Arizona’s largest utility is trying to solve a big problem with solar-powered homes

Imagine your local electric utility puts solar panels on your home, free of charge.

Now imagine that same utility gives you an array of state-of-the-art energy-saving devices — from thermostats you can control from your phone to batteries that automatically charge any excess energy from those solar panels.

You can also turn off your appliances remotely and access cloud-based software designed to help you save money on energy. And you’ll get push alerts notifying you when to avoid using energy-draining appliances.

Arizona’s largest utility, the Arizona Public Service Electric Company (APS) is launching a pilot program to do just that for 75 homes in the greater Phoenix area, long known as the Valley of the Sun. The pilot program — which Yahoo Finance is reporting on exclusively— aims to save both the consumer and APS money during the most expensive part of power generation: peak demand in the evening, after the sun sets.

“When you’re looking at the app it will tell you how much it costs to run the dryer at five in the evening compared to 10 p.m.,” says Ellen Howe, vice president of marketing at JLM Energy, whose products are included in the study.

APS calls the five-year Solar Innovation Study the most sophisticated and expansive of its kind. All the homes will get solar panels and a variety of devices to see what combinations work best. “We want to be agnostic for all this technology and flexible for the future of the grid,” says Marc Romito, APS Manager of Renewable Energy.

If it’s successful, the home laboratory program could solve one of the main problems with solar-power: a surge of demand for conventional energy when it’s cloudy or at night. The pilot may also end up spurring more utilities to get into the counterintuitive business of solar power.

Phoenix weather forecast: Sunny, roughly 300 days of the year

An image provided by APS.

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That forecast has a lot of Arizonans putting panels on their roofs: The state ranks second nationwide in installed solar capacity, according to the Solar Energy Industries Association (SEIA). But the trend — also fueled by sharply lower costs, government subsidies and concerns about climate change — creates a problem for electric utilities.

“Every time I hook up people to create their own power, I destroy my own customer base,” says Arizona State University’s W.P. Carey School of Business economics professor Timothy James, who advises utilities and solar companies alike. “It’s like a storekeeper allowing people to not buy things from the store anymore.”

Aside from the fact that they’re not consuming as much conventional energy, solar customers also create weird fluctuations in conventional energy use.

During the daytime when the sun shines, solar customers spin the meter backwards when they create their own juice and flood the electric grid with their excess power. That is, their electric bill goes down and can even become negative. Yet the utility must have ample amounts of reserve power ready in the event of clouds, and more critically, when the sun sets.

That’s precisely when there’s a surge of demand from solar and conventional customers alike — peak consumption — that puts a strain on the system.

‘We need to smooth out voltage fluctuation’

This strain on the electric system means “solar power is mismatched” with the grid, according to Romito. And that’s a problem because steady demand makes transmission lines work more efficiently.

“We need to smooth out voltage fluctuation,” Romito says.

An image provided by APS.

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APS uses an illustration of something called the duck curve to explain what it wants to do. Its 40,000-rooftop solar customers create the peak of their energy between noon and 3 p.m. So energy demand from the grid dips. That’s the curve of the duck’s back. But as the sun sets, the panels stop producing and energy demands spike. That’s the head of the duck.

APS would like to fill the belly of the duck with stored solar power from the day so that it can be used later and it can shave off the peak, or the head of the duck.

The homes’ energy-saving devices — including a push alert that lets you know when you’re using energy-draining appliances like dryers at peak hours — will all work together to fill the duck’s belly.

“They will all eventually be like Lego blocks. It will all fit together,” predicts Ivan Aguilar, a consultant for APS Energy Innovation.

An important piece of the puzzle is how the consumer behaves with all the new stuff provided by the utility. For example, some consumers may prefer to adjust their new devices remotely while others decide not to mess with their new setup once they leave the house.

“It’s not well understood the way people work with more intelligent energy devices,” says James, the ASU business school professor, noting that the so-called boomerang effect may come into play during the APS study.

Here’s how he explains that effect: Despite vastly more efficient household appliances from a few decades ago, he says per capita consumption hasn’t declined. That’s the boomerang, which he blames partly on the “internet of things” consuming energy in our homes.

APS hopes the pilot’s high-performance batteries — which store power for longer periods — will stave off the boomerang effect. Those batteries could eliminate a huge drawback for solar: that it can’t be saved for later use.

What’s in it for the utility?

On the surface, solar power isn’t a good thing for utilities. Those utilities sell power, and solar-minded consumers increasingly want to make it themselves.

“Utilities are feeling threatened, partly because of the success of solar,” says Sean Gallagher, SEIA vice president of state affairs. He says that’s why it’s getting more expensive for solar residents to be connected to the grid and why they’re getting less credit for excess solar energy.

While solar still only accounts for about 1% of the total energy consumed in the US (less than hydroelectric, biomass and wind, according to the Institute for Energy Research), it’s expected to become a bigger player — especially in areas where sunshine is abundant like the desert Southwest.

Moreover, SEIA says prices for installed solar systems have plunged nearly 50% since 2010.

And then there’s the growing number of legislative mandates: 29 states and Washington, DC. now have renewable requirements for their energy consumption, according to the Database of State Incentives for Renewables & Efficiency.

Gallagher contends that utilities won’t financially be hurt until solar hits 10% of the total energy pie. But virtually everybody — utilities, consumers, installers and regulators — agrees the business model for utilities is broken already.

“Power companies have enjoyed quasi monopolies for many decades and didn’t need to innovate or adopt new technologies,” says Jochen Spengler of Spengler Alternative Energy Consulting. “With alternative energy and distributed generation gaining momentum, some power companies will struggle to adjust.”

Romito of APS says, “We are incubating technology to allow the market to catch up.”

With 1,500 new solar customers coming online at the utility every month, urgency is clearly one of the factors behind the innovation in the APS pilot program.

Article originally featured at Yahoo Finance