by Roger Caiazza
According to their website, the “Clean Energy States Alliance (CESA) is the leading US coalition of state energy organizations working together to advance the rapid expansion of clean energy technologies and bring the benefits of clean energy to all”. On August 5, 2021, they released “Energy Storage Policy Best Practices from New England: Ten Lessons from Six States” that “explores energy storage policy best practices and lessons learned from the New England states.” This post gives an overview of the report.
The report “aims to inform state policymakers and regulators seeking to expand energy storage markets”. I will address the following ten recommendations that “each state should consider as it charts its own course”:
- Identify benefits of energy storage that are not priced or monetizable in existing markets; recognize and accommodate the multi-use nature of energy storage resources.
- Establish a monetary value for each storage benefit and use those values when calculating cost effectiveness and setting incentive rates. Estimated value is better than no value at all.
- Create incentives to support storage operations that further state policy goals. Incentivize storage use, not just storage deployment.
- Set ambitious clean energy and/or emissions reduction goals and explicitly include energy storage as an eligible technology. Define how storage is expected to be deployed and operated to help meet the goals.
- Incorporate energy storage into existing clean energy and efficiency programs.
- Incorporate equity considerations into energy storage program design from the start, not as an afterthought. This should include significant incentive adders for qualifying participants.
- Support a wide variety of storage ownership, application, and business models.
- Anticipate and proactively address needed regulatory changes.
- Replicate and improve on successful programs implemented in other states.
- Fund demonstration projects when needed, but do not rely on grants alone to build a market.
After Superstorm Sandy struck New York City the importance of resilient power became evident to the green energy policy makers and the idea that battery storage could help was broached. The report states that their efforts began “with the idea that advanced battery storage—especially when combined with rooftop solar and other energy resources—could provide clean, resilient backup power, allowing critical facilities such as emergency shelters and health clinics to ride through future grid outages.” A frequently used example of the viability of distributed systems is a hospital in Princeton, NJ that remained on-line despite widespread grid outages due to Sandy. Unfortunately, proponents of these distributed energy approach who cite this as proof of the viability of the concept don’t mention that the hospital had a natural gas fired backup system. The presumption that coupling battery storage with renewable resources will work as well is untested in practice.
The report goes on to note that energy storage can be used to provide other energy services: “demand management, frequency regulation, grid infrastructure investment deferral, renewables integration, and load shifting.” The report claims that: “As the list of possible storage applications expanded, state storage policy would need to become more sophisticated, and state utility commissions would need to review many regulations that had been written prior to the widespread availability of advanced battery storage, which now needed to be revised to accommodate this new technology”. The ten recommendations address these points.
The first recommendation is to “Identify benefits of energy storage that are not priced or monetizable in existing markets and recognize and accommodate the multi-use nature of energy storage resources”. The example benefit given is behind-the-meter (BTM) resilient power that is the ability to support critical facilities and infrastructure during an electric grid outage. As proof they note that that is “widely recognized as having value—otherwise, there would not be a thriving market for backup generators.” The claim is that “Battery storage, when properly configured, can provide resilient power, and this is one of the storage applications that customers value most highly.” Therefore, they recommend that the states figure out some way to monetize this benefit. However, in my case while I chose to install a generator because resilient power is important to me, I wanted the system to be able to handle the multi-day outages I have experienced due to a wind storm and an ice storm. In both cases there is no way I could have installed enough rooftop solar and storage to provide power throughout those days-long outages. Resilient power needs are for the worst case, not just most of the times the power goes out. The worst case is a long duration extreme hot or cold weather situation and energy storage is a poor choice for those scenarios.
In this recommendation, the report states that “Advanced energy storage can provide a wide variety of energy services, and storage owners frequently need to “stack” multiple services (each representing a revenue stream or cost savings opportunity) in order to make storage investments economic.” It includes a highlighted section that discusses a “multi-use” resource. While it recognizes that the different services are “not necessarily” available at the same time, it goes on in Table 1 to list the ratepayer individual savings for six beneficial services then sums for the total. Clearly, this is not appropriate.
The second recommendation is to “Establish a monetary value for each storage benefit and use those values when calculating cost effectiveness and setting incentive rates. Estimated value is better than no value at all”. The paper lists values for seven non-energy benefits of distributed storage in Massachusetts.
The first claimed benefit is Avoided Power Outages – “Battery storage helps avoid outages, and all of the costs that come with outages for families, businesses, generation and distribution companies”. I agree that outages have costs for families and businesses and battery storage that can reduce or eliminate them clearly has value. However, the only way I can think that outages would affect generation companies is if there is a power plant outage and energy storage is used during the outage but the existing system has enough spare capacity to handle that concern. I cannot think how energy storage would reduce costs for a distribution company.
