DENVER — Almost 500 members of the storage industry and assorted regulators, financiers, and utility and RTO representatives gathered last week for the GreenTech Media Energy Storage Summit 2019.
These are heady times for the industry. Seven states — California, Hawaii, Illinois, Ohio, Pennsylvania, Texas and West Virginia — have at least 50 MW of energy storage. In all, nearly three dozen states — blue, red and purple — have some sort of storage facilities, though some are 10 MW or less.
“The map is starting to fill out. That’s not a pattern you see with wind regions or solar regions,” said Daniel Finn-Foley, who leads consulting firm Wood Mackenzie’s energy storage team and focuses on front-of-the-meter energy storage applications.
Wood Mackenzie’s third-quarter market report indicates storage deployments were up 32% quarter-over-quarter to 430 MW, with 100 MW deployed during the period. Finn-Foley predicts the storage market will triple and come close to the $2 billion level in 2020, more than doubling to $4.2 billion in 2021, and that annual deployments will reach 5.4 GW by 2024.
“Energy storage is spreading across the United States in a way we haven’t seen other technologies do,” he said. “Storage has a value in whatever region it’s in. Years ago, we would have been confined to particular areas.”
Finn-Foley said the surging interest is driven by utility procurements and markets that see the need for storage’s fast-start abilities. That has led to a jump in grid operators’ interconnection requests.
“People are taking advantage of [storage’s] eligibility and hopefully making a little money. People are looking forward into these markets and making bets,” Finn-Foley said.
“No longer are developers going to the market and pushing up and saying, ‘Energy storage can do so much if you can give us a chance,’” he said. “It’s going to be the policymakers, the regulators, looking back down to the energy storage industry and saying, ‘We need you now, if we’re going to have these 100% renewable targets.’”
ISOs, RTOs Working to Accommodate Storage Resources
ERCOT is ground zero for storage’s growth, just as it has been for renewable energy. Though Texas currently classifies storage as a generation asset, developers have found the resource helps arbitrage wind power and meet demand peaks.
“We have a lot of people knocking on the door right now, a lot more than a few years ago,” said Paul Wattles, ERCOT’s senior analyst of market design and development. He recalled looking at the storage interconnection queue and seeing “almost nothing” in it.
Checking the numbers on a note in front of him, Wattles said ERCOT now has more than 5,600 MW of storage projects in the queue.
“I’m assuming that’s way back in the queue,” he said. “[Storage] is really in the category of noise, but with 5,600 MW in the queue, it won’t be noise for too long.”
Wattles said ERCOT’s scarcity pricing cap of $9,000/MWh, which the grid operator reached or neared for more than six hours this summer, “creates an opportunity for energy arbitrage, which I’m sure the batteries are well-qualified to take care of.” Storage providers are more likely to earn returns by providing ancillary service, he said, given the “island” grid operators need for fast-responding regulation service.
“Our challenge is to find friendly locations in ancillary service and the energy market for all types of resources,” Wattles said.
SPP General Counsel Paul Suskie and James Pigeon, NYISO manager of distributed resources integration, joined Wattles on the panel as they discussed roadblocks to energy storage’s participation in U.S. markets and implementing FERC Order 841.
Suskie said SPP has largely complied with the rulemaking, designed to eliminate barriers to storage’s participation in wholesale electric markets. He said FERC wants the RTO to move energy storage requirements from the protocols into the Tariff, “which we’ll do.” (See FERC Partially OKs PJM, SPP Order 841 Filings.)
“What we’re seeing in the queue is solar and storage paired together” to take advantage of tax incentives, Suskie said. With more than 22 GW of installed wind capacity and wind bidding in at negative prices, getting paid to store off-peak power and then letting it back into the market “makes sense,” he said.
“We have more wind on the system than load,” Suskie said. “It’ll be an asset to store the wind energy. Wind can drop off dramatically, and we’re going to need more products to get us up quickly, and batteries will do that.”
NYISO is the only grid operator still waiting on an Order 841 compliance ruling from FERC. (ERCOT is not FERC-jurisdictional.)
“We’ve worked with stakeholders to see where we land in meeting all of FERC’s requirements and still find benefits while providing lowest-cost power,” Pigeon said. NYISO has proposed a model that allows storage resources to either blend into a higher aggregation with storage and demand response, or to come together as one, virtual, larger resource.
“By leveraging this new aggregation model, hopefully storage and DERs will be able to come together and help the ISO,” Pigeon said. NYISO currently allows four-hour storage resources and expects more interest, he said, which has led the ISO to propose two-, four-, six- and eight-hour increments.
“If the storage device decides it wants to run longer, it can do so at a discounted rate,” Pigeon said. “Hopefully, that provides a flexibility people can use and leverage.”
