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Will Power Storage Incentives Be the Key to Expanding Renewables?

As battery power storage pricing drops, new installation goals and incentive programs are emerging. New York State is pushing for 1.5 gigawatts (GW = 1000 MW) of storage capacity by 2025, and 3 GW by 2030. Utility level and behind-the-meter (BTM) projects promoted through equipment rebates and power price adjustments under the Value of Distributed Energy Resources (VDER) process. The Federal Energy Regulatory Commission’s (FERC’s) Order 841 offers access to wholesale power markets by mandating Independent System Operators (ISOs) create rules for entry and valuing of power storage capacity.

While an ideal combination of these value streams is “under construction”, a pathway toward profitably optimizing grid operations, renewable power sources, and facility loads is on the horizon.

BUT WHY BOTHER WITH BATTERIES?

They do not save energy or directly cut greenhouse gas (GHG) emissions. In fact, they consume and lose some energy during charge and discharge cycles. Aside from their use as backup power during utility outages, why should end users utilize batteries?

Trimming peak kW demand can significantly cut monthly power bills for non-residential customers. Storing off-peak power when demand charges are low or non-existent, and using it during pricey peak periods may save more than is lost from battery inefficiencies. If charging power comes from a renewable source such as solar panels, storing it and delaying its release at its highest grid value may greatly boost ROI. It may also reduce carbon emissions as the stored power reduces the need to run dirty fossil-fired peaking generators.

At bulk power level, environmentalists and some utilities are eyeing power storage to reduce or eliminate use of the most polluting and inefficient peaking power units, many of which still run on jet fuel. If power can be stored off-peak and released when those units would normally run, cost and emissions may be reduced.

SHOW ME THE MONEY

So far, most battery megawattage has been utility scale on utility property where its high cost may be built into the rate base. Instead, end users focus on BTM options that arbitrage against tariffs with high demand charges. However, despite several efforts to encourage on-site power storage, few have gotten off the drawing board. While the $/kWh price for lithium-ion and other battery types have continued to drop, it is too high unless mitigated by significant incentives, at both construction and operation ends. Siting battery storage facilities within New York City is also a challenge, given concerns about fire hazards from the fire department and Department of Buildings. There is still a tendency to think of these systems as giant cell phone batteries and their incendiary tendencies under certain conditions.

The New York State Research and Development Authority (NYSERDA) offers up to $350 per stored kWh, nearly half the installation cost for a large battery and balance of its system. Through VDER pricing, the New York Public Service Commission (PSC) offers high $/kWh value for stored power if it is released to the grid at optimal times. Under some interpretations of new VDER rules, renewable power that is stored for release between 2 and 8 PM during summer weekdays, in areas with delivery constraints, could exceed $.50 for each kWh released into the market at that time.

YOUR PLACE OR MINE?

In a novel in-between approach, Con Edison is working on a 1 MW/1 MWh system as part of a demonstration in which batteries are located on rented property near, but not at a customer’s site.  Doing so could overcome existing transmission or distribution choke points, and avoid investing in new wires, transformers, etc. to meet growing load. As a new form of area-wide peak shaving, it too may curtail use of peaking plants. A battery emits nothing, makes no noise, consumes no water, and needs minimal attention. Locating them on less desirable real estate (e.g., vacant lots, unused industrial sites, brownfields) that would otherwise command little rent could convert it into a useful commodity.

That process may be easier than trying to find customers whose load profiles would allow optimal charging and discharging while also peak shaving. Few end users have loads large enough (e.g., multiple megawatts) for which a battery’s capabilities and economies of scale would be a good match.

OPTIMIZING POWER STORAGE’S POTENTIAL

One way to make BTM power storage work is to integrate it with a combined-heat-and-power (CHP) system that generates power and heat, and an on-site solar PV system. This would minimize the sizing of, and fuel used by, the CHP system by flattening a facility’s load profile. Calling such a system “premium CHP”, NYSERDA is looking for pioneers to showcase that option.

In December 2016, Dana Levy of NYSERDA rolled out the concept as “hybrid power” due to its innovative way for combining the best of all three systems, yielding more than they could provide individually.  Such a process would provide access to more of the VDER value stack that pays higher prices for power supplied. He cited the Marcus Garvey public housing microgrid in New York City as an example. That facility includes a 400-kW gas-fired fuel cell CHP, a 300 kW (1.2 MWh) battery, and a 400-kW solar PV system.

Siting batteries is often a challenge in urban areas. To help deal with restrictions, NYSERDA published a free New York State Battery Energy Storage System Guidebook that addresses many issues. Once a few more example sites are online, we expect to see a money-making template emerge that opens the door to a new world of power management.

Catherine Luthin's picture

Thank Catherine for the Post!

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Matt Chester's picture
Matt Chester on July 11, 2019

I find your comparison of the advantages/disadvantages of demand management and battery storage interesting-- really shows how it's about applying the right solution in the right scenarios, not going all in on one and forsaking the others

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