Smart meters slowing says FERC, Bloomberg finds storage cost slashed

Two reports from the US have highlighted tensions between smart meters and battery storage, where utility smart meter installations are slowing while the cost of battery storage is plummeting. This could be a looming problem, as storage and distributed energy resources (DER) need these smart meters to cooperate.

First, the Federal Energy Regulatory Commission (FERC) thinks there could be 90mn smart meters in the US by 2020, up from 70.8mn installed in 2016. That’s a penetration rate of 46.8%, given that there are some 151.3mn total meters in the country. However, the installation rate for the smart meters seems to be slowing, according to FERC’s findings, and it points to two recent legal blows to utilities that saw states reject their Advanced Metering Infrastructure (AMI) proposals.

Now, there are sometimes good reasons for rejecting such proposals. Shoddy workmanship on behalf of contractors saw a number of smart meters catch fire in Canada, and some utilities seem particularly keen to try and pass the installation costs onto their customers by hiking the bills. These are what most would consider to be anti-consumer practices, and many regulators would act to avoid these outcomes, especially if the utility can’t prove that they are cost-effective enough to justify including in the customer bills. To this end, short-term thinking seems to be hampering AMI installation.

These meters are the foundation on which smart grids are going to be built. Utilities need to have much richer usage data for their customers, so that better decisions can be made. This would include future planning decisions, but also Demand Response (DR) techniques, such as turning down a neighborhood’s HVAC usage by a degree to avoid firing up costly gas peaker plants in exchange for rebates, or even decisions on when to store renewable capacity inside grid-scale or in-home battery systems.

To this end, smart meters are the first step in this process, which then facilitate in-home technologies such as connected thermostats, rooftop solar, storage batteries, EV chargers, and later the Home Energy Management Systems (HEMS) that will coordinate all these elements. Without the meters, none of that happens.

And so the FERC findings are concerning. The US is not alone of course. The UK’s national program is woefully behind schedule and overbudget, while EU-mandated efforts have been almost ignored by some of the bloc’s member states. China seems to be storming ahead, embracing LPWAN technology to do so, but in the US, Kentucky regulators baulked at the $350mn price tag to install 1.3mn meters – some $269 per meter.

The figures indicate that there were 6.7mn advanced meters in the US back in 2007, meaning that just over 6mn have been added annually to hit the 2016 estimate. However, there have been significant ups and also some notable downs in that period.

When you actually look at the per-year figures, provided by the EIA, you see a huge jump from 12.8mn in 2009 to 37.3mn in 2011 (essentially 12.25mn a year), owing to funding from the Recovery and Reinvestment Act. This is followed by a significant slow-down, hitting 43.2mn in 2012 (5.9mn added), 51.9mn in 2013 (8.7mn added), 58.5mn in 2014 (6.6mn added), 64.7mn in 2015 (6.2mn added), and finally 70.8mn in 2016 (6.1mn). Outside of FERC, the EIA says that 2017’s total was 78.9mn (8.1mn added).

So three years of downturn seem to have reversed in 2017, but it seems likely that we will see another dip in the 2018 numbers. The US Court of Appeals for the Seventh Circuit recently concluded that smart meter readings could constitute a warrantless search.

The Congressional Research Service also described AMI as problematic, saying that “smart meters have run into cost and performance issues and resistance to the technology (generally from concerns of some customers over potential health impacts of radio wave emissions).” This the kind of environment that US utilities are operating in -privacy concerns and the equivalent of the anti-vax movement that think smart meters might give them cancer but will no doubt evangelize their Facebook friends with their concerns over WiFi and LTE …

However, there is some more upbeat news in the smart grid sector this week, thanks to Bloomberg’s New Energy Finance (NEF) report, which is something of a bellwether for the utility sector. Amid a lot of other data, the firm found that the long-term cost of sending electricity to the grid from lithium-ion batteries has fallen much faster than expected – making them cost-competitive with natural gas generation in a number of markets.

This means that batteries can increasingly be used as peak-demand generation capacity, to fuel the grid demand when it outstrips demand. The batteries can be filled with surplus electricity generated by renewable sources, which have also plummeted in price, and then drawn from when demand rises at peak hours.

The levelized cost of energy (LCOE), which tracks the lifetime cost of a technology, for lithium-ion batteries was down 35% in a year, to $187 per mWh, down 74% in five years. In the past year, the LCOE for offshore wind was down 24% to $100 per mWh, and down from $220 per mWh five years ago. The LCOE for onshore wind and solar PV fell 10% and 18% respectively, to hit $50 and $57 per mWh.

This means that “batteries co-located with solar or wind projects are starting to compete, in many markets and without subsidy, with coal- and gas-fired generation for the provision of ‘dispatchable power’ that can be delivered whenever the grid needs it (as opposed to only when the wind is blowing, or the sun is shining).”

Bids in the US for solar-plus-storage projects are coming in at under $30 per mWh in some market, with just solar getting down nearer the $20 per mWh mark. This isn’t the LCOE figure, but it is indicative of the price that these renewables can hit. The EIA’s most recent projections put Gas Turbine power plant operating expenses at $31.76 per mWh, so once you add in the profit margin, you’ve tracked higher than the solar-plus-storage rate.

The EIA has its own LCOE calculations too that paint a bleak picture for fossil fuels – charting them out to 2022 based on 2016’s data. Advanced natural gas comes in at $63 to $90 per mWh, with carbon capture used. Without the carbon pricing, it’s a weighted average of $87 (maximum of $130), and the older conventional turbines come in at $100 (maximum of $148).

As renewable prices are projected to fall, it could prove the final nail in the coffin for new fossil fuel investments, as investors lose confidence and bail. It seems that battery and renewable LCOE will soon pass natural gas. In the EIA’s LCOE calculations, this has happened by 2022. Onshore wind is at a weighted average of $55.8 (max $75.6), and solar PV is at $73.7 (max $143). Given the rate of progress in the market, this could happen a few years sooner.