California Outages Open Eyes to Storage
California’s attempts to prevent wildfires with public safety power shutoffs in November left more than 2 million residents in the dark — and created additional demand for energy storage solutions.
“The experience of a shutdown is a real motivator,” said Thomas Plagemann, Vivint Solar’s chief commercial officer. “We’re talking a lot more with customers about resiliency. The ability to store some of your energy in the daytime, to keep the refrigerator running, charge your phone overnight … that resiliency is in high demand in California.”
“Storage has become a standard part of what we evaluate for with [California] customers, where it was demand-side management,” said Suparna Kadam, EnterSolar’s director of business development. “Resiliency is now more meaningful to customers.”
Colorado’s Polis: Seeing Value in Storage
As the governor of a state intent on reaching a 100% renewable grid by 2040, Colorado’s Jared Polis would normally have been the star of his presentation. That is, until he brought along Gia, a terrier mix rescued 10 years ago by Polis and his partner.
“She’s really into storage,” he said, as he placed Gia in the chair next to his. “Not so much on the generation side.”
Polis mentioned an upcoming adoption event for rescue animals at the governor’s mansion, but he also had another … pet cause on his mind.
A Democrat, Polis easily won election last year, running on a pledge to have the state’s grid running on 100% renewable energy by 2040. While the renewable goal is not state law, the legislature did codify a 50% emission reduction by 2030 that increases to 90% by 2050.
“Colorado is a very forward-looking state. The people want to make sure the future works for us, rather than against us. They understand this is the way Colorado is going, America is going, the world is going,” he said. “Sure, there’ll be potholes along the way — for instance, the lack of federal progress under this administration — but we see enormous progress at the local level.”
Polis said 14 municipalities have set more aggressive renewable goals than the state and numerous private sector companies “large and small” have announced renewable energy goals. Xcel Energy, the state’s largest electric utility, has announced an 80% carbon reduction by 2030, and Polis talked of visiting an Amazon distribution facility with a rooftop solar array nine football fields long that will provide 80% of the facility’s total energy needs.
“It’s all about the economics. The generation side, solar and wind, they are there. They have a lower cost than coal,” he said. “Natural gas comes and goes, but we’re not building out our capacity based on low prices now. The question is how we can retire legacy assets and give consumers opportunities for savings sooner rather than later.”
Polis sees energy storage as supplying some of the answers to the question. He noted that Xcel’s bids for wind-plus-storage came in “significantly” lower than existing coal production.
“I think that helped inspire their confidence in 100% green by 2030,” he said. “It’s amazing just to see the improvement on energy storage. It brings into the realm of the economically possible even more energy. I think people understand the savings and the resiliency that could result from increased renewable energy, coupled with storage. With storage, you have enormous opportunities over time for exponential, game-changing type technological advancements.”
RPS Requirements Helping Drive Renewables
Alice Jackson, president of Xcel Energy-Colorado, and Colorado Public Utilities Commissioner Frances Koncilja took a break from rate case arguments and regulatory filings to discuss the increase in renewable portfolio standards across multiple states and energy storage’s role. Six states and D.C. are chasing 100% RPS, with New York and California accounting for one-third of investment firm Morningstar’s RPS-based renewable energy growth estimate over the next 10 years, and solar, paired with storage, is expected to be responsible for much of the growth.
Koncilja said the PUC is just beginning to work with stakeholders to create storage requirements through its electric resource plan (ERP), which is conducted every four years.
“We have really left this to the market. The bids that came in [2018’s ERP process] were so robust and amazing, the question was, does a regulator really need to come in and deal with this?” she said. “We are moving away from least-cost to cost-effective. Least-cost might mean we would never get to the RPS we need.”
Xcel-Colorado saw an “overwhelming” response to renewable procurements. Jackson said there were so many responses to a 2017 request for proposals that it broke the company’s modeling tool.
“Normally, you would have gotten about 50 bids from customers. We got over 400 bids,” she said. “We were surprised by some of the [storage] pricing.”
Xcel-Colorado has agreed to an early retirement of 725 MW of coal-fired generation, which will require the utility to obtain an additional 450 MW of generation. It plans to add 1,100 MW of wind and 700 MW of solar and pair 275 MW of storage with solar.
“We’re not invited to make the film, we’re not invited to the Academy Awards, and we’re not invited to the after-party. We’re sort of the cleanup crew,” Koncilja said. “We are the implementation group. We do that through our rules and our statutes.”
Koncilja said recent state legislation included “Machiavellian” language that surprised the commission. The so-called “Turducken Bill” not only reauthorized the PUC, but also set carbon-reduction targets and established a process for issuing low-cost bonds to retire power plants in lieu of cleaner resources.
“We’re more attuned to how many things are being required of our utilities,” she said. “For me, it’s how do we make this a level playing field. It should be where everyone is bidding the same.”
— Tom Kleckner
