Massachusetts’ finalized Clean Peak Standard (CPS) regulation has been lauded as a benchmark policy for addressing the duck curve, making strides in statewide emission reduction and promoting the widespread adoption of battery storage systems.
While the policy promotes large-scale battery development, it has been criticized by proponents of behind-the-meter storage like Russ Aney, CEO of Avid Solar, who asserts that the regulation does nothing to motivate investment — going so far as to refer to it as “a waste of ratepayer funds for behind-the-meter energy storage.”
Where did the value go?
“Fundamentally, I think Massachusetts Department of Energy Resources (DOER) was a bit frustrated at the time because the utilities don’t have any tariffs that provide price signals for discharging storage. We as a state are dramatically behind in terms of smart meter and grid modernization efforts: we don’t have time-of-use rates for 99% of ratepayers, we don’t have residential time-of-use rates. Clean Peak was trying to, in the absence of a market signal, attempt to convince people to discharge their batteries at a time where it’s most meaningful for the grid.”
In the finalized version of the regulation, several key factors of the policy were revised. The Alternative Compliance Payment (ACP) rate, essentially the base incentive credit, was raised to $45 from the originally proposed $30. That initial value will exist for five years, down from the ten years originally proposed. The Summer/Winter multiplier was raised to 4x from the originally proposed 3x, while the Actual Monthly Peak Hour Multiplier went to 25x from 15x.
Before the CPS was the MA-Smart program. Under this program, those who install a PV project up to 5 MW can apply to have a portion of the installation cost paid for by the state, on top of the initial investment tax credit. This provides meaningful subsidies to new PV installations, with additional subsidies for those who also choose to add an energy storage system to their array. However the storage adder was never designed to fully offset the cost of a residential storage system, since the benefit to DOER comes from the grid services provided by the system.
If the owner of that system wants to enter it into CPS, the value of the PV credits generated are discounted by 90% and the value of storage credits are discounted by 80%.
For the average residential storage system, the net benefit just isn’t there. Under the maximum scenario for each 4-hour peak discharge window in the summer, the system owner is making somewhere between 50¢ and $1.00, which translates to $50-100 a year. With the initial ACP rate lasting 5 years, this doesn’t translate into any real rebate on the cost of installing the system.
Enter Connected Solutions
While Clean Peak was being developed, Massachusetts’ utilities came up with a different design under the Mass Save program. Initially developed as a rebate system for energy efficiency upgrades, the program extended into a distributed energy resource management system (DERMS) pilot.
“They’re going to reward the average residential battery system owner anywhere from $500-1,500/year depending on the capacity of the battery for a typical residential installation. That’s a rate that’s locked in for five years and you only have to discharge your battery 50-60 times a year to claim that incentive.”
Under the pilot, batteries would be discharged remotely using the DERMS platform, via the installation’s smart inverters.
“Between the SMART energy storage adder, the Connected Solutions program and the ITC, all of a sudden we have enough incentive dollars on the table to make the investment in behind-the-meter storage economical.”
While Connected Solutions could provide better incentives to customers while also driving down the peak, it’s not a perfect pilot. The utilities have limited budgets for the program. From a market perspective, only certain battery vendors and inverter solution suppliers have been approved, a move Aney credits as being an exercising of control by the utilities rather than an issue of platform compatibility.
“The industry will have a very strong response and comment to the Massachusetts Department of Public Utilities about maintaining this as an open market.”
Certain vendors like SMA, Panasonic and Enphase have thus far been shut out of an incentive program with a greater value than Clean Peak.
A light at the end of the tunnel
If two state initiatives regarding energy storage weren’t enough, there’s Bill H.3622 “An Act relative to energy storage.” H.3622 directs DOER to establish a rebate for Massachusetts-based companies installing and manufacturing energy storage systems. A funding source considered for this program are the aforementioned ACPs, so long as the energy storage system installed provides sustainable peak load reductions on either the electric or gas distribution systems or is otherwise cost-effective.
It is a bill that Aney describes as having the potential to be a non-SMART storage incentive for all new PV. In addition, it could provide a critical incentive for the 90,000+ existing solar installations in the state to add energy storage.
The bill is currently sitting in the House Ways and Means Committee for review and approval.