The California Inland Empire Utility Agency’s solar panels, located at three of the Agency’s recycled water facilities and IERCF, generate 3.5 MW of clean solar power and will reduce electrical costs at its facilities — the single largest component of IEUA’s operating budget. The solar project is funded in part under the State’s Innovative California Solar Initiative. (Inland Empire Utilities Agency/John Mellin)

We may be getting a real time glimpse of a world that energy visionaries have long awaited — one featuring a large scale merger between clean energy technologies, like wind and solar, and large batteries that can store power from these sources and make it available at will.

Meet Advanced Microgrid Solutions, based in San Francisco and headed by former Arnold Schwarzenegger chief of staff and California Public Utilities commissioner Susan Kennedy. The company specializes in the creation of “hybrid electric buildings,” office or infrastructure buildings that contain large battery systems that can simultaneously reduce energy costs for users and owners, and also help strengthen the larger grid by running on batteries at key times, and thus not requiring grid power. Thus, AMS is selling to businesses and utilities simultaneously, and with a recently announced deal with SunEdison to supply 50 megawatts of energy storage to major California utility Southern California Edison, there is clearly a market for this kind of service.

But in many ways, AMS’s latest deal is even more intriguing — it is now announcing that it will supply and operate batteries for a very large California customer, the Inland Empire Utilities Agency. It’s a large municipal water treatment and distribution agency serving the San Bernardino County region of California, where it has 850,000 customers.

Inland Empire is very advanced in trying to switch its operations, which include multiple plants for recycling and desalting water, to clean energy. That includes 3.5 megawatts of solar capacity at its facilities, another 1 megawatt of wind, and a 2.8-megawatt bio-gas fuel cell system. The agency says the latter is the largest of its kind in the world.

Bringing large batteries into this mix will allow the agency to pay less in so-called “demand charges,” which are assessed based on peak levels of electricity usage, says general manager Joseph Grindstaff, by powering up batteries from the solar panels or other sources and then drawing them down again at opportune times.

“The key element will be that when we reach those points in the day when we have peak demands, we’ll be able to use the battery to offset those peaks, and the amount that we’re charged by power we buy off the grid is largely determined by peak demands, not just the ongoing constant demands,” Grindstaff says.

The batteries involved are about as large as a vehicle parking space and are made by Tesla — the company calls them “Powerpacks.” The installation should be able to cut Inland Empire’s peak electricity demand by 14 percent, leading to an electricity cost savings of 5 to 10 percent, the partners announced. In this equation, AMS does not just supply the batteries, it also operates the system and helps the utility figure out how to maximize its savings.

According to AMS’s Kennedy, what Inland Empire is doing now — installing storage capacity to modulate and balance all the different and variable sources of renewable energy out there — solves a problem that will be faced more and more as the grid and large companies add more renewables.

“They’re the first utility agency, water treatment utility agency, that I could find anywhere that is actually using energy storage to integrate their renewables,” Kennedy says. Doing so “makes integration of their renewables more economic, and that’s what every utility in the world is going to have to do.”

According to AMS, the total battery installations will provide 3.5 megawatts of power, a figure that denotes how much electricity they can discharge continuously (a megawatt is a million watts). However, what’s equally crucial is how long a battery can operate. In this case it would be a little more than 2 hours, giving the system an energy rating of 7.5 or 8 megawatt hours, Kennedy says.

For a piece of essential infrastructure like a water agency, what’s equally significant about the deal is how it helps ensure that there’s a source of backup power in the event of any outage, says Ravi Manghani, an analyst with GTM Research who specializes in the energy storage and battery market.

“Because of the critical nature of water treatment facilities, there is a movement towards looking at how to make the facilities more resilient,” Manghani says, and the deal is part of that trend. He points out that on the East Coast, there is also growing interest in water facility resiliency.

There are multiple benefits, agrees Inland Empire’s Grindstaff, to having the batteries. Besides reducing peak charges, they can provide backup power in the event of an outage. Plus, they will also literally help the agency fight the California drought. That’s because the agency recycles a great deal of waste water, and while that activity is critical in a time of scarce water supplies, it also takes energy — which, in turn, costs money.

Thus, more savings can mean more conservation. “In the long run this helps with water supply, and self-sufficiency applies to energy as well as to water, and they are very much linked,” says Grindstaff.

In fact, Kennedy argues that the project sits squarely at the water-energy “nexus” — a concept describing the strong relationship between heating, providing and reusing water and consuming energy. The California Energy Commission says that water and energy are therefore “inextricably connected,” and as water demand rises with population growth, so will electricity demand (and greenhouse gas emissions, unless that demand is serviced with renewables).

“Transportation and treatment of water, treatment and disposal of wastewater, and the energy used to heat and consume water account for nearly 20 percent of the total electricity and 30 percent of non-power plant related natural gas consumed in California,” according to the commission.

Given this relationship, Kennedy thinks we may see other water utilities or providers, in particular, try to source more of their electricity to renewables or to install batteries.

The news comes in a big and arguably breakout year for batteries and energy storage overall. On top of Tesla’s massively watched announcement of a new line of home and larger scale battery products, there are a growing number of installations overall, especially at the larger or utility scale, according to research by GTM Research’s Manghani. Earlier this year, he forecast that 2015 would see a record 220 megawatts’ worth of storage installations.

Other big projects this year include Solar City’s announcement of a vast 14 megawatt, 52 megawatt hour battery installation on the Hawaiian island of Kau’i. But where AMS is unique, says Manghani, is the way it is pursuing “these big clients who have multiple facilities that they own and operate.”

The company earlier this month announced a contract with the Irvine Company, a real estate developer and planner, to install batteries in 24 separate buildings, an offering that would not only allow for demand charge reductions but also provide Southern California Edison with 10 megawatts of potential demand reduction at peak times (between 40 and 60 megawatt hours, according to Kennedy). AMS says that’s enough electricity to power 10,000 California homes. The company also has a memorandum of understanding with Shell North America to install 20 megawatts of batteries in its California facilities.

Overall, the battery business is booming but also very new, and we don’t know where AMS’s approach will lead. But one thing is clear — major companies and utilities are thinking more and more about storage and sometimes going as far as to add it, both to back up their facilities and systems, but also to time when they use self-generated power so as to save themselves money.

We’re moving more and more into a world where you don’t have to use electricity instantaneously — and that changes the whole game.

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