The transcription of the video is below.

Guest Introduction

Kerim: Hi everyone, this is Kerim, Kerim Baran with SolarAcademy. I am here today with Alvaro Acosta of Lightsource bp.

Alvaro is the Senior Director of BESS, which stands for Battery Energy Storage Systems, and the commercialization of BESS across Lightsource bp in the US and beyond. We’re going to talk a little bit about Alvaro’s background first, and then we will dive into what’s new in the world of battery energy storage systems, in the world of utility solar development. With that, Alvaro, thank you for coming on and good to have you here.

Alvaro Acosta’s Career Journey

Alvaro: Hi Kerim, happy to be here.

Kerim: Let’s talk a little bit about how you found yourself at Lightsource bp, maybe going back in your early career, how your career has evolved and what brings you to Lightsource bp? What are the opportunities that you’re seeing there?

Alvaro: I have an electrical engineering background. I started working for a consulting company in Latin America, basically transmission and distribution projects like studies –

Kerim: In the world of utility power.

Alvaro: And electrical utility is actually part of the Enel Group, the biggest distribution company in Colombia. Then I was hired by an IPP, an independent power producer, like a global IPP. With them, we developed several projects in Latin America, the Middle East, Africa. They were based in Miami.

Kerim: This is SoEnergy, is that right? It’s on your LinkedIn profile.

Alvaro: After working with them for a couple of years, they relocated me here in Miami. We worked on several projects in both permanent and also temporary power projects, emergencies and things like that, all over.

We found that there were opportunities for mixing some fossil fuel with renewables, mostly in remote locations, like cities in the north of Brazil, in the Amazonas region, where diesel power is, let’s say, the main fuel for power generation. They’re very remote and isolated. We found that there were opportunities also for solar and for energy storage, just by doing energy shifting, which is, “Okay, let’s save some fuel, let’s save some diesel that is really expensive.”

I mean, we’re talking about $1.1 per liter. You get $0.32, $0.33 per kilowatt hour, which is really expensive. If you’re able to shift some of that energy with solar, you can diminish that cost by a factor of 20%, 30%.

Kerim: That you were doing with SoEnergy in remote parts of Brazil.

Alvaro: Correct.

Kerim: And then you also had a role as director of energy storage systems for 174 Power.

Alvaro: Yes, then I joined 174 Power Global and worked with them for almost two years.

Kerim: What geographies were you focused on then?

Alvaro: It was only the US.

Kerim: That was battery work in the US and the types of applications were, again, coupled with solar or standalone?

Alvaro: Both standalone solar and also co-located projects.

Kerim: Got it. Got it. Now you’re doing the same thing at Lightsource.

Battery Energy Storage Systems Overview

Kerim: Tell us a little bit about what you see in the market in the US at the utility scale level with, obviously, solar has been growing really well in that market for a couple of decades.

And now we’re starting to see batteries, which is the missing link to really have solar in a big way, not just 4%, 5%, 6%, 7% of the grid, but maybe 10%, 20%, 40%, 50% of the grid.

Do you think that’s going to happen anytime soon? Where are you seeing the movements? What are the cool applications and economical applications that you’re seeing?

Alvaro: I see the renewable penetration in the US. I mean, it has been gaining a lot of traction during the last years. As you mentioned, energy storage is the link. Once renewable penetration goes to a certain place like wind and solar, you start seeing that there is a need for storage.

There is a need for something that can add that flexibility that can somehow potentialize that energy or that renewable solution. That’s the missing link.

Market Opportunities and Regulatory Aspects

What we’ve seen in terms of markets, we have been seeing a lot of opportunities in different ISOs in the US.

There’s a lot of opportunities in ERCOT, in PJM, SPP, and CAISO. Each market has its own rules. There are some regulatory aspects that we have to be aware of.

The revenue streams are different. The way how you can add value to the customers could be a little bit different. We have to keep in mind to have all of those points very clearly to be able to develop the solution.

