At Storage East 2018, policymakers, businesses and utilities – the entire storage value chain – convened in Washington, D.C. to discuss the next steps for the Eastern Interconnection in the United States. On Oct. 16, utility companies, power services, and energy developers engaged in a panel discussion on how to best incentivize the rollout of energy storage under current regulatory conditions.
Earlier this year, two key (FERC) orders passed, accelerating the rate of storage deployment. FERC Order No. 841, issued in February, mandates that regional transmission organizations (RTOs) accommodate the “physical and operational” characteristics of storage. RTOs are required to file their “participation models” that detail how they plan to integrate energy storage projects by December 2018 and implement their plans by December 2019.
FERC Order No. 845, issued in April, confirmed that storage projects will explicitly fall under the definition of “generation facilities.” These two orders have laid the foundation for removing regulatory barriers for energy storage in participating in wholesale markets for energy and capacity. This also includes ancillary-services markets.
The panel started off with a quick summary of current state-level endeavors to stimulate storage growth. Gary Dorris, CEO and cofounder of Ascend Analytics, said some states have already put together ambitious goals and specific action items to reach their goals. Massachusetts has set a 200-MWh target to be achieved by 2020. New Jersey has set an even more ambitious goal of reaching 2000 MW by 2030.
New York’s target is to host 1500 MW of energy storage by 2025. New York has secured $200 million to help finance energy storage projects. And statewide market incentives worth $350 for advanced storage systems also exist. Additional funding can be found under the NY-SUN Initiative if a storage system is linked to a solar system.
Urgent Actions that Could Catalyze Change
“However, what are states not doing right now?” Dorris asked.
There was a general consensus among panelists and the audience that property tax relief is one urgent action item now. Energy storage projects are very capital-intensive, but currently there is no federal tax credit available for energy storage investment and installation.
For energy storage to be eligible for the investment tax credit, it has to be paired with solar or other renewable systems. Solar-plus-storage could create great synergy. States could further catalyze storage development by providing separate tax relief for standalone storage systems.
At the same time, creating accountability among stakeholders and governments would be crucial for realizing state goals and action items. States could play a leading role in shaping such rules and mechanisms.
Wish List for Market Transformation
Dorris also asked: “What is everyone’s wish list of ISO rules and policy changes?”
“To feel confident in investing, developers need certainty and predictability, which is apparently not so easy in a market-based system,” said Thomas Leyden, senior director of EDF Renewables Distributed Solutions. “And please don’t change rules too often – like every couple of years!”
Stephen Wemple, director of Con Edison's Utility of the Future team, introduced an interesting challenge New York (NYISO) encountered in examining the rules for energy resources. “We should do precise analytics and make sure we are valuing energy resources appropriately.”
“Our (utility’s) preference is to have all resources compete to help find the right mix of resources to meet our means,” Wemple said. “We want competitive pressure in the market to help lower costs and generate net positive benefits for our customers.”
Adam Rousselle, president of Renewable Energy Aggregators, said that “transparent systems and mechanisms are critical. Storage developers and investors should be able to communicate with a dependable market and its market rules.” Having reliable data from the grid will also be important in the meantime.
Rousselle also said working with transmission owners would be critical. Otherwise, they will be potential competitors for energy storage. If the market or independent system operator could align storage developers and transmission owners, for example, by providing load benefits for transmission owners, energy storage could be supported and connected by transmission infrastructure. Then, transmission owners will be able to get paid back for their capital investments.
Leyden said it would be helpful to quantify the value of lost load that alternative energy resources like energy storage could help provide. Energy arbitrage – buying off-peak energy and discharging at peak time – could be even more attractive with a known value of lost load.
According to Leyden, energy storage faces a significant limitation: it cannot inherently displace all loads. For example, New York City has significant load pockets – areas where there is insufficient transmission capability to reliably support 100 percent of the load without having onsite generation capacity.
Very hot summer weather usually lasts about 10-12 hours on multiple days in a row in New York City, Leyden said. This is certainly not enough time for storage to recharge and serve the load for the next day. Companies still need to run combustion facilities or pay high prices for transmission.
The Coming Era of Energy Storage
When asked to name what advances storage the most, each panelist expressed his thought on targets versus subsidies, combined targets and subsidies, and other combinations of programs.
Gabe Wapner, director of development at Hecate Energy, said government efforts to give mandates to structure targets for the private market help further storage deployment from a developer’s perspective.
Leyden said he agreed that mandates are preferred but short-term incentives and rebates are very attractive. This includes his experience with solar. A market-based program that helps lower the cost of these technologies will incentivize storage investment and development at a larger scale.
Wemple said having specific targets with competitive procurement process can help make things happen. “Generally, we are bad at predicting how much we have to pay to incentivize someone to reach that goal. But having a competitive process to determine that price is much more efficient than having governments, economists and consultants advocating or arguing for a certain price.”
Challenges Faced by the Energy Storage Market
The panel’s last discussion question asked: despite falling prices, what is holding energy storage back from replacing more traditional types of generation?
Wemple said there are two limitations. First, there are physical issues. This is because on a per-MW basis, 20 MW of energy storage takes up a lot more space than a 20-MW combustion turbine in urban settings does. Second, with current storage technologies, meeting 10-12 hours’ needs at a time may not be cost-effective for energy storage alone to take care of. Fortunately, a hybrid of storage and solar could be a solution.
Leyden said there is a “convergence of dire need to [act in response to] climate change”. A lot of capital is waiting to be invested in cleaner technologies, he said. “We are waiting for the right price signal now.”
Panelists also gave other recommendations for the market and regulatory organizations.
Wapner discussed potential revenue streams related to energy storage. Examples of programs include peak load, demand response, spinning reserve, conservation programs, congestion management, and flexible ramping. They also can include short-term capacity, day-ahead market, and fast-response ramping.
Currently, there is no number attached to these potential values, but as markets allow storage to access such mechanisms and monetize, storage development would be more viable in the east coast.
Rousselle called attention to the inherent gap between data and stability in interconnection process and also the conflict of interests among different players in the electric grid. One example would be differences of viewpoint between storage developers and transmission owners. He recommended that regulatory bodies listen to customers whose interests and concerns could help redirect attention to hidden market opportunities for energy storage.
The panel discussion concluded with a beautiful analogy between the music and power industries by Dorris. Music has transformed its presence from phonographs to cassettes and CDs. Music went digital. Now it’s all about iPod and music apps like Spotify. Technological progress has changed forever how music is distributed.
Just like the music industry, the power industry is also undergoing a great metamorphosis. He said, “You can’t stop the rate of technological advances and innovation. Digital power, solar-plus-storage, and other power mixes… There is no question that power is also going digital, and we can’t stop it.”