The Duck Curve NEM 3 and YOU - Part 4

In Parts 1-3 we’ve made the case that Solar plus Battery Storage is still a solid investment -  if you can afford it.

Once you have decided to take the plunge and invest in solar and storage for your home, you’ll want to maximize your investment.  Our focus is on your new solar and storage system and we’ll explore ways to get the most out of your investment leveraging them. 

However even before we do that there are ways to reduce your energy bill and increase  the efficiency of your home.  Energy Star is an Environmental Protection Agency (EPA) program that certifies products that meet strict standards for energy efficiency.  They have an “Ask the expert” function that provides information on ways to find efficient and smart appliances, thermostats, windows, HVAC, lighting, insulation to reduce your energy usage and thus save you money.  Plus they have this awesome rebate finder.  So many options and directions…how can you decide what to do?

An Energy Audit

To help you decide how deep to dive we recommend an energy audit.  We covered government assisted energy and weatherization audits in Part 3. For a fee this service can also be provided by certified auditors for anyone interested in saving money on their utility bills.  Rewiring America has a nice overview on what to expect in an audit.

What you save depends on where you start. Typical audits take 2-3 hours and according to Home Advisor cost between $212 and $700.  This will help you determine what sort of investment options you may want to make to make best use of the energy that you are generating and storing in your newly built microgrid.

I have a Microgrid?  

The Department of Energy defines a microgrid as a local electrical grid with defined electrical boundaries, acting as a single and controllable entity.

Here’s what a typical system includes:

1. Battery Energy Storage System (BESS): The core component of your setup, this system stores energy during off-peak hours when electricity is cheaper and discharges it during peak hours when rates are higher.

2. Energy Management System (EMS): A newer technology which monitors your energy usage in real-time, controls when your battery charges and discharges, and ensures that your system operates at peak efficiency. Most modern Lithium-type batteries have built-in EMS systems.

3. Inverter: Converts the direct current (DC) electricity stored in your battery into alternating current (AC) electricity used in your home. 

4. Metering Equipment: This is needed to accurately measure your electricity use and the electricity produced by your battery. Many batteries come with smart phone apps that monitor this data.

5. Solar Panels: Generate electricity during the day, which can be stored in your battery for use during off-peak hours.

So yes, you now have a microgrid.

All these components will let us take advantage of Energy Arbitrage.  Energy Arbitrage?  Yeah it’s a real thing.

With Financial Arbitrage, market participants take advantage of the differences in prices of an asset between when it is bought and sold. In other words: Buy low - sell high! 

Energy storage arbitrage works in a similar way - electricity is stored when the price of electricity is cheap and used or sold when electricity from the grid is expensive. Homeowners save money on the difference between the price at which power was stored and the price it would have cost when the power was discharged. 

Let’s look at two classic strategies.

Load Shifting involves on shifting the use of electricity during peak times (expensive, usually 4pm to 9pm) to off-peak times (cheap). For example charging electric vehicles overnight or running the laundry or dishwasher before 4pm or after 9pm. Simple. If you are on a Time of Use (TOU) tariff. You can do this without any solar or batteries.  

We’re using PG&E’s E-TOU-D tariff with a Peak of: 4 to 9 weekday

Here’s what I came up with for my house:

A similar strategy called Peak Shaving is used to avoid peak demand charges by reducing power consumption during peak times. For a homeowner this can be accomplished by using the energy already stored in their battery energy storage system to temporarily power the home during on-peak times.  This can also be done without Solar.

Note: Unfortunately as we saw in Part 3 the industry uses multiple phrases that cover the same programs.

The term of "Load Flexibility" which encompasses the concept of adjusting energy usage based on grid conditions, which includes both Load Shifting and Peak Shaving to efficiently match electricity supply.

Behavioral Load Shaping is the practice of adjusting energy use to account for weather, time of day, and other factors.

Optionally and additionally, instead of storing the energy for use later a homeowner also can utilize NEM 3 and sell back any excess electricity.  This is a useful strategy when you go on vacation and are using a minimum of power.  

While we’re not endorsing their specific product, here’s a good explainer from Enphase that states even with NEM 3 “adding a small grid-tied battery to a solar system can significantly improve the homeowner’s electric bill offset from 55% for solar only systems to 70%­–90% while delivering a payback period of about five to seven years”.

Heat Pumps

Since you’re now getting electricity from the sun for free, many people have opted to swap out their furnace for a heat pump.  Chances are heating and cooling is the big ticket item on your utility bill. Installing a heat pump to work along with your solar is a money saver …. Once again Energy Star has a very good site that explains how Heat Pumps work, gives buying guidance and even includes a savings calculator: Air-Source Heat Pumps.  

