State Legislative Actions Supporting Energy Storage
Across the U.S. a growing number of state lawmakers are focused on policies that support energy storage. Nearly 400 energy storage-related measures were introduced in 2019 and 2020 and of those, 77 were enacted or adopted in 27 states. This is more than triple the number of bills introduced in 2017 and 2018. Four states have enacted or adopted more than a dozen measures related to energy storage so far in 2021.
While decisions carried out by federal regulators and regional market operators have an impact on state energy storage policy, state policymakers—and state legislators in particular—are instrumental in enacting policies that remove barriers to adoption and encourage investment in storage technologies. Legislatures have taken varied approaches to accelerate adoption of energy storage, with some states enacting energy storage procurement targets and others focusing on creating programs that promote and fund developing technology.
States have also focused on removing regulatory barriers to adopting energy storage by requiring or authorizing utilities to consider energy storage in resource planning and by creating standards for connecting storage resources to the grid. Additionally, some states are focused on integrating energy storage into existing renewable energy policy and looking to encourage pairing renewables with storage.
As the energy sector in many states moves toward a cleaner and more diverse energy mix, legislatures are also considering policies that promote economic growth in advanced energy industries and provide training to equip the workforce with the skills needed to keep pace with a constantly evolving energy sector. Examples of recently enacted legislation that apply each of these policy tools follows.
One major tool for increasing the deployment of energy storage technologies is setting a storage target that requires the state to procure a certain amount of energy storage, measured in megawatts (MW) or megawatt-hours (MWh), by a specific date. States have accomplished this through a combination of legislative and regulatory actions, with California being the first to enact storage target legislation in 2010.
Since then, six other states— Massachusetts, New Jersey, New York, Nevada, Oregon and Virginia—have followed suit, with New York and Virginia being two of the latest to successfully enact legislation establishing mandatory targets for energy storage. As part of New York’s Climate Leadership and Community Protection Act of 2019, the legislature directed the state to create programs to achieve specific deployment targets for renewable energy and storage technologies, including 6,000 MW of solar by 2025, 3,000 MW of energy storage by 2030 and 9,000 MW of offshore wind by 2035. In 2020, Virginia also enacted comprehensive clean energy legislation that in part requires utilities to petition the State Commerce Commission for approval to acquire or construct a combined 3,100 MW of new energy storage resources by the end of 2035.
MAKING SURE ENERGY STORAGE IS CLEAN
Storage technologies can support state clean energy policy goals when paired with clean and renewable generation. This requires carefully crafting legislation to ensure storage technologies are deployed in a way that supports clean energy resources and reduces emissions. Massachusetts enacted clean energy legislation in 2018 that created the legal framework for the nation’s first clean peak standard. The program’s implementing regulations require utilities to supply a certain percentage of retail electric sales with “clean peak resources” including stored renewable energy and renewables plus storage.
States have also recently considered more targeted legislation on the topic. For example, Oregon enacted HB 2618 in 2019, which directed the State Department of Energy to adopt rules for a rebate program for purchasing, constructing or installing solar energy systems and solar paired with storage. The program offers a rebate of $7,500 for homeowners installing solar paired with storage. It also allocates 25% of annual rebate funding for serving low- and moderate-income households. Maine’s SB 565, enacted in 2019, authorizes the Public Utilities Commission to establish rules to encourage the procurement of distributed generation resources using “renewable fuel or technology” paired with energy storage.
INCLUDING STORAGE IN THE PLANNING PROCESS
States are also supporting energy storage by implementing policies that encourage or require utilities to integrate energy storage into their resource planning. Virginia enacted SB 632 (2020), which amends the state’s utility integrated resource planning requirements to require that utilities consider “developing a long-term plan to integrate new energy storage facilities into existing generation and distribution assets to assist with grid transformation.” Colorado’s SB 236, enacted in 2019, directs the state Public Utility Commission to establish rules requiring that utilities submit distribution system plans that incorporate “adoption of distributed energy resources” including “energy storage systems connected to the distribution grid” among other technologies. South Carolina’s Energy Freedom Act (HB 3659), enacted in 2019, in part requires that utility integrated resource plans include resource portfolios to fairly evaluate “the range of demand-side, supply-side, storage, and other technologies and services available to meet the utility’s service obligations.”
Some states are also focused on encouraging utilities to invest in broader grid modernization improvements that include a role for energy storage. New Mexico’s HB 233, for example, enacted in 2020, authorizes utilities to submit applications to the Public Regulation Commission for approval of grid modernization projects, including energy storage projects that support “grid stability, power quality, reliability or resiliency or provide temporary backup energy supply.”
