Dive Brief:

• Maryland regulators should create new value streams for energy storage projects that would compensate them based on their ability to reduce emissions and defer the need for distribution grid upgrades, among other factors, a group of utility and government stakeholders said in a filing with the Maryland Public Service Commission (PSC).
• The document is the next step toward determining how Maryland utilities will solicit energy storage projects 5 MW to 10 MW in size, as the state's investor-owned utilities are mandated to do as part of a pilot program created by the state legislature last year.
• The outlined compensation methods could determine how energy storage in the state is monetized under several business models, including utility-owned, third-party-owned or a "virtual power plant" model in which customer-owned storage projects such as batteries are aggregated.

Dive Insight:

The ideas for how to value storage came from members of the Maryland PSC's Energy Storage Working Group, which includes representatives of Exelon Corp., Exelon subsidiaries Baltimore Gas & Electric and Pepco, the Energy Storage Association and wholesale electricity market operator PJM Interconnection.

An example of a value stream is an "air emissions reduction value." Energy storage can create reductions in greenhouse gas emissions by storing electricity generated by non-emitting sources like wind and solar, and then discharging that electricity at times when renewable energy is less available.

Under the working group's proposal, the megawatt-hours discharged by a storage project could be converted into an equivalent number of tons of CO2, and then that number could be multiplied by a CO2 price to calculate a greenhouse gas reduction value. When this value is combined with other potential value streams, the electricity discharged by a storage project would be worth much more on a dollar basis than would be captured by the price of electricity alone.

The filing mentions that the emissions reductions allowed by potential storage projects can help Maryland reach its goal of cutting greenhouse gas emissions by 40% below 2006 levels by 2030.

Maryland is only the third state to propose substantive analysis of the costs and benefits of storage, Energy Storage Association State Policy Director Nitzan Goldberger said in an email to Utility Dive.

"Currently, only two states—California and New York—have sought to implement [benefit-cost analysis] frameworks beyond simplistic estimates of distribution investment deferral or replacement value," she said.

"Absent reforms to most current [benefit-cost analysis] frameworks—along with regulatory and market reform that facilitates business models that can provide multiple applications from the same asset—energy storage economic impact analyses would not illustrate the full value of storage," according to Goldberger.

Another value stream envisioned by the working group would be the savings created when storage defers, or negates the need for transmission and distribution upgrades. Fewer wires and substations need to be built if there are more ways to store electricity, which enhance the reliability of the grid.

More energy conservation at times of peak demand should also be treated as a value stream for storage, according to the working group.

"By reducing the overall need to supply customers during periods of peak demand, the utilities will save money for ratepayers by reducing the overall need to serve the system during period of high demand," the filing said.

The group also proposed that utilities and regulators should also take into account "non-quantifiable" value streams of storage. For example, battery storage projects can help boost adoption of electric vehicles by serving as additional charging stations.

In addition, because the storage pilot program will embrace various ownership models, another qualitative value stream is "the development of a robust market of vendors" serving Maryland customers with a variety of storage technologies, the filing said.

Maryland's pilot program for storage follows the state's 2017 creation of an investment tax credit for residential, commercial and industrial storage installations.

The biggest storage project in Maryland is the 10-MW Warrior Run Advancion project from AES Corp., Goldberger said. The pilot program would create an additional 10 MW of energy storage for Maryland by around 2022.