With the requirement for decarbonisation intensifying for many nations across the globe, Powerstar has released part two of its US Industry Insight to summarise the progression of energy storage across the US, particularly focusing on the East Coast.
You can view part one of the Industry Insight which explores the West Coast here.
Below Powerstar summarises the energy storage goals publicized by the following East Coast states:
- Massachusetts (MA)Energy storage east coast
- New York (NY)
The energy storage agenda in the state of Massachusetts has been a somewhat underwhelming affair and the target that was set in late 2017 did little to ease concerns.
This is because the target that Massachusetts set for itself in 2017 was to procure 200MWh by 2020 1, this failed to take into account recommendations from the multiple organisations and agencies that contributed to the State of Charge report published in 2016 which suggested that the target should be 600 MW by 2025 2.
The considerable disparity between the two targets has invited critics to understandably claim that Massachusetts is being less ambitious than it could be. This is compounded by the difference in units, (the target being in MWh and not MW), when compared to the leading energy storage targets of Arizona, California and New York.
However, there are other aspects somewhat overlooked by the critics. The target is supported by infrastructure investment promises such as $10 million in additional funding for demonstration projects and a pledge to investigate eligibility for storage systems under the state Alternative Portfolio Standard 1. The most attractive aspect, however, is that the suggested target of 600 MW hasn’t necessarily been ignored at all. Instead, the target of 200MWh by 2020 could inspire quicker action because of its urgent timeframe and then potentially, once this goal has been achieved, the state would be in a much stronger position to set and deliver the larger objective of 600MW by 2025. In addition to this, it could be argued that despite the less ambitious targets compared to the other states, it is still ahead of the majority of the nation and that Massachusetts is building from a low base of energy storage, with nothing currently implemented in the state on a commercial scale and just 180kW at residential 3.
The main reason for the complexity of implementing an energy storage target in Massachusetts is the fact that it shares its Independent System Operator with other states. Unlike California (CAISO) and New York (NYISO), the electricity system in Massachusetts is managed by ISO New England 4. This means that all other states in New England: Maine, Vermont, New Hampshire, Connecticut; and Rhode Island need to co-operate with Massachusetts if it is to achieve its energy storage goals. This opens the energy storage target of Massachusetts up to a level of politicisation that is absent in California and New York and means that the road to the target is likely to be a lot less smooth as a result, as neighbouring states, with potentially different energy goals, hold the power to decide whether the objective is achieved.
It is undeniably positive that Massachusetts has set an energy storage target because it contains both the major metropolitan city Boston, and therefore is a significant energy user, as well as being home to the world-leading technology institution MIT, giving it the ability to innovate within the energy storage market and deliver specialised systems based on the states’ unique requirements. However, the complexities involved and the stunted ambition of its initial target which is misaligned with the objectives of leading states mean that it is much more likely to be a follower than a leader in the decarbonisation effort.
NEW YORK (NY)
The state of New York has, unsurprisingly, set an ambitious goal for energy storage with a none legally binding target to deploy 1.5GW of energy storage by 2025 5 as the state works towards 50% renewable energy by 2030 6. Furthermore, the state has announced that an energy storage roadmap is set to be released later this year to explain in greater detail how its targets are set to be achieved 7.energy storage NY
Despite having a similar objective to California, to implement 1.3GW by 2020 8, there is a significant difference in how the two states expect to achieve their goals.
In contrast to California, New York’s approach is about creating a localised industry of energy storage by clearing the hurdles that could thwart the development of energy storage, with faith in the market to organically create a thriving industry once the barriers to entry have been removed or, at least, significantly reduced.
There will be public money spent to remove these barriers and funds have already been committed in the shape of the New York State Energy Research and Development Authority’s (NYSERDA) Green Bank pledging to invest $200 million in financing for energy storage projects 5. In addition to this, NYSERDA’s Clean Energy Fund will provide $60 million in categories such as soft-cost reduction and business model pilots, product development and field testing, and grid modernisation and resiliency 5. This level of investment is likely to lead to innovative solutions being discovered in New York and, consequently,successful companies forming.
The difference in approach taken by the state of New York is high risk but also high reward. The risk inherent arises in a number of different ways. Firstly, the model is reliant on investors and although energy storage is gaining prominence, the fact that there are only 5 states with defined targets shows that it is still at an early adoption phase on a national scale. This could potentially result in investors showing reluctance to invest in energy storage as it could be seen as a bleeding edge technology market.
Secondly, the deadline for the target poses another risk. The target deadline is 2025, and reliant on the mechanisms of the market. This means that the success of the target could be dependent on a seven-year phase of economic stability which, while certainly not unprecedented, is a risk to take for the development of such an important market.
The final issue that brings risk is the possibility that the market could become an oligopoly with just a few, dominant players operating within it. In this scenario, the profit motive of the market leaders could conflict with the aims of the state. If it transpired that these companies could make a greater profit and strengthen their position in the market through re-erecting barriers to entry for new entrants, it would strangle the growth of capacity and would therefore be a direct threat to the aims of the state.
However, despite all these risks, it could be argued that the reward could significantly outweigh them. This is because if the market was to be successfully stimulated and supported in the right way, then innovation would increase exponentially and provide a thriving marketplace for energy storage within New York. This is down to the competitive environment it would create which would attract new entrants into the developing market all of which would need to find ways of differentiating from each other in order to establish a competitive advantage and overcome challenges.
The winners and losers of such a phase would be clear, and companies would either need to pivot and adopt the strategies and methods of the leading companies or exit the marketplace, therefore the energy storage market as a whole would grow stronger as a higher percentage of the companies involved would adopt proven and innovative technologies and services which help refine and improve the offering of the industry as a whole.
In addition to this, the risk posed by the requirement for a prolonged period of economic stability is minimised due to the fact that the proposal is for the state of New York. The economic and cultural capital that New York City possesses, with the New York metropolitan area having a GDP of almost $1.5 trillion in 2015, 9 is likely to shield it from the more damaging impacts of economic downturns and although there would still be some effects, it would be unlikely to derail an emerging market with state support such as energy storage. Finally, although the risk of an oligopoly emerging exists, this is more likely a problem which impacts upon the long-term future targets as if a number of companies were to gain such a prominent and powerful position in the market then it would, in all probability, be as a consequence of deploying enough capacity to achieve the 2025 target of 1.5GW.
It seems clear that the East Coast is just as willing as the West Coast to boost its decarbonisation efforts through energy storage, and that the potential for world leading companies, innovations and installations resides on both coasts.
Although Massachusetts is not well placed to be an energy storage leader, the attraction of New York and the way in which the state aims to foster a culture of energy storage and innovation, although risky, could lead to it becoming the energy storage capital of the nation.