Dive Brief:
- States looking to grow battery resources should consider making energy storage eligible for efficiency funding, a report from the Clean Energy Group suggests. The firm's economic analysis paved the way earlier this year for Massachusetts to adopt that policy.
- Enacting that first-in-the-nation policy hinged on two steps, according to CEG: including peak demand reduction as an energy efficiency goal, and demonstrating the cost-effectiveness of customer-sited batteries.
- The firm concluded making battery storage eligible for efficiency incentives could help reduce up-front capital costs and expand their use. The price of storage is already falling: Recent analysis by Bloomberg New Energy Finance found the levelized cost of electricity from batteries has decreased by 76% since 2012.
Dive Insight:
The cost of batteries is declining, but a key to expanding their use may actually be found in how another resource is defined.
"One of the key findings of this report is that the old definition of efficiency needs to be updated," CEG Project Director Todd Olinsky-Paul said. "As more renewable energy is deployed, reducing peak demand becomes more important."
Olinsky-Paul, the report's author, said that while traditional energy efficiency measures cannot address peak demand, storage can. More states should expand their ideas of efficiency, "to embrace peak demand reduction and the new technologies, like battery storage, that can accomplish it.”
By broadening the definition of energy efficiency, "states can open energy efficiency programs to battery storage with one simple step," the report says.
The report has several recommendations for states, including:
- Energy storage incentives should include three basic elements: an up-front rebate, a performance incentive, and access to financing;
- Incentives should also include adders and/ or carve-outs for low-income customers;
- And non-energy benefits of storage should be identified, analyzed and valued.
Non-energy benefits can include resiliency, reduced outages, increased property values, job creation and reduced land use, according to CEG.
In Massachusetts, CEG said battery storage "would have been found to be even more cost-effective had the non-energy benefits of batteries been included in the calculations." But CEG also said "more work is needed" to determine the true value of battery storage, including identifying a broader range of benefits.
"Establishing a more accurate benefit-cost ratio for distributed battery storage will support its inclusion in state energy efficiency programs and other incentive programs," CEG concluded. Otherwise, the firm warned storage will "continue to be at a disadvantage" relative to other technologies and may not qualify for incentives.
“Energy efficiency programs always have included new energy technologies,” CEG President Lewis Milford said in a statement. “Storage is now a technology that deserves early stage funding support, a trend that other states should follow to bring down their energy costs and bring more customers into this emerging storage market.”