Energy Storage and the 2021 Winter Storm In Texas
In February 2021, winter weather in Texas caused power outages that left more than 4 million homes and businesses without power for nearly a week, resulting in more than 50 deaths and widespread hardship. Could energy storage have played a role in preventing this disaster?
With widespread grid failures on this scale, energy storage would have to make up a much larger share of system capacity than it currently does to change the dynamics, although it can respond to sudden system fluctuations by providing ancillary services, like frequency and voltage regulation.
Distributed energy storage systems equipped for emergency scenarios, however, do have the potential to soften these types of hardships. These systems could help residents power critical loads, such as heaters during extreme cold or plug-in medical devices, while the power is out. Given that solar PV (photovoltaic) performed well during the winter storm, homes with rooftop solar and battery storage may have been able to recharge battery systems throughout the grid outage.
This situation highlights the limitations battery storage technologies have to address disasters. The current discharge limitations would have restricted the effectiveness of most of the newer energy storage systems during an event that lasted many days. These types of events highlight the need for storage systems with the capacity to supply power over a longer period of time. On a larger system level, if energy storage were to be positioned to support the widespread generation failures seen in Texas, it would have required not only a massive increase in storage capacity, but also storage projects with weeks-long or seasonal capacity reserves.
RESILIENCY AND LONG-DURATION STORAGE
Several states have turned to energy storage not only to complement clean energy policies, but also to protect residents and critical services during disasters. Some of the most destructive natural disasters in our nation’s history have occurred in recent years—from hurricanes in the Gulf and flooding in the Midwest to wildfires in the West. Many of the states affected by such events have looked for ways to mitigate the destruction of future disasters by making electric service more resilient, and energy storage has increasingly played a role in policymakers’ considerations. In some cases, resiliency measures focus on energy storage specifically or on backup power and microgrids more broadly—with energy storage as one of several potential tools.
In California, lawmakers enacted AB 1144 in 2019, which requires state regulators to allocate a certain percentage of the state’s Self-Generation Incentive Program to community storage pilot projects focused on districts at high risk of wildfires. That same year, California enacted SB 167, which requires electric companies to identify ways to mitigate the impacts of de-energization events—when utilities shut off power to portions of the grid to avoid sparking a fire during periods of elevated fire risk. The bill authorizes financial assistance for customers who use medical equipment that requires electricity, to assist in acquiring adequate backup power resources. Similarly, Virginia and Puerto Rico enacted legislation requiring certain places—such as assisted living facilities and daycare centers—to have sufficient backup power on-site for use during power outages. Virginia also enacted SB 350, which established the Emergency Shelters Upgrade Assistance Grant Fund to provide matching grants to localities to upgrade backup energy systems at emergency shelters. Hawaii considered HB 1583 (2019) that would have authorized the state Department of Education to evaluate renewable-powered backup energy systems at its schools, which serve as emergency shelters.
Most lithium-based technologies are limited to around four-hour discharges. Entities often opt to deploy backup diesel or natural gas generators because backup generation resources typically must be serviceable for up to three days. To address the current shortcomings of storage technologies, some states have sought to incentivize competing technologies with different technical characteristics, such as long-duration pumped hydro facilities. Oregon adopted SCR 1 in 2019, declaring the legislature’s support for pumped storage projects that offer longer-duration discharge, and California has considered at least four bills—Assembly Bill 1720 (2019), Assembly Bill 2255 (2020), SB 597 (2019) and SB 772 (2019)—seeking to establish incentives for long-duration storage. Most recently, California Assembly Bill 64 (pending 2021) “would require the development of 5 gigawatts (GW) of “clean, long-term backup electricity” by 2031, and an additional 5 GW of long-term backup power each of the following years through 2045. In order to leave the target open to new storage and technological developments, the legislation only defines this type of resource as being able to “deliver electricity for weeks at a time.
Some states are continuing to evaluate pumped storage hydropower as an effective source of long-duration storage. For example, Washington enacted HB 2819 (2020), which designates pumped storage projects be located in a county near the Columbia River for expedited permit processing. Garnering support for pumped-storage hydropower, however, can be challenging given the potential negative environmental impacts associated with such projects.
