‘All hands-on deck’ for the energy storage industry

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The following is a contributed article by Kelly Sarber, CEO of Strategic Management Group.

Energy storage technology may be the singular, most important component in our nation’s transition away from fossil fuels to renewable energy, since utility-scale, battery systems provide the flexibility to absorb, store and deploy energy at locations where and when the power is most needed. Energy storage is crucial to replacing America’s fleet of polluting, fossil fuel plants because they integrate the increasing amounts of wind, solar and hydropower being transmitted hundreds of miles without jeopardizing grid reliability — sometimes the wind isn’t blowing or the sun isn’t shining where and when the power is most needed.

For example, in New York City alone, there are plans to construct more than 9,000 MW of offshore wind projects that will connect to land, replacing more than 8,000 MW of an aging fleet of natural gas plants while adding more electrification capacity for vehicles. These goals cannot be accomplished without deploying utility-scale storage to connect new, intermittent offshore wind power that will take years to develop. More importantly, energy storage projects need to be constructed and operational before these new, planned renewable energy resources come online, making sure intermittent resources are balanced against demand.

Unfortunately, and like every segment of our nation’s economy, the energy storage industry is reeling from unforeseen costs and supply chain delays, facing uncertain, external risks and market-based obstacles that must be acknowledged and addressed if we are to stay on track to aggressively fight climate change by investing and constructing energy storage projects that support dual goals of renewable energy and grid resiliency.

Utility-scale, battery systems operating today are quickly proving themselves to be a reliable and resilient workhorse for grid support in locations where projects have come online. California leads the nation in deploying energy storage because the state’s climate change policies are complemented by market incentives that reward grid resiliency, reliability, resource adequacy, voltage support and energy islanding. In most other states, energy markets do not compensate developers of energy storage with the same benefit-based approach — policies that need to be immediately remedied if they hope to attract similar investment.

Elected leaders, the Independent System Operators and other stakeholders need to recognize the detrimental impacts from escalating costs and move quickly to replicate market-based incentives that reward energy storage with similar financial incentives. It is ironic that billions of dollars in stand-by fees flow into keeping polluting natural gas plants online while the one asset base that is desperately needed by the grid for resiliency and reliability — energy storage — is stymied. The risk of not acting today could slow down our nation’s clean energy transition by decades.

A recent Wood Mackenzie national report quantifies delays or cancellations for over 2 gigawatts of grid-scale capacity originally slated to come online in the 4th quarter are now largely attributed to supply chain pressures, increased capital expenditures, and interconnection-related delays forecasted to persist at least through 2024 and possibly 2025. Because utility-scale energy storage projects can take several years to construct, the timing gap means many projects that were in development during Covid are caught in a tightening noose with no relief, leading to projects that once were profitable now being in the red with no recourse.

Without corresponding increases on the revenue side through both market changes and federal/state incentives, energy storage projects will get more expensive for ratepayers in the future while current projects may have to cancel, losing years of development time invested in progressing this transition to clean energy resources. It is akin to throwing a bucket of cold water on private capital interested in addressing climate change goals in states where corresponding market-based support incentives aren’t being adopted.

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