DOE Report: The Good, the Bad, the Ugly … and the Redemption (Blog)

by Kelly Speakes-Backman, CEO, Energy Storage Association

Last week the Department of Energy issued its much-anticipated Staff Report to the Secretary on Electricity Markets and Reliability, in the shadow of the August 21 eclipse and right before Hurricane Harvey made landfall in Houston. The main takeaways of the report were clear: in the midst of a rapidly changing energy mix, much more needs to be done to reform electricity markets to incorporate the significant value of resiliency and flexibility into markets.

The good

I was pleased to see energy storage highlighted throughout the report, it included a section dedicated to the benefits of advanced storage systems and their ability to transform the power sector.

The bad

Importantly, this report acknowledges the need to institute market reforms that better reflect the systemic value of different resources. However, in ESA’s opinion, the DOE report was limited in scope, and did not fully explore the benefits of clean energy technologies and distributed energy resources that also contribute value to our electric system.

The ugly

The staff report included valuable information about energy storage, but there were some notable errors, specifically around the rapid acceleration of energy storage markets and policy. While it may not detract from the points made in the report about the viability of storage already operating in today’s markets, these errors are worthy of correction:

  1. REPORTED: California directed utilities to acquire 500 MW of energy storage by 2020.

FACT: The 500MW target was actually an expansion of the previously implemented 1.325GW target passed in 2014 (AB 2514)

  1. REPORTED: Massachusetts has ordered its utilities to procure 200 MWh of storage by 2019

FACT: The target number is correct, but the program is voluntary

  1. REPORTED: NY legislators have proposed creation of an Energy Storage Deployment Program, with a 2030 procurement target

FACT: Legislators unanimously passed a bill in both houses directing the NY PSC to create such a program

  1. REPORTED: Maryland has adopted a 30 percent investment tax credit for storage facilities

FACT: The Maryland ITC is the lesser of 30% or $5K for residential, and $75K for C&I installations, and is capped at $750K per year

  1. REPORTED: Nevada’s legislature has passed a storage incentivize [sic]

FACT: NV has signed into law a new $5 million solar+storage incentive program, and a PUC process to determine whether/what procurement targets to pursue

The redemption: a more resilient and flexible electric system

These corrections are minor, and probably indicative of rapidly evolving energy storage policy and markets. Overall, the DOE Staff Report brings a greater focus to the core value that energy storage brings.

The DOE report clearly emphasizes the role of resiliency and flexibility on the grid. These concepts are distinct from reliability, which measures the availability during normal operations of electric service.

Resiliency on the other hand refers to the ability to withstand and recover from external forces, such as deliberate attacks, accidents, or naturally occurring incidents1. While a coal or other “baseload” power plant can be a very reliable source of power, when the system is disrupted or a power plant trips offline it can be very slow to get back online – which, by definition, would not be resilient. Advanced energy storage systems and distributed energy resources offer a higher degree of resiliency to the system than baseload power plants can provide. Energy storage systems can be sited anywhere and at nearly any scale. From massive pumped hydro systems, to strategically placed utility-scale systems along the transmission or distribution grid, to smaller distributed storage in homes and businesses, and everything in between: these systems ensure electric service throughout the grid. Additionally, energy storage systems are adaptable and can be quickly re-deployed as needed to mitigate the impacts of a severe or prolonged disruption.

Thousands of energy storage systems are already deployed and operational on the electric system, demonstrating their cost effectiveness, flexibility and resiliency on a daily basis. They balance supply and demand, defer the need for costly infrastructure upgrades, and deliver reliable power during system outages and disruptions. As part of the report’s recommendations, DOE Staff highlight the need for proper valuation of resiliency and flexibility when procuring and compensating different assets on the grid.

We at ESA couldn’t agree more. The shift to a performance-based, technology-neutral approach to energy markets is fundamental to the continued acceleration of the energy storage industry. Even though thousands of energy storage systems are already installed and operational, in most markets they are only rewarded for a small portion of their overall value to the grid and to consumers.

The DOE report clearly reinforces the need for a more resilient and versatile electric grid that is able to deliver affordable and reliable electricity today, and enables continued grid modernization in the future. Advanced energy storage systems are the hub of a more flexible, resilient, sustainable and affordable electric grid, and ESA is encouraged by the report’s findings and what it can mean for the continued acceleration of the industry.