The second value is Higher Property Values – “Installing battery storage in buildings increases property values for storage measure participants by: 1. Increasing leasable space; 2. Increasing thermal comfort; 3. increasing marketability of leasable space, and 4. reducing energy costs”. My understanding is that energy storage systems need space so it is unclear how they would increase leasable space. The other three benefits also seem to be stretch the concept of “value”.
Next is Avoided Fines – “Increasing battery storage will result in fewer power outages and fewer
potential fines for utilities”. I have no clue how energy storage can provide this benefit. Utilities get fined when they don’t plan for enough resiliency in their system to prevent extreme weather impacts on their transmission and distribution systems. Energy storage cannot prevent power outages caused by damages to the wires.
The fourth value is Avoided Collections and Terminations – “More battery storage reduces the need for costly new power plants, thereby lowering ratepayer bills, and making it easier for ratepayers to consistently pay their bills on time. This reduces the need for utilities to initiate collections and terminations.” The ability of battery storage to reduce the need for new power plants is an article of faith amongst the advocates of this technology. However, the claims are long on rhetoric and short on quantitative analysis. If an old power plant has to be replaced it would take one heck of a lot of energy storage to provide the output of any natural gas fired turbine. Until I see their numbers then I will continue to believe that the costs of sufficient energy storage coupled with renewable resources would be far more than the costs of a new turbine.
The fifth value is Avoided Safety-Related Emergency Calls – “Increasing battery storage results in fewer power outages, which reduces the risk of emergencies and the need for utilities to make safety-related emergency calls”. In theory if a customer has a need for uninterrupted power a personal battery storage system could reduce emergency calls. However, you are back to the issue of energy storage capacity versus outage time. If I have the need for uninterrupted power, I want it available for long durations. In order to provide that with energy storage I have to purchase so much capacity for such a rare event that it cannot be cost effective relative to a generator.
The sixth value in the document is Job Creation – “More battery storage benefits society at large by creating jobs in manufacturing, research and development, engineering, and installation”. I have my doubts about this claim but don’t want to do the research necessary to refute this.
The last value in this recommendation is Less Land Used for Power Plants – “More battery storage reduces the need for peaker plants, which are more land-intensive than storage installations—benefiting society by allowing more land to be used for other purposes.” This is only true at the facility itself. However, the grand plan is to combine energy storage with power generated from wind and solar power. Ignoring the vast land use requirements for enough coupled energy storage and diffuse renewable generation is an egregious oversight as shown in the following picture from the report.
The third recommendation is to “Create incentives to support storage operations that further state policy goals. Incentivize storage use, not just storage deployment.” The report states that because
“clean energy incentives generally support broader policy goals such as energy sector decarbonization, electrification, sustainability, modernization, efficiency, resilience, and reliability” that the “energy storage incentive program should not be about ‘storage for storage’s sake,’ but should be designed to support specific policy goals”. The report notes that battery storage can “provide several different services depending on how it is used” so it suggests that “a state energy storage program must actively link the use of battery systems to applications that support specific policy objectives. However, it does not recognize that battery systems that support one policy objective cannot necessarily support all other policy objectives. For example, batteries used for energy storage when intermittent renewables are not available need to be kept charged at their maximum capacity but batteries for frequency regulation and to smooth intermittent fluctuations in supply are kept at an intermediate capacity so that they supply power and draw power as needed. Consequently, I believe the report underestimates the amount of energy storage needed.
Furthermore, there is another example of the disconnect between energy storage by itself and energy storage coupled with renewable energy to solve intermittency. Figure 4A, Misaligned Financial Signals claims that a California energy storage program to reduce emissions was set up incorrectly because “battery owners frequently discharged their batteries during low emissions periods, rather than charging when emissions were low and discharging when they were high”. Honestly, I don’t think the author understands emissions control programs or diurnal peak loads. Time of day emissions matters for conventional air pollution but does not matter for GHG emissions because GHG contribute only to a global long-term alleged problem. Diurnally, California renewable energy primarily comes from solar which peaks during the middle of the day. Figure 4A shows the batteries being charged during the day and then discharging later in the day causing the emissions to go to zero. Diurnal peak loads are usually in the late afternoon so even though there are emissions in the middle of the day the program eliminated emissions during the peak period – it worked precisely as it was supposed to if the goal of the program is to reduce nitrogen oxides for ozone attainment. The “solution” shown in Figure 4B is simply switching the charging source to wind because if it is charging in the night, it certainly is not coming from solar.
The fourth recommendation is “Set ambitious clean energy and/or emissions reduction goals and explicitly include energy storage as an eligible technology. Define how storage is expected to be deployed and operated to help meet the goals.” Regulators take ambitious goals as an article of faith believing that somehow the goals can be met because previous air pollution control programs have always met their goals. The concept that feasibility should be considered is not an element of many regulators and no politician’s thought process.
The next recommendation is “Incorporate energy storage into existing clean energy and efficiency programs.” I think this is pretty obvious so no comment.
