Re: Case 14-M-0101 Proceeding on the Motion of the Commission in Regard to Reforming the Energy Vision Track 1 Policy Issues

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1 VIA ELECTRONIC FILING July 18, 2014 Hon. Kathleen H. Burgess Secretary to the Commission New York State Public Service Commission Empire State Plaza, Agency Building 3 Albany, New York Re: Case 14-M-0101 Proceeding on the Motion of the Commission in Regard to Reforming the Energy Vision Track 1 Policy Issues Dear Secretary Burgess: On behalf of the New York Battery and Energy Storage Technology Consortium ( NY- BEST ) please find enclosed for filing with the New York State Public Service Commission, our responses to the questions posed by Administrative Law Judges Eleanor Stein and Julia Smead Bielawski in Case 14-M-0101 Ruling Posing Questions on Selected Policy Issues and Potential Outcomes, Establishing Comment Process and Revising Schedule, commonly referred to as Track 1 Policy Questions. NY-BEST and our 135 member organizations from across New York State and beyond view this matter as critical to making energy efficiency and distributed energy resources, such as energy storage, a primary tool in the planning and operation of an interconnected modernized power grid. If you have any questions or require additional information regarding these comments, please contact me at (518) Respectfully, William P. Acker Executive Director Enclosure 1

2 NY-BEST RESPONSES TO QUESTION RAISED IN CASE 14-M-0101 (PROCEEDING ON THE MOTION OF THE COMMISSION IN REGARD TO REFORMING THE ENERGY VISION) RULING POSING QUESTIONS ON SELECTED POLICY ISSUES AND POTENTIAL OUTCOMES, ESTABLISHING COMMENTS PROCESS AND REVISING SCHEDULE INTRODUCTION The New York Battery and Energy Storage Technology Consortium ( NY-BEST ) is a notfor-profit industry trade association that serves as the voice of the industry for over 135 member organizations on matters related to advanced batteries and energy storage technologies. Our membership covers the full span of activities related to research, development, production and deployment of energy storage devices, and currently includes technology developers ranging in size from small start-up companies to global leaders such as General Electric, leading research institutions and universities, Brookhaven National Lab and numerous companies involved in the electricity and transportation sectors. Our mission is to catalyze and grow the energy storage industry and establish New York State as a global leader in energy storage. We do this by: (1) serving as a center for communication, education and interaction amongst stakeholders; (2) leveraging New York s world-class intellectual and manufacturing capabilities and market leadership; (3) supporting and accelerating the commercialization process from research and development to products and widespread deployment; and (4) advocating for policies that promote the energy storage industry. NY-BEST s Approach to REV NY-BEST supports the NYS PSC s efforts to transform New York s electric industry with the objective of creating market-based, sustainable products and services that drive an increasingly efficient, clean, reliable, and customer-oriented industry. NY-BEST envisions over the longer term the electric grid to be a bidirectional, transactive, and situationally-aware system that supports the following principles: 2

3 Transactive nodes across the grid, with bidirectional interconnections and prosumers (producer-consumers) buying and selling energy products and services; The elimination of barriers to entry, allowing new technologies to participate in the electric grid and ensuring that the batteries and energy storage are not excluded; The valuation of products and services based on transparent and standardized methodologies, procedures and processes through the unbundling of the costs and benefits of energy resources in providing products and services to the grid, ensuring that each DER s value streams are appropriately and fairly captured; and The elimination of competitive barriers so that each resource can participate on a level playing field. Ensuring that Distributed Energy Resources (DER), such as energy storage, are fully evaluated prior to the selection of any generation, transmission or distribution asset. NY-BEST has been proud to participate in the Reforming the Energy Vision process and we are pleased to provide these responses to the Track 1 Policy questions. I. Potential REV Outcomes NY-BEST generally agrees that the anticipated outcomes identified in the outcomes matrix are the appropriate results that the Commission should be striving for in the REV effort. As discussed in our introductory comments above, we have also outlined five distinct longer term goals for this process that are articulated above. NY-BEST envisions over the longer term the electric grid to be a bidirectional, transactive, and situationally-aware system that supports: Transactive nodes across the grid, with bidirectional interconnections and prosumers (producer-consumers) buying and selling energy products and services; 3

