by David Baldwin



The San Diego-area utility, San Diego Gas & Electric (SDG&E) claims that rooftop solar without battery storage isn’t helping SDG&E address its peak-period energy demands for residential customers in its service area.

So the utility is exploring the potential of energy storage by proposing, as part of its recently published distribution resource plan, a pilot program, called the residential energy storage rate program, which would provide households and small businesses that generate solar power an incentive for the purchase of large, grid-connected batteries.

The residential energy storage rate proposal differs from similar projects virtually everywhere else in that SDG&E won’t own the batteries it is testing. The utility would take control of the customer’s storage system’s charge and discharge functions at certain times of day. As SDG&E says, “This pilot provides an opportunity to test the ability of customer-owned, behind-the-meter storage assets to potentially defer circuit upgrades (e.g., re-conductor or new circuit extensions).” Put another way, customers’ batteries might save the utility the cost of making infrastructure upgrades as often as it does now, and such savings would be shared with the utilities’ shareholders.

According to SDG&E officials, the three keys to the program’s success would be: 1) if the rate savings are high enough to attract customers; 2) if the utility could make use of the batteries often enough and during the appropriate times of day; and 3) if the utility could reach an arrangement with companies (e.g., SolarCity, Tesla) to offer customers third-party-funded batteries at no upfront cost. (At the same time, as a kind of experimental control, SDG&E has proposed a separate pilot project involving batteries it manages itself, so as to compare and contrast the two programs.)

The plan would be advantageous for SDG&E customers, who now pay the highest electricity rate among the major utilities in California: 23 cents/kWh. It would be advantageous for the utility as well, because, according to a new report, “The Economics of Load Defection,” it is vital for the survival of utilities to adopt new business models, even if they succeed in efforts to limit net metering or establish fixed fees for solar in their service areas.

“This is a little ray of light through the darkness of the traditional utility business model,” said James Fine, senior economist with the Environmental Defense Fund. “It’s a new way to sustain and support the utility operations, to get away from the incentive to put more steel in the ground.”