Kerim: Let’s talk about how they’re different. Can you tell us a little bit about the West Coast market and the ERCOT market or maybe PJM or the Northeast? What are some high level bullet points that –

Alvaro: There are several drivers that a lot of them have. We have to keep in mind all of them. For instance, there are some states in the US which have renewable portfolio standards or clean energy mandates. Most of the time, those states have an accelerated renewable penetration that, as we just discussed, brings opportunities to storage.

There are the northern states in PJM and MISO. They’re known for that. Also, California, we all know that it’s being very active. There are also some places or some states where just everything is more, let’s say, deregulated like ERCOT, where there’s a lot of renewable as well, a lot of solar.

It’s very dynamic, the amount of data centers that are going there. That’s part of what we see or where we see the opportunities, understanding where we can add value and what type of value.

Kerim: Some of these solutions are obviously long duration storage type solutions. 

Revenue Streams and Applications

Sometimes the solutions are more for providing voltage or power just for short periods for peak demand type scenarios. What are some of those key scenarios?

Alvaro: Like the typical, let’s say, let’s start first with the typical short-duration storage. Mostly, when you have a two-hour duration of storage, it’s basically because you want to take advantage of the energy arbitrage. That’s basically like a picker where you charge the battery at low prices or where the load is low, and then you discharge the battery later during the afternoon when the sun is down and when it peaks up. That difference on the energy is what we call the energy arbitrage, and it’s one of the most important revenue streams in some markets.

There’s also some grid services which are called ancillary services and they are basically all over the place where you basically provide frequency regulation. You basically stabilize the grid. We see that in PJM, in ERCOT, and CAISO.

Kerim: There’s a name for that. It’s like a VPP monetization or not demand charge, obviously, but it’s on-demand providing that extra frequency to the grid, and you make a big chunk of money for providing a ton of voltage for a really short period of time. Right?

Alvaro: Exactly.

Kerim: What’s the term? I thought there was a term for that. I forget what that term is. 

Alvaro: Do you mean the scarcity events?

Kerim: Yeah.

Alvaro: For instance, in ERCOT, there are some situations where the system finds the margins between the supply and the demand. When they get too low, they call that a scarcity event or a scarcity condition. At that point, batteries and others can take advantage of that situation. You can really make a lot of money just in a short period of time.

Kerim: That type of revenue that the battery asset owner makes has a specific term to it, too, I thought. Or maybe, I can’t remember that term. It’s called a certain kind of revenue to the battery owner. Or maybe it’s just called scarcity event revenue or something like that. 

What are some other types of monetization techniques for battery energy storage systems?

Alvaro: There are other applications, for instance, where there are ways to add value with storage, such as transmission deferrals. It applies more to long-duration storage in most cases, where the utility sees that instead of investing on a transmission line, for instance, which is… I mean, those projects could be expensive, could have some effects in terms of the environment. It can take long in terms of permitting, developing, construction, and everything.

Sometimes just by adding a battery storage, you can avoid or defer that construction. That’s one way to add value. There’s also some bigger plants, like simple cycles or coal power plants that right now, they are seeing difficulties to operate.

They cannot compete with solar or with wind in some cases. Now they have been operating mostly as bigger plants at moments where they are really needed.

What they’re seeing is that BESS in these situations can provide that capacity and that energy that those bigger plants have been providing. That’s another possibility, which is, compete for energy and compete for capacity in some markets. There are some states that have initiatives to decarbonize and have some plants already online for future retirements.

That’s also a niche for us, finding those locations where we can replace a fossil fuel power plant that is about to get retired in the future.

Technological Innovations in Energy Storage

Kerim: In terms of technology, what kind of chemistries are most common in these applications?

Alvaro: The most common one and the one that is being most successful right now is the lithium ion. It’s dominant for grid scale applications, also for EV right now. There are some other technologies like flow batteries, like the Vanadium redox, Zinc-bromine.

