Sunrun has credited the state’s bedrock of distributed energy policies for enabling its participation in ISO-NE’s capacity market with an aggregated solar-plus-storage bid.
Massachusetts is a leader in the deployment of distributed energy storage in America, due to forward-thinking legislative approaches and other measures aimed at unlocking the full potential of the resource, analysts told Utility Dive.
The state, which is part of ISO New England (ISO-NE), recently became the first in the nation to allow behind-the-meter (BTM) energy storage to qualify for energy efficiency incentives. But the biggest boost to storage deployment in the state came when regulators decided to include storage resources in a new solar incentive program, Solar Massachusetts Renewable Target (SMART).
“Solar projects that participate under our SMART program are eligible to get an additional compensation rate if they pair with energy storage. You get more money if you pair with storage. The bigger the storage is and the longer duration it is, the more money you get,” Michael Judge, renewable energy division director of the state’s Department of Energy Resources (DOER), told Utility Dive.
The policy allowed Sunrun to bid into ISO-NE’s capacity market with 20 MW of aggregated BTM solar-plus-storage.
First of its kind
As a developer, Sunrun has reaped the benefits of Massachusetts’ aggressive push to expand energy storage deployment. The California-based renewable energy developer earlier this year set a new benchmark when ISO-NE accepted its bid for the 2022-2023 capacity market auction.
The success of Sunrun’s bid was a combination of strong state level policies and favorable wholesale market pathways, Christopher Rauscher, the company’s director for policy and storage market strategy, told Utility Dive.
“If we didn’t have that rock solid foundation for residential solar, we would not have been able to add on the storage in aggregate and fit into the market. That’s really what unlocked this at the state level,” he said. “The New England system operator, they have market access rules that are much more conducive to residential demand side resources than any other market in the country.”
Similar to Massachusetts, other ISO-NE markets, including Vermont, New Hampshire and Rhode Island have policies to encourage the development of residential solar and energy storage. Sunrun anticipates that the contract’s 20 MWs of capacity will be met with roughly 5,000 homes featuring onsite solar-plus-storage, which will be tied together through software to create a dispatchable resource for the system operator.
“It’s super exciting because we were competing head-to-head with traditional centralized fossil fuel resources, like a natural gas peaker plant and an oil plant. And we were able to fit in and win based on price. For us, we really see this as a paradigm shift and a signal of where the energy infrastructure is going to be heading in the future,” Rauscher said.
In addition to providing capacity generation, Sunrun’s bid will increase grid resilience and lower prices for everyone in the market region. All 5,000 homes will be set up to provide indefinite backup power, should the grid go down due to storms or other causes, Rauscher explained.
“It definitely brings an entirely new resiliency component that a natural gas plant, coal plant, or even a solar array off in a field cannot bring,” he said.
Furthermore, the increase in distributed solar means a lower peak load, which in turn keeps the overall amount of resources that a system operator has to secure down. This not only lowered the clearing price in the capacity market auction, but ultimately lowered prices for everyone in the region, according to Sunrun.
Massachusetts state officials welcomed ISO-NE’s decision to award Sunrun with the capacity contract. In order for the state to reach its renewable energy and climate goals, there needs to be an expansion in the pairing of intermittent resources with battery technology, DOER said.
“We’re excited to see what Sunrun did and we expect to see a lot more opportunities for that going forward. And we really need to see more of that happening going forward, if we want to achieve our long term goals,” Judge said.
Building a foundation for residential solar
Batteries are now eligible for a much larger piece of Massachusetts’ $620 million annual energy efficiency budget. The American Council for an Energy-Efficient Economy (ACEEE) in October named the state the most energy efficient in the nation for the eighth consecutive year. To reach that status, a few years ago, the state began efforts to define storage as a resource.
Massachusetts started looking into the benefits of energy storage in 2015, launching the Energy Storage Initiative. The initiative included a comprehensive study and provided funding for demonstration projects, authorizing the DOER to establish a statewide energy storage target, Judge said.
The state went from less than 2 MW of energy storage to setting a target of 200 MWh by 2020 nearly two years ago, although that now pales in comparison to storage targets set by other states such as New York and New Jersey. Massachusetts’ goal was extended to 1 GW last August.
The state continues to craft policy to spur storage deployment and enable full regional participation in residential, commercial and wholesale energy markets.
In 2017, DOER and the Massachusetts Clean Energy Center (MassCEC) teamed up to launch the Advancing Commonwealth Energy Storage (ACES) initiative, which awarded $20 million in grants to 25 energy storage projects, including commercial projects, utilities, hospitals and educational institutions.
The Massachusetts Department of Public Utilities (DPU) in February issued two orders to complement these ongoing energy storage initiatives by specifying net metering requirements for solar-plus-storage facilities and clarifying capacity ownership rights of solar-plus-storage projects.
The orders addressed concerns raised by developers that storage deployment at existing or new solar facilities might negatively impact the economics of those projects. The policies were not developed to the extent they need ed to be for storage to take off, Zachary Gerson, an attorney with Foley Hoag, told Utility Dive last year.
“Now that there’s clarity that you can pair those two resources, and there’s a path forward to obtaining the capacity rights to both, having that clarity should unlock the ability for people that are looking at solar-plus-storage, or wind-plus-storage or whatever, to move forward with the confidence that they can then monetize those revenue streams in the markets, and that they will be able to continue to net meter if and when that’s applicable,” Judge said.
Continuing to spur storage deployment
Last August, Massachusetts Gov. Charlie Baker, R, signed An Act to Advance Clean Energy, which includes raising the energy storage target to 1 GW by 2025.
“In our view, the Clean Peak Standard and storage deployment target initiatives put forward by the House and Senate are complementary and critical to ensuring the Commonwealth maintains its position as a leader among states in breaking down the hurdles to energy storage deployment, attracting industry jobs, and achieving the Commonwealth’s ambitious energy and environmental goals,” the Energy Storage Association (ESA) said in a statement.
The Clean Peak Standard, which is currently under development, will be designed to provide incentives to clean energy technologies that can supply electricity or reduce demand during seasonal peak demand periods, DOER said.
“That could be a really big opportunity for energy storage, particularly energy storage that doesn’t qualify for the SMART program to receive additional compensation for the value it provides in terms of shifting peak energy use,” Judge said. “Charging energy during periods of low demand, discharging during periods of high demand and flattening out that load curve …. becomes a bigger and bigger challenge as you have more solar and other intermittent renewables on the grid.”
Massachusetts’ push to become a leader in storage deployment is not surprising given some of the state’s energy challenges.
“[Energy storage] makes sense for Massachusetts, because [of] some of the specific needs of the New England system in general, and Massachusetts specifically, because they have challenges with capacity. They are trying to figure out how to retire several traditional power plants, they have trouble building new transmission lines, and energy storage is obviously a potential aid or solution to a lot of those issues,” Eric Hittinger, public policy professor at the Rochester Institute of Technology, told Utility Dive.
Hittinger says the commonwealth also is using energy storage as a tool to support local manufacturers and developers, not unlike what Germany did when it became an early adopter of solar.
“Massachusetts is doing things that are maybe marginally cost effective today, but what they’re really doing is investing in the future of an entire industry that will pay dividends out into the future. Just like solar might have been 10 or 15 years ago. It wasn’t really a good investment,” he said.
The ESA said in a 2017 white paper that market forces will drive the deployment of more than 35 GW of new energy storage systems in the U.S. by 2025, and many states will look to Massachusetts for how to set their regulatory framework.