Panelists at a July 18 House hearing detailed for lawmakers some of the barriers that face energy storage and outlined for House members possible actions that could be taken by policymakers to remove those barriers and support storage.
The panelists spoke at a hearing held by the House Energy and Commerce Committee’s Subcommittee on Energy.
A background memo prepared by committee staff for lawmakers said that the hearing would examine the growth of large-scale energy storage in the U.S., the unique reliability attributes energy storage provides for the electric grid, and the use and impacts of energy storage within wholesale electricity markets. The hearing was part of the subcommittee’s “Powering America” series of hearings that it has held.
Panelists at the hearing were:
- Keith Casey, vice-president of market and infrastructure development at the California Independent System Operator;
- Mark Frigo, vice president and head of energy storage at E.ON North America;
- Kiran Kumaraswamy, market applications director at Fluence;
- Zachary Kuznar, director, CHP microgrid and energy storage development at investor-owned Duke Energy Corp.;
- Kushal Patel, partner at consulting firm Energy and Environmental Economics Inc.
Utility sees storage as playing ‘significant role’
In his testimony, Duke Energy’s Kuznar said that the utility believes energy storage “will play a significant role” in how Duke Energy operates, supplies and delivers energy for its 25 million customers “now and well into the future.”
Kuznar said that storage “allows us to dispatch energy during times of peak demand, enhance the reliability of our grid, provide energy security and back-up power for customers who provide critical services for our communities, and enables increased flexibility for helping manage the continued growth of renewable generation on our electric system.”
The utility official said that this will become “increasingly important as more solar connects to our system.” He noted that North Carolina, one of six states where Duke operates, is currently number two in the country for solar generation, trailing only California.
“We plan to expand our investment in our regulated footprint for our customers’ benefit by building off our decade of storage experience, which includes eight pilot projects and 40 megawatts of commercially owned and operated assets,” Kuznar said.
As the technology matures and the costs of batteries continue to decline, he said, “we believe the time is right to increase our investments in this area.”
Over the next five years, Duke Energy plans to deploy a minimum of 145 MW of energy storage across its regulated businesses, representing approximately $300 million of new investment to continue to modernize its electric system.
In 2017, Duke Energy received approval from the Florida Public Service Commission to deploy 50 MW of battery storage projects in its Florida service territory. “We are targeting applications to improve reliability, which will result in a better overall customer experience, along with utilizing these storage assets to advance the flexibility of our system as solar generation continues to increase in our Florida footprint,” Kuznar said.
In response to a question from Rep. Kathy Castor, D-Fla., Kuznar said that in Florida, the utility has been approved to pursue 700 MW of solar and 50 MW of storage, “but our plan is to go well beyond that. That was just kind of the first ask there. As part of this process, we’ve identified what we think are much more than 50 megawatts of storage on the grid.”
Public power utilities are pursuing storage projects in Florida. In late 2017, public power utility Lakeland Electric detailed how it was preparing to launch a pilot project that will use batteries to store solar power and potentially curb peak demand and lower customer bills. Also last year, the board of directors for Florida-based public power utility JEA approved a battery storage incentive plan.
North Carolina
In North Carolina, Duke Energy has incorporated 75 MW of energy storage into its integrated resource planning process. The utility’s first two projects in its western North Carolina service territory, totaling 13 MW, will be used to provide back-up power to communities, “and give us the ability to deliver grid services, such as frequency regulation, that will help us to incorporate and manage the increased growth of solar generation onto our system,” Kuznar said.
Duke Energy also continues to evaluate and explore projects in South Carolina, he noted.
Meanwhile, the company recently received approval from the Indiana Utility Regulatory Commission to deploy 10 MW of battery storage projects in Indiana. One of the projects is a partnership with the Indiana National Guard at Camp Atterbury, where Duke Energy will deploy 3 MW of solar generation along with a 5 MW energy storage asset at the base.
E. ON official says more steps are needed
E. ON’s Frigo said that while storage technology continues to evolve and costs continue to fall, “more steps from both a policy and fiscal perspective are needed to unlock this technology’s full potential to support the grid” and save taxpayers money on their electricity bills.
E. ON has three energy storage projects that are currently in operation in the U.S., totaling approximately 30 MW.
He said that the Federal Energy Regulatory Commission’s (FERC) Order 841 was a significant step forward to allow for energy storage participation on the grid in organized markets.
Order 841, which was issued earlier this year by FERC, requires regional transmission organizations and independent system operators to revise their tariffs to establish a participation model for electric storage resources that consist of market rules that properly recognize the physical and operational characteristics of electric storage resources.
Frigo said that FERC “must now ensure that the RTO/ISOs, over which it has jurisdiction, faithfully and fully implement the order to allow energy storage into their markets to the benefit of customers.”
At the same time, he said that it is also important that utility commissions in states not included in organized markets ensure that the utilities they regulate evaluate energy storage resources as a viable and cost-effective tool in their utility planning process. “Market rules should not only ensure participation but should be examined to ensure that interconnection processes do not constitute barriers to entry,” he said.
Frigo said that energy storage would also benefit from fiscal policy that rewards investment in the technology for a limited period. “For example, an investment tax credit for energy storage would encourage greater investment and faster deployment of energy storage solutions to help utilities, generators, and, most importantly, customers to unlock the many benefits of storage,” he said.
