Energy Storage Outlook for Ohio

Standard

New research coming out of the University of Minnesota’s Energy Transition Lab indicates that standalone energy storage can now compete with and potentially displace new gas combustion turbines installed to meet peak demand—and be cost-effective after 2022.[1] Competitive forces and declining costs confirm this outcome in research conducted by consulting firm GTM Research/Wood Mackenzie. The analysis conducted by the Energy Transition Lab on the Minnesota power sector is predicated on calculations that require consideration of the environmental benefits associated with energy storage. In a comparison of energy storage and solar energy mix against a simple-cycle, natural gas peaking plant, researchers found that both the economic and environmental benefits prevail with energy storage because of factors such as the federal investment tax credit and the reductions in air pollutants (e.g., NOX, SOX, and greenhouse gas emissions). The report also indicates the need for updating modeling tools used by utilities and regulators for resource planning. Innovative cost-recovery mechanisms for new energy storage investments should be considered as well as supporting private investments in the future. We have seen this recently with stacking revenues adopted in California as an incentive to recognize both the supply and benefits of storage, thereby offering multiple revenue streams. If weighed in Ohio, this would build on the automotive, fuel cell and battery storage sectors already active in the state for stationary and mobile sources.

In many instances, Independent System Operator (ISO) and Regional Transmission Organization (RTO) rules for storage integration have been under scrutiny because the grid operators’ current structure limits many energy storage resources from participating in wholesale power markets. Over the next ten years, the U.S. requires more than 20,000 MW of additional peaking capacity to be added to the grid according to GTM Research/Wood Mackenzie. Almost 13,000 MW alone of storage is anticipated to come online in 2023-2027. Grid barriers and limitations were a critical finding of the recent notice of proposed rulemaking on energy storage and distributed energy resources by the Federal Energy Regulatory Commission in late 2016 (Docket Nos. RM 16-23; AD-16-20-000; www.ferc.gov). The lack of appropriate terms and conditions that foster the cost savings and benefits of energy storage is a national problem which the rulemaking seeks to address. Moreover, ISOs and RTOs must consider energy storage as a capacity and grid resource and include energy storage in increasing market roles. The benefits of such inclusion are increased customer service through delivery stability, improved integration of distributed and renewable energy resources, ongoing cost reductions for the customer, and long-term and strategic performance enhancements that benefit all parties and stakeholders on the grid. FERC is expected to finalize these rules in 2018.

As these findings relate to the State of Ohio, significant value and economic outcomes may exist here for energy storage. This is fostered by an increase in forecasted renewables above 2.2% of the state’s electric supply and increased needs for new electric capacity from plant life retirements of older nuclear and coal-fired plants rendered uneconomical by increased natural gas supplies from the Utica Shale. The findings also support the desirability of incentives and rate design to increase the market penetration of energy storage in Ohio. Growing opportunities for energy storage has the added benefits of bolstering renewable energy integration into the fuel profile and modernizing the transmission and distribution (T&D) grid statewide: both goals of the PowerForward initiative led by the Public Utilities Commission of Ohio (PUCO).

Therefore, greater development of energy storage in Ohio will require thoughtful leadership by the ISOs and RTOs working with the PUCO through this visioning process. Related factors to monitor in Ohio by PUCO, the utilities, and affected stakeholders include:

  • Load differentials which may exist between on peak and off-peak wholesale energy prices
  • Lack of strong and enforceable federal state and local policies to address greenhouse gas emissions for the future
  • Declining wholesale capacity prices and uncertainties regarding the ability of utilities to claim capacity credits for energy storage investments in resources
  • Frequency of fossil generation on the margin which diminishes the environmental benefits of grid-supported storage in the future
  • Low prices and small-market sizes for ancillary services (i.e., frequency regulation) at this time
  • Lack of retail rate options and incentives to support smart deployment of energy storage technologies in Ohio
  • Different capital cost structures for traditional capacity resources versus energy storage, with different performance guarantees and operating protocols
  • Increased desirability of promoting more effective integration of distributed and renewable energy resources

Ohio hosts a need for increased customer services and also many companies that are part of the supply chain for the national energy storage sector in the future. However, most of the manufacturing capacity for energy storage is occurring west of the Mississippi. Appropriate and effective incentives in Ohio would promote the long-term development of an energy storage manufacturing sector and supply chain hub in-state. The PowerForward proceedings are an important platform for consideration of these vital opportunities supporting industry leadership on storage. The next PowerForward sessions are scheduled for March 2018, and we continue to look forward to advising critical stakeholders on these opportunities for Ohio ahead. See https://www.puco.ohio.gov/industry-information/industry-topics/powerforward for additional information.

Blog by Michael J. Zimmer, Executive in Residence and Senior Fellow, Ohio University Voinovich School of Leadership and Public Affairs & Russ College of Engineering and Technology. Edited by Elissa Welch, Project Manager, Ohio University Voinovich School. March 2018.

[1] “Modernizing Minnesota’s Grid: An Economic Analysis of Energy Storage Opportunities.” University of Minnesota’s Energy Transition Lab. 2017. www.energytransition.umn.edu.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s