To create a regulatory environment that supports energy storage as a distributed energy resource, legislatures have also focused on interconnection requirements and ensuring that distributed resources can connect to the grid in a timely and efficient manner. South Carolina’s Energy Freedom Act (HB 3659) enacted in 2019, in part directs the Public Service Commission to establish interconnection standards for renewable energy facilities that provide for timely and efficient processing of requests and provide a process for “amending existing requests to include energy storage.” In 2018, Colorado lawmakers enacted SB 9, which establishes the right of customers to interconnect energy storage systems to the grid and directs the Public Utilities Commission to establish rules for customers seeking to install and interconnect energy storage. And, legislators in California enacted AB 546 in 2017, which requires certain cities and counties to make all permitting documentation and requirements for advanced energy storage systems available on public websites, including providing applications, guidance, best practices and other factors under consideration by local governments.
FINANCING AND TAX INCENTIVES
States also often consider creating tax credits or other tax incentives to encourage individuals and businesses to purchase and install energy systems, including systems for renewable energy and energy storage. For example, in 2020 Maryland enacted HB 980, which defined taxpayers eligible for the state’s energy storage tax credit to include individuals and businesses and increased the maximum allowable credit amount for systems installed on commercial properties from $75,000 to $150,000 or 30% of the total installed cost, whichever is less. New Hampshire also recently enacted an energy storage tax incentive through HB 464 (2019), which authorizes localities to adopt a property tax exemption for energy storage systems.
Additionally, states are looking to provide financing for energy storage projects and upgrades. Some states have accomplished this by updating existing or creating new residential or commercial Property Assessed Clean Energy (PACE) programs (which offer residential or commercial building owners low-cost financing for renewable energy and energy efficiency improvements) to also include financing for energy storage. Illinois lawmakers enacted HB 3501 (2019) amending PACE laws to provide for financing of resiliency improvements, including energy storage. And the Washington Legislature enacted HB 2405 (2020) authorizing localities to implement a commercial PACE program that provides financing for improvements related to increasing resilience, including energy storage.
TECHNOLOGY DEMONSTRATION PROGRAMS AND STUDIES
State legislatures are also supporting emerging energy storage technologies and capabilities by facilitating pilot and demonstration programs. In many cases, state legislatures appropriate funding and issue directives to state PUCs to implement these programs, which provides both regulators and utilities with clear guidance over how to proceed with this emerging suite of technologies. California’s Assembly Bill 1144, mentioned previously, is focused on amending an existing technology demonstration program to allocate funding for certain distributed generation and storage projects that bolster resiliency. California’s SB 676, enacted in 2019, is focused on exploring and developing strategies to maximize vehicle-to-grid integration technologies. In developing such strategies, the state PUC is directed to consider incorporating national standards for reliability and cybersecurity protocols.
States are also developing expert task forces and committees to evaluate storage technologies and opportunities for growth. Maine, for example, enacted HB 1166 (2019) creating a commission to study the benefits of energy storage in the state’s electric industry. The legislation charges the commission with evaluating how energy storage could resolve some of the state’s transmission-related challenges and improve resiliency. It also requires the commission to consider the economic benefits of establishing energy storage procurement targets. Also, Virginia HB 1183 (2020) directs the State Corporation Commission to establish a task force “to evaluate and analyze the regulatory, market and local barriers to the deployment of distribution and transmission-connected bulk energy storage resources to help integrate renewable energy into the electrical grid, reduce costs for the electricity system, allow customers to deploy storage technologies to reduce their energy costs, and allow customers to participate in electricity markets for energy, capacity and ancillary services.”
WORKFORCE AND ECONOMIC DEVELOPMENT
States are growing increasingly concerned about the availability of a qualified workforce to replace the impending large-scale retirement of energy sector workers necessary to power a modern electric grid. Additionally, as new technologies and resources come online, policymakers are developing programs focused on ensuring the energy workforce is adequately trained. Hawaii’s HB 560 (2019) creates a technology training course for county employees focused on energy systems, including training on energy storage. State legislators are also focused on identifying opportunities for economic development and job creation in highly technical fields, including advanced energy technologies like energy storage. New Mexico’s HB 233 (2020), mentioned earlier, in part charges the Energy, Minerals and Natural Resources Department with implementing a Grid Modernization Grant Program. In approving projects for funding under the grant program, the department is required to consider whether a project “stimulates in-state economic development, including the creation of jobs and apprenticeships,” among other factors. Maryland’s HB 436 (2020) creates a Task Force On the Economic Future of Western Maryland responsible for studying and making recommendations regarding economic development in the state’s western counties, including evaluating opportunities to expand technology-driven industries, such as energy storage and cybersecurity.