4 The elimination of barriers to entry, allowing new technologies to participate in the electric grid and ensuring that the batteries and energy storage are not excluded; The valuation of products and services based on transparent and standardized methodologies, procedures and processes through the unbundling of the costs and benefits of energy resources in providing products and services to the grid, ensuring that each DER s value streams are appropriately and fairly captured; and The elimination of competitive barriers so that each resource can participate on a level playing field. Ensuring that Distributed Energy Resources (DER), such as energy storage, are fully evaluated prior to the selection of any generation, transmission or distribution asset. In addition, we would suggest adding an additional goal to Category IV: Operational Efficiency. We specifically recommend adding to the subject Peak Load, the following goal, Provide capacity through distributed energy resources to effectively manage peak load across the entire DSPP territory. Importantly, while peak load can be managed through reduced demand, it can also be addressed by adding capacity through clean distributed energy resources, such as energy storage, which allows energy produced during off-peak hours to be stored for use at later peak use hours. NY-BEST believes it s important to recognize that energy storage is not just a behind-the-meter resource. II. Optimal Ownership Structures for Distributed Energy Resources As discussed in the Staff Report, an important issue in the definition and implementation of the DSPP vision will be the extent to utilities are directly engaged in DER-related activities. Direct utility engagement with DERs could come in the forms of ownership, financing, operation, contracting and any combination of these. NY-BEST believes that at the outset, utilities will be an important part of the emerging DER landscape and should become an active participant in their development. We support a 4

5 system that provides an open competitive, fair and level playing field where multiple types of organizations and vendors are able to participate, including private corporations, contracted third-party ownership, public/private partnerships, and utility investments in DER projects. Utilities have access to lower-cost capital than many other entities in the marketplace and understand existing distribution systems. On the other hand, third parties that specialize in the deployment of DER resources arguably have more experience purchasing power because of long-term supply contracts, are willing to handle technology and operational risks, and can execute on a faster schedule. As a result, a system that allows multiple parties to participate will help facilitate an increased penetration of DERs and the evolution of the grid to a distributed, dynamic and flexible system. III. DSPP Identity With respect to the question of who should serve as the DSPP, NY-BEST agrees that this is a choice between incumbent utilities and an independent entity or entities. In the longer term, given that the DSPP will be responsible for managing a robust market, an independent entity would arguably be preferred over a regulated monopoly. However, NY- BEST recognizes that interim steps are necessary to achieve a fully functioning market for distributed energy resources. As a result, in order to begin a process of integrating DER resources, we acknowledge that the utilities will need to play a key role in developing, employing and compensating DER. However, the utilities involvement should not preclude or interfere with the ability of customers, DER providers, or other third parties to engage in existing markets without the interference of the utility or DSPP. As a first step in developing additional DER, NY-BEST recommends that utilities first identify areas where DER would have near term value. These areas may include, but are not limited to, areas where transmission or distribution infrastructure investment will be needed, particularly those areas where facility capacity is currently stressed or significant load growth is expected. In addition to providing this information to DER providers, NY- BEST recommends that the Commission consider taking specific actions to require utilities to integrate and utilize DER resources. These are articulated in our response to Question V. As recommended by the Markets and Pricing Working Group, NY-BEST agrees that utilities should also integrate DER in system planning efforts. We also recognize that for that to occur, visibility into new and existing DER locations, performance and availability must be 5

