Vermont utility Green Mountain Power recently became the first U.S. utility to sell batteries from electric car company Tesla to its customers. With the batteries, homeowners can tap into back-up power if the grid goes down or pair the batteries with solar panels so they can use solar energy at night.
While a handful of utilities plan to buy energy from large battery banks manufactured by Tesla, the Vermont utility is unique in its decision to sell small home batteries to regular homeowners. The move is particularly unusual because the U.S. market for home batteries is the smallest—and most over-hyped—part of the emerging grid battery market.
According to GTM Research, only 4 megawatts worth of batteries have been deployed by U.S. homeowners to date. That’s tiny, compared with the 164 MW worth of batteries that are estimated to be installed in the U.S. in 2015, mostly in large projects for utilities or in commercial and industrial buildings.
The home battery market is very small because it often doesn’t pay off for the customers who buy the batteries. In contrast, businesses can use batteries to shift electricity for their buildings over to batteries during times of day when grid electricity is expensive. Doing so can save businesses significant money on their monthly energy bills. At the same time, utilities see batteries as a cheaper alternative to building and using expensive peaker power plants that are only turned on during peak times of day.
So what does the Vermont utility know that others don’t? Here’s three reasons why Green Mountain Power is taking this unusual move to sell 500 Tesla batteries to its customers:
1). A progressive utility: As The New Yorker wrote earlier this year, Vermont’s main electricity provider is operated by a rare utility executive who has an entrepreneurial background. While many regulated utilities see their customers as a sea of electricity meters, CEO Mary Powell runs her utility more like a customer-focused tech company such as an Apple [fortune stock-symbol=AAPL] or a Google [fortune stock-symbol=GOOG].
Powell has eagerly embraced new technologies that can deliver clean power, and low carbon products, to her progressive customer base, but at the same time she has mostly kept electricity rates flat. Tesla’s Powerwall battery is another technology perk that Powell can offer her customers if they want it. The company proudly touts the battery on the its website’s home page.
2). Off grid storm season: One of the main reasons why U.S. homeowners would want to buy a battery is for back up power. In that way Tesla’s home battery is competing with backup generators. Vermont, with its many rural areas, and harsh winter seasons, is one region of the U.S. where back up power can be attractive and worth investing in. A typical power outage in winter in Vermont can last 2.5 hours.
3). Smart home experiment: Green Mountain Power has been helping its customers modernize their homes, using digital energy technology, and adding solar panels, smart appliances, thermostats, and heat pumps. The utility can use this upgraded energy network to turn down the home’s air conditioner or water heater during peak times of electricity use. In the energy world this called “demand response.”
A Tesla battery is just another asset that the utility could potentially tap into to make the grid and home smarter, and to help the utility better manage its network. If Green Mountain Power customers agree to share their batteries with the utility, the customers will pay significantly less than if they had complete control over the battery, notes Greentech Media.
To learn more about why Tesla is making batteries for homes and businesses, watch this Fortune video:
