By Matthew S. Cote, Sherin and Lodgen LLP
Commercial property owners with existing energy storage systems, or owners considering implementing an energy storage system, may be able to benefit from a recent order by the Massachusetts Department of Public Utilities (DPU) allowing utility companies to pay customers who agree to rely upon their energy storage systems and dispatch the energy during peak events.
This order makes Massachusetts the first in the nation to incentivize behind-the-meter battery storage by providing new tools and resources for Mass Save (a collaborative of Massachusetts’ natural gas and electric utilities and energy efficiency service providers) to offer pay-for-performance programs to customers of Massachusetts utilities, including Eversource, National Grid, Berkshire Gas, Blackstone Gas Company, Cape Light Compact, Columbia Gas of Massachusetts, Liberty Utilities, and Unitil.
While each utility has its own set of standards and criteria, the order allows the utilities to make year-end payments to customers who agree, upon request of the utility, to reduce their use of electricity during peak events (when demand from the electrical grid is forecasted to be high) by drawing energy from their energy storage systems instead of the local electrical grid. While it may vary by utility, in general, utilities will only request that customers dispatch from their energy storage systems on weekdays between the hours of 2-7 p.m. and for no more than three hours at a time. Customers will be notified the day prior to an event and there will be no events scheduled on holidays or when a significant storm is forecasted so that customers who use their energy storage systems to protect against power outages will not be negatively impacted by participating in the program. Mass Save estimates a total of thirty to sixty (30-60) events per summer.
For commercial properties and industrial properties in Massachusetts, this new incentive is primarily offered through the Daily Dispatch program – designed for energy storage systems that can frequently decrease the load on the grid and which have lower costs of controls and special metering, such as battery storage systems or thermal storage systems. The program is technology and vendor agnostic, extending the benefit to those owners with existing storage systems or those who do not want their options limited when implementing a system.
As an example of the available incentives, National Grid and Eversource are currently offering commercial and industrial customers who participate in the Daily Dispatch Program up to $200/kW per event in the summer. At these rates, the incentive would be $20,000 per year for a customer dispatching an average of 100 kW over the summer. Some utilities offer programs during other times of the year, such as National Grid’s Winter Dispatch Program, offering incentives of up to $25/kW per event in the winter. The incentives are paid on performance, with some of the rates locked in for the first five years of the program.
Combining Energy Storage with Solar Energy Systems
Property owners who combine an energy storage system with a solar energy system (sharing a point of common coupling) may also be eligible for the Solar Massachusetts Renewable Target (SMART) energy storage adder, increasing the incentives received from the SMART program. The Department of Energy Resources (DOER) provides a list of energy storage system eligibility requirements (including nominal rated power, nominal useful energy, minimum efficiency, data provision, and operational requirements) and a calculator and table, which can be used to determine the potential value of an energy storage system and which illustrates possible adder values for different system sizes.
The SMART Program is a 1600 MW declining block incentive program for eligible projects interconnected with Eversource, National Grid or Unitil. Those interested can learn more about the SMART Program online here.
Matthew S. Cote is an associate in Sherin and Lodgen’s Real Estate Department. He represents owners, developers, lenders, investors, and businesses in all aspects of commercial real estate transactions including acquisitions, dispositions, financing and development. Matt can be reached at firstname.lastname@example.org.