The US energy storage market has been witnessing a lot of activity recently. The policy and regulatory push at both the federal and state levels is playing a significant role in shaping the future of the energy storage systems (ESS) market. At the federal level, incentives, such as the investment tax credit to solar-plus-storage systems and those provided for research and development, and innovations and technologies by the US Department of Energy are attracting investors in the segment. Further, the Federal Energy Regulatory Commission’s (FERC) Order 841 requiring regional transmission organisations and independent system operators to establish a participation model for electric storage resources (ESRs), and Order 845, which revises interconnection rules and procedures for generators of over 20 MW capacity, have opened up new opportunities for storage.
At the states level, while California continues to lead as an early starter, several states, particularly in the north-eastern region, have announced policies to promote ESS development. States such as New York and New Jersey established ambitious storage mandates during 2018. Further, noteworthy activity is taking place in states such as Massachusetts, New Hampshire and Vermont. In Maine, a new legislation passed in May 2019 calls for a study on the benefits of energy storage by December 2019 including a recommendation on the adoption of ESS procurement targets. Meanwhile, the Connecticut legislature passed a bill allowing utilities in the state to own energy storage facilities and add them into the rate base. Utilities in several states are ramping up procurements of both behind-the-meter and front-of-the meter ESRs to integrate higher levels of renewables and provide additional grid services such as demand response.
Power Line presents recent developments in the energy storage market in the northeastern states of the US.
The recent activity in the energy storage space in the Commonwealth of Massachusetts is driven by several initiatives by the state to help achieve its energy storage target of 200 MWh by January 1, 2020 (set by the Department of Energy Resources [DoER] in June 2017).
The target itself was set to build on Governor Baker’s Energy Storage Initiative (ESI), launched in May 2015, with a commitment of $10 million to study the opportunities to support Commonwealth storage companies and storage projects at the utility, distribution system and customer side scale. In line with ESI’s state-of-the-charge study released in September 2016, the DoER implemented several of its recommendations to promote energy storage in the state. These include the Solar Massachusetts Renewable Target (SMART) incentive (for pairing of energy storage with solar power systems); authorising pairing of energy storage technologies with procurement of clean (9,450,000 MWh) and offshore wind energy (1,600 MW) generation; continued energy storage grant opportunities through the Community Clean Energy Resiliency Initiative; and funding energy storage projects through a peak demand reduction grant programme.
In November 2018, the SMART programme began accepting applications and by mid-2019, the SMART interconnection queue included over 130 MW of storage. While smaller systems with capacities of less than 25 kW are being installed, larger solar-plus-storage projects in congested grid locations take a longer time (18-24 months) to get interconnected.
Further, the Massachusetts Clean Energy Center and the DoER launched the second phase of ESI, a $10 million competitive grant programme for energy storage demonstration projects – Advancing Commonwealth Energy Storage (ACES).
Massachusetts has also approved a Clean Peak Energy Standard in a bid to meet a large part of the peak-hour electricity demand from clean rather than fossil-fuelled sources. The policy is being finalised and may translate into additional market opportunities for ESS.
Recently, the Massachusetts Department of Public Utilities issued an order allowing utility companies to pay customers who agree to rely on their ESS during peak times (pay-for-performance programme). This incentive is offered to commercial and industrial properties mainly through the daily dispatch programme designed for ESS, which can decrease load on the grid and have lower cost of controls and special metering. This makes Massachusetts the first in the country to incentivise behind-the-meter battery storage in this manner. Property owners, combining ESS with a solar energy system, are also eligible for the SMART energy storage adder, which increases the incentives received from the SMART programme.
Several storage projects have come up under various incentive programmes. For instance, recently, NEC Energy Solutions announced six new ESS of over 20 MW at municipal power plants across New England including the 3 MW/6 MWh Tauton Municipal Lighting Plant in Massachusetts, which will be one of the largest projects in New England. The project, which has received the ACES grant, will help reduce transmission and capacity costs during peak demand times.
Engie North America has a four-project pipeline in the state with 25 MW solar and 22 MWh of energy storage under the SMART programme. The projects will become operational by 2020 and run for 20 years. The ESS will use Engie’s GridSynergy software platform and will operate in the ISO New England wholesale markets.
With advanced control software, ESS can provide multiple services including wholesale market services such as capacity, reserves, energy and frequency regulation as well as retail services such as peak shaving, distribution utility demand response and installed capacity charge reduction. Further, compliance with incentive programmes must be managed. In addition to improving grid operations, energy storage in the state can provide benefits such as reducing energy costs, providing backup power through storms, and benefitting the local economy.
In 2018, New York announced an ambitious energy storage target of 1.5 GW by 2025 and 3 GW by 2030. In a move to support the state in achieving these targets, the New York governor announced $280 million support for storage projects in April 2019. This funding is part of the $400 million investment committed to achieving the 2025 energy storage target. In the long run, it will also help the state achieve 100 per cent carbon-free electricity by 2040 under its Green New Deal.
The funds will be channelised through the New York State Energy Research and Development Authority’s (NYSERDA) Market Acceleration Bridge Incentive Programme, which aims to build a self-sustaining storage market. Funding is available under two categories, storage systems over 5 MW that provide energy for the wholesale market or distribution services ($150 million), and retail storage systems below 5 MW ($130 million). Based on future opportunities, NYSERDA will allocate another $70 million besides $53 million allocated under the Regional Greenhouse Gas Initiative that will be available to retail and bulk storage projects in Long Island later this year. Further, funds are available for solar-plus-storage projects within the NY-Sun Initiative.
