By Juliana Mandell, Director of Market Development, and Walker Wright, VP of Policy | January 10, 2019
2018 may be behind us, but it was a banner year for distributed energy resource (DER) policy. And because it portends an exciting future for energy storage in 2019 and beyond, it’s worth another look.
Without question, energy storage—distributed energy storage in particular—is a hot topic in the energy policy world. Municipal, state, and federal government entities see the value of DERs in environmental sustainability, improved grid operations, and lower costs to customers. Accordingly, analysts predict that energy storage deployments in the U.S. will reach 659 megawatts this year and will more than double to 1.7 gigawatts in 2020.¹
In many ways, California and Massachusetts led the nation in adopting DER-favorable policy in 2018 supporting wider-scale commercialization of DERs and job creation. Following are three key energy storage developments in 2018 in these two states that have important implications for customers and developers. We expect to gradually see similar progress in other states.
1. California’s SB 700: SGIP extension.
Signed by Governor Jerry Brown in September 2018, SB 700 extends the collection for the self-generation incentive program (SGIP) through the end of 2025. Up to $800 million has been earmarked for the five-year extension of the program, giving developers—and their financial backers—additional confidence in the DER market in California, potentially leading to the deployment of nearly three gigawatts in additional behind-the-meter energy storage (much of which will be tied to solar) throughout the Golden State.
From the perspective of customers, whether they are public institutions or commercial enterprises, the financial benefits of behind-the-meter storage in California are clear, especially with the recent time-of-use (TOU) changes in rate design. Shifting peak hours to later in the day works to the disadvantage of solar PV-only net metered customers, significantly reducing the value of exported electrons when the sun is shining. As this value decreases, customers are increasingly looking to energy storage technology, not only to protect their solar value proposition, but also to participate in other revenue streams via energy storage.
The SGIP extension sends the right signal for market confidence. Participating in the program and obtaining the incentives, however, has been a challenge. In an effort to improve the online application process, which has been perceived as onerous and bureaucratic, storage and solar industry leaders have been serving in various policy working groups throughout 2018.
For example, drawing on years of experience helping customers apply for SGIP, ENGIE Storage developed best practices for the process. Along with other industry colleagues and experts we provided these best practices to the California Storage & Solar Association (CALSSA) and participated in the California PUC’s SGIP workshops, suggesting ways to streamline SGIP applications.
Here are several of the suggestions that we expect will be addressed on the SGIP website in 2019:
- Offer a drop-down list of pre-approved battery systems, eliminating the need to re-submit equipment information with each application. Equipment selected from the list is automatically applied to the open application.
- Provide the option to submit video documentation in lieu of inspections. This avoids the project and payment delays associated with inspection scheduling.
- Allow developers to make minor changes to an application without obtaining a new customer signature.
- Waive the requirement for a building permit, if PTO has been issued.
- Simplify cost breakdown accounting, to save developers time and reduce the risk of errors that may occur when repeatedly entering the same information.
2. The Solar Massachusetts Renewable Target (SMART) program.
Massachusetts’ SMART program began accepting its first round of applications on November 26. This incentive program pays a fixed tariff, based on kWh of solar production, to solar facilities under five megawatts across the residential, commercial, community solar, and qualifying facility industry sectors. The goal is to support the addition of up to 1,600 megawatts of new solar PV capacity.
Applicants gain even bigger benefits if they have solar-plus-storage projects, thanks to an adder for integrated battery storage. In energy industry parlance, an adder is a calculation of additional factors in determining the final tariff or rate, in this case, the total SMART incentive to be awarded. The battery storage adder calculates how much the incentive would be for a solar PV project with integrated battery storage. The design and implementation of the SMART storage adder was the result of in-depth discussions between policy stakeholders, industry associations, and the Massachusetts Department of Energy Resources (DOER). Solar-plus-storage customers and developers can expect the storage adder to significantly improve their projects’ financial position.
Another issue that arose in the process of developing the SMART program was developer access to their projects’ SMART energy storage capacity rights. Without these rights, and the ability to control storage dispatch, projects would struggle with bankability and would not be able to participate in the wholesale market. The problem was that utilities claimed title to the capacity rights in early versions of the SMART tariff filing. Over the summer, we saw industry representatives, the utilities, the DOER, and the Office of the Attorney General reach a compromise, ensuring that developers would retain their capacity rights. It was encouraging to witness this kind of collaborative policy-making. The decision is currently before the Massachusetts Department of Public Utilities (DPU) as part of docket 17-146. Stay tuned—we expect a resolution that works well for energy-storage developers and customers.
3. Ongoing efforts to protect DERs.
As our electricity system continues to evolve to become more decentralized, cleaner, and more consumer friendly, DERs have an important role to play. Still, some groups seek to undermine them. Consequently, the DER community had its hands full in 2018, working to fend off various “anti-DER” initiatives. In California, two pieces of energy legislation that received much public attention recently were also those in which the community had to work the hardest. In SB 100 (100 percent carbon-free electricity by 2045) and in SB 901 (pertaining to wildfire liability), pro-DER industry activists successfully staved off attempts by several stakeholders to insert language into the bills aimed at curbing customer participation in distributed energy resources in the state. Legislators were ultimately convinced that the benefits to customers, communities, ratepayers, and society at large should take precedence over more narrow interests. The anti-DER amendments were removed from both bills, and they were signed into law in September.
Heading into 2019, there are still many energy policy threads to untangle. But we think it’s worth the effort. With every year that passes, decarbonization becomes more urgent. Digitalized (software-controlled) and decentralized energy is a viable path to that goal. We invite you to join us.
Happy New Year, everyone!
¹“Q4 2018 U.S. Energy Storage Monitor,” Wood MacKenzie, accessed January 8, 2019