Minnesota’s investor-owned utilities must consider energy storage in their long-term resource plans, a move that could put pressure on the use of natural gas peaker plants in the state.
Under an omnibus energy and jobs bill that was signed into law on May 31 utilities must assess how energy storage could meet generation and capacity needs as well as provide ancillary services.
The bill includes several additional provisions aimed at jump starting energy storage in the state.
When seeking to build power plants or power lines, utilities must show that energy storage cannot more cost effectively meet customer demand.
Also, the legislation requires utilities to propose at least one energy storage system before 2021. Among other things, the utilities must describe how the proposed energy storage resource will meet its needs and what services it will provide.
The new law also allows utilities to ask the Minnesota Public Utilities Commission to approve cost recovery for energy storage pilot programs.
The bill requires the Minnesota Department of Commerce to hire a consultant to analyze the costs and benefits of energy storage, with a report due to the Legislature by the end of this year.
The bill also directs the department to develop benchmarks and strategies to “significantly” accelerate cuts in greenhouse gas emissions in the state by 2030. As part of the effort, the department must consider incentives for energy storage to help integrate wind and solar on the state’s grid. A report of the initiative must be delivered to the Legislature before December.
Generally, Minnesota’s utilities have used natural gas-fired combustion turbines to meet peak demand, but as energy storage becomes more cost-effective, it will compete with and displace new gas-fired peaking units, according to a 2017 report prepared by the University of Minnesota’s Energy Transition Lab, Strategen Consulting and Vibrant Clean Energy.
Energy storage was more cost-effective than natural gas-fired peakers at meeting Minnesota’s capacity needs after 2022, according to analysis in the report.
Also, solar combined with storage was found to be more cost-effective than a peaking plant in 2017, mainly because of the federal investment tax credit and environmental benefits such as reduced greenhouse gas emissions, the report said.
Northern States Power, an Xcel Energy utility, is the only utility so far to file an integrated resource plan since the law was enacted.
Given its excess capacity position through the mid-2020s, energy storage is unlikely to be cost-effective in the near term, according to the utility.
However, NSP expects to need about 1,700 MW of firm dispatchable, load supporting resources starting in 2031. “With the expected price declines and technology development, between now and the 2030s, we fully expect utility-scale storage will be an integral resource used to meet this need,” NSP said in its July 1 filing with the PUC.
Noting that battery costs are falling and expected to decline further, the utility said it is evaluating the possibility of using energy storage resources to meet distribution system needs.
NPS noted energy storage has challenges, including the fact it cannot handle wide seasonal variation in renewable energy generation. Even so, NPS said it is “bullish” on storage, which the utility sees as having four main values: renewable integration, grid support, deferred investment and power quality.
Minnesota is part of the Midcontinent Independent System Operator, which, like other regional transmission organizations, is developing rules to allow energy storage participate in its markets.
Storage as a replacement for peakers getting a closer look
The idea that storage could increasingly replace peaking capacity is also cropping up in other states.
For example, a recent report from the New York Department of Public Service said that energy storage could replace as much as 500 MW of peaking capacity in New York.
The report, issued July 1, conducted a unit-by-unit analysis of the operational and emissions data of about 4,500 MW of peaking power plants across the state, but “almost entirely” concentrated in New York City, Long Island and in the Lower Hudson Valley. The analysis used data from 2013 because it was the peak demand year for the New York Independent System Operator.
A study released by the National Renewable Energy Laboratory in June found that a “substantial portion” of peaking capacity in the United States could be replaced by energy storage facilities.
The capacity of the national peaking power fleet is about 261 GW and about 150 GW of that capacity is likely to retire over the next 20 years, NREL estimated. That could lead to the potential for about 28 GW of 4-hour battery storage that could serve as peaking capacity, NREL said.