They are good for certain applications because they are easily scalable. You can just add, if you need power. Easily, you can just improve, increase from 20-30 megawatts to 50 megawatts, or you can also increase the capacity duration of the battery as well.

They may degrade less than lithium, but they also have less round-trip efficiency. There’s a lot of things to always do.

Kerim: When you say less round-trip efficiency, does that mean they have fewer life cycles in terms of lifespan? Or is it that they can’t go to 100% and down to 0%?

Alvaro: What I mean by round-trip efficiency is that normally the energy that the battery charges goes through a conversion process where it loses some energy. There’s some energy loss due to the conversion process.

Kerim: You’re losing inverters a little bit.

Alvaro: Correct. You’re losing the rectification and you’re losing that on the inversion of the energy.

Kerim: That obviously affects the ultimate kilowatt-hour price of the electrons.

Alvaro: Correct. Exactly. There’s also one interesting technology right now, which is the sodium-based batteries. Right now their cost is not as low as lithium-ion right now, but in the future it might. That’s a promising technology, which is the sodium-based batteries.

Kerim: Okay. While we’re talking about this, I just want to share for our viewers’ benefit this one particular page on your website at lightsourcebp.com. If you go to the U.S. site under Energy Solutions, Energy Storage System, there is a really good resource here in terms of understanding the basics about all the storage system solutions you guys are offering and the value you provide to the utilities. I just wanted to make sure viewers are aware of this resource.

Coming back to the value to the utilities, so then if we were to summarize that value, there’s flexibility value, there’s the diminishing the volatility, the dispatch capability, providing additional capacity. Maybe we can talk a little bit about certain use cases.

Alvaro: We haven’t talked about grid congestion. With the amount of renewable penetration that we’ve seen, what is very common is to have the transmission grid congested so that leads to curtailment.

Some of the projects like PV projects are curtailed for different periods of time. Sometimes the curtailment levels get to 10% or even more than that in some particular regions. Having a battery project co-located or in the vicinity can help to diminish that.

Kerim: And that helps lessen the volatility on the grid.

Alvaro: Correct.

Kerim: And that curtailment then, does that usually happen in the midday hours when solar is shining strong and directly onto the system? And the system is producing more than the inverters can take, probably. That’s essentially free-energy loss.

Alvaro: Correct.

Kerim: Putting that on a battery, and also, if it’s running at full force, that might be just too much.

Alvaro: Most of the time by doing that, you are reducing the overall cost of energy. Because what happens is that the LMPs or the energy prices at the node have like three main factors, which is like what they call the lambda, which is the system price, plus the congestion component, plus losses.

If you have a large congestion component, you’re basically having a greater cost of the energy for that particular node. With the storage over time, what you do is you’re able to lower that cost of energy in the system.

Kerim: So, I get that. And the dispatch use case, what does that look like? I think you briefly touched on it, but can you clarify that again? What’s the dispatch?

Alvaro: Most of the time, with this renewable penetration, with the PTC as one of the incentives that is widely used in solar, there’s a lot of negative pricing in the grid.

Batteries can take advantage of that, like charging at really low prices, negative sometimes.

Kerim: Really? Negative? So you actually make money for taking electrons through the battery.

Alvaro: Exactly. And then you can sell that energy into the market when the price is higher. You get a big difference.

Kerim: That reminds me of the oil prices of COVID days when oil prices went below zero because there was no place to put the oil coming into the country.

That’s really interesting. Okay. Great. I think we covered most use cases. Are there any others that we should touch on before we jump on to certain projects that we can talk about maybe?

Use Cases and Real-World Applications

Alvaro: There are some applications that maybe we can touch on, which is with the data centers’ boom that we are seeing right now in the US. We believe that there are opportunities for BESS and also for behind the meter solutions.

Those data centers, what they really want, they want mainly two things. One is renewable energy and the other one is really reliable energy, right? They want the energy 24/7.

They cannot tolerate having a lack of power by any means. At the end of the day, the most expensive kilowatt hour is the one you don’t have. Battery storage can be very important, like a key player of behind the meter solution where you can have many other pieces like solar, in some cases wind, or for a particular data center or a group of data centers.

Kerim: Are you seeing a ton of data centers being built with solar plus battery behind the meter, behind the transformer, almost in an off-grid manner, but really not off-grid because they’re touching the data center, which is also connected to the grid. But you can design that to almost run the data center in an off-grid manner, I assume.

Alvaro: That’s an option that you can do.

Kerim: That’s a thing that’s happening at more and more scale as time passes. I’m even seeing in the startup world, in my little Venture operation, I’m seeing residential-focused startups with 2, 3 kilowatt hour solar, about that maybe 3 kilowatt hour battery or maybe bigger battery, all like to be dropped into a backyard and so you can plug in your AC.

I’m seeing solutions. I mean, of course, there’s been solar direct to AC kits that you can buy in the Caribbean too, which makes a lot of sense. But as batteries are getting cheaper, the applications of solar plus battery even in small residential settings as well as commercial C&I settings are increasing. What else are you seeing besides data centers?

Alvaro: Besides data centers, there are opportunities for microgrids.

Kerim: In campuses and stuff like that?

Alvaro: Yeah, things like that. Of course, those applications are probably for batteries with smaller capacity.

But there are also opportunities like that or also in places like islands in the Caribbean and things like that.

Kerim: When you are talking about a data center battery system, what’s an average size or what’s a range of sizes? And when you’re talking about a small Caribbean island, I mean, those islands run on the diesel economy like you were saying in parts of Brazil.

Putting in battery there, I have no doubt makes a ton of economic sense politically and socially, business-wise. It might rub certain people the wrong way. I’m just curious, are these deployments happening? At what scale? What are the sizes of these types of batteries?

Alvaro: In places like the islands I’ve seen projects like around 50 megawatts, 100 megawatts hours. It’s not big compared to what you see here in the U.S. markets like CAISO or ERCOT, where you see 200, 300 megawatt batteries. But still it’s important.

Kerim: And then in terms of data, what’s a typical data center battery?

Alvaro: Data centers? There are three types of data centers. There’s the hyper scale data centers, which are huge, like demands from 500 megawatts to 2, 3 gigawatts. 

Kerim: And that’s the wattage? Or the gigawatt hours are we talking about or the wattage?

Alvaro: The load. Then you have the artificial intelligence, the AI ones. Their range are between probably 30, 40 megawatts to 400 or something like that.

And then you have the edge data centers, which are the smallest ones, where it could be from 500 kilowatts to 10 megawatts.

And there are opportunities for all of them. Of course, one of the most important aspects is that you have to understand the particular needs and try to find like a tailored solution, like a customized solution, depending on the particularities of each data center.

Kerim: Makes sense. Yeah. I mean, just like every C&I solar project is a different animal, every battery project is also slightly different. What else can we talk about? I think we covered a lot of key use cases and top value prompts for batteries coupled with solar.

Conclusion and Final Thoughts

Besides these data centers, C&I applications, microgrids, is there anything else? Any last words or thoughts?

Alvaro: I would say that us as Lightsource bp, we want to be, of course, technology-agnostic, and we strive to add the most value possible to our times and of course to our shareholders as well too.

But we want to look for those opportunities where we really can add value. And that’s what we’re doing here.

Kerim: And you guys are one of my favorite type of developers because you are sharing a lot of your knowledge with the market as you are innovating, and you’re generally on the forefront of innovation in terms of social impact and more socially acceptable ways of developing these solar farms, literally on physical farms, and coupled with nature and respecting that aspect of nature as well.

That’s been my observation of Lightsource. Thank you very much, Alvaro, for coming on and sharing more of your wisdom and know-how.

Alvaro: Thank you, Kerim.

Kerim: Thank you. All right. We will continue more of this soon.

Alvaro: Thank you. Bye.

Kerim: All right.