Barrier to Energy Storage in New York?

Nov. 14, 2018
New York is crafting one of the most ambitious energy storage targets in the nation. But will it be stymied by uneconomic rate design? GI Energy warns state regulators of “massive uncertainty.”

New York is crafting one of the most ambitious energy storage targets in the nation, but major barriers could make it difficult to meet the target, according to a recent filing with state regulators by storage developer GI Energy.

The affiliate of Shell New Energies US argues that energy storage developers face “massive uncertainty” regarding undefined delivery service rates for energy storage placed in front of the meter. The company made the argument within a docket that the Public Service Commission opened seeking comments on the state’s energy storage roadmap (Case 18-E-0130).

Andrew Cuomo, New York’s Democratic governor, has called for a 1,500 MW energy storage target, but state agencies in June released an energy storage roadmap that cites the potential for as much as 3,000 MW.

The commission, along with other state agencies, is in the process of drawing up the target and the rules that will govern energy storage.

The rates that would apply to those projects, however, remain “to be determined” for most New York utilities, the GI Energy filing states, leading to ambiguity and “costly, protracted debate and negotiation on a case-by-case, territory-by-territory basis, inflating project delivery times, legal fees and related soft costs.”

Uneven playing field

Because third parties are unable to price their projects properly, they face an uneven playing field, GI Energy argues.

And, “perhaps most confounding of all,” GI Energy writes, utilities can deem their own energy storage projects as grid assets subject to no delivery bills while third party projects are treated as new retail accounts that are billed for delivery” — as if they were any other commercial behind the meter service.

As a result, what could be the single biggest operating expense for energy storage developers remains undefined in New York, the filing states.

“Other developers are just becoming more and more aware of this,” said Pete Falcier, vice president of analytics and regulatory affairs at GI Energy.

GI Energy developing pilot in New York

Meanwhile, as part of New York’s Reforming the Energy Vision (REV) program, GI Energy is developing four 1 MW, 1 MWh battery storage pilot projects in Zone J, which includes the congested New York City area. The projects are scheduled to be deployed in 2019.

The batteries would be located on distribution lines at locations designed to provide grid support and would have the capability to “value stack,” that is, to earn revenues by selling services to the New York Independent System Operator, as well as to the local utility, Consolidated Edison in this case.

GI Energy says Con Ed is proposing to charge its energy storage pilot projects a buy-back tariff for battery discharging under its SC 11 rate class and a standby tariff for recharging under its SC 9 rate class. Both rate classes were designed for behind the meter applications, GI Energy says.

In effect, imposing those rates turns GI Energy’s front-of-the-meter projects into behind-the-meter projects, despite the fact that the operation of the batteries is designed to provide grid services and would be under Con Ed’s control, Falcier said.

At the retail $7.87/kW contract demand rate, simply keeping the four projects plugged into Con Ed’s distribution grid would amount to $2 million in delivery bills over the five-year term of the projects — even before including upfront interconnection fees or any additional demand or volumetric delivery charges.

Uneconomic rate design

“Stated plainly, this rate design is uneconomic” for mass front-of-the-meter storage, the filing says.

The utility says it supports demand charges for large assets such as batteries that allow it to recover its costs of service and ensure that other customers don’t absorb those costs, said Con Ed spokesman Allan Drury in an email.

“Developers can and should factor these charges into their analyses of investment opportunities,” said Drury.

“Our tariffs are designed to apply these charges consistently to all distributed energy resources and not for a specific technology or project. Policy will continue to evolve as the state and other stakeholders follow the Energy Storage Roadmap and establish storage as a key part of the New York’s clean energy future,” Drury said.

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About the Author

Peter Maloney

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