Earlier in December 2018, the New York Public Service Commission (PSC) issued a landmark energy storage order that establishes deployment mechanisms to achieve both goals. Among other things, it focuses on regulatory changes to customer rates and utility solicitations that reflect the environmental benefits and resiliency that energy storage brings to the grid; recommends measures to improve the wholesale market design and enable distributed energy resources (DERs) to meet distribution and wholesale system needs more cost effectively; and emphasises continued efforts to streamline permitting and siting challenges, reduce the non-hardware costs of energy storage, and ensure straightforward access to market rules and opportunities. It authorises NYSERDA to use the allocated funds to implement storage incentive programmes between 2019 and 2025.
In a significant move, in May 2019, FERC gave approval to New York ISO (NYISO) to add ESRs to its real-time market settlement rules in order to increase wholesale market participation. This is in response to its filing with FERC in December in compliance with Order 841.
To encourage storage deployment across the state, in May 2019, the New York Power Authority (NYPA) issued a request for information to identify battery storage companies interested in participating jointly in competitive solicitations or other storage development opportunities within the New York state. Earlier in December 2018, the NYPA board approved a $600 million revolving credit facility for short-term borrowing (available until January 2022) to support the utility’s energy efficiency programme, including that related to energy storage.
In June 2019, NYPA announced its first large-scale energy storage demonstration project of 20 MW to be set up near one of its substations in the Franklin county at an investment of $30 million. Construction of the project is set to begin later this year to be completed by June 2020.
Meanwhile, in April 2019, the New York PSC made improvements to the value of DERs or value stack mechanism that replaces net metering and compensates DERs based on when and where they provide electricity to the grid. As per the new rules, the compensation rates are locked in for a decade, creating greater certainty to the revenue streams under the mechanism.
Therefore, multiple income avenues are available to developers including the federal investment tax credit, bridge incentive, VDER income, bring-your-own-device (BYOD) programmes as well as participation in the NYISO wholesale markets.
The state has set a target of 600 MW of energy storage by 2021 and 2 GW by 2030 in the run-up to its long-term goal of achieving 100 per cent clean energy by 2050. While a few commercial storage systems have been deployed in the state, the market is yet to pick up pace.
According to the energy storage analysis by Rutgers University (appointed by the New Jersey Board of Public Utilities to conduct a comprehensive study on energy storage), the state’s short-term storage target will require $140-650 million in incentives if the systems are paired with renewables. It also concludes that a further decline in lithium-ion battery prices is essential before they become cost competitive for most applications (beyond providing ancillary services for the bulk power market).
The state’s largest utility, Public Service Enterprise Group Incorporated announced plans to invest over $180 million up to 2024 to develop 35 MW of energy storage systems in New Jersey. In 2018, Viridity Energy Solutions Inc.(VESI), a subsidiary of the US-based Ormat Technologies Inc., commissioned two 20 MW/20 MWh utility-scale BESS in Plumsted Township and Alpha, New Jersey. The project was initiated to provide grid ancillary services to assist PJM Interconnection in balancing the electric grid and to serve as capacity asset.
However, despite the incentive to back up critical commercial and industrial infrastructure with renewables and storage, not many projects have taken off. The Renewable Electric Storage programme, which provides financial incentives for ESS that are integrated with renewable projects installed behind-the-meter at non-residential customer sites, has to its tally only one completed project (by VESI), two projects in pipeline and 15 cancelled projects.
In New Hampshire, utilities are leading the way in using energy storage as an innovative solution to trim peak loads. This is even as the state has not explicitly stated its overall energy storage policy. In end-2018, Liberty Utilities announced its plan to install Tesla Powerwall batteries at customer locations to reduce peak consumption. The Public Utilities Commission approved its plan in January 2019. The customers get backup power and a three-tiered time-of-use rate (mid-peak, critical-peak and off-peak) that syncs individual incentives with system requirements. The utility benefits from a distributed solution instead of investing in capital-intensive grid upgrades. Parallelly, third-party companies will also be able to participate in a BYOD programme.
Another utility, Eversource New Hampshire, proposes to back up the rural town of Westmoreland with a combination of central, utility-owned battery and customer-sited energy devices. This would lead to net savings compared to building a redundant power line (costing $6 million) to the town, which experiences frequent and long power outages. In 2020, Eversource will build a battery involving an investment of $7 million with an estimated savings of $2 million for all the company’s New Hampshire customers.
In Vermont, Green Mountain Power (GMP), which serves about 75 per cent of the state’s electricity consumers, has been proactively implementing innovative storage solutions to not only help reduce carbon emissions by bringing clean power but also generate savings for customers. The Resilient Home programme helped customers save over $600,000 during 2018. Under the programme, GMP has partnered with Tesla to replace traditional meters with a battery-based energy storage system providing customers increased resiliency during outages. The customers can either get the batteries directly on a monthly payment or tie-up with third parties under GMP’s BYOD programme.
Separately, GMP has also committed to 100 per cent carbon-free power supply by 2025 and 100 per cent renewable power supply by 2030 (from the current share of 90 per cent carbon free and 60 per cent renewable supply respectively). Energy storage is expected to play a significant role in achieving this goal. It is also planning to add 50 MW-100 MW of utility scale storage and flexible load resources over the next 10 years as per its 2018 integrated resource plan.
Net net, energy storage has gained prominence owing to its ability to provide multiple services to maintain system frequency and stability. This is essential in view of the integration of huge amounts of intermittent renewables and the continuing retirement of fossil fuel-based generation in the country. Recent developments in the country’s ESS space, particularly in the northeast, are expected to attract investments and further develop the storage market.