Tri-State policy change discourages battery projects in rural Colorado and New Mexico

By Joe Smyth | joe@cleancooperative.com | @joesmyth

United Power will dedicate the largest battery storage system in Colorado next week, a 16 megawatt hour Tesla Powerpack in Longmont that the electric cooperative expects will save its members $1 million each year.

But recent policy changes by Tri-State Generation and Transmission Association, United Power’s wholesale power supplier, aim to discourage other cooperatives from pursuing similar projects, creating uncertainty for the deployment of battery projects in much of rural Colorado and New Mexico.

United Power shifted its focus to battery projects last year, after the co-op reached the 5% limit on local renewable energy generation imposed by Tri State. Over the past several years, United Power sought to reduce its purchased power costs by building several solar arrays in its service territory that deliver power at a lower cost than power sold by Tri-State. Blocked from pursuing more local solar projects, United Power developed a strategy to use batteries to help control its peak demand. Last month, United Power also wrote to other co-ops expressing "grave concerns" about Tri-State, including the high cost of power it sells to member co-ops and "Tri-State’s reluctance to embrace additional sources of renewable energy generation due to constraints of its largely fossil fuel generating fleet."

Controlling peak demand will help the co-op manage its purchased power costs - which could slow the growth revenue that Tri-State receives from United Power. So this past summer, Tri-State changed its Policy 115, which describes how the 5% limit will be implemented. Tri-State inserted language into the policy to include “energy storage devices, such as batteries,” even though the policy was designed to deal with co-ops’ renewable or distributed generation projects.

A June 2018 copy of the proposed changes to Tri-State Policy 115 shows the edits to the policy in red, before those changes were finalized.

Tri-State policy change could block some co-ops from installing batteries
That policy change significantly reduces the economic value of energy storage projects for the 43 electric cooperatives in Colorado, New Mexico, Wyoming, and Nebraska that buy power from Tri-State, and could limit several of those co-ops from pursuing battery projects at all.

Because Tri-State now classifies batteries in the same category as renewable energy projects, co-ops in Colorado and New Mexico that have reached (or are approaching) the 5% limit by building solar projects in recent years could now suddenly be blocked from considering battery projects.

The policy change could also discourage co-ops that haven’t reached the 5% limit because instead of being able to use the battery to directly reduce peak demand charges from Tri-State, co-op battery projects will instead be compensated as though they were a source of energy generation - at a less valuable rate that is established by Tri-State.

Discouraging co-ops from deploying batteries to manage their peak demand charges could lead to higher electric bills for members of electric cooperatives that buy power from Tri-State. That's because those peak demand charges can account for a surprisingly large portion of the bill that co-ops pay for wholesale power. For example, Gunnison County Electric Association, another co-op that buys power from Tri-State, says: “Six hours of each year, 30 minutes of each month, causes 46% of GCEA's wholesale power bill.” The proportion that peak demand charges account for in a wholesale power bill varies among co-ops.

Those high costs are why several co-ops have developed projects and policies aimed at managing their peak demand, such time of use rates and discounts for smart thermostats that co-ops can manage on the hottest days, to limit soaring electricity demand when everyone’s air conditioners are running. United Power New Business Director Jerry Marizza thinks that batteries could be a more powerful tool for managing peak demand than some other programs, because they can provide the co-op with a more precise level of control.

United Power's 4 megawatt/16 megawatt hour Tesla battery project near Longmont Colorado

CEO says Tri-State has “tried to get our members to move slow” with batteries
At the Colorado Rural Electric Association (CREA) Energy Innovations Summit in October 2018 CREA CEO Kent Singer asked Tri-State CEO Mike McInnes about United Power’s battery project:

We've got one Colorado co-op that is looking at that, installing a battery on their system. Mike, what kind of issues does that bring up for Tri-State, when your members want to look at a battery project?

McInnes acknowledged that Tri-State has “tried to get our members to move slow” with batteries, but did not mention the recent policy change that directly discouraged new battery projects:

We do have a member that is ahead of the others on battery projects. We haven't figured out exactly how that all works, we hope to be able to work through that. Obviously we talk about batteries as being game changers, everybody wants them to be a game changer, it certainly appears that they could be a game changer. But in our view, there are still some things that need to be developed before they become those game changers. We haven't seen some of the end that others apparently see, and so we're trying to move through that in a little more measured fashion.

I just hate to be a trendsetter, it just - it's not in my DNA. I figure if somebody else wants to be first one to get their name in the paper, if somebody wants to be the first at something, I can learn their lesson, their hard ones. And then I can slip right in the wake of that boat, enjoy all the benefits but not have the bruises. So now I've told you my weakness, I've made a confession.

But we've tried to get our members to move slow with that as well, let's let some of the industry work those wrinkles out, and then we can come in and we can provide a much better product, it can be much less volatile, as far as our rates go, and much less risk for the membership.

The discussion between ​Kent Singer and Mike McInnes about United Power's battery begins at minute 54:19:

United Power CEO: “the G&Ts have to be a little more open to change”
Later at the same event, in a session about co-op battery storage projects, United Power CEO John Parker said that the future of battery development among co-ops depends on whether generation and transmission associations would be “a little more willing to work with their members:”

I think if you're going to see a lot of movement in batteries, the G&Ts have to be a little more open to change, a little more accepting, a little more willing to work with their members. If this is really going to change the industry, we all need to work together to figure out how to make it work. I don't understand how batteries might work on transmission systems, I've never studied it, I hope our G&T has. But it's a coming thing, and we can treat it like rooftop solar and just go: "Nah, it will never come down and be price competitive." But we didn't pay any attention to that, and it got away from us. And I would hate to see that happen with batteries.

Parker also explained why United Power didn’t pair its battery project with a solar array:

We thought that would be a complicating factor in just getting the project coordinated with Tri-State. We thought that politically, or pragmatically, we just thought it would be easier to charge it off of Tri-State's system than through bringing the complication of a solar array. Plus we were already at our 5% as far as the renewables go.

Slide from United Power battery presentation at the CREA Energy Innovations Summit in October 2018

​Further reading:

​Blocked from building more solar projects, United Power shifts to community batteries

United Power seeks solutions to "increasingly outmoded G&T business models"

Tri-State’s limits on local energy development are a growing problem for co-op members

Senator Heinrich highlights “frustrations in New Mexico” with Tri-State’s limits on local solar

​Governor Hickenlooper discusses Tri-State at the Climate Leadership Conference