Congress Hears the Case for Energy Storage

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Energy Storage Gets Its Day in Congress

The House Energy and Commerce Committee invited experts to testify on what federal storage policy should look like.

Written by Julian Spector, greentechmedia.com, July 18, 2018

Energy storage experts got to ask what their country could do for them Wednesday.

The House Energy and Commerce Committee convened a hearing on “the role of energy storage in the nation’s electricity system,” which gave industry insiders the rare chance to share what they’ve been thinking before a national audience.

The committee members of both parties generally expressed support for energy storage as a nationally valuable asset to allow better control of the supply and demand of electricity, to avoid more expensive traditional grid upgrades and to provide resilience after cataclysmic events.

“Mr. Chairman, energy storage has the potential to fundamentally transform the way we produce and use electricity in a way that benefits the nation as a whole, but we must be willing to make the necessary commitments and the necessary investments in this technology for it to do so,” said Rep. Bobby Rush of Illinois, a Democrat.

For a young industry that typically talks in state-level goals, but is largely focused in only a handful of states, the event marked a maturation in ambition. The goal: to clarify what a federal energy storage policy should look like.

No unified federal storage policy currently exists, although the oft-cited FERC Order 841 is pushing grid operators to systematically value storage’s unique attributes and allow it to compete in wholesale markets.

Potential congressional action will likely be focused elsewhere. Here are the key ideas proposed at the hearing.

Expand federal research and development funding for energy storage technology

Simply earmarking more money for storage research would be the easiest action for Congress to take.

This appears feasible, even in the current political climate. When the Trump White House proposed slashing the budget for the Department of Energy and ARPA-E, the House responded with more funding.

R&D funding could help bring down costs over the next few decades, but it won’t help the practitioners installing batteries today.

Create an Investment Tax Credit for energy storage

Policy wonks might cringe at the American propensity to use the tax code to advance energy policy, but that’s how the system works these days.

Storage, though, hasn’t been able to make the most of the federal Investment Tax Credit that has proven so helpful in scaling solar power. The IRS allows the ITC for storage connected to solar, but claiming it dictates engineering and accounting that don’t necessarily maximize the value of the investment.

The upshot: The tax code incentivizes storage that can only charge from solar, regardless of potential optimization that could come from grid charging at key times.

A standalone credit would reduce the distortion, but it’s not a new idea. Senator Martin Heinrich (D-New Mexico) introduced a bill back in 2016, and it hasn’t moved since. There’s also a bipartisan bill in the House.

It’s hard to imagine the storage industry suddenly gaining the political clout to muscle such a bill through, past other national priorities, in an election year, no less. If the industry can harness Washington’s recent interest in grid reliability, though, there might be a way.

Craft a federal energy storage road map similar to state-level plans

The state-level “energy storage road map” has become a hallowed ritual for the industry, and each new state entry precipitates much fanfare and launching of press releases. The state-by-state effort to do the math, and prove that storage would be useful if only we fully accounted for its value, does leave one to wonder how much effort will be duplicated before significant deployments can occur.

A federal road map could do that analysis for the nation in one go. The risk here is that states wouldn’t like the federal government telling them how they should invest in their grids. The Clean Power Plan, which let states determine their own paths to a cleaner grid, prompted a couple dozen attorneys general to sue.

Tone and messenger both matter keenly in politics. If Rick Perry’s DOE leveraged its analytical resources to crunch the numbers for the states on how best to deploy storage, and then left it to them to decide what to do, that might evade the kind of resistance inspired by the so-called “war on coal.”

Rather than prescribe actions, the feds could also set national targets on things like cost and deployment, said Kiran Kumaraswamy, market applications director at storage vendor Fluence.

Speaking to GTM after his appearance at the hearing, he pointed to the DOE’s SunShot Initiative as a successful model for how a federal road map for energy technology improvement reduced costs and accelerated the industry.

Ensure utilities consider storage in their planning and procurement analysis

This goes deeper to the heart of why storage has advanced in some states, but not in most of them.

Where utilities examine it as a potential tool, they tend to find ways to use it. But in broad swaths of the country, utilities have yet to seriously weigh storage against traditional assets like wires and gas plants.

It’s hard to imagine Congress stepping into the highly federalized world of utility regulation and applying an across-the-board mandate to consider storage. That said, there might be a way to ask politely and get conversations started, or to ask FERC to prioritize this.

On a related note, Kumaraswamy told GTM he hopes to see storage integrated into the regional transmission planning process, where it could reduce costs on the most massive grid investments.

Something to watch out for

Energy storage has managed to dodge the partisan rancor that surrounds other energy discussions, like the decline of coal.

Part of this stems from how new and relatively unknown grid storage technology is. Rep. Joe Barton of Texas nodded to this when he quipped, “Rarely do we have a hearing or something like this where I know nothing about it, but you got me today.”

He followed up, though, with a savvy energy economics question: How do you measure the cost of new build storage, which can’t generate, versus a depreciated power plant serving standby capacity?

When one expert witness noted that the economics for storage are more favorable in places with ambitious clean energy and environmental goals, Barton called out the conflation of politics and economics.

“I’m not against battery storage…but I’m a little bit skeptical if we’re doing this simply because we don’t like natural gas power, we don’t like coal power, we don’t like nuclear power, because that would be an added cost that somebody’s got to bear,” he said. “It may be socially [and] politically viable, but it’s not economically the best decision.”

It is incumbent on the storage industry to clarify the accounting for storage compared to traditional assets. PG&E is testing out this theory with some massive batteries in the South Bay region that will replace existing gas peakers.

Overall, the tone of the questions was inquisitive, rather than combative.

“The lawmakers seemed most interested in learning about the barriers and were focused on what they can do to help the technology provide the benefits it should to ratepayers,” Kumaraswamy said.

This article was written by Julian Spector and was originally posted on greentechmedia.com