6 established. Additionally, standard methods for predicting, measuring, observing, and verifying performance must be established. IV. Benefits and Costs As background, NY-BEST would like to first highlight for the Commission the full range of benefits energy storage can provide. Energy storage technologies and applications enable all generation sources on the grid to operate more efficiently, flexibly, and resiliently; increase system efficiency and utilization; facilitate integration of renewable energy resources on the grid; reduce greenhouse gas emissions, other air pollutants and limit environmental impacts; and lower costs for consumers. Energy storage resources are currently operating on the nation s grid and are used in a variety of applications to balance generation and load in an efficient and cost-effective manner. Energy storage technologies are ideally suited to assist with grid resiliency and increased reliability. Storage provides the flexibility to integrate renewables into the electric grid without consuming additional fossil fuels needed to meet the ramping requirements of renewable energy generation resources. The numerous benefits of energy storage have been studied by reputable government, academic and industry experts. NY-BEST recommends the Commission review the following reports: Final Report for Assessment of Visibility and Control Options for Distributed Energy Resources, June 21, 2012, DNV GL Energy, completed for California ISO Energy Storage Cost Effectiveness Methodology and Results, August 18 th, 2014, DNV GL Energy completed for California Public Utility Commission and the California Energy Commission Cost Effectiveness of Energy Storage in California: Application of the Energy Storage Valuation Tool to Inform the California Public Utility Commission Proceeding R , 2013, Electric Power Research Institute, Palo Alto, CA

7 Minnesota Department of Commerce Value of Solar Tariff ( VOST ) "Guide to Estimating Benefits and Market Potential for Electricity Storage in New York, March 2007, Prepared for NYSERDA by Distributed Utility Associates and E Cubed Company. (This report is provided for reference. Please note, however, this report was published in 2007 and energy storage costs have dropped by over 50% in this short period. NY-BEST would recommend updating this study to reflect current technologies and pricing) VPS Cycle with Steam Feasibility Study for Bulk Power Storage in New York City, May 2013, prepared for NYSERDA by Barry Liebowitz and Jeremy Dockter of Expansion Energy. Reports/Electric-Power-Delivery-Reports.aspx Analytical Framework to Assessing Benefits and Costs As part of the move toward standardized, transparent processes, procedures and methodologies for valuing distributed energy resources, NY-BEST believes there is a clear, identified need to build a framework that allows energy resources to be compared on an equal footing and to have each distributed energy resource valued based on its actual costs and benefits to the grid. In this way, new pricing and compensation mechanisms can be developed that allow for economic value creation proportional to a particular DER s contributions to the grid. When examining the benefits and cost of DER devices such as storage, NY-BEST recommends that the Commission consider two primary components. First, devices need to be evaluated at the stand-alone, project level, ensuring that all benefits that are potentially offered by the devices are allowed to be accrued. Secondly, the analysis should assess at the system level, overall benefits that can be provided when the DER devices are considered in terms of aggregated assets that will contribute to overall system operation and contributions to the State goals of increased renewable production and cleaner energy. 7

8 In the early stages of the REV process, NY-BEST asserts that it is important to model the benefits of the system as a stand-alone device, ensuring that it has access to benefits on the customer side, distribution level, and market opportunities. In the later stages of the REV process, systems such as storage need to be considered for the system level benefits the devices can provide as aggregated, distributed bulk systems. The modeling methodologies in each case differ, but do require a level of sophistication and complexity to accurately assess. When assessing the early stage accounting of benefits of storage, NY-BEST believes it is important to ensure that all capabilities of application provided are accounted for and accrued to the system. Using storage as an example, when considered as a stand-alone unit, consideration will need to be made for: a. Standard, project level benefits of the device to include reliability, peak shaving capabilities, load shifting capabilities; b. Benefits to the feeder itself, to include benefits such as deferral, feeder level protection against intermittency of variable renewable devices; c. Benefits from participating in market opportunities, such as customer side access to market products such as regulation, spinning reserve, or potential new products offered to support grid operation; and d. Societal benefits such as emission reduction, though better suited to be examined in the system analysis due to the cause-effect issues Methodology When examining DER devices at this level, simulation approaches need to be considered. DER devices will be performing multiple roles and tapping into multiple benefit streams. The devices themselves will be governed by controls and optimization routines that will make simple accounting of how units operate difficult. The best means to assess such scenarios is through actual simulation of operation of the devices. Examples of this have been seen in the California AB 2514 evaluation process where tools and methodologies were incorporated that simulated the grids and how the devices operate in performing specific roles or use cases. When assessing later stage applications, the benefits need to focus more on the grid operation where improvements in efficiency, cost savings from visualization of the DER 8

