Consultants and academics have been saying for a while that multiple revenue streams are key to the economics of an energy storage projects.

Consolidated Edison is testing that idea with an innovative real world application.

ConEd, in partnership with NRG Energy, has embarked on a $7.6 million, 1 MW, 4 MWh demonstration storage project in New York City that will “serve many needs with one asset,” according to Adrienne Lalle at ConEd, who is the manager of Storage On Demand project.

The project will also test another concept — mobile storage. ConEd’s single asset will have wheels, multiple sets of wheels. The batteries, which are being provided by LG Chem, will be housed on two tractor trailer trucks. A third truck will house the electrical switchgear.

Greensmith Energy is acting as the integration manager and providing the energy management system.

When the project is up and running – it is expected to launch by mid-year and run until first-quarter 2021 – ConEd will be able to deploy the batteries where they are needed to relieve distribution system constraints, most likely during the summer when peak load in New York City spikes.

ConEd aims to use the batteries to shave peak demand and lower distribution costs by moving the truck-loaded batteries to where they are needed, either for pre-determined periods during the peak load season or in response to unanticipated “contingency events.”

Once in place, ConEd anticipates they will stay at a single location for weeks at a time or even for several months.

At first, the batteries will need two-and-a-half days of notice for deployment, but ConEd and NRG intend to shrink that lead time as they gain experience with the project so that they can use the batteries to respond to emergencies.

When not deployed, the batteries will live at NRG’s Astoria generating plant the New York City’s borough of Queens. From Astoria, NRG will be responsible for managing the project’s participation in the New York ISO’s wholesale electricity market, which it will do through its Distributed Asset Real-Time Operations Desk, or dDesk.

The partners intend to bid the batteries into NYISO’s energy ancillary services market. NRG will also be responsible for working with NYISO and ConEd to enable the assets to participate in the wholesale market when they are deployed in the field.

NYISO’s current rules assume that a resource is stationary, so the partners anticipate that changes will have to be made to NYISO’s rules to allow mobile assets to participate, particularly in the capacity market.

The partners say that energy and ancillary service sales are “certainly possible,” but for revenue calculation purposes they are counting on capacity market sales only “at a later stage in project development.”

Those revenues are important to the project. They provide an income stream and a way to monetize some of the project’s other benefits. One of the benefits of the storage project to ConEd is that it would enable the utility company to defer investments in distribution and transmission assets.

Transmission and distribution upgrades typically are overbuilt relative to need. As ConEd points out in its proposal, solving a 200-kW system constraint during peak hours would require a 1,000-kW transformer. Deferring that investment could save millions of dollars.

The opportunity ConEd sees with mobile storage is that storage devices used solely for demand charge reduction have utilization rates of only 5% to 50%. So the theory is that finding other uses for the batteries can create additional value for all electricity system stakeholders.

ConEd is following the multiple revenue model with the Storage On Demand project, but with a twist: More than one party could receive the revenues.

Multiple customers, multiple opportunities 

ConEd will pay for and own the batteries. The utility does not need explicit approval from the state’s Public Service Commission to do that. The project just needs to be approved as part of the state’s Reforming the Energy Vision effort, which aims to reshape utility business models to encourage the deployment of distributed energy resources.  

In a broader approval in a previously filed rate case as part of the REV initiative, ConEd will be able to put its investment in the Storage On Demand project into ratebase.

ConEd will also pay NRG a “Mobility Option Premium” for operating and maintaining the units when they are at the Astoria site and for ensuring that they are available when needed off site.

On an annual basis, NRG will reimburse ConEd for the Mobility Option Premium from gross margin generated by selling wholesale services into the NYISO market. If NRG is able to generate more revenue than is required to repay the Mobility Option Premium, the additional gross margin will be split between Con Edison and NRG.

The arrangement lets both parties test the real world economics of a battery storage device in deferring investment and generating income with limited downside and the potential for some upside.

NRG views the project as a way to gain practical experience in “applying this type of flexible, rapid and mobile storage on the grid” and to integrate storage into the wholesale energy markets, according to spokesman David Gaier.

The partners expect the entire cost of the system will be less than the cost of an equivalent system purchased by ConEd and used exclusively for T&D deferral. However, ConEd does not anticipate that the total revenue realized during the demonstration project, estimated at $1.4 million, will exceed its $7.6 million cost. ConEd attributes that in part to its desire to test several monetization strategies, which could result in the sacrifice of some potential revenue.

ConEd also sees the project as an opportunity to test the appetite for mobile storage and to test an “anticipated future market model” — one in which third-party developers could purchase or develop mobile storage and offer “storage as a service” both within and outside of New York.

In such a scenario, a developer could acquire customers with differing needs — customers with summer peak needs and customers with winter peak needs, for instance. Those customers would pay for only the capacity they need while the developer would have revenue streams from multiple customers.

It could end up being a business model that ConEd might not be able to participate in, at least in terms of ratebasing its investment. Lalle says that it is unclear if ConEd would be able to ratebase an investment in a battery storage project outside of the REV initiative. Under the regulatory proceeding's rules, regulated utilities may only own distributed generation if they can show private developers are not filling a market need. 

“Right now, there is not a market to for mobile storage, so it makes the most sense to structure the project this way,” says Lalle.

ConEd is also exploring other business models for storage. In January the utility filed a proposal for a front-of-the-meter energy storage demonstration project with microgrid developer GI Energy. In that model, ConEd would pay customers for hosting batteries through leases.

“We are trying to figure out how to maximize the use of these batteries,” says Lalle. Or, as she says of the mobile storage project, “We are taking these things for a test drive.”