Teri Viswanath: Electricity is the leading source of energy for essential services in our homes and communities, and the impact of a power outage is immediately felt. Homeowners are becoming more aware of the importance of uninterrupted power supply, leading to growing demand for residential generators and batteries. The U.S. residential battery market is expected to experience significant growth in the coming years.
But how can consumers get the most out of that investment?
Hello, I’m Teri Viswanath, the energy economist at CoBank and I’m joined by my co-host of Power Plays, Tamra Reynolds. She is a managing director here at the bank. We are going to explore this topic from the perspective of a locally owned electric co-op in Texas that has a really dynamic member program to fully capture the investment made by its members in this new technology. Hello, Tamra.
Tamra Reynolds: Hey Teri. When we were brainstorming ideas about this year’s podcast line-up-- oh, and I want to thank our listeners and some of our LinkedIn connections on giving me some programming ideas for the rest of the year, I think there were some great ideas coming out. But I really wanted to lift up some great examples of ingenuity and innovation in our broader co-op community. Thankfully there’s a lot to choose from. These stories always make us feel good and reinforce why co-ops are so very important to the communities they serve.
Viswanath: So Tamra, when I was away on family vacation is when you caught up with Will Nichols. He’s the executive manager of power supply and data analytics at Guadalupe Valley Electric Cooperative. That’s GVEC. Imagine my surprise, when I heard you mention of my alma mater, the University of Texas at Austin. Audience, this is a fun fact, Tamra attended “that other university in Texas” and is a die-hard Aggie, so wait for that particular mention.
But, this program is really outstanding. You can hear that Will is really passionate about the work he’s doing and he outlines the steps for developing a successful co-op program for his membership that I think others can use. So, let’s dive into Tamra’s discussion with Will.
Reynolds: Welcome to the show. I wanted to introduce Will Nichols. Will, give me a little bit of background about the co-op you’re with and how you got there.
Will Nichols: GVEC is a cooperative that offers reliable electric, broadband, and what we call beyond-the-meter services. Our beyond-the-meter services would include rooftop solar installations, residential battery installations, electrician services, HVAC services, things of that nature. Our service territory covers 3,500 square miles, over 13 counties here in south central Texas, just outside of San Antonio, south of the New Braunfels, Austin area. I came to the cooperative not too long after I graduated from UTSA with my undergrad in mechanical engineering.
I started as a management assistant under our chief operating officer and then moved to power supply very shortly after that. We were in a unique situation where we were coming out of an all-requirements contract and moving to be more hands-on with our day-to-day supply decisions. With that, I was a key contributor in setting up all the processes and procedures, risk policies, things of that nature with our power supply department. Then, from there, I got promoted to the manager of the group back in 2021. Then, since then, they’ve asked me to take on other services, such as GIS, data analytics, as well as our IT department.
Reynolds: Very cool. UTSA, am I supposed to say birds up? Is that the phrase?
Nichols: That is, yeah
Reynolds: I was watching the baseball tournament last weekend. I was really excited to see them take down the other UT. That’s great. What inspired you guys at GVEC to look at a virtual power plant program? What was the catalyst behind that? How did you guys come up with it? What was the inspiration?
Nichols: We started with just traditional voltage reduction, monitoring the voltage on our transformers to lower demand. We’ve also had a C&I demand response program for a long time. We stepped into residential batteries and demand response there back in 2019. Right around the same time, our beyond-the-meter services began selling and installing residential batteries.
From that point, it made a whole lot of sense to us to start looking at residential batteries as a part of our DR VPP program. It took a few years for the technology to get to where it is today, so that we had control and were able to access the capacity from those batteries.
Reynolds: With maybe the stigma around ERCOT now following the winter storm. Have you guys seen more people asking questions of GVEC about how they can be prepared for the potential for outages and thinking about, how do they partner with their utility around these types of services and opportunities?
Nichols: That’s the primary reason, for the most part, why our members are asking to be in this residential battery program. The fact that we’re able to offer a rebate structure in order to incentivize them to do that is fantastic. A lot of them are more focused on that reliable service. It also allows us to partner with them as opposed to going building a physical, utility-scale asset. We’re able to partner with our membership and share in the value of those assets.
Reynolds: How did you all decide who to partner with? There’s so many companies out there that are looking to find ways to integrate with utilities and even, in some cases, go around the utilities.
Nichols: The two that we partnered with initially were Enphase and Tesla. We had several years of selling and installing both of their products. We knew that they had a very large market share in that space, and so it made a lot of sense for us to partner with those two entities. The fact that both of those entities have been forward-looking and are able to provide the kind of software controls needed for a VPP-type program certainly helped as well.
Reynolds: It’s easy to throw around the word partnership a lot because it means something different when we’re co-ops, right? Partnerships help you execute a variety of different objectives. I think that’s how you’re referring to Tesla. What exactly does that relationship look like for you all, and how did you decide on picking them specifically for this type of a pilot project?