9 devices on the system, and aggregated bulk assets being incorporated into system planning activities. The methodologies have again been demonstrated in prior studies, but analysis will need to incorporate: a. Better understanding of the value and cost of self-optimizing behavior b. Modeling and analysis of the likely behavior of self-optimizing customers enabled by technologies such as storage and weighed against the economics of New York tariffs and market signals c. Understanding of the likely load and profile changes that will occur due to adoption of the DER devices For the long term incorporation of the benefits, a more holistic understanding of the likely scenarios will need to be considered but the benefits such as improvement in efficiencies, cost reductions, potential improvements in emissions will need to be assessed, extracted, and accrued to owners of DER systems. 9

10 A summary of the potential benefits that need to be accounted for in assessing DER systems in shown in the chart below: End Use Distribution/Trans Wholesale/Markets System Local Reliability Reactive supply and Voltage control Regulation (ISO product) Criteria air pollutants (SO2, NOx, PM) Load management T&D capacity upgrade deferral Flexible resource adequacy Carbon Emissions Energy time shift T&D reliability upgrade deferral System resource adequacy Security & Resiliency Local Resiliency and leveraging renewable assets Intermittency mitigation of variable renewable resource Local resource adequacy Cost reductions due to utilization of aggregated DER (storage) asset Peak Load Reduction Black start capability Over-generation and curtailment support Distribution System Reliability Market energy (day-ahead/realtime) Efficiency improvement of fossil generation (hybrid application) Transmission & Distribution Capacity Flexible ramping product (Future ISO product) Fuel Price Hedging Frequency response (inertia) (Future ISO product/standard) Generation Capacity Spinning/non-spinning reserve (ISO products) Capacity Market 10

11 V. Transition for Clean Energy Programs The REV Staff Report envisions that the DSPP (i.e., Utilities) will integrate energy efficiency (and presumably DER resources) into its system planning, targeting efficiency where it will produce maximum system value, and rather than being funded through a surcharge, efficiency/der expenditures will be treated like any other part of the utility s revenue requirement and energy pass-through charges. The Staff Report further states that NYSERDA programs will be refocused on market and technology transformative strategies designed to provide temporary intervention and support to overcome specific barriers and produce self-sustaining markets. NY-BEST believes it s important to note that many distributed energy resources exist today in New York as a result of the efforts of the Public Service Commission, New York State Energy Research and Development Agency (NYSERDA), the NYISO, utilities, ESCOs and others. The development of these resources have been fostered by programs and tariffs including the Renewable Portfolio Standard (RPS), the Energy Efficiency Portfolio Standard (EEPs), Systems Benefit Charge, various NYISO and utility demand response programs, and other state programs and policies. As discussed on the Markets and Pricing Work Group, in order for the vision of REV to be fully realized, while also continuing to make progress on the State s environmental goals, NY-BEST believes that a smooth well-planned transition from the existing regulatory and funding framework is essential to successfully achieve the REV vision. Specifically, we believe the existing Clean Energy programs need to be continued or expanded in the near term and that new mechanisms will need to be put in place to enable increased utilization of existing and new distributed energy resources. NY-BEST specifically recommends that the Commission and NYSERDA broaden the existing Clean Energy Programs to include energy storage. At the present time, there is an insufficient penetration and utilization of DER to enable a near term transition to the end state envisioned in the Staff Report. Continuing and expanding Clean Energy Programs will be instrumental to increasing the penetration of DERs. Further, clear, reliable long-term market and regulatory mechanisms will need to be in place to allow the DSPP and all market participants to incorporate these changes in their planning and best ensure a successful transition. 11