Heat pumps have been around for over 160 years. The British mathematician, physicist and engineer Lord Kelvin proposed using heat pump systems for space heating way back in 1852.  Sure, Absolute Zero is cool but how about a Heat Pump that uses weather forecasts to determine the best time to heat water?  Panasonic has one: Panasonic offers residential heat pump solution that uses solar radiation forecasts.

That brings us to Smart Thermostats.  They’ve also been around a while. Environmental Protection Agency data estimates an 8% annual reduction in utility costs via the use of Energy Star rated smart thermostats like Google Nest and Ecobee.  Consumer Reports explains, “When the thermostat senses that your house is empty, it’ll switch to an energy-saving mode that turns back the temperature (up in the summer, down in the winter). It’s the same effect as adjusting your thermostat by hand when you leave the house—but these smart thermostats do it automatically, so you don’t have to remember to adjust it yourself.”  The best systems have both a motion sensor, and geo-fencing. 

Ok, so now you’ve installed your microgrid, audited your home and upgraded your appliances, installed a heat pump, a smart thermostat, and configured your Energy Management System to take advantage of arbitrage while saving 15%-20% of your battery power for emergency back up for power outages.

From Total Energies of Houston Texas

So how does your EV fit in?  Glad you asked. EVs have the capability to play major role in diversifying how we power ourselves in the near future.  Did you know that the average EV battery now has a capacity of 65kWh?  While the Tesla Power Wall weighs in at 13.5kWh.  So that’s a lot of energy sitting in your garage or driveway.

As JASON SVARC explains for Clean energy Reviews in the aptly named: Bidirectional EV charging explained - V2G, V2H & V2L an EV can augment your microgrid in multiple ways.  

Let’s open with Vehicle to Load (V2L) which does not need a bi-directional charger.  Your EV would have to have an integrated inverter to supply AC power one or more standar

d outlets in the vehicle, or use a special V2L adapter plugged into the EV charging port to provide AC power. So in an emergency, extension cords can be run from the vehicle into a home to power critical lights and/or appliances. 

It is also possible to connect the V2L directly to your electrical panel using a specialized AC transfer (change-over) switch.  This mode would be serve useful for Power outages or other such dire circumstances.

The key for V2G and V2H is a bidirectional charger which is an advanced EV charger capable of two-way charging which converts AC to DC during charging and the reverse during discharging.  These are slowly becoming available as car makers introduce more models. CNET provides this handy update on which vehicles offer bidirectional charging.  GM is planning to make it standard in 2026.

I am going to lean on this nice iEVPower article: Vehicle-to-Home (V2H): Everything You Need to Know to explain the complexities and current state of play in this space.  TL,DR; iEVPower says that V2H is currently expensive, requires a complex set of  hardware and software and its availability is currently limited. 

GM Home Energy System

However, that the GM Energy Home System starts at $12,700, which includes a Powershift Charger, PowerBank Energy Storage, and V2H Enablement Kit.  If you compare that to the $12,255 you’ll need for a Tesla Powerwall 3 then best we can conclude is they’re both expensive. 

I can see V2H becoming a common configuration in a few years as more vehicles and companies make the technology available.

Embracing this next mode takes some faith.  

Vehicle-to-Grid (V2G).  Allowing your vehicle to export electricity to the grid when it is needed.  V2G suffers from the same scarcity of options as V2H but again this will be a growing mode of operation soon as more and more EV companies provide solutions.  

Interacting with the grid opens up a whole new paradigm for how we share our electricity with others in the community.  We touched briefly on being an individual and exporting our energy back to your utility, now we’ll take a closer look at other options.

From Energy Sage

What is a Virtual Power Plant (VPP)?

VPPs link small energy systems (like your bidirectional EV, Solar Panels and/or Home Battery) and smart devices (smart battery, thermostat, heat pump) into a connected network managed by a utility or third-party energy companies working with utilities (called “aggregators”).

Aurora Solar has this nice blog: What are virtual power plants (VPP) & why do they matter for solar?  In it they explain: “Each component, whether it’s a PV panel on a homeowner’s roof or a battery storage system in a commercial building, operates independently. Yet, they interconnect and coordinate through the VPP’s software.”

And here’s where we get back to the Duck Curve: “By aggregating distributed energy assets, VPPs can balance supply and demand in real-time, reducing the need for costly and polluting peaker plants.”  Peaker plants!?! We’ll cover how these vital power plants work and why reducing the need for them is good in Part 5.

