Could you give us an example of the challenges facing the energy storage industry in New York?
New York is a challenging place to do business, a dense urban environment. The challenges include building codes, fire codes which currently don’t have the technologies listed that we’re looking at now. Lithium-ion has just made it into the latest revisions of the fire codes for New York City but not for building energy management. So it’s listed as a resource for emergency power, for backup power, for standby power, but not, say to do peak shaving and demand management in the building, or renewables integration. So those aren’t listed and in NYC you have to go through the exception process for siting, which takes a long time and is expensive and is rather difficult.
Energy storage can be classified variously as generation assets, transmission infrastructure and load. How is the regulatory environment in New York dealing with this aspect of storage?
You have this very challenging view from a regulator’s perspective. How do I permit this thing? How is it compensated? Who can own it, even? Because we’re in a deregulated environment where our utilities can’t own generation assets.
It’s clear that our Public Service Commission [the regulator] has taken the view that utilities can own storage, that it’s ok, so there is a more forward-leaning view from the regulators. It doesn’t mean that we’ve got it all right yet. So it’s all of the kind of embedded value that you get from having this distributed resource – where they can produce value and then creating a regulatory environment where the transactions are compensated. It’s a complicated thought to get your head around if you’re a utility regulator. Fundamentally what you’re saying is, if you’ve got a battery in Manhattan that fills up with its off-peak power at night, and deliver demand response, peak shaving and, say, frequency regulation, all during the course of the next day, it should be compensated for all of those things and it’s a wonderful vision but it’s a huge amount of work to get from where we are today to implementing that.
Demand charges appear to be a big driver for commercial scale storage in the US generally - what’s that aspect of the electricity market like in New York?
The long-term capabilities that storage could bring to the US market are just tremendous. Demand charges for a facility are often as much as 50% of the electric bill. So if you own a big building in New York you’re basically paying a big payment every month, to reserve capacity to serve your highest demand and that’s set in a 15 minute window.
So in that 15 minutes you’re building double your demand because every ones’ turning on everything at once. That becomes your charge for the next three months on the bill, so it’s a really onerous expense and it’s one that people are always looking for ways to address. They’ve done, you know, building energy management systems and demand setting. They’ve tried to do a lot of things but storage is clearly a way to take a bigger bite out of that peak demand charge. So that’s the application that’s really driving a lot of activity.
I recently did a presentation for a manufacturing group on Long Island and one of the charts I showed is the one page calculation for a system that was installed in New York City in one of the buildings and this was a pre-incentive installation and in this particular case it was 100kW of storage. It made enough impact on the building demand charges that it paid back in just over 3.5 year payback – before incentives. So if you cut that initial install price in half with incentives, you’re talking less than two years payback for a good sized system. So those are kind of the drivers that are really pulling products into the marketplace, getting people excited about getting into the market here.
Globally, residential storage systems are starting to hit the market in greater numbers. We’ve heard the case for large-scale and commercial storage in New York, but not much about the smaller end of the spectrum. Has there been any activity to speak of?
We haven’t seen as much activity in the residential side. We have a good net metering law in the state – I have PV on my house in the state and I don’t have storage. It’s a combination that the grid is very solid, we don’t have many outages, and there have been a few times that we had outages when I’ve wished my panels could be producing power but overall there’s a fair compensation mechanism in place with net metering that for the majority of customers in the state, storage is more like a decision to put in a backup generator. Under the new rules let’s say net metering goes away and I can use my system to arbitrage, fill up the battery at night with off-peak power at half the price or less, there’s night time wind in upstate New York, hydro assets that can produce 24/7, if that finds its way to my house at night and I’m not using peak power the next day, now I get a payback calculation and if it’s attractive enough I’ll buy it. It’s getting the whole market rules right that allows you to think about what else is there, and where else will these things make sense and I think at that point, residential really does come on the scene in a big way. Because it doesn’t take a big system to make a difference on a residential building. We haven’t even touched on resiliency issues. If there’s a hurricane or other extreme weather, if you have PV on your roof and a battery you’re an island and the neighbours will probably come and move in with you!
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