The Bay State could soon follow the Bay Area as a leading battery boomtown.
The Massachusetts Department of Energy Resources (DOER) decided, at the close of 2016, that it would set an energy storage target. Now it has six months to figure out what that number should be and how to implement it, following the timeline set by legislation last summer. Once complete, this will be only the third state-level target after California and Oregon.
California's mandate gave it a decisive lead in attracting storage companies and deploying the technology in homes, businesses and on the grid. Massachusetts currently has very little storage deployed, but it is already home to a cluster of storage startups that spun off from research at MIT. With an effective target, Massachusetts could set itself up as the second hub of the U.S. storage industry, while streamlining the operation of its grid and the integration of new renewable generation.
Finding the right target, though, requires a careful balancing of competing goals.
"DOER should assure the target is large enough that substantial, relevant experience is gained by all, but not so large that it becomes unworkable and a substitute for the fully functioning market," wrote Phil Giudice, CEO and president of Cambridge-based storage company Ambri, in a letter to DOER Commissioner Judith Judson in December.
DOER isn't starting from scratch here. The department had a hand in the State of Charge report from September, which comprehensively analyzed the value of storage for the Massachusetts grid and concluded that up to 1,766 megawatts of storage installed by 2020 would maximize savings for ratepayers. Storage can reduce the state's system costs like peak capacity, transmission and distribution upgrades, overall energy prices, integration of intermittent renewables, and ancillary grid services that smooth out the momentary differences between supply and demand.
The authors included a humbler proposal -- namely, that 600 megawatts would be achievable given current market and regulatory realities, and still save ratepayers $800 million by 2025.
The state could go in a different direction after gathering stakeholder input this month. Questions remain about how exactly the target would be implemented, which will have a significant impact on what kind of real-world changes it drives. Given the uncertainty, GTM reached out to policy experts and storage industry professionals active in Massachusetts to hear what they hope the state decides.
Keep it 600
Based on current market design and state rules, 600 megawatts is a reasonable target, said State of Charge coauthor Jacqueline DeRosa, vice president of emerging technologies at Customized Energy Solutions.
"The 1,766 megawatt number makes some assumptions that the world is a certain way," she said. It's more of a best-case scenario, if storage deployment could proceed optimally without bureaucratic or regulatory obstacles. But, she added, "It’s not that easy to change the world overnight."
The 600 MW goal reflects the deployments the state could likely achieve in the near future. It was the outcome of collaborative discussions held by DOER with stakeholders like utilities, project developers and storage vendors.
A common refrain among energy storage professionals interviewed for this story was that a higher number would be great, but 600 megawatts is a strong starting point. It would be a big step up from the approximately 2 megawatts of advanced storage capacity the state has now.
With two and a half years from the adoption of the targets to their due date, the state may opt for a less ambitious number initially. It would be possible to hit 600 megawatts in that timeframe, though, said Ravi Manghani, energy storage director at GTM Research.
For others, like Ted Ko, director of policy at commercial storage company Stem, 600 megawatts is the minimum for attracting a bustling industry.
"The state can and should go higher -- the industry has shown time and again that it is ready to respond quickly, at scale, when given a big enough market signal," he wrote in an email Wednesday.
What type is it?
The energy storage industry is still young enough that just saying the words "storage mandate" gets folks fired up. The fact of the matter is, though, the number itself doesn't mean very much in terms of what the deployment will look like.
The category of energy storage includes systems that operate on a matter of minutes, or for half an hour, or a couple hours, or very many hours. Different jobs require different durations.
"My biggest wish is that the storage be discussed in terms of its application, and therefore the type of technology that is best suited to meet that application," said Jonathan Milley, director of business development at Massachusetts-based battery maker Vionx. "If you need a hammer, don’t get a screwdriver."
Vionx is scaling its flow battery technology, and has one system operating in Massachusetts, one being commissioned and one under construction. Those three will add up to more than 1 megawatt of capacity at 6 hours duration.
It's not surprising to hear a long-duration battery maker recommending a carve-out for long-duration batteries. Without that, cheap, short-duration lithium-ion batteries could swarm the mandate. Similarly, Ambri, which is commercializing a new liquid metal battery technology, recommended that part of the procurement target go to demonstrations of emerging technologies.