We’ll let EnergySage pick up the narrative via: What is a virtual power plant?  “You could get paid to stabilize the grid—if you let your utility control your energy devices.”

Ah so there’s the faith part.  You need to trust the utility companies or other 3rd party to pull power from your batteries or raise or lower your thermostat.  I have to tell you I am not entirely comfortable with that concept.  On the one hand I like the idea helping out my neighbors and it really undercuts the argument that the Solar and Storage folks are making it more expensive for people unable or unwilling to install their own systems.  Plus you are getting paid for providing your assistance.  

On the other hand we just made it possible to live a good portion of our time off the grid.  Energy independent and using an abundant power source that helps the planet.  Why would we want to opt back in?

Let’s take a closer look at some programs that VPP enables:

During high demand the VPP will pull from enrollees batteries back to the grid.  In California the state program is the Demand Side Grid Support Program (DSGS).  “DSGS offers incentives to electric customers that provide load reduction and backup generation to support the state’s electrical grid during extreme events from May to October, reducing the risk of rotating power outages.“

There are 3 incentive options and multiple payments within each one.  So the compensation varies depending on the option chosen. According to Utility Dive, for a similar program in Texas Tesla provided an annual customer payment of $400 per Powerwall in 2024. 

Other types of programs include:

Peak time rebates/events - These occur when energy demand and prices are high.  Utilities know when these are going to occur and usually designate a Peak Time Event 24 hours in advance.  Then you’ll have the option to reduce your energy for typically 3 to 4 hours. Which then earns you a rebate on your next bill.

Portland General Electric (PGE) offers such a plan.  For this program “You earn $1 per kilowatt hour (kWh) when you reduce below your baseline during a Peak Time Event.”

Pacific Gas and Electric (PG&E) calls their plan SmartRate which has SmartDays and SmartDay Events.  

However the PG&E plan is not as straightforward as Portland’s.  “Participants will be charged $0.60/kWh in addition to their regular rate charges for all usage between 4 p.m. and 9 p.m. on each SmartDay.  A minimum of nine and maximum of 15 SmartDays may be called in any calendar year.”  

On the other hand: “Participants will receive a SmartRate Non-High Price credit ($0.00636/kWh and a SmartRate Participation Credit ($0.00167/kWh)) for usage other than 4 p.m. to 9 p.m. during SmartDay and all usage on those days within a bill period that are not declared as SmartDays. These credits are only applicable for bill periods in which at least one SmartDay occurs. The SmartRate Participation and Program credits are multiplied by the number of SmartDays in a bill period.”

Similar to Peak Days Portland also has a Smart Thermostat program.  Again this means having faith in the electric company and giving them the ability to take over your regular settings during peak energy hours.  As KOIN News explains: “The settings can be overridden by those in the home, but doing so may cancel the credits available to customers who successfully maintain the settings.”

And it makes a difference, from the same article: “Sometimes people think ‘oh well it’s just a couple degrees in my home, what difference can I make?’ The answer is you can make a huge difference because you and dozens of others are making those little changes,” said John Farmer with PGE.”

It may make a big difference community-wise but my calculations of a typical year with PG&E doesn’t show much of a benefit for a homeowner.  About $10.

Again it’s based on your priorities on whether to opt-in.

Other programs include:

Interruptible Load Program (ILP) - According to Diversegy “utility customers are paid for being willing to shed load during certain demand events. Unlike demand response programs that require customers to reduce energy consumption during these events, ILP customers are paid to be on standby.”

PG&E has their usual convoluted twist on the same program called the Base Interruptible Program.  I’m not even going to try and analyze it. 

“To participate, you must designate a Firm Service Level (FSL), which is the maximum

allowable demand at which you can operate during a program event. The designated

FSL must be no more than 85% of your highest monthly maximum demand during the

summer on-peak and winter on-peak periods over the past 12 months, with a minimum

load reduction of 100 kW. If you are deemed an essential customer, you may commit no more than 50% of your average peak load.”  And it goes on in a similar vein from there.  It’s almost as if the purpose of this program is to make people have their eyes glaze over, throw up their hands and yell “Fuck it!”

EV Charge Manager (active managed charging)

This excellent article from the excellent Jeff St. John (@jeffstjohn.bsky.social), How to make EVs get along with the grid covers the concept and PG&E’s limited program.  EV Charge managing is what those of you who read the first part this article would expect. A program that offers incentives to charge your EV during low demand times. 

