Did you know that Tucson Electric Power has a pilot program that allows you to get paid if you allow them to use your batteries to support the grid? This “virtual power plant” program allows our clients with Enphase batteries to potentially save more on their electricity bills, if they allow TEP to discharge their batteries to the grid up to 100 times each year.

Read on to learn more about the basics of VPPs, the details of how TEP’s program works, some estimates regarding compensation, what we see as the pros and cons of enrolling in the program, and how to enroll.

For those who’d like the bottom line up front, we think this program can be really financially beneficial for those who have or are considering installing batteries, but it’s important to understand the details of the program before participating.

Disclaimer

In this post, we are sharing our best understanding of how this program works, based on materials from Tucson Electric Power, Enphase Energy, and our individual experience in the program. We are not representing TEP or Enphase. We recommend that you review all program information directly on TEP and Enphase’s websites, especially the terms and conditions.

What is a Virtual Power Plant?

A virtual power plant, or VPP, is a way to bring together many distributed resources to support the grid and grid reliability. These distributed resources can be smart thermostats, smart water heaters, electric vehicles & their chargers, home solar and battery systems, and more.

In short, VPP devices are anything that can be controlled by the utility to reduce load on the grid, or ideally, send energy to the grid. Many of you may be familiar with utility programs that allow them to control your thermostat, slightly adjusting your temperature up during peak times, and lowering the peak load on the grid. 

When you aggregate home batteries as a VPP, the resource is even more valuable–all these batteries acting in concert become like a small power plant! Recently, TEP shared that the first 150 participants in their VPP program were able to reduce demand by 1,300 kilowatts–and there are even more participants now.

Utilities like VPPs because they provide capacity at a relatively low cost, without the need for them to build or own infrastructure. Utility regulators at the Arizona Corporation Commission like these programs because they save utilities money, and provide benefits to ratepayers.

Self-Consumption with an Enphase Battery

Before we share the details of TEP’s program, let’s talk about how Enphase home battery systems are usually operated by our clients. The screenshot below shows a typical day with solar and a home battery system. Scroll down for a detailed explanation of what’s happening.

This screenshot from the Enphase monitoring shows a lot of information! Let’s talk about each part. First, the green graph at the bottom shows how full the battery is–what we call “state of charge,” or SOC. The blue bars above the x-axis show the solar production. The green bars above the axis show battery discharge, and the green bars below the axis show battery charge. The gray bars below the axis show energy exported to TEP’s grid. And last, the orange bars show energy consumption in the home. Oh, and that red line? That’s energy used to charge an electric vehicle.

That’s a lot of information, but let’s cut to the chase: From midnight, the home uses the energy stored in the batteries to power the electrical load in the home. Once the sun comes up, the solar electric system starts producing power, and the batteries start to charge. Once the batteries are fully charged, excess energy is sent to the grid. In the evening, the energy from the batteries is once again used to power the loads in the home.

TEP Energy Storage Rewards Program Basics

You can find all the details of this program on TEP’s website,  and a great frequently asked questions page on Enphase’s website,  but we want to break it down a bit.

Compensation

TEP will pay $120 per kW average delivered across events during a season (winter or summer), paid as a bill credit 2-3 bills after the end of the season. TEP customers can request a payment check at any time if they have a credit on their account, or simply keep the bill credit on their account for future use. You might be wondering: What does $120 per kW average really mean? We’ll share more.

Seasons

TEP breaks the program into two seasons. The summer season is May-September, and the winter season is October-April. These are the same five-month and seven-month seasons that TEP uses for their time-of-use rates.

Events

TEP calls each time that they use batteries for grid support an “event”. Under the terms of the program, they can call up to 100 events per year, for any day–holidays and weekends included. 

Each event can be 1-4 hours in duration. Most events we’ve seen so far have been three hours long. Generally, the batteries will be discharged during peak hours of 3-7pm in summer and 6-9am & 6-9pm in winter. 

