Why it Just Got Easier for Businesses to Divorce their Utilities

on December 13, 2013 at 4:00 PM
Telsa CEO Elon Musk Speaks At Business Conference In New York

Telsa CEO Elon Musk (R), speaks at the Ignition Future of Digital business conference on November 12, 2013 in New York City. Musk, who is also the CEO of SpaceX and Chairman of SolarCity, was interviewed at the Time Warner Center by Henry Blodget, CEO and Editor in Chief of Business Insider.

SolarCity has unveiled an energy storage system for businesses. The system includes software that determines when to charge and when to discharge so as to minimize the utility bill. They use batteries from sister company Tesla motors.

Although SolarCity has previously teamed batteries with rooftop solar, the new DemandLogic systems are meant for peak shaving. They will make the most sense in California, Massachusetts, Connecticut and other parts of the country where utilities apply “demand charges” during peak periods. SolarCity’s storage system minimizes the amount of electricity that organizations need from the grid during peak periods, reducing exposure to demand charges.

Unlike demand response programs, DemandLogic requires no change in operations or cutbacks in power use. The system is fully automated and, on its own, analyzes an organization’s energy use to design a charging and discharging cycle.

The systems are available with no upfront cost through 10-year service agreements. SolarCity promises businesses will save more on energy than they pay each month for the storage service.

Additional detail is contained in the press release:

SolarCity DemandLogic™ integrates intelligent management software and Tesla battery technology to reduce businesses’ peak demand, provide backup power during outages and potentially save thousands on energy costs.

SAN MATEO, Calif., Dec. 4, 2013—SolarCity has unveiled a smart energy storage system to address two major pain points for business: rising utility demand charges and increasing grid outages. SolarCity DemandLogic™ can allow businesses to reduce energy costs by using stored electricity to reduce peak demand, and can also provide backup power during grid outages. Developed with advanced battery technology from Tesla, SolarCity DemandLogic storage includes learning software that automates the discharge of stored energy to optimize utility charge savings for customers.

“Utilities have altered their rate structures such that demand charges are rising faster than overall energy rates, and businesses are bearing the bulk of those increases,” said Peter Rive, SolarCity’s chief technology officer and chief operations officer. “Time is money, but so are control and predictability. Our storage systems can give businesses the tools to address all three—delivering immediate savings, protection against escalating demand charges and optional, grid-independent backup power in case of outages.”

SolarCity storage systems are available to new solar power customers through 10-year service agreements including monthly payments, with no upfront cost required. SolarCity will customize the system size to make it possible for businesses to save money immediately by saving more on energy costs than they spend for the storage service. Unlike load shifting approaches to demand management, this product requires no change in operations for the business and is fully automated. SolarCity DemandLogic can also power IT functions, security systems, cash registers and other critical business systems during power outages. SolarCity analyzes each organization’s energy usage to design a storage system that can offset peak load and support high priority backup functions.

“We are thrilled to leverage Tesla’s technology leadership in energy storage systems, charging and power electronics to enable this exciting SolarCity launch,” said Tesla CTO and co-founder JB Straubel. “The economics and scale that Tesla has achieved in the automotive market now make stationary energy storage more cost effective and reliable than it has ever been in the past. We expect this market to grow very rapidly now that we have crossed this economic threshold.”

The utility grid is aging and outages are increasing. The U.S. experienced 679 major weather-related power outages between 2003 – 2012, including 7 of the 10 costliest storms in American history. At the same time, while overall electricity usage in the U.S. has increased only modestly since 2001—approximately 10 percent according to the U.S. Energy Information Administration—utility revenues have increased more than 50 percent in the same time period.*

Utilities have increased revenues faster than electricity usage in part by creating “demand charges” for businesses that have increased their share of the utilities’ cost burden. Some utilities are basing rates less on the overall amount of electricity consumed, and more on “peak demand”, i.e. the maximum amount of electricity used at a specific point in time. Solar power can significantly offset the overall amount of electricity used by organizations, but if an organization’s “peak” electricity demand is still high during the day—in the late afternoon, for example—the organization can be hit with high demand charges. SolarCity’s commercial storage system regulates the amount of electricity that organizations need from the grid during “peak” periods, reducing exposure to exorbitant demand charges.

SolarCity storage systems will initially be available in areas of California serviced by Pacific Gas & Electric and Southern California Edison, areas of Massachusetts serviced by NSTAR, and areas of Connecticut served by Connecticut Light & Power.   


Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.