Aligning Host's and Developer's Goals in a Behind-the-Meter SMART Program Solar with Storage Bid World
Objective: To provide a method of incorporating the benefits of storage into a request for price proposal bid (RFP) construct for behind-the-meter (BTM) hosts.
Background: VNM power purchase agreements (PPAs) have flourished in the ISO-NE states of Connecticut, Massachusetts and Rhode Island. These PPAs have been relatively straight-forward: either offering a fixed price, or fixed discount off the VNM rate. The proliferation of VNM projects dominated by greenfield development on sparely loaded radial lines has led to rural outcry, extreme interconnection upgrade costs and project delays. In reaction, policy makers are proposing incentives that will tip the balance to on-site BTM projects, particularly those combined with storage (e.g., see the MA DOER’s incentive proposals 400 MW review SMART Program straw proposal). Including storage w/ onsite solar means that benefits (and risks) traditionally associated with demand response are now available to the onsite Host. The goal from the Host’s perspective has evolved from the obtaining the lowest net metering PPA $/kWh price to the lowest Host net costs of delivered $/kWh; that is, it has evolved to a shared savings model, and any RFPs must evolve as well.
Methods: The goal of a shared savings solar w/ storage project proposal is to request bids for the Host to minimize its Net Costs. Host Net Costs equals the sum of Project Delivered Energy Costs (i.e., the cost $/kWh of energy consumed from the project), plus Project Consumed Energy Costs (if the storage system is connected so that it can consume the Host’s electricity), less Demand Management Benefits (which includes lowering the Host’s monthly peak utility demand charges and annual ISO-NE ICAP Tag assigned retail costs), and less Market / Program Participation Revenue (e.g., active demand program response revenue, forward capacity revenue, and potentially other ISO-NE revenue from the regulation, reserves and other markets). This presumes a tracking mechanism (e.g., Price Bid form spreadsheet) in order to provide an “apples-to-apples” comparison of bids, of which many of the assumptions will be stipulated over a 20-year project life (e.g., hourly 8760 load curve, hourly meteorological data, $/kW demand charges, $/kWh retail price of electricity, etc.). The Bidder provides, modeled production, cost of energy provided and by calculation the Host Net Costs for at least three shared savings cases (e.g., 0%, 25%, custom).
Results: An RFP using this construct has bids due early January 2020. The poster will provide details of the methods used to elicit bids, a summary of bids received, reaction from bidders, and comparison of proposed Host net costs under each shared saving case.
Conclusion: Storage with solar BTM projects with this RFP construct hopefully will provide a way to drive down Host net costs while providing upside for developers.