Growing energy storage in Massachusetts needs holistic overview of grid, markets
If Massachusetts acts on recommendations in the recently released report from the state’s Department of Energy Resources (DOER), the state could have a mandate for 600 MW of energy storage by July of next year.
The DOER is in the process of forming a stakeholder group to discuss the details of what a storage mandate would look like, with a year-end 2016 target date for setting out its recommendations. If a mandate is approved, it would be put in place by July 12, 2017 with a target date of 2020.
However, the State of Charge report goes beyond the possible creation of an energy storage mandate and recommends a list of programs and projects, as well as policy changes that would facilitate the integration of energy storage into every aspect of the state’s grid.
The report used tools from Alevo Analytics to model the state’s electric system and found that the total optimal amount of advanced energy storage would be 1,766 MW. “Advanced” storage in the report does not include pumped storage, though it was included in the simulations. Massachusetts has about 1,600 MW of pumped storage capacity.
The modeling showed that adding up to 1,766 MW of advanced energy storage would maximize Massachusetts’ ratepayer benefits to the tune of $2.3 billion. That would yield a benefit-cost ratio ranging from 1.7 to 2.4 for ratepayers. In addition to benefits for ratepayers, the modeling results also shows the potential for $1.1 billion in direct benefits to resource owners from market revenue.
The report identifies benefits from a range of functions that storage can provide, including energy cost reductions, reduced peak capacity, ancillary services cost reductions, transmission and distribution cost reductions and a greater ability to integrate renewable resources into the grid.
That analysis is one of the most important aspects of the report, said Brett Simon, a storage analyst at GTM Research. By breaking down the benefit-cost ratio for a variety of storage sectors – behind-the-meter, merchant, utility – it helps developers identify the “low hanging fruit,’ he said.
Regions ripe for peak shaving
One of the areas identified in the report as ripe for savings is peak shaving. Peak demand in the region, according to the ISO-New England’s State of the Grid 2016 report, is growing at a 1.5% annual rate.
According to the State of Charge report, between 2013 and 2015 on average the top 1% most expensive hours accounted for 8%, or $680 million, of Massachusetts ratepayers’ annual spending on electricity, and the top 10% of hours accounted for 40% of annual electricity spending, or more than $3 billion.
The conventional utility model “sizes all grid infrastructure to the highest peak demand, resulting in system inefficiencies and high costs,” the report argues, but new advanced storage technologies can optimize grid assets deferring investments and making better use of resources.
The report also touts pairing solar power with behind-the-meter energy storage for its potential cost savings, for both system owners and ratepayers. That policy is picked up in the state’s recently proposed revision of its solar power incentives.
In general, the report serves as a roadmap for policy initiatives, including a planned request for proposals that the DOER and the state’s Clean Energy Center (CEC) plan to release in October.
The RFP would use $10 million from the state’s Energy Storage Initiative program to fund storage demonstration projects, though the report recommends increasing the funding to $20 million. For commercial and industrial businesses, the report calls for $20 million in funding for a storage rebate program called MOR-Storage and aims to encourage that sector to invest in storage to lower their electricity bills and integrate on-site generation.