Tech Advancements Alone Won't Bring Energy Storage to Market – Regulatory Reform is Equally Important

Tech Advancements Alone Won't Bring Energy Storage to Market Regulatory Reform is Equally Important

If one takes a look at news articles regarding advancements in technology in almost any sector of the economy, a common theme emerges: perfecting the technology is merely the first step in actually being able to offer the benefits of that technology to the broader market. The process of obtaining the appropriate regulatory approvals is often as arduous of a path, particularly where technologies are truly groundbreaking and disrupt common notions of how the marketplace in question is regulated. The newly realized potential of cost-effective distributed energy storage brings this issue into particular relief in the electricity sector.

It is widely recognized that distributed energy storage can offer a host of benefits to utilities, storage customers and ratepayers.  It is particularly true that energy storage has enormous potential to ease the integration of high levels of renewable energy onto the electric grid. However, as it stands today, the regulatory and market policies in the electricity sector are not yet positioned to enable energy storage developers and customers to deploy the technology in a manner that ensures access to the full range of benefits it can offer.

Take for example the current discussion in California regarding how the states interconnection procedures apply to energy storage. At a basic level, the procedures are probably adequate to enable utilities to safely interconnect energy storage projects. But the procedures apply simple notions of traditional generators to these projects without taking into account the technological advances in inverters and energy control devices that could simplify the review of energy storage projects.  In addition, energy storage is disruptive in that it is not simply acting as a generator it also functions as load.

In most if not all states, the processes for reviewing and assigning costs associated with new generation are entirely separate from the processes for reviewing and assigning costs associated with new load. Namely, most distribution upgrade costs associated with accommodating new customer load on a utilitys system are not assigned directly to a single customer and are instead paid for in the aggregate through distribution rates on a customers bill.

Distribution upgrade costs associated with accommodating new generation, on the other hand, are paid for under a cost-causer principle and usually assigned directly to the generator that first triggers the need for an upgrade. Thus, California is currently faced with the question about whether to combine this review process, and if so, how to assign the costs of any upgrades that are attributed to the loading function of energy storage.

This interconnection issue is just one of the many dilemmas currently facing energy storage developers as they begin to see increased customer interest in their technology. A number of recent articles have highlighted that it is not subsidies that energy storage needs as much as clear regulatory policies in order to move forward. Recognizing this, the Interstate Renewable Energy Council, Inc. (IREC) just released a report that is designed to help regulators identify the critical near-term regulatory and market policies that need to be addressed in order to enable effective deployment of distributed energy storage.

Source: Renewable Energy

Smart Grid Bulletin March 2019

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