In late 2017, Reps. Mike Doyle, D-Pa., and Ryan Costello, R-Pa., both members of the House Energy and Commerce Committee, introduced the bipartisan Energy Storage Tax Incentive and Deployment Act of 2017. This bill called for the establishment of a separate investment tax credit for energy storage infrastructure for utilities, businesses, and homes. The legislation was cosponsored by Rep. Mark Takano, D-Calif.
CAISO official: battery storage development driven primarily by state policy
CAISO’s Casey said the grid operator currently operates with approximately 2,000 MW of energy storage on its system. Most of this is legacy pumped hydroelectric generation, but, in recent years, 134 MW of battery storage has been added to the ISO system.
Casey said that development of battery storage is being driven primarily by state policy. He noted that the California Public Utilities Commission requires investor-owned utilities to procure 700 MW of transmission-level electricity storage, 425 MW of distributed electricity storage, and 200 MW of customer electricity storage by 2020 “and the utilities are making good progress in achieving that goal.”
Casey said that over the past several years, “we have made numerous changes to our wholesale energy market to enable storage resources to effectively participate. Most notably, we developed a specific storage resource participation model so that our wholesale market can optimally manage the state of charge of a storage resource. We also developed special participation rules for storage to provide other grid reliability functions and have evolved our transmission planning process to consider storage as an alternative to conventional wires and generation.”
Earlier this year, through CAISO’s transmission planning process, “we identified and approved two battery storage projects for meeting grid reliability needs.” The projects will be treated as transmission assets with their costs fully recovered through transmission rates.
Currently, “we allow storage resources as well as other types of resources to participate in the wholesale energy market even if they are connected to the distribution system. While the development is at a very nascent stage, we believe the future grid will be one where distribution and transmission networks are highly integrated, providing for bi-directional flow of energy versus the traditional grid where power flows one direction from large centralized power plants to end-use consumers.”
Casey said that the grid of tomorrow “will have a much more diverse set of smaller resources – with many located behind a customer’s meter and will have the potential to provide services to the host customer, the distribution network, and the transmission network.”
However, getting to that point, “will require overcoming a number of challenges – most notably how do you enable resources behind the meter to provide multi-use services to their host customer, the distribution, and transmission grid in a coordinated and verifiable way that ensures the services being paid for are actually being provided, are not operating at cross purposes, and are not being double counted.”
The CAISO official said that California is currently grappling with this multi-use concept.
Another thing that is getting a closer look from the grid operator is how to allow storage resources that are approved as transmission assets and therefore able to fully recover their costs through transmission rates to also participate in the wholesale energy market and earn market revenues.
“FERC policy allows for this type of hybrid treatment but I do not believe any ISO or RTO has currently implemented this hybrid model so the California ISO may very well be the first,” Casey told the lawmakers at the hearing.
Barriers to storage technologies
In his testimony, Patel said that significant barriers “stand in the way of large-scale deployment of mature and emerging storage technologies.”
The official with Energy and Environmental Economics said that these barriers include high but declining technology costs “and more importantly the limited ability for storage to earn revenues for the numerous services it can perform.”
Patel believes that the key to maximizing energy storage benefits for the electric system is twofold. “First, policies and rules must be established that allow storage assets to provide multiple services at the wholesale, distribution, and customer levels,” he said. “Second, storage assets must receive fair and equitable compensation on a level playing field.”
Fluence’s Kumaraswamy said that barriers to storage “have taken numerous forms including market rules that inadvertently exclude energy storage from revenue streams because the market rules were written with other technologies in mind.”
He said that policymakers can continue removing barriers to storage by focusing on three main policy goals: (1) removing barriers to grid and market access; (2) allowing storage to compete in all planning and procurement that occurs across the country; and (3) appropriately valuing and compensating storage for the flexibility that it provides to the power network.
Fluence, a global energy storage technology and services provider, is a joint venture between Germany-based Siemens AG and Virginia-based AES Corporation.
Lessons learned from Order 841
During the Q&A portion of the hearing, Rep. Jerry McNerney, D-Ca., asked Casey to detail some of the lessons learned from implementation of FERC Order 841 that could be applied to other states. (In his written testimony, Casey said that CAISO has already implemented all of the major reforms called for under Order 841).
In response to McNerney’s question, Casey said, “[w]e’re still learning. Battery storage in California is relatively new. Operationally, we’ve had just about two years of experience.” He sees a need for ISOs and RTOs to “really engage with the storage resources that are participating to understand what they’re seeing.”
The CAISO official noted that the grid operator has made refinements to its market model for battery storage based on feedback from developers, “so I think that’s important.”
When it comes to the value proposition of storage in organized markets, “I think California can check the box on every value category for storage. The challenge is how do you stack those values and not look at them in silos?” Casey added, “if you’re looking at battery storage as a transmission alternative, what are the other values it could provide to the ISO? And I think that’s kind of the next stage of market sophistication with battery storage…stacking those multi-use values.”
Storage and rural areas
Meanwhile, Rep. Billy Long, R-Mo., asked panelists to explain how storage technologies can help ensure that rural areas have reliable electric supplies.
Kuznar said that a good example of this is a Duke project that the utility recently received approval for in a rural community in Indiana.
Duke Energy is going to install a battery storage device in the community, “which during a grid outage will provide backup power to that community, give the crews enough time to fix the major outage and get them back up, so hopefully they don’t see there’s any outage there.”