Company interests aside, there's a strong argument to be made for connecting the storage mandate to particular services on the grid.
The State of Charge report found the most lucrative savings from storage come from using it for peak capacity, which defers expensive gas peaker plant construction and lowers prices in capacity markets. If the state decides to prioritize storage taking over the role of peaking plants to save ratepayers lots of money, it could create a mandate with a certain percentage of capacity dedicated to longer-duration storage for peaking capacity.
Conversely, if the state wants to ensure that storage can meet certain ancillary service needs in the near future, it could set a target for short duration batteries. DOER asked stakeholders to comment not just on the scale of the target, but the structure, so targeted goals such as these could end up in the final decision.
Further guidance could also address whether the storage goes in front of the meter, putting it in the realm of utilities, or behind the meter, under the purview of commercial and residential customers. Ko suggested one-third of the target should be set aside for behind the meter storage, to take advantage of private investment to spur deployment.
California set a precedent in this regard, as it required its three investor-owned utilities to procure storage at the transmission, distribution and customer levels.
Who owns it?
Who controls the storage asset says a lot about what it will look like, so some stakeholders are pushing for the target to address this as well.
If the target expects utilities to shoulder most of the burden, they could push for a lower target, because they've have to do all the work. Opening up ownership to a wider range of entities spreads out the responsibility, and diversifies the potential benefits.
Ko proposed that a minimum of 50 percent of storage installations should be for customer or third-party-owned systems. That would carve out some territory for Stem, which owns and operates storage systems on behalf of commercial customers, but it would create opportunities for other companies too.
"A primary purpose of any storage mandate is to enable all stakeholders to learn from a wide range of business models and see where the market wants to use and evolve the services," he said. "Last year’s energy bill gave the utilities permission to own storage, so if a minimum isn’t set, the mandate could be met with a handful of large projects used in a utility-owned business model."
If DOER chooses to prioritize storage as driver of business learning, it could even consider a carve-out for storage designed or built in-state, although out-of-state battery companies would have something to say about that.
Learn from the West
Massachusetts benefits from the chance to watch a storage mandate unfold in California over the last couple years.
"California has absolutely led, they broke open the market, they really put a shock to the utility system and said the world is going to be different," said Matt Roberts, executive director of the Energy Storage Association.
One highlight: launching a mandatory storage deployment did not explode the grid. The utilities are chugging along toward the 1.3-gigawatt goal and do not appear to be suffering from overexertion. In the meantime, the policy nourished a once-tiny industry and turned it into a considerably larger one.
The grid benefited too. When the enormous natural-gas leak transpired at Aliso Canyon, the Southern Calif. utilities fast-tracked storage deployment to keep meeting local capacity needs in the absence of all that fossil fuel. The storage industry, buoyed by previous deployments, responded with cheaper-than-ever bids and rapid deployment.
That said, Massachusetts has differed from California in its approach to forming the policy. The eastern state has prioritized stakeholder buy-in throughout the process as a means to collaboratively form the target.
"In California, it was a little more of a top-down, 'Go procure this stuff' type of approach," Roberts said. "Massachusetts is a little more bottom-up, a little more, 'Let's get together and everyone show their math.'"
If a utility wants a certain target, it has to explain why. Meanwhile, storage companies have a chance to justify their dream targets. The final product will be some kind of synthesis of many voices.
California's mandate benefited from a strong collaboration between the California Public Utilities Commission and grid operator CAISO, which allowed storage to play more of a role at the wholesale market level. That kind of working relationship isn't guaranteed between Massachusetts and ISO New England, Manghani noted.
"California had the luxury of an ISO that has jurisdiction in a single state," he said. "ISO New England has to work across multiple New England states. That could cause some friction. Without the successful and wholehearted participation of ISO New England, the mandate would lose some of its effectiveness."
There are plenty of rules and policies under Massachusetts' control on which the state can act quickly, like adding storage as a qualified technology under the Alternative Portfolio Standard. To unlock the full potential value of storage, though, the ISO would need to change certain rules governing the wholesale electricity markets for energy, capacity and ancillary services.
In a world with a more developed storage industry, Massachusetts has more options to choose from in crafting a target that best serves its own goals and desires. The choices made there in the coming months will model a path forward for the next state to take this plunge.