This utility keeps customers cool during heat waves while saving them money

Again and again this summer, U.S. power grids have struggled to meet demand for electricity to run air conditioners amid heat waves. Utilities and grid operators have asked people to use less electricity in hopes of averting widespread outages in places such as Indiana, New York and Texas.

Such pleas put the onus on regular people to keep the grid up and running, instead of the companies that make money from producing electricity. And though ​“demand flexibility” is something that power companies pay for, these emergency calls for customer cutbacks ask people to donate this service for free.

Voluntary customer conservation has helped grids stay functional in dicey situations. But the power sector can do better than hoping people choose not to use air conditioning in a heat wave — especially as extreme weather events and ensuing grid crises worsen due to climate change.

Against that backdrop, Vermont utility Green Mountain Power wants people to know there’s a readily available alternative: Instead of asking customers to sacrifice, it uses clean, decentralized energy sources to reduce consumption and save millions of dollars.

“We want to let customers remain comfortable during those more uncomfortable times when it’s really hot and humid, or really cold,” said Josh Castonguay, the top innovation executive at the investor-owned utility, which serves 270,000 customers in Vermont.

GMP used this strategy to great effect on the evening of July 20, when a heat wave drove electricity consumption on the New England grid to its highest hourly level so far this year. The utility sent a command to a network of 4,000 batteries installed in customers’ homes, totaling nearly 20 megawatts of capacity, ordering those batteries to release some of their stored power to the grid. By shoring up the grid as well as meeting power needs at homes where they’re installed, these batteries knocked $1.2 million off the bill the New England grid operator charges GMP for usage during the annual peak demand hour.

Releasing updates about how much money home batteries have saved has become a reliable summertime tradition for GMP, which has grown its battery network steadily for years now. It’s saved customers more than $3 million annually for several years running by lowering bills for monthly as well as annual peak demand.

Many utilities worry about losing control (and, potentially, revenue) in a world of consumer-owned energy devices; indeed, many startups that sell such devices frame their products as an explicit challenge to the centrally managed, monopolistic utility system. GMP embodies a different vision: a creative utility managing the influx of new localized energy technologies to benefit everyone in its territory.

The fact that this model exists implicitly challenges other utilities to do more with readily available consumer energy technology. There are high-tech alternatives to the frantic pleas to turn down the AC.

Local batteries deliver regional savings

It’s worth pausing to explain how this scheme actually works.

Back in 2015, GMP offered customers in its service territory a discount to buy or lease their own Tesla Powerwall home batteries, on one condition: In a pinch, the utility can control the battery for its own needs.

The customers get to use the batteries (offerings now include brands beyond Tesla) however they want almost all the time. Key benefits include storing rooftop solar power and keeping the lights on during a grid outage. But if GMP senses a major weather event — like a storm threatening power lines, or a heat wave driving a spike in air conditioning — it takes control, makes sure the battery is charged up ahead of time and discharges it during the event to deliver extra power when it’s needed most.

All of these batteries are pretty small. But there are thousands of them, thanks to years of customer outreach. After starting as a pilot program, the battery offering was codified as a rate option customers can select for their utility services. Renters can participate, with permission from their landlords. And if a resident gets a battery on their own, they can sign it up to participate. GMP now also controls around 1,000 smart electric-car chargers, as well as large-scale batteries at solar power plants, which it can also dispatch to send power to the grid.

All those devices working in unison give GMP ample capacity to play with in the form of what’s called a ​“virtual power plant,” or VPP. If the utility control center predicts an hour when demand will peak, it can throw its VPP at it. Every megawatt sent to the grid by those little batteries is a megawatt the company won’t have to buy from the New England wholesale power markets, just as prices spike due to high demand.

The New England grid operator also charges GMP a fee based on its usage during the peak hour of the year and the biggest consumption hour each month, as a sort of proxy for its share of the costs of running the grid. Using the batteries to lower demand in those hours reduces the fee it has to pay, which ultimately saves customers money because the fee is wrapped into their utility rates. And customers get to enjoy secure electric supply without any disruption or pleas to sweat it out during a historic heat wave.

Why isn’t every utility doing this?

GMP has successfully wielded its battery network for too many years for it to be a fluke. And the utility isn’t shy about telling the world how much money it’s saved. Yet its seasonal press blasts have not inspired much copycatting by fellow utilities, raising the question of why this eminently possible feat has not been achieved elsewhere.

One reason GMP’s example hasn’t been widely followed is that the bounds of the possible are circumscribed not just by what a utility wants to do but also by what its regulators will allow.

GMP had to be willing to jump in on a new grid technology. But its regulators also had to embrace an unconventional approach to grid reliability and cost savings. In Vermont, the Public Utility Commission allowed a small-scale version of the program as a pilot; it later approved a full-blown customer rate option for home storage based on the early results.

Castonguay said that starting with a pilot program was key. ​“You’ve got to just do something — just go and show the value,” he said. ​“The pilot regulation is what really got us started here. We can show real data and real customer testimonials.”

Many utilities across the country have piloted home battery systems at relatively small scales. But outside of Hawaii, U.S. utilities have been slow to expand those pilots into full-fledged programs like GMP has — although some non-utility actors, like the community choice aggregators that are taking an increasing role in procuring power for counties and cities in California, are starting to move more quickly in this direction.

Utilities elsewhere have run into trouble trying to fund microgrids that would be paid for by the overall customer base but would directly benefit the small subset of customers living near the microgrid. GMP structured its program to generate savings for customers overall, so people benefit whether or not they have a battery.

The need for resilience was also a huge driver for GMP, which faces outages from winter storms knocking down power lines in rural areas. In regions that don’t suffer from frequent outages, the resilience benefit would be less pronounced. If a utility just needed to lower peak demand in a heat wave, batteries would be a much more expensive approach than, say, equipping homes with controllable smart thermostats to precool before crucial hours of high temperatures.

It helps that the New England grid operator levies very clear charges for discrete hours of peak system demand. That gives GMP a specific goal to aim for: lowering peak demand during a small number of high-impact hours. Other grid operators use different structures to charge for grid usage, which may be harder for a battery fleet to address.

Many states lack competitive markets to set the price for grid services; instead, utilities both generate the power and operate the grid. That could make it harder to tabulate how much money was saved in a particular deployment of home batteries. But the fundamental dynamic of peak demand dictating grid buildout persists across geographies.

“Peak demand is going to drive peak-related investments,” Castonguay said. ​“That is an expensive time for customers.”

There’s no place quite like Vermont, but plenty of utilities elsewhere are grappling with reliability concerns in extreme weather and the stress of heat waves on peak electricity demand. The battery technology and software controls that GMP uses are available just about anywhere. Creativity and follow-through are rarer.