United Power, a large rural electric distribution co-op serving a portion of the Denver metro area, is in a dispute over battery storage with United’s principal power supplier, Tri-State G&T Association. The wrangle involves the impact of United’s use of its new Tesla battery array.
The dispute is important not only in itself, but could reverberate to scores of situations around the country in which rural electric and municipal distribution utilities contract with power supply agencies of which they are members.
At the retail level as well, large commercial or industrial customers may install batteries for reliability or load-shifting in ways that ruffle the feathers of its utility supplier. So battery storage is emerging as a hot-button issue among generators and customers.
Battery storage can provide fast frequency regulation, peak-load shifting, and trimming peak demand on transmission systems. Among those deploying battery storage: Large retail consumers, utility distribution companies, large utilities, and regional power market operators like PJM and the Midcontinent Independent System Operator. But when the party installing a battery may not see its expected benefits because of supplier contracts or policies, disputes can arise.
Tri-State serves 43 member rural electrics in Nebraska, Colorado, Wyoming, and New Mexico. According to its 2017 annual report, the G&T sold 15.9 million MWh to its members that year. Now, member co-ops may grow restless to pursue opportunities that are lower cost or “greener” than Tri-State’s heavy investment in coal-fired plants. The advent of accessible wholesale power markets and solar and wind projects that are smaller in scale and more affordable makes this possible for the members.
Jerry Marizza, United Power’s director of new business, told The Quad Report that United installed a Tesla 4MW/4-hour battery in late 2017 to trim its peak demand. United does this by charging its battery during low-cost, off-peak hours, discharging the stored energy later during high-cost, on-peak periods. The battery is located on the customer side of a United substation. At the time of United’s battery installation, Tri-State had no policy that addressed a member co-op’s action to reduce its peak demand through battery storage.
Lee Boughey, Tri-State’s senior manager of corporate communications, told The Quad Report that in early 2018, after United moved to acquire a battery to trim United’s peak load, Tri-State convened its members “to develop an approach to energy storage … that is fair and equitable to all of our members.” He said the approach Tri-State adopted “met our wholesale power contract requirements,” and was consistent with other utilities and transmission providers’ best practices and tariffs.
At issue is cost shifting. Tri-State’s policy treated United’s demand on Tri-State’s transmission system as unaffected by United’s peak-reducing battery storage. Tri-State’s transmission charges on United are based on United’s peak load, ignoring the battery’s peak reduction. The policy “cut our saving from the battery about in half of the $1 million we expected to save” Marizza says.
United says it alone bears the financial and operating risks of its battery. It adds that it and other Tri-State members had previously used other load-shifting measures with Tri-State’s cooperation, such as control of customers’ electric water heaters to trim peak. Marizza adds that its battery’s charge-discharge cycle costs 11 KWh of every 100 KWh of battery storage.
Boughey outlined three components of Tri-State’s billing: generation demand, transmission demand, and energy. Member batteries may offset generation demand on a one-for-one basis through net metering, which reduces a member’s billings. But Tri-State and its transmission providers calculate transmission demand based on a co-op’s actual total load, ensuring that costs of all transmission invested to serve load are recovered. Tri-State’s energy rates are applied “only applied when the battery is charged,” he said.
As with most wholesale power contracts between public power supply agencies and their members, Tri-State’s members must agree to buy nearly all their power supply from Tri-State. The requirement – members may meet just 5% of their load from other sources – was necessary to enable Tri-State to finance its generation.
Tri-State says its members decided that United’s battery fell under the all-requirements contract. The battery, insofar as it meets systems’ peak load, would be treated as generation. But counting a battery as generation under Tri-State’s 5% member generation rule restricts the freedom of United and other members to acquire other storage and renewable resources that retail customers increasingly favor.
Tri-State isn’t renewables-shy. Its portfolio soon will be comprised of roughly one-third renewables. It announced earlier this month that it has contracted for the 100-MW Spanish Peaks Solar Project, to be developed by Boulder-based juwi, a unit of German-based juwi AG. Spanish Peaks will more than double Tri-State’s 85-MW of existing solar generation, more solar than any other G&T cooperative.
Tri-State’s growing renewables commitment may not be enough for United Power or other members. Last Nov., James Vigesaa, United Power chairman, wrote to the 42 other Tri-State electric cooperatives. The Times-Call newspaper reported that Vigesaa urged United’s fellow Tri-State members to start talks with Tri-State that would allow them more flexibility in buying electricity.
There is also a competitive dimension to the issues dividing United Power and Tri-State.United notes that the wholesale power and energy charges of competitor Xcel Energy are 28.5% lower than .
—Robert Marritz