7 US States where Energy Storage Works

7 US States where Energy Storage Works

Tehachapi is nominally a wind energy-related project attached to the 4.5 GW Tehachapi Wind Resource Area, although in actual fact the plant was conceived as a two-year test bed for a wide range of potential grid applications.
When it opened, in September 2014, it was credited with being the largest battery storage project in the North of the US, with 604,832 Li-ion cells housed in 10,872 modules.

Everyone knows California and New York do have behind-the-meter energy storage at a large scale. But there are some sleeper states where the economics already work. 

A new report from GTM Research, The Economics of Commercial Energy Storage in the U.S, outlines the states where demand charges at the largest utility in each state would create a favorable rate of return for commercial batteries.

Behind-the-meter storage

Today, the pure demand-charge economics work in seven states that all provide an internal rate of return over 5%. Let’s have a look.

7 US States where Energy Storage Works 2016

source: GTM Resource

  • Kentucky
    As for the state’s largest utility, Kentucky Utilities, which serves more than 500,000 customers, peak demand charges are about $19 per kilowatt for small and medium-sized commercial customers.That gives a rate of return on a 1-hour system of roughly 13%, and 9 percent for a 2-hour system. By 2021, GTM Research is forecasting a rate of return for small commercial customers in KU territory of 25%, the third-best payback of any state’s biggest utility.

Even with the solid rate of return now, the commercial energy storage industry in Kentucky remains practically nonexistent. That could change, however. The Federal Energy Regulatory Commission recently rejected a proposal by Maysville Pumped Storage for a 1,000-megawatt pumped storage project to be located in Mason County. There is a possibility that some of the grid needs for storage could be met in part by behind-the-meter commercial systems.

  • Connecticut
    Connecticut is on the cusp of providing an internal rate of return high enough to justify storage. To get a rate of return of at least 5%, demand charges have to be at least about $15 per kilowatt, according to the report. And Connecticut Light & Power has a demand charge of about $15 per kilowatt.Connecticut has some other factors going for it, including an RFP from the state for energy battery systems, renewables and customer-sited combined heat and power. For this RFP, however, energy storage projects smaller than 1 megawatt may not be aggregated, except for behind-the-meter thermal storage, which will be treated as passive demand response.

    Although there has been relatively little commercial batteries in Connecticut so far, the state’s interest in microgrids could also help build the market for distributed energy storage.

  • Delaware
    Delaware is another state with an interest in distributed energy systems for increased resiliency. Earlier this year, the state approved its Solar Resiliency Pilot Program to install solar-plus-storage at public or non-profit emergency response facilities and school districts.Unlike Connecticut, it has already seen a bit more action. Sunvault Energy and Edison Power have signed a deal for solar-plus-storage at three fire stations. Earlier this year, Alveo also announced it will install an energy storage system for the City of Lewes. For commercial clients of Delmarva Power, the peak demand is slightly higher than Connecticut, but the internal rate of return is the same for large commercial customers with 1-hour systems, at about 5%.
  • Massachusetts
    The Bay State is probably the least surprising entry on the list. Of all the states in this quintet, Massachusetts is furthest along on storage deployments and policy support.The state launched a battery initiative that allocates $10 million for pilot projects. There will also be more projects funded through community resiliency efforts. The state senate has also proposed a storage mandate.

    As for demand-charge management, Eversource, the state’s largest utility, has peak demand charges that would offer an 11% return on 1-hour energy storage systems for both small and large commercial customers, and a 7% internal rate of return on 2-hour systems.

  • New Hampshire
    Like some other Northeast states, New Hampshire has also issued a docket on regulatory reform to achieve more grid reliability and flexibility, with a focus on more distributed energy resource integration and better use of demand-side resources.Though energy storage is not specifically mentioned in the docket, given similar proceedings in states like Massachusetts and New York, GTM Research expects batteries to be a component of New Hampshire’s future grid modernization plan.

    Today, the economics only pencil out for small commercial customers at the state’s largest utility, Public Service Company of New Hampshire, where peak demand charges would offer a 6 percent internal rate of return for 1-hour systems.

  • California

    Assembly Bill 2514 directed the California Public Utilities Commission (CPUC) to adopt an energy storage program and procurement target. As a result, the CPUC established an energy storage target of 1,325 MW by 2020 – the largest in the nation for the states investor owned electric utilities (Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric).

    Batteries will help the state integrate renewable energy and achieve the 33% Renewables Portfolio Standard (RPS) by 2020 and will aid the state in meeting the goal of reducing greenhouse gas emissions to 1990 levels by 2020.

    By supporting technology demonstrations and bringing accu innovators and investors together, the California Energy Commission’s funded storage projects provide data and real-world experience that will help reduce investment costs and prove which solutions work best in specific applications.

    The Energy Commission has invested in more than a dozen energy battery demonstration projects since 2010 through its energy research, development, demonstration and deployment programs to strategically explore and address issues facing a wide range of energy storage technologies when coupled with power grid operations.

  • New York

    In June 2011, a 20 MW modular plant built by Beacon Power was put into commercial operation in New York, which was the largest advanced EES facility operating in North America. It employs 200 high speed flywheel systems to provide fast response frequency regulation services to the grid, providing ∼10% of the whole state frequency regulation demand.

    Normally, FES devices can supply sufficient power in a short time period with modest capacity. Thus it is not used as standalone backup power unless operated with other EES or power generation systems, such as batteries or fuel-fired generators. The main weakness of FES is that flywheel devices suffer from the idling losses during the time when the flywheel is on standby. This can lead to relatively high self-discharge, up to ∼20% of stored capacity per hour.


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