. We show how it is possible to optimize returns by sizing the battery intelligently with a software model.

For economy, we use the term “commercial” here to represent any non-residential end user of electricity, including commercial enterprises, schools, non-profits, government entities, etc. Also, we assume the host is the owner of the storage system.

Applications of Commercial Energy Storage

As we mentioned in Energy Storage 101, commercial customers have several potential sources of value for energy storage (Figure 1):

Figure 1: Sources of Value from commercial Btm energy storage

Sources of value from commercial BTM nergy storageStorage can be used for peak shaving and/or backup power.  Many buildings already have segregated wiring for systems they want running in case of an outage (e.g. elevators or emergency lighting), but in most cases a battery designed for peak shaving will not have enough capacity to run an entire building.  Here, we focus here only on the economics of peak shaving only because modelling the value of back-up power relies heavily on the importance of continuous power to a specific building.

In some markets, storage can also generate grid services revenue. For example, a storage system owner could sell frequency response services to an ISO or “generation” capacity to a utility.

Finally, storage could create value in conjunction with solar if storage would allow a larger solar system than would otherwise be allowed or economic and solar is otherwise less expensive than the grid. A battery system installed together with solar would also be eligible for an investment tax credit (30% through 2016, 10% thereafter). For simplicity, we don’t consider solar + batteries in this analysis. We will come back to this in a future post.

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Energy Storage 102: Technology and Value Chain

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This is the second in a series of posts on grid energy storage. In Energy Storage 101, we discussed how various customer types can benefit from storage.In this post, we discuss key storage technologies and identify the economic value chain for battery storage. Next week, we will examine, in detail, the economics of commercial behind-the-meter storage in Energy Storage 201.

Energy Storage Technologies

A variety of energy storage technologies have been/may be used for each the applications we described in Energy Storage 101. However, there are some technologies that are simply better for some applications than others. Here we will briefly examine the some of the more popular technologies:

  • Pumped hydro
  • Lithium ion batteries
  • Lead acid batteries
  • Sodium sulfur batteries
  • Flow batteries
  • Others (flywheel, compressed air, other batteries, etc.)

[Read more…]

Energy Storage 101: Applications

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Energy storage is one of the hottest topics in the energy world. SolarCity’s partnership with Tesla to provide solar-charged battery systems, the California PUC’s mandate of 1.3 GW of energy storage by 2024, and energy storage plants entering into PJM’s ancillary services markets are just some of the many examples we hear about every day.

While the headlines are clear, discussion of the details often gets murky. This is the first in a series of three posts, in which we explain the applications of grid electrical energy storage. Later this week, in Energy Storage 102, we will discuss the technologies and value chain in more detail. Next week, we will examine the detailed economics of commercial behind-the-meter storage in Energy Storage 201.

Important terms

Power and Energy

To understand the energy storage landscape, it is first important to draw a clear line between power and energy. Power, usually measured in kilowatts (kW) or megawatts (MW), is the load that a storage system or generator can serve at any instant in time. Energy, measured in kilowatt-hours (kWh) or megawatt-hours (MWh), is the amount of power that can flow over time.

Capacity

This is where terms in the energy industry can get confusing. When discussing the capacity of a power plant people mean the amount of power it can generate (MW). When discussing the capacity of a storage system, however, they mean the volume of energy it can store (MWh).

Response Time and Discharge Time

Response time is the time it takes for a system to provide energy at its full rated power. Discharge time is the amount of time a storage technology can maintain its output. A one MW battery that has a discharge time of five hours can provide five MWh of energy.

Depth of Discharge (DOD)

Depth of discharge is the percentage of capacity discharged. Deep discharges (>50% DOD) shorten the lives of some batteries, while others operate best this way.

Energy Storage Customer Types

Five major groups may be customers of grid-tied energy storage:

  1. Utilities
  2. Commercial users (including government and non-profits)
  3. Residential users
  4. ISOs
  5. Independent Power Producers (IPPs)

Some of these have a number of applications for storage.

[Read more…]