Massachusetts has become the first state in the nation to make battery storage eligible for energy efficiency incentives. Clean Energy Group, a nonprofit advocacy organization focusing on innovative policy, technology and finance strategies in the areas of clean energy and climate change, worked on a report that describes if and why this strategy is worth including in the state’s energy efficiency plan.
Behind the request for this cost/benefit analysis, which used data and methodologies from Massachusetts investor-owned utilities, is the state’s Department of Energy Resources. Massachusetts’ Department of Public Utilities (DPU) approved the state’s three-year energy efficiency plan in January.
The battery market seamlessly complements the energy industry, storing the excess generated by various types of plants powering our cities. Energy storage is seen as one of the most revolutionary new energy technologies since the electric grid was invented more than a century ago, and rightly so as it can transport electricity over time and distance, it can act as a generator and as a load, and it can integrate renewables into the grid or enable customers to disconnect from the grid if they chose to.
Massachusetts’ energy efficiency plan has a budget that amounts to nearly $2 billion over three years, behind only California’s $1.4 billion per year, and ahead of New York’s $450 million per year.
For the first time ever, Massachusetts utilities will begin offering electric efficiency performance incentives for behind-the-meter active demand reduction measures, including battery storage. Only new battery installations would be eligible for the incentive, but there is no requirement that batteries be paired with renewable generation. Hence, customers installing batteries or other storage devices will have the option to sign up for a five-year contract with their utility. At the end of each year, they will receive an incentive payment based on how much they reduced their load during peak demand times, in response to a signal from the utility.
The program will be offered to both residential and commercial customers and is estimated to drive the installation of 30-34 megawatts of behind-the-meter battery storage in the state. HEAT loans (zero-interest loans) will also be available to customers purchasing storage equipment and some developers plan to offer their own financing plans, which may include leasing and purchasing options. The performance incentives consist of $100/kilowatt-hour average load reduction for a “targeted” dispatch program, and $200/kilowatt-hour average load reduction for daily dispatch program. For example, a commercial customer installing a 60-kilowatt-hour battery system could earn $2,000/year ($10,000 over the five-year contract period).
Ways to improve
While the energy efficiency plan makes some big advances in the right direction, it also poses a few drawbacks. The initiative’s biggest shortcoming is that it includes no provisions for energy storage incentives to low-income customers and communities, which is contrary to the state’s professed commitment to including the segment in its clean energy program offerings.
Even more so, the lack of low-income provisions deteriorated further when the DPU nulled a proposal by energy services organization Cape Light Compact to give batteries to 1,000 customers, at no cost. In fact, Cape Light Compact’s proposal was the only part of the plan that included low-income customers. The firm has until the end of September to reach an agreement with the utility which objected its proposal—Eversource, an energy provider that serves more than 3.6 million electric and natural gas customers in Connecticut, Massachusetts and New Hampshire. If the two parties cannot reach an agreement by that date, the DPU will consider alternatives, which include allowing Eversource to roll Cape Light’s customers into its own battery offering.
Another deficiency discovered by the authors of the report is related to the targeted dispatch proposal—the DPU approved the measure but dialed back the daily dispatch proposal from full program offering to a limited demonstration one. This is noteworthy as targeted dispatch has a much lower incentive rate than the daily dispatch and is more compatible with commercial customers than with residential ones. This decision, consider the authors of the analysis, allows the utilities to reduce or eliminate the higher incentive rate option that would have made batteries more affordable for residential customers.
The third problematic finding of the report has to do with the cost-benefit calculations that form the basis for storage to be included in the energy efficiency plan: These are based solely on the energy benefits of storage, leaving out non-energy benefits such as job creation, reduced land use, reduced grid outages and higher property values.
“One of the key findings of this report is that the old definition of efficiency needs to be updated,” said Todd Olinsky-Paul, report author & project director with Clean Energy Group, in prepared remarks. “As more renewable energy is deployed, reducing peak demand becomes more important. Battery storage can do this, while traditional efficiency measures can’t. States need to expand their efficiency plans to embrace peak demand reduction and the new technologies, like battery storage, that can accomplish it.”