Sonnen hopes 2,900-home Virtual Power Plant will fuel US expansion

Sonnen’s energy storage systems and solar panels will be fitted at a new high-efficiency housing development in Arizona – built with Mandalay Homes, consisting of 2,900 houses, and becoming one of the largest planned Virtual Power Plants (VPP) in the world. It’s a big win for Sonnen, which is looking to expand in the US, from its German roots.

A deployment on this scale is significant given the size of the residential battery market in the US. The project should also demonstrate the popularity of the battery storage with consumers, and enable those homeowners to generate revenue by selling their spare battery capacity back to the utility – although a deal with a utility is not currently in place, and remains a sticking point.

The point of construction makes for the best time to install a battery storage system in the home, as the cost on the consumer is then spread across a mortgage, opposed to more expensive and shorter-term credit options associated with storage retrofits. Sonnen’s batteries typically cost between $10,000 and $20,000, and that cost would be included in the homes sale price.

Given the anticipated cost benefit for the utility the installation of this solar-plus-storage virtual power plant (VPP) presents, Mandalay and Sonnen feel the utilities in the state should offer an incentive to those that purchase the homes – to help bring the costs down. For now, however, Mandalay and Sonnen will proceed without support from utilities, but admit talks with Arizona Public Service and Salt River Project have been ongoing for a few months.

Homebuilders and construction firms could have a large influence in setting trends in the market, and encouraging the standardization of what constitutes a necessity in the home – and so deals with homebuilders could prove a good strategic move in encouraging wider adoption of battery storage. Local building regulations are also important for this trend, but most areas have been slow in this regard.

Mandalay plans for the homes to power themselves during daylight hours with rooftop solar, storing the excess for later, which should last through the evening’s peak demand, once occupants have returned home. The battery can then charge during the night, on cheaper energy, powering the early morning activities until the sun comes back-out to replenish the storage using the solar panels.

Mandalay wants utilities to pay for the energy stored in the batteries, as it represents a cost saving for them as they would not need to purchase as much or any power at peak times on the grid – the cost of energy from a ‘peaker’ plant power to the utility is considerably more expensive.

The deployment will total 11.6 megawatts of power draw and 23 megawatt-hours of capacity. Those involved with the project believe that is enough capacity to decommission a coal peaker plant in the region.

Arizona has a growing supply of surplus daytime solar generation, such that batteries soaking up the excess solar provide value to the grid – as otherwise the electricity might be wasted, and causes problems if allowed onto the grid.

Batteries also mean that during peak hours of usage, less energy is demanded by those consumers, meaning the utility has less difficulty meeting peak loads. A utility trying to meet its peak loads might be forced to purchase electricity from gas and coal peaker plants. This can be at a significant additional cost to the utility as those plants are used only rarely and are very expensive to spool up and then ramp down.

As yet, there is no standardized model for integrating a VPP in Arizona, so this deployment will make Mandalay the first company to negotiate with the utilities there on VPP incentives. As there is no standard model the deal will likely be defining for future VPP deployments in Arizona.

The scale of the 2900-home project is significant for Sonnen, given that to date it has only shipped around 1,000 home batteries in the United States. Sonnen aims to get to at least 10,000 by 2020. The company will hope that solar-plus-storage becomes a standard feature of any high-efficiency residential buildings – and that more deals with homebuilders follow.

Sonnen is experienced in deploying VPP’s in its native market of Germany, but this will be the first project of this kind for the company in the US – a market it only entered at the end of last year with a capital injection of $85m. When Riot spoke to Sonnen’s head of business development in the US, Olaf Lohr, earlier this year, he told us that the company had made some 15,000 installations back in Germany.

Lohr also believes, the market for battery storage systems in the US is still relatively nascent, and is still deeply tied to the rooftop solar panel market. The U.S. International Trade Commission, having unanimously ruled that American solar-panel makers are harmed by competition from Asian and other rivals, looks set to impose punitive tariffs on panels from overseas. Tariffs would increase prices for panels, and could cause a dramatic slowdown in the number of new solar installations. Battery storage vendors would also see fewer shipments, as most installations are made accompanying solar installers.