Nichols: I’ll say Tesla’s been a great partner for us. They’ve been very flexible in everything that we’re asking for. We have periodic meetings and discuss what’s important to GVEC and its membership. They’re always very flexible in what they’re able to offer to us. A lot of what came down to partnering with Tesla as well is they’re leading in the space of the ADER program space, the Aggregated Distributed Energy Resource space within ERCOT, which is the same as FERC 2222 everywhere else. Here in Texas today, I want to say they have two aggregations that have been accepted in the program. Then Bandera Electric Cooperative also has the other aggregation. It’s not a long list of entities that have been able to have the technical knowledge and the market know-how to make that happen. It was important for us to partner with someone that had that experience and that skill set.
Reynolds: There’s some unique things that when we talk about the details of the program are also viewed as, I would say, member benefits, and then probably how you market it to them. Can you talk a little bit about the Peak Time Payback Program, and how that works, and maybe how it benefits your membership?
Nichols: I think the benefit for the member really is that reliability aspect. We’re able to partner with a member because the times at which GVEC is going to be looking to utilize their battery asset for market outcomes are not going to be the same times in which the member is going to need that backup power to keep their power on the grid. Generally, we see a lot of outages, I think you see a lot of outages typically with hurricanes, thunderstorms, windstorms, things like that, which are all bearish when it comes to market prices.
There’s good synergies there where the times at which the member wants to have a battery, we don’t necessarily need it, and the times at which the cooperative needs it for economic impact, the member doesn’t really need it. It’s a very synergistic partnership there. We’re able to pay the members. After you get your battery installed, you get a one-time upfront rebate, $220 per KW installed. Then, on an ongoing basis, we’re paying you $75 a KW a year, divided up over monthly installments.
We’re also offering 0% financing to really try to break down that barrier of entry for anyone that does want to have a battery installed at their home. From a cooperative perspective, it helps us on two fronts. It provides that backup power for the member so that if we do have an outage, they’ve got power, and so it helps with customer satisfaction, but it’s also helping us lower our energy cost as well because we’re able to use those assets for economic benefit.
Reynolds: What’s your average monthly usage for a home in Guadalupe Valley’s territory? And from a financing perspective, is that like an on-bill financing program, or is that separate and apart from just the typical monthly bill?
Nichols: Yes, no, we do on-bill financing, and then the typical home consumption is right around 1,500 kilowatt hours a month. The 0% financing has been really helpful. It’s been very well perceived. We’ve had basically as soon as we rolled out the program, our battery installation numbers jumped up and have been climbing since then. There’s not a whole lot of barrier to entry. We do put a lien on the home for the time period of which you’re financing until it’s paid off, of course.
Reynolds: If someone were to sell their house, how does that work?
Nichols: We put a lien on the house whenever they finance with us, and so the total principal has to be paid before the house is sold, and if they are trying to sell it, it gets paid with the sale of the home.
Reynolds: We talked a lot about batteries, and I know programs across the country vary in terms of types of DERs that are brought to the table. What are some of the other resources that you all are seeing or potentially are looking at adding as this program continues to go forward?
Nichols: We’re getting ready to release a press release here pretty soon, but we just partnered with another battery company. They’re actually an REP here in the state of Texas called Base Power. Their whole business model is really installing batteries for resiliency purposes. They own and operate the batteries. We’ve negotiated a tolling agreement with the batteries within our service territory so that we’ll have ultimate say in how they’re monetized and receive the economic benefit.
We’re really partnering with them on new subdivision builds. They have a partnership with Lennar Home Builders. As a new Lennar Home gets built, the customer that’s buying the home has the option to have this battery installed free of charge. They get all the resiliency benefits, and GVEC gets the economic benefits, and we pay a small fee to Base to allow us to control it.
There’s other things we look at periodically as well. EV load reduction, we look at that from time to time, really just waiting for more penetration within our area to really push that across the finish line. We’ve looked at home standby generators, which has come on pause right now. We look at anything and everything that’s out there that can be electrified in a home.
Reynolds: I know typically when folks start these programs, they probably have some timelines and goal milestones that they like to target or look toward and think about. What does that look like for GVEC?
Nichols: Every year within our business plan, we have a target for where we want our VPP to go. I’ll focus on batteries, because that’s most of what we’ve been talking about. Our target this year was two megawatts of installed capacity. We actually blew that out of the water. We’re at 2.7 right now. The program has been very popular and very successful so far, but we’re going to be looking at those numbers. The long-term goal for this is we really want to utilize this ADER asset, this VPP asset, to offset our ancillary service obligations that we get from ERCOT. For ECRS and for non-spin, that’s somewhere between 10 and 20 megawatts. We’d be really happy if we could offset 75% or 100% of that cost via this program.
Reynolds: I know EVs are another area where folks are starting to say, how can we make that a business model or a value stream? How are you all looking at that potentially and those types of opportunities over the next few years?
