New York could go the extra mile under the energy storage roadmap released at the end of June.
The plan supports Democratic Gov. Andrew Cuomo's energy storage target of 1,500 MW by 2025, but several sources say the final plan could call for an even more ambitious target. Reaching that target, though, could involve challenges that are largely outside of the scope of New York energy agencies.
The roadmap identifies near‐term policies, regulations, and initiatives needed to realize the governor's 2025 target in anticipation of a 2030 target to be established later this year by the state's Public Service Commission.
While higher storage targets will help with the growth of storage, the roadmap also addresses critical needs for clearer permitting guidelines. Progress for indoor siting is essential for deployment in congested areas like New York City, according to Doug Staker, vice president at energy storage developer Enel-X.
Shooting above the governor's target
"The roadmap's conclusion that the deployment of 2.8 GW to 3.6 GW of energy storage by 2030 would produce $3 billion in ratepayer benefits reinforces our expectation that the New York Public Service Commission could establish this December a 2030 storage target that builds upon and may likely exceed" Gov. Cuomo's 1.5 GW by 2025 target, Timothy Fox, vice president at ClearView Energy Partners, told Utility Dive via email.
"We see the ability to go up to 3,000 MW."
Executive director of the NY-BEST consortium
The 2,800 MW to 3,600 MW number laid out in the roadmap was the result of analysis by consulting firm Acelerex that examined system needs that can be met by energy storage in a least‐cost combination of resources as New York approaches its 50% by 2030 renewable portfolio standard target.
The report also says that analysis was "limited in its distribution system detail and consequently neither reflects an upper bound of ratepayer benefit nor maximizes the amount of storage that can be deployed in the state."
"We see the ability to go up to 3,000 MW," Bill Acker, executive director of the New York Battery and Energy Storage Technology consortium (NY-BEST), told Utility Dive. He said the document provides "a pathway" to reach a larger storage target by 2030.
The final target will "definitely be more than 1,500 MW" at the least because it is five years further out than the governor's 2025 target, Jason Doling, program manager for energy storage at the New York State Energy Research and Development Authority, told Utility Dive. NYSERDA played a key role in the development of the roadmap.
If the PSC follows through with a target above 1,500 MW, it could transform New York into one of the top states for energy storage. California already has a 1,300 MW by 2020 target. Massachusetts regulators are considering a policy that would raise the state's existing 200 MWh storage target to 2,000 MW by 2025. And New Jersey recently adopted a 2,000 MW by 2030 energy storage target.
For now, however, energy storage is still in the early stages in New York. Of the 1,460 MW of storage deployed in the state, about 1,400 MW is pumped hydro at two New York Power Authority facilities. Otherwise, the largest non-hydro storage facility in the state is a 20 MW flywheel used for frequency regulation. There is also customer‐sited thermal storage to reduce air conditioner load and battery storage used for peak load management. There is another 100 MW of storage in various stages of development, mostly in constrained downstate regions, and another six potential battery storage projects totaling 430 MW in aggregate. "We know we need to start aggressively building the pipeline" and bringing more energy storage developers into the New York market, Doling said.
To build out energy storage in the state, the roadmap makes several recommendations, including several for funding that could be available to support energy storage projects. Most of those funds have already been collected but are still uncommitted.
The roadmap recommends that $60 million of the state's $5 billion Clean Energy Fund be set aside for efforts to reduce soft costs, such as the cost of capital. In addition, Cuomo has directed the New York Green Bank to invest a minimum of $200 million in energy storage projects that can demonstrate the technology's potential. The plan also recommends establishing a $350 million fund to provide bridge incentives. That could prove to be a critical part of the plan to move storage forward in the state.
Building storage incentives and developer partnerships
One of the challenges New York will face in reaching its energy storage targets is that the state is revamping its regulatory model. The governor's Reforming the Energy Vision (REV) program aims to move New York's utilities from a cost-of-service business model to a market-based model.
