Last week, Tesla announced a program for owners of their home battery products in California. Sign up with the company and you’ll become part of what the company calls a “virtual power plant.” You could use your battery to keep the grid stable during periods of high demand and be well compensated for the electrons.
While this may conjure up images of Powerwall batteries in the state sending electricity to the grid during a crisis, that doesn’t seem to be happening here. Instead, the batteries will participate in a utility program designed to reduce demand, which the utility will presumably do by using the battery to meet some of the demand in the battery owner’s home. to provide. It’s a smart way for homeowners to take advantage of a program that’s otherwise limited to commercial users.
It’s an emergency
Tesla’s announcement of the program says it will be part of Pacific Gas and Electric Company’s (PG&E, a California utility) Emergency Load Reduction Program, which we’ll focus on in the next section. We are currently looking at what the participants will ultimately do.
Based on Tesla’s description, Powerwall owners can sign up for the program using the battery management software. After participating, users can set a minimum battery reserve: the software will not allow the battery to fall below that value, even if grid stabilization would benefit from extra power. Of course, if the network goes down, that reserve can eventually be tapped.
It just wouldn’t be due to participating in this program. The plan is open to all PG&E customers not yet participating in a similar program.
The program guarantees a minimum of 20 hours of events. If the grid does not experience power demand crises, these are planned with advance warning. Demand spikes, which often accompany California heatwaves, could exceed the 20 minimum hours and provide much less warning. Participants can unsubscribe, suspend or drop out of a particular event at any time.
What more do participants get than just the satisfaction of keeping the state’s electrical grid stable? A very good price for their electrons. Charging the battery from PG&E’s electrical grid generally costs less than $0.50 per kilowatt hour. For every kilowatt-hour that a person’s battery relieves the system during these events, participants get $2. That’s a pretty substantial difference.
Demanding
How can that price difference make sense from a utility perspective? Home users do not directly pay the price the utility company pays for electricity when it is needed. Instead, they pay slightly above the average price the utility expects, allowing for some profit. When PG&E feels the need for an emergency tax cut, it’s because it’s difficult to build enough inventories to meet demand. At that point, it’s forced to pay for the most expensive generation sources that come online, and these can cost more than the $2 per kWh-hour it’s willing to pay for battery owners.
(As Tesla notes in the program’s announcement, these expensive generators are also the least efficient and most polluting, so avoiding activation has additional benefits.)
An alternative to activating these low-efficiency, expensive generators is to reduce the power demand, which brings us to PG&E’s Emergency Load Reduction Program. There are many options for reducing demand: raising thermostats from 70°F to 74°F, turning off some equipment until demand drops, and so on. PG&E’s program is aimed at commercial organizations that can aggregate enough of these changes to reduce demand by one kilowatt during periods of high demand.
What Tesla appears to be doing is pooling the services of a large number of battery owners who, individually, wouldn’t come close to being able to reduce demand that much. And given the involvement of batteries, it would likely reduce demand by using the battery to meet some of the homes’ energy needs. In other words, it bundles a whole bunch of individual houses together and makes them act as a single large facility that has reduced demand.
The standout here is that Tesla is apparently passing all the money it will receive from PG&E directly to its battery users without paying a fee itself. There’s a chance the company has negotiated a variant of the Emergency Load Reduction Program agreement with PG&E, and we’ve reached out to Tesla to find out. But the fact that the details match up so well suggests that any differences are minimal.