The sixth recommendation is “Incorporate equity considerations into energy storage program design from the start, not as an afterthought. This should include significant incentive adders for qualifying participants.” The rationale for this is:
“Low-income and underserved communities spend proportionally more of their income on energy costs than other segments of the population. They are also more likely to suffer from energy related environmental and health burdens; and they are hit hardest by natural disasters and the accompanying grid outages and have fewer resources with which to recover. In short, they are most in need of the cost savings, resilience, and health benefits energy storage can offer.”
This another example of limited thinking. While I do not dispute the underserved communities are disproportionally impacted by environmental impacts and extreme weather events the presumption that cost savings will accrue from clean energy are not supported by the experience of any jurisdiction that has tried it. Furthermore, if society not only subsidizes clean energy but also attempts to provide it to those who cannot afford existing energy then it only increases the costs to everyone else. Most importantly, those who may be just able to afford energy bills now but will not be able to afford them in future net-zero energy systems will be impacted by this recommendation.
The recommendation listed in the introduction as “Anticipate and proactively address needed regulatory changes” apparently morphed into the seventh recommendation in the report “Pay attention to regulatory friction points” during the documentation preparation process. The point of the recommendation is that there may be unintended consequences when new energy storage policies are adopted. The analogy used is regulatory whack-a-mole where the states will have to “spend several years fixing problems one at a time as they pop up” after they implement a new rule. In my opinion this should be addressed as part of the feasibility study that most advocates don’t think is necessary. However, the presumption that all the problems associated with converting an energy system using dispatchable energy sources that has taken decades to evolve to one utterly dependent upon intermittent energy sources in a decade or two can be anticipated is wishful thinking. Anyone in a net-zero jurisdiction will be a guinea pig for this experiment.
The eighth recommendation is “Support a wide variety of storage ownership, application, and business models”. The rationale is that energy storage can “integrate renewables and make regional grids more efficient, reduce transmission congestion, defer distribution grid investments, make variable generators dispatchable”. It is also claimed that it can “flatten demand peaks, balance microgrids, make critical infrastructure resilient, and provide ancillary services”. Not noted is that these applications are mostly theory and, especially in a de-regulated market, developing business models that work for both society and the grifters selling energy storage as the solution to anything and everything will be a challenge.
The ninth recommendation is “Replicate and improve on successful programs implemented in other states”. Obviously, there is no sense reinventing the wheel so this makes sense. However, “success” has to be defined well because it can be in the eye of the beholder.
The last recommendation is to “Fund demonstration projects when needed, but do not rely on grants alone to build a market”. As I read this document, I became more and more convinced that the author had limited electric energy system experience. He claims that “there is little need to demonstrate another utility-scale lithium-ion battery providing peak demand reduction and frequency regulation services when numerous such projects already exist in the region”. The report is illustrated with pictures and descriptions of five energy storage facilities with the largest having an 8 MWh duration and totaling 22.4 MWh. The average daily load in New England is 260,120 MWh so those facilities are inconsequential. I don’t think there is any question that in these micro grid applications that batteries can provide peak demand reduction and frequency regulation services. I question whether the author understands that the issue is a matter of scale and it is not at all clear that peak demand reduction and frequency regulation is feasible when non-dispatchable resource penetration is significant. Ultimately it is obvious that ratepayers cannot provide grants for all the energy storage projects needed to try to support the utility grid.
The report concludes that “With falling battery prices, increasing adoption of state clean energy and decarbonization goals, and forward-looking utilities (and ratepayers), many states have a strong foundation for success”. The report is supposed to offer “some suggestions to policymakers for building on that foundation”.
I am unconvinced that this report provides any value. The report was not proofed well because wording of the ten recommendations in each chapter do not match the description of the ten recommendations in the introductory text. I was prompted to write this article by the following quote from the introduction: “In Vermont, for example, Green Mountain Power’s residential battery program has placed battery systems in more than 3,000 homes; the utility dispatches this aggregated, distributed energy storage resource to reduce peak demand, saving ratepayers millions of dollars.” The report notes that the “Stafford Hill solar farm includes 7,700 solar panels capable of producing 2.5 megawatts (MW) of electricity, enough to power 2,000 homes. Therefore 3,000 homes are powered by 3.75 MW. I would love to see the math that produces millions of dollars of savings from shaving peaks by 3.75 MW. I just don’t think this is credible and indicates a lack of knowledge about electric systems by the author.
I believe there is a fundamental oversight not mentioning that stacking energy storage applications is problematic. A single energy storage system cannot supply all the different resources suggested (e.g., by summing the benefits of each resource in Table 1) in this report. There is another fundamental issue with the report because it considers energy storage by itself. Batteries are supposed to solve non-dispatchable renewable energy issues. Claiming that energy storage improves resilience when the coupled energy input is fragile and intermittent is at best a stretch. Finally note that there was very little in the way of caveats and cautions with respect to this unproven, at utility scale and using renewables, technology. As a result, policy makers will not get a full appreciation of the challenge of this transition.
Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York. This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.