Battery Energy Storage 2019

1. Battery Energy Storage2019 Source: SEPA 2018

2. Energy Storage Policy Update The energy storage market remains policy dependent, just as the solar energy market was a decade ago. A few states have implemented energy storage mandates and incentive programs through legislation. Energy Storage in Integrated Resource Planning (IRP) The role of energy storage, particularly battery storage, is increasingly considered in integrated resource planning. Individual utilities have altered the technologies considered in their planning to include energy storage while states have also issued specific regulatory guidance for utilities to consider energy storage in their IRPs. Source: SEPA Aug 2018

3. Policy in Action - Massachusetts - Advancing Commonwealth Energy Storage The Massachusetts Energy Storage Initiative was launched by the governor in May 2015 with the goal of establishing a local energy storage industry. Advancing Commonwealth Energy Storage (ACES) is a collaborative demonstration program between the Massachusetts Department of Energy and Resources and the Massachusetts Clean Energy Center. The program has offered grants to projects that are testing a wide variety of energy storage applications and business models. In total, the ACES program has issued $20 million in cost share grant funding for a diverse array of 26 demonstration projects, accounting for 32 MW, 81 MWh. These projects were determined to have the best opportunity to increase commercialization and deployment of energy storage technologies. The novel concepts being tested are an investment in the energy storage industry and worth paying attention to as their potential success may be replicable across the country. Source: SEPA Aug 2018

4. Overview of FERC Order 841 • Purpose and Summary of Requirements - FERC Order 841 directs RTOs/ISOs to establish a participation model consisting of market rules that, recognizing the physical and operational characteristics of electric storage resources (ESRs), facilitates their participation in the regional transmission organization (RTO) and independent system operator (ISO) markets. • A regional transmission organization (RTO) in the United Statesis an electric powertransmission system operator (TSO) that coordinates, controls, and monitors a multi-state electric grid. The transfer of electricity between states is considered interstate commerce, and electric grids spanning multiple states are therefore regulated by the Federal Energy Regulatory Commission (FERC).[1] The voluntary creation of RTOs was initiated by FERC Order No. 2000, issued on December 20, 1999.[2] The purpose of the RTO is to promote economic efficiency, reliability, and non-discriminatory practices while reducing government oversight. • An independent system operator (ISO) is similarly an organization formed at the recommendation of the Federal Energy Regulatory Commission (FERC). In the areas where an ISO is established, it coordinates, controls, and monitors the operation of the electrical power system, usually within a single US State, but sometimes encompassing multiple states. RTOs typically perform the same functions as ISOs but cover a larger geographic area. • The two are similar, with an RTO being more clearly defined and born out of the concept of electrical grid reliability. The delineation between an ISO and an RTO is subtle to some and quite specific to others.

5. In short, an ISO operates a region's electricity grid, administers the region's wholesale electricity markets, and provides reliability planning for the region's bulk electricity system. Today's RTOs do the same thing with an added component of greater responsibility for the transmission network, as established by the FERC.

6. . PJM Interconnection LLC (PJM) is a regional transmission organization (RTO) in the United States. It is part of the Eastern Interconnection grid operating an electric transmission system serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. PJM, headquartered in Valley Forge, Pennsylvania, was the world's largest competitive wholesale electricity market until the development of the European Integrated Energy Market in the 2000s. More than 1,000 companies are members of PJM, which serves 65 million customers and has 177 gigawatts of generating capacity. With 1,376 generation sources, 82,000 miles (131,970 km) of transmission lines and 6,038 transmission substations, PJM delivered 791 terawatt-hours of electricity in 2013.

7. The participation model must: • Ensure that a resource using the participation model is eligible to provide all capacity, energy, and ancillary services that the resource is technically capable of providing in the RTOs/ISOs • Ensure that a resource using the participation model can be dispatched and can set the wholesale market clearing price. Account for the physical and operational characteristics of electric storage resources through bidding parameters or other means • Establish a minimum size requirement for participation in the RTO/ISO markets that does not exceed 100 kW • Each RTO/ISO must specify that the sale of electric energy from the RTO/ISO markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price Responses to the Order A wide range of stakeholders filed comments in March 2018 pursuant to the publication of FERC Order 841. While many respondents were supportive of lowering participation barriers for Electric Storage Resources (ESRs), others identified areas for clarification or rehearing of the order.

8. In Support • Improved market access. Facilitates participation in RTO markets by requiring RTOs to improve market access, e.g. by clarifying existing rules, allowing storage resources to de-rate capacity to meet minimum run-time requirements • Maximizing competition from all resources. Including full participation of ESRs increases competition and supports just and reasonable rates • Improved system flexibility. Expanding participation of energy storage in wholesale markets allows consumers to capitalize on its inherent flexibility, both in operations and siting, creating value both on wholesale and retail markets • Improved access for distributed energy resources (DERs) in wholesale markets. Improves market access for small resources through 100 kW minimum size requirement

10. Energy Storage Market Trends The energy storage market is a rapidly evolving segment of the electricity sector. Storage technologies are being deployed in demonstration projects across a wide range of applications. Early stage markets are being animated by local incentives. A few projects in specific circumstances are being deployed that require no incentives to be financially viable. Battery storage in particular has been equated to a “Swiss Army knife”14 due to its broad set of capabilities. While these capabilities have been demonstrated, the energy storage industry is still in its early days: deployment is less than 1 GW as of 2017 and price declines due to economies of scale remain around the corner for the majority of storage technologies. Despite being a newly emerging market, energy storage is set to play a rapidly expanding role in the electricity sector. As the price of battery storage technologies continues to decline, more of the capabilities of energy storage become economically viable.

12. Declining Energy Storage Prices Lithium-ion battery prices have declined by more than 20% annually over the past three years. The data collected from this survey aggregates battery prices within electric vehicles, e-buses, and stationary energy storage systems. With applications in telephones, computers, and electric vehicles, lithium-ion batteries have seen a drop in costs as a result of expanded research and funding. The cost of these battery packs will continue to decline as lithium-ion battery production scales up to match the demand for electric vehicles. As a result, this storage technology is the first to achieve economies of scale, which is why lithium-ion accounts for the vast majority of stationary energy storage projects deployed globally. There are a number of other energy storage technologies with capabilities that align with the needs of the electric grid and demand for stationary storage will continue to evolve.

13. Summary In issuing Order No. 841 on February 15, 2018, the Commission adopted a final rule requiring each RTO and ISO to revise its tariff to establish a "participation model" for electric storage resources. As envisioned by the Commission, these participation models will consist of market rules that facilitate electric storage resources' participation in organized wholesale markets, while recognizing storage resources' physical and operational characteristics. Once it takes effect, the final rule gives RTOs and ISOs 270 days to develop and file their proposed rule changes, and a year for their implementation. If you take the February 15, 2018 date of final ruling and add 270 days that brings you to November 12, 2018 and then another year for them to implement, this is why the industry is being pro-active.