In states where cost-of-service regulation prevails, regulators can direct utilities to procure a certain amount of storage resources. New York is taking another approach and trying to build its incentives into market mechanisms.
"A lot needs to happen, and we don't want to wait."
Energy storage program manager at NYSERDA
"We're recommending that NYSERDA partner with the state's utilities," to help provide the finance support to meet broader financial relief, Doling said. As an example, he cited a utility's analysis for using storage as a non-wires alternative for substation or transmission deferral that is based on addressing local peak demand needs. Building a larger system could provide even greater benefits by cutting system peak needs, Doling said, but there is not yet a mechanism to monetize those benefits. NYSERDA could step in and attribute a value to and provide payments for those larger benefits.
NYSERDA is looking beyond "the delivery portion of a customer's bill. It is the future state we want to focus on," Doling said.
The idea is to provide incentives for system benefits storage can provide, thereby creating a framework that accelerates and pulls energy storage forward. Other mechanisms under discussion are changes to rate design in the state that would make load shifting via energy storage more attractive and incentives that would pay benefits for other attributes storage could provide such as flexible capacity. "A lot needs to happen, and we don't want to wait," Doling said.
The bridging incentive is going to be "key in jump starting" energy storage in New York, as are the new rate designs the PSC is going to be working on, Staker said.
He noted that it was an innovative regulatory structure that enabled the Brooklyn Queens Demand Management project to move forward. Enel-X worked with Consolidated Edison on the BQDM project, which allowed Con Ed to avoid a $1.2 billion substation upgrade with $200 million of demand management, storage and other resources that it was able to put into ratebase.
Unlike other evolving regulatory structures, New York is encouraging developers to be partners. Staker said he is now working toward developing a storage system in the state that would able to earn income by reducing the use of peakers.
Regulatory certainty in New York City
Siting storage projects in highly congested areas, such as New York City, has posed a difficulty as building and fire codes did not evolve evenly with the technology. NYSERDA collaborated with the city's regulatory agencies to help advance permitting for exterior storage. Doling said NYSERDA is working with the agencies to establish the interior siting requirements, which remain a primary concern for developers.
It's the more immediate challenge to developing storage projects in New York]], Enel's Staker told Utility Dive. Much of the work he is doing with Enel is in the downstate area where congestion results in high electricity rates. But in those areas, particularly in New York City, the fire safety rules are still being worked out.
There is a "big desire for a lot of developers" to get clarity on siting lithium ion storage systems indoors, Doling said. He said that the fire and building departments will need to promulgate the guidelines drawn up for indoor siting as regulators and ultimately incorporate the guidelines into their respective codes.
While the city's building and fire departments are both working on updating their codes for indoor storage devices, approvals are granted on a case by case basis, says Staker. What is needed is a standardized approach, he said.
The roadmap "specifically calls out the work that's been done in New York City," regarding exterior siting regulations, and dedicates a section to the reduction of different components of soft costs, including permitting, Doling said.
Addressing power market barriers
One of the keys to the success of energy storage in New York is what the roadmap calls "dual participation" and what is otherwise known as revenue stacking. The roadmap identifies three categories for storage applications: customer sited, distribution sited and bulk or wholesale market applications.
One of the challenges to achieving dual participation is going to be harmonizing the state's vision for storage with that of the New York ISO. The ISO launched its own energy storage roadmap in December 2017.
NYISO is also working on revising its rules to comply with the Federal Energy Regulatory Commission's Order 841, which directed RTOs and ISOs to reduce barriers to the deployment of energy storage in wholesale power markets.
Being able to participate in the ISO is going to be key to the full implementation of energy storage in New York. But the ISO is not under the jurisdiction of state agencies and its mandate is narrower than the wider mandate of state agencies such as NYSERDA or the PSC. That can create conflicts for projects that are seeking dual participation.
Staker says Enel sometimes participates in NYISO's demand response program, but the program also presents problems. NYISO's rules mitigate DR bids into its market if the resource is also being paid by a utility. Con Ed has its own DR program. "We prefer to enroll in that program," he said.