12 NY-BEST members have suggested a number of potential initiatives that the Commission could adopt to increase the penetration of DERs. Two specific recommendations that NY- BEST urges the Commission to consider are as follows: 1. DER Targets To help incentivize the development and deployment of DER resources, NY-BEST recommends that the Commission consider setting DER targets for each utility. Similar to renewable energy goals, Commission could require that the utilities procure a specific amount of DER resources between now and This essentially builds on the program adopted by the Commission as part of the Indian Point Contingency Plan whereby a 125MW target was established for the ConEd service territory for demand response, energy efficiency, and energy storage. In expanding the program statewide, the Commission could consider allowing utilities to enter into power purchase agreements following competitive solicitations to ensure the procurement is cost competitive and includes performance based contract standards. 2. Procurement Loading Order The Commission could create a public benchmark for utility planning that informs all parties of the preferred methods to meet the State s energy needs. This would include a hierarchy of options with the top priority given to technologies or solutions that achieve certain results such as: reduce total energy usage, reduce emissions, and proximity to the load. For example, the California Energy Action Plan highlights technologies in their loading order with preference given to technologies which are selected first. To meet New York s needs, NY-BEST suggests the Commission consider building on the California model by creating a program that focuses on capabilities rather than specific technologies. This would be more flexible than the approach taken in California and would focus on capabilities needed by the system rather than on ever-evolving technologies. We would also recommend the Commission consider creating a loading order with the requirement for utilities to first evaluate 3 rd party solutions before choosing to invest in transmission or distribution assets. 12

13 VII. Access to Data NY-BEST echoes the findings of the Markets and Pricing Work Group report with respect to access to data. Specifically, the Working Group noted that a key challenge to further proliferation of DER was information availability. The need for better information was identified in three areas. First, DER providers noted that there is a need to have information regarding the distribution system needs and capabilities by location. This information will facilitate the development of projects in areas where the need and presumably the payment for DER services is the greatest. Additionally, the utilities noted that there is a need for DER performance and commitment data, which NY-BEST agrees with but we believe the data should be maintained by the third party provider and made available by the third party providers, similar to data collected by revenue grade meters for thermal power plants. Finally, ESCOs and other third parties in particular noted the need for customer account and usage information to assist in identifying appropriate customers for particular DER services. VIII. Other Issues Energy storage facilities have the power to extend and optimize the operating capabilities and reliability of the electric grid because they allow electricity that is generated at one time to then be used at a later time. This capability provides flexibility in generation and distribution, improving the efficiency and utilization of the entire system. Energy storage facilities allow surplus generating capacity to be used to charge energy storage facilities during overnight periods in order to serve peak loads the following day thereby relieving stress on transmission equipment during peak periods, making better utilization of transmission, distribution and generation assets and providing better service to customers. Energy storage increases the overall efficiency of the grid and multiplies environmental benefits because the electricity that is stored is derived from cleaner, more efficient assets (i.e., high efficiency thermal power plants and renewables), rather than low efficiency, higher emission peaker plants. Dispatchable energy from energy storage can avoid the need to build additional generation to reliably meet customers needs during periods of high demand. Further, modernizing the electric grid for today s needs and creating a grid capable of handling an increasing amount 13

14 of intermittent renewable generation (such as wind and solar) will require a substantial capacity for electrical energy storage. Energy storage facilities are environmentally beneficial and have limited environmental impact. Specifically, these technologies: o Result in no direct emissions, and reduced system-wide emissions through better utilization of existing assets o Do not require substantial amounts of water to be used or consumed o Have no chemical or fuel handling or storage o Have limited visual, ecological and land use impacts In addition, NY-BEST believes it is important to note that energy storage provides locallydelivered energy and capacity and we urge the Commission to recognize this in the REV proceeding. While some see energy storage facilities as simply behind-the meter resources, NY-BEST believes it s important to recognize the on-grid benefits energy storage provides to transmission and distribution load areas. For example, energy storage can provide ramp-rate control for renewable energy, as well as other grid services such as reactive power and voltage support. If energy and capacity from energy storage are limited to load reductions behind the meter, the size of the energy storage system will be limited by the individual site requirement and the full benefits provided by energy storage will not be realized. Importantly, the benefits and the economics of energy storage systems are derived from both grid services and energy and capacity. If these benefits or products are not recognized through the REV proceeding, the market will grow more slowly and may not achieve all of the goals set out for REV. 14

15 NY-BEST appreciates the opportunity to provide these comments and we stand ready to assist with the Commission as the REV proceeding continues. Respectfully submitted, William P. Acker Executive Director NY-BEST 1450 Western Ave, Suite 101 Albany NY