With a potential $30 billion market up for grabs, key industry players are urging Massachusetts to think big and move faster as its sets an energy storage target.
The bellwether state has floated the idea of setting a goal to develop 600 MW of energy storage by 2025. But some influential companies – specifically Advanced Microgrids Solutions, Green Charge Networks and Stem – are pushing for 750 MW by 2020.
The state’s 600 MW proposal underestimates “the ability of the industry to deliver MWs given the right market and policy conditions,” said the three companies in a recent joint filing to the Department of Energy Resources (DOER), the agency charged with setting the standard by July 1.
Massachusetts has the right conditions, in terms of supply, demand, energy cost and weather to warrant a higher target, the companies said. They cited a finding by the DOER that Massachusetts could accrue $2.3 billion in benefits for electricity consumers with an eventual energy storage total of 1,766 MW – 14.5 percent of the state’s 2020 peak load.
The three companies also pointed to evidence from California and elsewhere of an energy storage market growing faster than anticipated, with projections of 35-fold acceleration over the next five years.
“Our companies alone are currently deploying hundreds of MW across the country, much of that in California,” the companies wrote.
A recent report by Morgan Stanley buttresses the companies’ argument. “Energy Storage: An Underappreciated Disruptor,” describes an accelerating energy storage market that could reach $30 billion by 2020.
How Massachusetts proceeds is important to the energy storage industry nationally. Like California, Massachusetts is seen as a clean energy leader. In fact, the two states have jockeyed for years for the position of top state for energy efficiency. California and Massachusetts, along with Oregon, are the only states so far to pursue an energy storage target. So, how high Massachusetts sets the target is likely to influence other states that choose to set such standards in the future.
For microgrids, the target is important because energy storage is often a part of new and advanced microgrids. And perhaps more importantly, energy storage can seed unintentional microgrids, places on the grid where the right mix of resources appear – such as storage, renewables and automation – to easily justify creation of a microgrid.
The three companies also are urging the state to allot at least half of the target to beyond-the-meter energy storage, arguing that it offers the most value streams, and fits with the increasing distributed nature of the grid.
Other stakeholders that filed comments offered a range of targets and policy recommendations to the DOER. Here are some examples.
Tesla/Solar City support a 600-MW energy storage target by 2020 – five years earlier than the state recommended in its report on energy storage in Massachusetts, “State of Charge. The companies also urged the state to set up programs to support development of the entire 1,776 MW the state identified. Utilities should own 40 percent of the energy storage, which they would procure competitively, says Tesla/SolarCity. The remainder would be owned by third parties and customers, which would receive a one-time incentive, under a program similar to New York’s MegaWatt Block program for solar or California’s Self-Generation Incentive Program.
Registration is now open for Microgrid 2017, the industry’s defining event, Nov. 6-8, in Boston.
NEC is pushing for a binding requirement of 300 MW to be procured by 2020 and installed by 2022. The requirement would be applied to each of the state’s three investor-owned utilities based on the size of their customer load. NEC supports utility ownership of energy storage, or third-party ownership where the utilities procure services from private players or buy their alternative energy credits. Municipal utilities should not be required to install energy storage. Instead, the state should try to incentivize them to do so, NEC said.
Sunrun wants to see a 600 MW target – five percent of the state’s peak load. It would be divided over four years in 150 GW annual increments. Sunrun says that half should apply to utility-scale storage and the other half to behind-the-meter storage. Half of the behind-the-meter storage would be set aside for residential customers. Utilities would procure their storage through an annual solicitation and would not be allowed to own behind-the-meter storage.
NRG Energy says Massachusetts should aim to become one of the top 10 states for energy storage. It now ranks 23rd, according to the “State of Charge” report. To get there, the state will need a minimum of 150 to 250 MW by 2020, a step toward the larger goal of 600 MW and eventually 1,766 MW. The independent power company prefers third-party ownership of energy storage. If utilities are allowed to own advanced energy storage, there should be an upper limit on the amount, NRG said.
The Energy Storage Association wants to see an energy storage target of 600 MW by 2020, with 400 MW of that in operation by then. The organization called for regulators to make the target binding, meaning failure to meet the goal would result in monetary penalties. The greater portion of the goal would be met through utility solicitations.
The New England Power Generators Association (NEPGA), an advocacy group that represent 80 percent of the region’s installed generation (26,000 MW), opposes any subsidies or special carve-outs for energy storage. If the state does decide to give “out-of-market” support to energy storage, it might consider following the renewable portfolio standard model, the organization said. If it uses this model, the state should start with a modest RPS requirement to allow energy storage to become cost effective and scalable.
Utilities on the energy storage target
The Edison Electric Institute, which represents investor-owned utilities, said that barriers to growth occur when utilities are not allowed to own energy storage in deregulated electricity markets. Energy storage is often misclassified as just generation, when in fact it can provide transmission and distribution services as well.
The Joint Utilities (Eversource, National Grid and Unitil) support aspirational, not mandatory targets that are ambitious but reasonably achievable. Specifically, they recommend 200 MW/500 MWh by 2020, which they said would put the state on a path to achieve 600 MW by 2025. Moving too quickly may increase ratepayer costs, since battery prices are expected to fall. For example, the cost of reaching the aspirational target today is 60 percent more than it is expected to be in 2020, the utilities said.
Municipal Organization of Massachusetts, which represent 40 municipal light departments, said that municipal utilities should be spared any energy storage requirements. The energy storage target would mark a radical change for municipals in state policy. Had they meant to include municipals, state lawmakers would have specifically said so in recent legislation, the group said.
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