An innovative program in Vermont that uses batteries in customers’ homes as a “virtual power plant” paid off to the tune of almost half a million dollars during the recent heat wave, according to the utility running the project.

“During that peak usage, peak hour, every megawatt that we can knock off is a real savings. That one hour is a very significant cost,” said Josh Castonguay, vice president and lead innovation officer for Green Mountain Power, which has a quarter-million customers in Vermont.

At times during the heat wave that covered much of the first week of July, the utility – often known as GMP – drew electricity out of about 500 Tesla Powerwall batteries installed in the home of about 400 customers and fed it into the grid. This meant GMP had to buy less electricity from power plants when the wholesale price of power in New England, which changes every five minutes depending on demand and supply, was particularly high.

This had a double price benefit. It saves on the momentary energy charge, but more importantly it can reduce the utility’s payment to the bulk transmission system in New England. That charge is based on usage during the hour of the year when the most electricity was being used.

The peak demand hour so far in 2018 occurred from 5 to 6 p.m. July 5. By drawing power from customer batteries as well as other sources including its own battery systems during that peak, GMP will cut its annual grid costs, explaining a large portion of the nearly $500,000 it says it saved. If a higher peak hour happens later in the year, that number can change.

Subsidizing batteries in customers’ homes can be a cheaper way of creating a large power storage system.

“We’re always predicting the peak, looking at ISO-NE’s forecast information, looking at our own systems here. If tomorrow looks like there’s going to be a peak between 5 and 6 p.m., let’s look at running from 4 to 7 p.m. with batteries and other loads” to lessen power purchases, he said.

And as distributed energy from solar and wind becomes more widespread, Castonguay said, the financial benefits of batteries will increase.

“Right now, knocking down the peaks is the big advantage, but as we move ahead there will be more, things like regulation service, balancing solar intermittency,” he said. “You can use them like a generator, like a load, like a voltage source – you can do a lot with battery storage that we haven’t had flexibility to do in the past.”

The battery subsidy was approved by the state Public Utilities Commission and is rate-based because GMP says it can pay for itself.

“Unlike when you build poles and wires, where you have to build them and function with them but they don’t return any value, this actually pays for itself plus more,” he said. “Over the life of the program, we anticipate returns of over $2 to $3 million.”

A number of utilities around the country are testing programs to help customers buy solar panels or batteries to reduce power loads and trim carbon emissions. In New Hampshire, Liberty Utilities is proposing such a pilot program in the Hanover area, looking for permission from state regulators.

Green Mountain Power’s Powerwall program is one of the most extensive in the country. The utility is using it to help plan the transition that electric utilities are facing with the increase of solar power being produced from multiple smaller sites, rather than just a few large power plants.

“Part of the importance of this pilot is we are shifting to distributed grid, which also means dealing with things that come with that, like intermittency. … We’re looking at solar like we’ve looked at poles and wires for the last hundred years. It’s a must-have – so how can we best prepare for it,” Castonguay said.

Under the utility’s program, a customer can buy one of the Powerwall 2.0 batteries for $1,500, less than a fifth of the usual cost, or $15 a month, if they let Green Mountain Power draw electricity from the battery at times.

Customers don’t have to have solar panels to participate, although many do: They can charge the battery from the grid, using it mostly as a backup to replace a generator if power fails.

A single Powerwall 2.0 provides 13 kilowatt hours of power, which can run an efficient house for a day. Some customers buy two, which provides enough power to do such things as run the pump in a private well.

“We saw customers in recent storm events who went for a couple days on Powerwalls. If they have solar panels that can charge (batteries) you can go longer,” Castonguay said.

GMP customers also don’t have to buy a Powerwall through GMP; they can buy their own batteries and get the subsidy as long as they let the utility integrate it into the system.

Castonguay said part of Green Mountain Power’s learning process has been developing and using software and systems to take advantage of this spread-out energy storage without depleting the customer’s battery at important times.

“There’s a software platform that’s monitoring these all the time – check powerwall performance, diagnose problems. We create a schedule so that it will make sure everything is topped off and ready to go.

“If we see storms coming, we can shift it. That same software can carve out batteries and say this group of systems we’re going to leave alone, or maybe use only 40 percent of them, to keep it for the customers if there’s a (power outage),” he said.