As the energy system undergoes a massive technological transformation, energy storage in its many forms provides energy planners, utilities and policymakers with a multitude of additional options as they work to create a more flexible, reliable and efficient energy system. As this document has discussed, state regulatory policies may need to be adjusted to address the unique characteristics of this relatively new technology. State legislators in several states are already demonstrating that they have a significant role to play in ensuring that storage can fairly compete and be adequately valued for the many services it can provide. These lawmakers have acted on a number of fronts, from setting storage targets and requiring the integration of storage into energy planning to funding research and development and pilot projects. As storage technology options expand and costs decrease, storage is likely to play an increasingly important role in the transition to the clean, responsive and resilient electric grid of the future. State policymakers have the opportunity to play a pivotal role in this transition.
Case Studies of Energy Storage Solutions
GENERATION (ANCILLARY SERVICES): INDIANAPOLIS POWER & LIGHT—HARDING ST. STATION (INDIANA)
Indianapolis Power & Light (IPL) deployed a 20 MW battery project in 2016 to help the utility balance and integrate its growing fleet of renewable generation. It was the first large-scale battery storage project built within the Midcontinent Independent System Operator (MISO), which operates the electric grid for all or part of 14 states in the central U.S. The utility also planned to use the battery to participate in MISO’s ancillary services markets but found that those markets were not designed to account for the technical capabilities of the battery, resulting in limited opportunities for market participation.
Indianapolis Power & Light filed a complaint with the Federal Energy Regulatory Commission (FERC), which regulates the operations of regional energy markets like MISO, arguing that MISO’s ancillary service markets unfairly discriminated against energy storage. FERC agreed with the utility and directed MISO to change its rules to recognize storage’s capabilities more accurately. More importantly, the case is credited with being one of the factors that drove FERC to take more sweeping action on the role of energy storage in regional energy markets.
GENERATION (PEAK REDUCTION): SOUTHERN CALIFORNIA EDISON—MIRA LOMA BATTERY STORAGE FACILITY (CALIFORNIA)
When the Aliso Canyon Natural Gas Storage Facility outside of Los Angeles began leaking in late 2015, it severely reduced the amount of natural gas available to Southern California Edison (SCE) to fuel its natural gas-fired generators to serve its customers. For an expedited replacement of some of that lost generation capacity, SCE procured a 20 MW/80 MWh battery storage system. The system stores energy from solar generation during the day to meet local needs during high-demand periods in the evening after the sun goes down.
The Mira Loma Battery Storage Facility took just 88 days to build and activate, which was incredibly fast in an industry where it takes years to site and build new generation facilities. The Mira Loma project entered service less than a year after the Aliso Canyon leak was contained (Southern California Edison 2017).
TRANSMISSION/DISTRIBUTION (THERMAL MANAGEMENT): MIDCONTINENT INDEPENDENT SYSTEM OPERATOR—WAUPACA ENERGY STORAGE SYSTEM (WISCONSIN)
MISO prepared a regional transmission plan in 2019 which identified a scenario in which an outage on a given transmission line would cut service to the town of Waupaca, WI. To ensure reliable service to the area, grid planners looked at two options: building new transmission lines or adding an energy storage device to serve one part of town and doing a minor reconfiguration of the existing line to ensure continued service to the other part of town. The energy storage option resulted in lower costs and is expected to be in service in late 2021 (MISO 2019).
TRANSMISSION/DISTRIBUTION (INFRASTRUCTURE DEFERRAL): NATIONAL GRID—NANTUCKET ISLAND (MASSACHUSETTS)
Faced with growing demand during the summer tourist season, the utility identified a need for a third undersea transmission cable to maintain reliable service. However, analysis showed that by adding a small combustion turbine and a battery system to Nantucket Island, the National Grid could defer the third line for about 20 years and improve electric reliability on the island while saving millions of dollars (Balducci et al. 2019).
CUSTOMER (RATE MANAGEMENT/BACKUP POWER): GREEN MOUNTAIN POWER—RESIDENTIAL ENERGY STORAGE PROGRAM (VERMONT)
In 2015, Green Mountain Power in Vermont launched a first-of-its-kind program in the U.S. in which the utility offered incentives and low-cost leases to enable its residential customers to purchase or lease an energy storage device for their home. Through this partnership, the utility retains operational control of the device, with the promise that it will use the battery to reduce the customer’s time-of-use rates and provide backup power in the event of an outage.
By leveraging all the individual storage devices from participating customers, Green Mountain Power can meet peak electricity demand while lowering the cost it pays to its regional grid operator for generation and transmission services, resulting in lower energy costs for all customers. The growing network of connected storage devices enabled Green Mountain Power to reduce system costs for all customers by about $3 million in 2020 (Green Mountain Power 2020).