Arizona’s largest electric utility will spend up to $4 million on a residential energy storage program following a pioneering decision by the Arizona Corporation Commission last month.
The utility, Arizona Public Service, has 120 days to decide how to spend that money and get approval from the commission, so it’s not clear yet what form the deployments will take.
It appears to mark the first time a state other than California has specifically mandated investment in storage for the home after this decision was made. Thus, it will stake out a new way for state utility commissions for experiment with energy storage technology in a limited way, opening the door for expanding the nascent industry down the road.
Perhaps the most impressive thing about all of this, is that the commission achieved it at no additional cost to ratepayers by tapping a surplus in a fund already collected for energy-efficiency projects.
Residential storage can do a lot of things that are valuable to the grid, including storing rooftop solar generation for self-consumption, lowering a house’s load during peak demand periods and providing energy the utility can call upon when needed.
The challenge is that with so many functionalities, utilities have a lot of options to sift through in designing optimal programs for making use of storage. It’s better to think through these things before residential storage becomes a widespread phenomenon.
This new allotment comes at an appropriate time as the costs of storage for household use still outweigh the available returns in most cases, given the ways the markets are structured currently.
Current State of Arizona
The Arizona Public Service is already developing a smart home pilot project, so the open-ended mandate will allow the utility to apply initial results from that program toward structuring the storage rollout.
The ACC stipulated that the storage should help residents reduce demand during times of peak system load by having the utility offer participating customers “advanced, time-differentiated rate plans.”
Arizona grapples with particularly brutal demand peaks due to high air-conditioning use during its hottest months. Those peaks force the utility to build out generation that isn’t needed most of the year, and that usually comes in the form of expensive gas peaker plants.
One of the few options is incentivizing families to turn to stored energy at those times. If the pilot helps create a market for storage in the state, it could lead to profound savings for ratepayers in the long run.
The commission also passed a measure in July to target energy-efficiency programs more specifically at reductions during periods of peak load. Energy-efficiency programs attempt to reduce electricity consumption overall, but actions that reduce general load don’t necessarily help tackle peak demand.