As Gabriela Olmedo, regulatory affairs specialist at EnergyHub says via PV Magazine “When everyone in a neighborhood starts charging their EVs at nine p.m. when the time-of-use rate ends, that rate spike isn’t going to be great for the grid infrastructure. Active managed charging will be critical.”  

Mr. St. John explains why the stakes are high, “Studies of California’s three major utilities, including PG&E, show that upgrading distribution grids to handle the 13.5 million EVs expected to be in the state by 2035 could add up to more than $50 billion.”

There are more gems in the same Canary Media article as they report on this AES study in Indiana.  Astrid Atkinson, CEO and co-founder of Camus Energy who worked on the study “You don’t just see people randomly adopting EVs…” instead, there’s a “clustering,”  Meaning “certain neighborhoods quickly reaching a concentration of EVs that can cause distribution grid overloads. Managed charging for those clusters could save a lot of money for AES Indiana customers at large…”.  

Understanding where these clusters are can allow a utility to use managed charging and to defer grid upgrades in those areas.  This deferred work is mostly at the distribution grid level and not the transmission grid or power plant level (more on why this is important in Part 5).

Mr St. John is riffing now. “Time-of-use rates can actually worsen wear and tear on distribution grids, due to what’s known as the “snapback effect” — the phenomenon of EV chargers restarting en masse when high prices end and cheaper rates start.

That can “inadvertently create new peaks on local equipment,” which in turn will “drive increased capital expenditures compared to no EV management,” damn!

SEPA, Weavegrid

How can the utilities possibly keep track of everything?

According to Atkinson in the Canary article, “Distribution-system benefits and costs usually aren’t calculated because utilities don’t have enough data to understand them”.

Well, yes and no.  As Atkinson herself said previously in this exceptional podcast: Managing a distributed grid, it’s not only the lack of data; it’s also the inability to process the data and turn it into information.  And in fact that’s why she started Camus.  

VPP bigger picture

So VPPs offer the promise of being able to use the community’s excess energy to shore up the periods of high demand.  Win-win right?

Well just who are these VPPs and how effective can they be?  The bigger the aggregator gets the more effective their programs can be.  The Brattle Group estimates that a “VPP could provide resource adequacy at a net utility system cost that is only roughly 40% of the net cost of a gas peaker, and 60% of the net cost of

a battery.”  Again, more on ‘gas peakers’ in Part 5.

As Pier LaFarge from PV Magazine reports: “The current model of VPPs, led by third-party aggregators, heavily relies on customer investment and opt-in, and limits the speed and scale at which DERs can be deployed. Several utilities and energy companies have launched VPP pilot programs, but to date, it has felt like VPPs are stuck in pilot mode, with slow rates of customer adoption and deployment levels that are too small to impact grid planning at the system level.”

The solution is to have the utility providers create their own VPPs.  Utility VPPs have the advantage of:

• the ability to decide where DERs should be placed to best support constrained areas.

• “higher rate of customer acceptance”

• “Customers get a more cohesive and positive experience“

Let’s look at VPP Pros and Cons  as provided by Energysage

Pros:

1. Energy Resilience - No single point of failure.

2. Avoiding major infrastructure investments - VPP power can delay the need for expensive upgrades.

3. Compensation for energy producers - selling your excess power for $$$

4. Reduced (or stabilized) electricity costs - helps avoid utilities needing to expensive ‘peaker’ plants 

5. Greater energy efficiency - For the utility companies to use your power during high demand.

Cons:

1. Potential discomfort - Your VPP program may turn down your thermostat on a hot day or drain your battery on high demand days. 

2. Lower Battery Savings - giving power to the grid means not being able to use it (free) for your own needs.

3. Battery Degradation - a solar battery’s performance degrades the more it’s used.

4. Cybersecurity and data privacy risk - “When you join a VPP, your home device information and data become part of a network that could be vulnerable to cyberattacks.”

The end game is an interconnected power grid where individual connections can be made a la the internet.  What sort of virtual power plants and resilient hubs, microgrids, can we conjure up?  Will AI be useful managing multiple real-time distributed power generating nodes?  Can we trust AI?  Can we trust the utility companies? I really think that’s what it comes down to.  Frankly it seems that some companies feel that the more complicated they make the systems the more people will opt into them and let the technology take care of it.  Especially if the utilities can prove it does save you money, of course they get their cut.  And their profits. 

So how do the utility companies make their profits?  Glad you asked, let’s move on to Part 5.