In the same way that states have led the policy support for wind and solar technologies, they are now leading the way on energy storage. A model for states to look to when crafting energy storage policy is Massachusetts.
Over the past three years, the Commonwealth has committed tens of millions of dollars toward energy storage deployment, produced a landmark study documenting the benefits of energy storage on the state’s electric grid, integrated storage into a myriad of state policies and programs, and is now considering implementation of a utility procurement mandate for energy storage.
If the state’s Department of Energy Resources (DOER) decides in favor of a mandate, Massachusetts will become the third state in the country, after California and Oregon, to do so. DOER has until the end of this calendar year to make its decision.
With support from the Barr Foundation, Clean Energy Group (CEG) has submitted stakeholder comments to DOER in collaboration with several other nonprofit organizations including Conservation Law Foundation (CLF), Acadia Center, Union of Concerned Scientists (UCS) and the Northeast Clean Energy Council (NECEC). All five groups declared their strong support for a mandate in their comments, but they also recommended some restrictions and guidelines to ensure the establishment of a robust, competitive energy storage market, and to make sure the benefits of utility-procured storage reflect the state’s clean energy goals. These comments and recommendations should serve as guidelines not only for Massachusetts, but for other states interested in establishing a utility procurement target for energy storage.
Key elements of these comments included:
Size of the Mandate
Massachusetts’ energy storage report, State of Charge, identifies 1.7 GW of advanced energy storage as the optimal amount to add to the state’s grid, to produce benefits that include $3.4 billion in savings and revenue; $250 in regional system savings; a 10 percent reduction in the state’s peak demand; and a more than 1 MMTCO2e reduction in greenhouse gas emissions, which represents a significant portion of the state’s statutory emission reductions targets set under the Global Warming Solutions Act (GWSA). However, the report’s policy and program recommendations will only support an additional 600 MW of energy storage. CEG proposed establishment of utility procurement targets in the 600 MW — 1.16 GW range. At a minimum, utility procurement should match the state’s policy target of 600 MW, while at maximum, utilities could be called upon to procure 1.16 GW, which, in combination with the state’s policy target, would result in the optimal 1.76 GW as established in the State of Charge report.
Other organizations argued that setting significant energy storage procurement targets would be essential to the state meeting its 2020 GWSA emissions reduction commitments and, like renewable portfolio standards, would drive down storage costs over time by encouraging deployment at scale.
Limits on Utility Ownership
In addition to its contemplated procurement mandate, Massachusetts recently adopted a law allowing utilities to own energy storage assets. A main concern is that without a cap on utility ownership, utilities could use their considerable market advantages to discourage or even prevent third-party or customer-owned energy storage from entering the Massachusetts market. Limiting utility ownership is a necessary precaution to develop a vibrant storage industry and to capture the full flexibility of storage for a wide number of applications. Indeed, numerous studies have shown that many of the most valuable services provided by energy storage can best be provided from behind-the-meter, such as reducing demand charges and resiliency. This argues strongly for the advantages of customer- and third-party-owned storage resources.
Examples of other states that have limited utility ownership of storage resources include California, which restricts utility ownership to 50 percent of energy storage projects counted toward procurement targets; and New York, which limits utility ownership of distributed energy resources, including storage, to very specific circumstances in its REV Track 1 proceeding.
In order to encourage a wide range of energy storage technologies, applications and ownership, CEG recommended that DOER divide its overall procurement target into locational categories (transmission-, distribution- and customer-sited storage) with minimum requirements for procurement and a cap on utility ownership in each category.
Utility-owned storage can save money for ratepayers, which is a worthy goal; but it can also serve other state goals such as greenhouse gas emissions reductions, resilient power, and the integration of renewable generation. In its comments, CEG urged the state to require that utility-procured, and particularly utility-owned, storage serve social purposes beyond simple cost savings for utilities. These purposes would include:
- Low- and Moderate-Income Benefits. Specifically, the mandate should be structured to ensure that at least 10 percent of utility-procured and utility-owned energy storage be deployed to benefit low-income and otherwise underserved communities, including both community facilities and affordable housing. Precedence for this type of requirement can be found in Massachusetts’ 2008 Green Communities Act, which mandates that no less than 10 percent of electric efficiency expenditures and 20 percent of gas expenditures be devoted to the low-income sector.
- Resiliency. Massachusetts has already recognized the resiliency value of energy storage systems through DOER’s Community Clean Energy Resiliency Initiative. CEG recommended that a utility storage mandate should prioritize energy storage resources that increase the resiliency of communities and/or the reliability of the electric grid during power disruptions.
- Public Health. Energy storage resources displacing fossil-fuel generation, especially high-emissions gas peaker plants, should be also be prioritized. Research by PSE Healthy Energy has found that proper siting and dispatch of energy storage resources could significantly improve public health by reducing reliance on peaker plants, which typically emit local air pollutants at a higher rate than baseload generation and are often located in disadvantaged communities.
- Baseload Replacement. In addition to peaker replacement, energy storage is increasingly being deployed to replace baseload generation. For example, the California utility Pacific Gas & Electric recently proposed replacing the 2,240-megawatt Diablo Canyon nuclear facility with a combination of renewables, energy storage, and efficiency. CEG recommended that DOER prioritize procurement of energy storage resources deployed to replace generation from retiring power plants in any future regulatory or resource planning proceedings.
- Collocation with Renewables. Because collocation of renewables and storage maximizes emissions reduction, DOER should require utilities to collocate energy storage, where possible, with existing renewable generators. Collocation has the added benefit of smoothing variable generation and increasing grid reliability.
In summary, Massachusetts has made a strong commitment to crafting meaningful policy in support of energy storage, including work on a new potential mandate. Assuming DOER moves ahead with a mandate, we will continue to provide stakeholder input on this and related issues over the coming months.
The full text of CEG’s comments, dated December 16, 2016, to DOER on the proposed utility procurement mandate, is available here.