If you participate in the program, you are automatically included in each event, but you can also choose to opt-out of any individual event. TEP will also try to avoid scheduling events when storms are forecast, to save your battery capacity for backup in the event of a grid outage.

How will you know if an event is scheduled? TEP will send you an email or you can also see upcoming events in Enphase’s Enlighten monitoring app.

One thing to note is that TEP/Enphase may send a signal to charge your batteries before an event, to make sure they are ready for the event. If it’s not sunny, you will have to buy this energy from TEP.

Imported and Exported Energy

The program provides an additional payment based on your batteries’ contributions, but changes nothing in terms of your current billing arrangement with TEP.

If you import any energy during the event or before the event to charge the batteries, you’ll buy that energy from TEP as usual. Similarly, you’ll be paid your export rate (or retail rate for net metered systems) for any energy you send out to the grid during an event.

An Example Energy Storage Rewards Event

So what happens during an energy storage event? Let’s take a look at one of the first events on my system, from earlier this year, on February 8th. TEP sent me an email a few days before the event, letting me know that this and two other events were scheduled. This event was planned to last from 6:00pm-9:00pm.

Twelve hours before the event, Enphase sent a signal to charge my batteries to 100% in preparation. Although it’s understandable that they want the batteries to be fully charged in preparation, this is a bit annoying, as the batteries were charged from the grid rather than the plentiful solar energy available throughout that day.

At 6:00pm, the battery started discharging on command from TEP & Enphase, at the maximum output power of 11.52 kW. Because I’ve dedicated 13.5 kWh of my battery to this program, it took about an hour and 15 minutes to discharge my batteries down to 10%. After that, the batteries were idle until 9:00pm, when the event ended. At that time, my system automatically charged up to my normal self-consumption reserve value of 25%.

This figure shows the summary of the event from the Enphase Enlighten app. The energy I exported represents an average of 4.07 kW over the three-hour event on February 8th. You can also see two other events in the screenshot, from February 1st and 9th.

Calculating Compensation

The biggest question we’ve heard about participation in this program is: “How much would I get paid?” For better or worse, the answer is complex. We’ll work through the math together. The bottom line is that if you’re willing to give up some control of your system and enroll in this program, the financial benefits can be significant.

TEP compensates those in this program based on their average output in kW during battery events. This is because utilities mostly think in capacity, not energy. They have to balance the whole grid–the total load on the grid has to equal the total energy production at any moment. 

Let’s look at an example, using this table from TEP’s website, for a 10 kWh battery that can deliver 90% of its capacity. Let’s focus on “Event 2.” Event 2 is two hours long, and 9 kWh was delivered in those two hours. So the average capacity is 9 kWh / 2 hours = 4.5 kW.

If you do the math on this table, the average capacity delivered is 3.0 kW. If this table represented an entire season, the compensation from the season would be 3.0 kW * $120/kW, or $360. Not bad! 

Compensation Per kWh

For most of us with batteries, we think of our systems in terms of their usable capacity in kWh. So can we figure out a typical compensation per season per kWh? Let’s try! Here are the steps we can take:

● We estimate that TEP will have 50 events per season, split between winter and summer.
● Assume we have a 10 kWh battery system (the smallest we install), that we’re willing to discharge 90%, or 9 kWh, down to a state-of-charge of 10%.
● If we discharge that 9 kWh during 50 events, we’ll have discharged 9 kWh * 50 events = 450 kWh total
● Using the average event length of 2.625 hours per TEP’s example, we will have a total number of event hours equal to: 50 * 2.625 hours = 131.25 hours of events that discharge the batteries
● So, our average capacity delivered will be: 450 kWh / 131.25 hours = 3.43 kW
● Our season’s payment would be: 3.43 kW * $120/kW = $411.60
● Our payment per kWh discharged would be $411.60 / 450 kWh = 91.47¢/kWh

Of course, this is just an estimate. The number of events, distribution of events between summer and winter, length of events, opting out of events, and other factors could change the results. But the bottom line is 91.47¢/kWh is nothing to sneeze at!

