The Long Island Power Authority (LIPA) could replace more than half of its aging and rarely used fossil-fueled peaker plants with energy storage by 2030, saving ratepayers almost $400 million, according to a study released last week.

The report by consulting firm Strategen, prepared for the New York Battery and Energy Storage Technology Consortium (NY-BEST), said “it is feasible and cost-effective” to replace 1,116 MW of peakers by 2023 and more than 2,300 MW by 2030. It said LIPA frequently dispatches the 4,357 MW of peaker units on the island uneconomically and for reasons other than meeting peak-load needs.

In addition to saving customers more than $390 million in net present value over the next 10 years — about $360 per household — the study says swapping peakers with batteries would significantly reduce harmful air pollutants.

“The whole framing of this is that New York has the goal of getting to zero emissions by 2040 … so we need to start on that path with what we can do now,” Edward Burgess, lead author of the study and a senior director at Strategen, told RTO Insider.

Strategen, based in Berkeley, Calif., estimates that the peaker fleet is costing Long Island ratepayers approximately $473 million annually just for capacity — three times the market rate for capacity resources cleared through NYISO’s competitive markets — and that if it is not replaced, the cost could increase to $716 million by 2030. (The study identifies as peakers those plants with an annual capacity factor of 15% or less; it says about 3,053 MW of the capacity operated 10% or less of the time, while 36 units (1,249 MW) ran less than 1% of the time in 2019.)

A 15-year power service agreement (PSA) between LIPA and National Grid that runs to 2028 accounts for the bulk of these costs. The PSA is for 3,634 MW, 90% of which are for peaking plants.

LIPA spokeswoman Jen Hayen told RTO Insider that LIPA will be issuing a request for storage proposals in the next several months that may result in the replacement of certain Long Island peaker or steam plants and will evaluate the proposals it receives compared to the costs of the existing units.

“LIPA has already announced the retirement of 68 MW of peaker plants in 2020 and 2021 and has an ongoing study for the retirement of an additional 400 to 600 MW of steam and peaker plants in 2022. We anticipate additional retirements in 2024 and beyond,” Hayen said.

She challenged the study’s savings estimates, saying they “are higher than we have experienced in either deploying storage or retiring existing plants.”

“In classifying low-usage steam plants as ‘peaking plants,’ the study overstates the potential savings in fixed costs, much of which are prior capital costs that must be paid to the plant owner at the time of retirement,” Hayen said. “Moreover, the study assumes that future storage discharge requirements can be determined from past peaker operation, which does not reflect the significant system changes that will be occurring.”

Uneconomic Dispatch?

The study’s claim that the peakers are frequently dispatched when they are not economic is based on the 2019 NYISO State of the Market report by the ISO’s Market Monitoring Unit, Potomac Economics. It said out-of-merit “dispatch was frequently used to manage 69-kV constraints and voltage constraints (i.e., transient voltage recovery requirement on the East End of Long Island).”

In addition to using peakers to resolve local transmission problems, LIPA generally does not coordinate their dispatch with NYISO, so the actions are not optimized through the ISO’s day-ahead and real-time market software, the study said. The result is often depressed locational-based marginal prices that send inaccurate price signals for potential future investment and require millions of dollars in uplift charges.

“The proportion of hours where out-of-merit actions were taken to resolve congestion issues (versus times when the market was used to resolve these) were quite significant throughout Long Island and are more pronounced in certain locations,” the study said. “For example, in the Brentwood area, 99% of congested hours in 2019 were managed through out-of-merit actions rather than through the [day-ahead] and [real time] markets.”

The MMU’s 2019 report also noted that NYISO has said that issues frequently arise because of lack of coordination between the ISO and LIPA regarding the scheduling of phase angle regulators to manage congestion. Under state law, LIPA is generally exempt from the New York Public Service Commission’s jurisdiction.

An Evolving Grid

The study notes that the percentage of the peaker fleet on Long Island (Zone K) needed to meet peaking needs has declined in recent years, from 71% in 2016, to 67% in 2017 and 64% in 2018. Whether that decline continues, Burgess said, will depend not only on the peakers, “but also [on] what’s happening on the load side.”

“On the one hand, maybe we have increasing demand from electrification, but on the other hand, maybe there’s more distributed solar or energy efficiency,” he said.

Other generation on the system is also a factor, he continued. “Are we using more of the recently installed combined cycle units because gas is cheap? That certainly would be an interesting thing to look into further and see how those trends have gone over a longer period of time,” Burgess said.

The state’s Climate Leadership and Community Protection Act (CLCPA) calls for at least 9 GW of offshore wind energy by 2035, and 6 GW of that will likely interconnect onto Long Island by 2030. The CLCPA also targets 6 GW of distributed solar generation by 2025, 3 GW of energy storage by 2030 and raising energy efficiency savings to 185 trillion BTU by 2025.

The study mentions that the iconic Ravenswood peaker plant on the East River in New York City is being converted to a 318-MW energy storage facility.

Asked why such conversions aren’t happening on Long Island, Burgess said, “Definitely there’s a need for local generation capacity in New York City [Zone J]. There’s also a need for generation on Long Island too. I believe part of the rationale for that is that [at Ravenswood], we have a site with an interconnection and it’s all ready to go, and New York City is even more constrained in that sense than Long Island is.”

One of the values of storage is its ability to perform functions in addition to substituting for generation, he noted. “Storage can also be a load; it can absorb energy,” Burgess said. “Perhaps down the road when we have a lot more renewables on the system that’s going to be a necessary function too, if you have oversupply of wind or solar at a certain time. And there’s all the different ancillary services it could provide too: balancing functions [and] ramping up and down in very quick succession.”

Of the 2,300 MW of fossil peaker plant replacements, 334 MW could be retired and replaced immediately, and in the East End of Long Island, there is a near-term opportunity for up to 90 MW of fossil peakers to be displaced with storage, the study said.

Burgess said some peakers will likely retire because of the state Department of Environmental Conservation’s (DEC) regulation limiting nitrogen oxides (NOx) emissions from simple cycle combustion turbines. The department required all impacted plant owners to file compliance plans by March 2, 2020. The phased approach goes into effect May 1, 2023, and limits emissions to 100 ppm, dropping two years later to 25 ppm for units using gaseous fuels and 42 ppm for units burning liquid fuels. (See NY DEC Kicks off Peaker Emissions Limits Hearings.)

Because of “the NOx regulations that the DEC put out … some of these plants without the pollution controls will have to either be making retrofits or retiring,” Burgess said. “We’ve also got decisions that LIPA is going to have to make around contracts and the current power supply agreement that they have with National Grid. … There are provisions that would allow them to ramp down a portion of that.

“And there are a lot of inefficiencies that we’re seeing here in how some of these plants are being operated. There are some economic benefits to be gained, so that’s another driving factor, along with the environmental,” he said.

Replacing peakers with storage will eliminate 2.65 million metric tons of CO2, 1,910 tons of NOx and 639 tons of SO2 of emissions annually, resulting in societal benefits of $163 million annually through fewer pollution-related deaths and hospital visits, according to the study.