Nichols: From a residential standpoint, it all comes down to penetration really. We do our best to keep our finger on the pulse to make sure that we understand how much load is out there when those cars are charging, so that we can keep an eye on when we’re going to reach that penetration level that gets us to a break-even from an economic standpoint. I will say from a fleet perspective, it is very interesting. We haven’t had any of our commercial customers approach us to talk about that recently.
I know a couple of years ago, we had one or two that were looking at it. The main benefit, whether it being on a commercial aspect, is there’s a lot of electric infrastructure that would need to be upgraded to convert your entire fleet to electric or a portion of your fleet. As those discussions come to us, we proactively work with those folks to see if we can dispatch their fleet, really. A few years ago, back when EV school buses were first coming out, we did talk to a couple of the school districts within our service territory to see if they would be interested.
It has a benefit for everyone, really. It increases the consumption at the school, better load factors, and school buses, for the most part, in the summertime are just parked batteries if they’re electric. We do look at those things from time to time, but it really comes down to when the customer wants to make that transition. We do our best to partner with everyone as best as we can.
Reynolds: One thing we often learn through the process of doing a new program, sometimes is the challenges you didn’t anticipate. Is there anything out there, as you have put this program into place for VPPs, that maybe occurred that you didn’t anticipate happening, any unexpected challenges that you guys would share with us?
Nichols: I would say the biggest challenge to getting something like this off the ground, especially once you get past the contracting aspect with your chosen partner, is really just the amount of communication and coordination that needs to occur internally to make this happen. You’re talking all the way from the folks that are installing the batteries to engineering staff that’s reviewing the interconnection agreements, what that looks like, marketing staff being able to market appropriately, getting all the proper documentation on the website.
Then, once you’re contracted, making sure your partner understands from a communication standpoint what your expectations are with the member. Customer service as well. Customer service fields a lot of questions on this type of program. Going into it, it seems smaller than it ended up being, but it takes a lot of coordination to get something like this going.
Reynolds: It sounds like you all have staff that do the installations and things like that. Did you consider looking at contractors and running it that way? If you did, how did you choose which direction to go?
Nichols: We don’t use any contractors for our installs. You don’t have to have your battery installed by GVEC to participate in the program. It can be installed by anybody as long as it meets the interconnection requirements that we have. But it is a benefit on our side to be able to not only offer the program but also help the customer with the install and really just walk them through the process. That’s one of the things our installers have done a really good job of is not only installing the product but also explaining the program to the member and walking them through the enrollment process.
Reynolds: What advice would you give to other electric cooperatives that are considering, maybe, similar initiatives or elements of the initiative that you guys are undertaking?
Nichols: The advice I’d give folks is to incorporate this type of product into their supply strategy. This is going to be something that should be complementary to what they’re doing from a procurement standpoint today. Then, as you’re working through the economics of the program, I would look at where you set your rebate and try to have that be somewhat similar, on a dollar per KW basis, to what you would pay if you were to go out and install a utility-scale battery. It’s the same thing, except instead of just one site, you’re looking at hundreds, if not thousands, of sites. As you’re looking through this, don’t get hung up on the numbers too much. Try to make sure that your rebate makes sense from a broader perspective.
Reynolds: I think about one of the limiting factors, as we think about growing power supply anywhere, not just in ERCOT, is the transmission component and the approvals around that. If you’re able to use some of these tools to be able to provide stability and reliability to your members, that’s a great opportunity, I think, and it continues to become even more valuable, as things continue to get more constrained in some ways.
Nichols: That is a great point because it took almost no time for us to add a megawatt to our dispatch capability. A megawatt battery would take months and months, probably, to get interconnected and through the whole process.
Reynolds: Thanks for your time. Really enjoyed the conversation, and good luck with the rest of your pilot program.
Nichols: Yes, of course. Thanks for having me.
Viswanath: Tamra, there are so many aspects of GVEC programming that are worth lifting up. Breaking down the financial or technical barriers for member technology adoption, leveraging partnerships, and identifying multiple pathways for implementation. This is really outstanding work. I was thinking about the battery company that already has an existing relationship with the homebuilder in their territory. It’s important to understand that more than 60% of new home construction, especially in those power-unstable regions, now includes pre-installed backup generator systems, and that really indicates a rising shift toward the demand for uninterrupted residential power supply.
Reynolds: There is an important element of how to scale these programs quickly so that the effort pays off, right? Will emphasizes the alignment of these programs with GVEC’s larger mission of providing reliable, affordable electricity. His organization is looking to offset the alternative costs of ancillary services. So it’s a win-win situation for the membership that is making the investment in the technology for increased reliability and the community that will benefit from lowering their energy costs. We are living in a time where energy costs are rising faster than inflation, so having a novel approach for lowering those costs is worth lifting up.
Viswanath: Absolutely. I do hope that all of you have enjoyed today’s program and will join us next month as we catch up with EPRI scientists who are working on the next iterative of energy efficiency programming and demand response. Bye for now.