Note that there are a couple factors that need to be subtracted from this value to reflect actual compensation. First, if you have to buy power from TEP to charge the battery, that’ll cost you. And if discharging your battery for an event means you then have to buy power from TEP during peak, that also will cut into that 91.47¢/kWh. You can see the values for energy bought from or sold to TEP for a system installed recently in the image below.

Program Pros and Cons

So what are some of the benefits and drawbacks of this program, in our opinion? Here’s what we came up with, but we’d like to hear your thoughts as well.

For benefits, the biggest is clearly the compensation. Battery owners get additional value from their investment. In a bigger sense, you are able to help support the grid with clean energy. I think the word that comes to mind is “interdependence.”

Some of the drawbacks that we’ve identified are the possibility of more cycles on the battery, though for Enphase batteries, we don’t see this as a big issue. Enphase batteries have a 15 year or 6,000 cycle warranty, whichever comes first. 6,000 cycles is 16.4 years with daily 100% charge and discharge, so most owners won’t reach the maximum cycle count before the end of the warranty period.

Other drawbacks are that the battery has to be charged before events, which will cost you if you’re charging from the grid. It’s also worth considering that if a power outage occurs after an event, while the batteries are discharged, you’ll have less or no backup power available, although you can choose settings to minimize this problem.  Overall, choosing to participate in the program gives you a little less independence. 

Program Enrollment

To enroll in this program, you have to wait until after your batteries have been installed and approved for operation by TEP. The actual signup process is quite easy, and can be done through your Enphase Enlighten app. The signup process explains the program, then has you read and sign some terms and conditions. After submission, it took about ten business days for me to be accepted into the program.

You’ll find a detailed walkthrough of the process here, or linked from the TEP Energy Storage Rewards page.

Specific Enphase Enlighten Settings

After enrollment, all settings for the program are completed through your Enphase Enlighten app. 

The most important setting is the battery discharge limit, under Menu → Services → Grid Services → Program Details → Battery Discharge Limit. This setting controls how much of your battery you dedicate to the Energy Storage Rewards program. You can choose to set it at a 10% discharge limit, allowing TEP to use as much as 90% of your battery capacity, or at a 70% discharge limit, allowing TEP to use up to 30% of your battery capacity, or anywhere in between.

Anywhere on this spectrum is a reasonable choice. Lower discharge limits mean more compensation, but less battery capacity dedicated to backup for your home after an event. If you want to prioritize your independence, but still participate in the program, you might consider starting with a battery discharge limit of 50-70%.

Note that the battery discharge limit setting is not the same as the self-consumption reserve percentage, which can be adjusted in Settings → Profile → Edit. The self consumption reserve percentage is the lowest that the batteries will be discharged during normal operation, not during an Energy Storage Rewards event. If this value is set higher than the battery discharge limit, and charging from the grid is allowed (see below), then the batteries will charge up to the reserve percentage after a TEP event is completed, as in the example we shared above.

You can choose whether you allow the battery to charge from the grid or not. You’ll find this in Settings → Battery. This can allow your battery to charge up to reserve level after events or outages which can be beneficial, but you’ll have to pay TEP for any energy you purchase from them.

Another key setting is the electricity rate, found in Settings → Electricity rate. This is important as it can change the charging and discharging behavior of a system with batteries. You’ll want to make sure the chosen rate matches your electric bill. For most of our clients, this will be the TRREST residential time-of-use rate. For customers still on net metering, it will likely be the TRRES residential basic rate.

We know this is a lot of settings to consider. If you’re a client of ours, we’d encourage you to get in touch with us, and we can discuss the details over the phone or a video call.

Wrap Up

Thanks for taking the time to read this article! We’d love to hear your feedback and questions! Please share them in the comments below.