At the end of January 2019, the Massachusetts Department of Public Utilities (DPU) approved the addition of a new three-year battery rebate program known here as the “Statewide Plan.” Adding battery storage to a solar system helps homeowners harness, enjoy, and control their energy supply while optimizing customer benefits and expanding the potential of renewable energy. Battery storage and solar PV systems hold substantial value alone, but utilities and stakeholders see them as more beneficial together.
Massachusetts has a limited amount of energy storage currently installed, but with the introduction of battery storage programs in the Statewide Plan, battery companies like Tesla are joining energy storage programs to clean, balance, and enhance electric grid operations.
The Statewide Plan calls for 200 megawatts (MW) of peak electricity demand reduction and 50 MW of winter demand reduction by 2021. Program Administrators are required to develop energy efficiency plans every three years that provide information on all possible cost-effective energy efficiency and demand reduction resources compatible with the Green Communities Act.
The Role of Grid-Tied Energy Storage
Batteries, or energy storage systems, store power, most often in lithium-based battery storage systems. Storage saves customers money by avoiding conventional electricity consumption from the grid, establishes back-up power during outages, adds grid resiliency, and fosters sustainability goals. Adding such balance to the grid works as a stepping stone in generating a more sustainable future.
Behind-the-meter systems, such as storage connected to a solar PV system, generate power on-site. Since this power is not produced from the grid, it’s referred to as ‘behind-the-meter.’ Behind-the-meter energy, like solar energy stored in a battery, can be used during periods of peak demand to reduce stress on the grid or when the sun isn’t shining to sustain energy needs. Massachusetts is the only state to offer electric efficiency performance incentives for behind-the-meter reduction measures through battery storage.
Your battery’s efficiency is rated by performance, determined by the rate at which it charges and discharges energy (in kW). This is determined through a battery’s cycle life. The battery’s cycle life measures the number of times a battery can reach a full charge and discharge to a specific level. For example, Powerwall has a depth of discharge (DoD) of 100%, which means that the entire 13.5 kWh of energy can be discharged if needed. A battery’s performance is important because it will determine how much a customer can earn from performance-based incentives.
Breaking Down the DPU’s ‘Statewide Plan’
The DPU approved performance-based incentive programs to small-scale demonstration projects. Customers installing new storage systems sign a five-year contract with National Grid or Eversource Energy to ensure incentives.
Program Administrators proposed a statewide distribution of incentives totaling $116.7 million for 3.3 billion kWh of total electric savings, and $23.5 million for about 96.5 million therms of total gas savings, giving the State plenty of room for pilot storage projects.
Program objectives are to decrease energy costs and increase reliability through reductions in winter and summer peak demand: the target dispatch program during the winter peak periods, and the daily dispatch program during the summer peak periods. Both residential and commercial customers qualify.
Daily dispatch means that the energy storage from the battery is cycled daily. Incentives for target dispatch programs are also included but at a lower rate. A target dispatch means that energy storage is to be discharged at a targeted time, such as during storms or power outages.
Storage customers will be paid an incentive at the end of each year based on the customer’s average load reduction during peak demand hours. Utility companies are to signal customers when peak demand hours are in effect so customers can maximize incentives. This is known as ‘demand response.’
Simply put, demand response is an economic rationing system. Retail customers actively participate in electricity markets by seeing and responding to prices as they fluctuate over time. By offering price incentives, customers can take advantage of demand response and reap major benefits. Demand response programs give utilities the ability to cycle electricity on and off during peak periods of demand in exchange for a decrease in power consumption, lower electricity costs, and boosted reliability within the grid.
The Massachusetts SMART Storage Incentive
Customers who already have solar can combine the recent battery rebate program with the SMART program and the 30% federal tax credit to maximize benefits. The exact value of the tax credit for batteries is determined by how frequently the battery is charged. The credit is based on the portion of renewable energy the battery receives.
Tesla Joins National Grid’s ConnectedSolutions Program
The Statewide Plan requires that National Grid and Eversource create sustainability programs to reduce stress on the grid. National Grid’s ConnectedSolutions program, executed before the Statewide Plan was deployed, qualifies under the Statewide Plan as an energy efficiency measure.
ConnectedSolutions links battery systems across the grid, creating a virtual power plant (VPP) that can reduce emissions, infrastructure costs, and electricity prices for ratepayers. When National Grid identifies a grid need or during peak times, Tesla will charge and discharge customers’ Powerwalls.
Incentive payments are based on how much energy Powerwall discharges to the grid. Powerwall systems without solar power are not allowed to export power to the grid, but will still be able to discharge to serve their own home load. Homeowners who’ve installed Tesla Powerwall in Massachusetts can receive up to $700 a year for reducing grid demand.
Customers who join the program are guaranteed incentives for the first five years. Incentive payments are distributed twice per year during the Summer and Winter seasons. Powerwall customers in Massachusetts have the option of combining the ConnectedSolutions program benefits with SMART program benefits.
All existing Powerwall customers in National Grid territory are eligible as long as they were included as part of the original system interconnection application. The program is guaranteed through 2023 for those who install or have installed battery storage before May 2021. If the program is successful, it will be extended.
Why Incentivize Energy Storage?
Peak demand is a dominant driver of grid costs and can be reduced by using energy storage efficiently. Paying for conventional power during peak times accounts for nearly 10% of the entire cost of grid operations, totaling nearly $3 billion every year. These programs are structured to strategically add storage capacity to the existing grid, unlocking $2.3 billion in savings for New England ratepayers by reducing peak capacity and costs associated with production, transmission, and distribution.
What better state than Massachusetts to lead the way? Massachusetts has the second largest energy efficiency budget in the country at $620 million each year and was, once again, voted the most energy efficient state in the country. Furthermore, Boston has been named the most energy efficient city in the nation for eight consecutive years. With titles like these, the State prides itself as an efficiency powerhouse. The State’s success stems from net-metering, solar renewable energy credits (SRECs), and a strong Renewable Portfolio Standard (RPS).
The Commonwealth is projected to change the energy distribution at a state level, and create a template for other states to follow. The energy efficiency programs are expected to decrease Massachusetts aggregate carbon dioxide emissions by more than 2.6 million tons over the three-year period.
Benefits for All Ratepayers
The programs will advance the deployment of distributed, clean energy resources for the benefit of Commonwealth electricity ratepayers, economy, and environment. Energy storage actually benefits all ratepayers, whether a storage owner or not.
Storing more energy in the state lowers the stress on the grid. The cost of electricity lowers for every Massachusetts ratepayer when customers store energy during off-peak periods and use it during peak periods.
Adding active demand management to Massachusetts’ energy efficiency plan increases the potential for battery storage applications at the state level. The Statewide Plan anticipates the installation of 30-34 MW of behind-the-meter battery storage and could cut sales from electricity providers by 2.7 percent and cut natural gas sales by 1.25 percent. The Baker administration said the new initiatives will deliver $8.6 billion in benefits by investing $2.8 billion of ratepayer money, “more than three dollars in benefits for every dollar invested.”
Everyone benefits from a cleaner environment. Battery storage reduces fuel costs as well as greenhouse gas emissions by replacing fossil fuel burning back-up generators. Other states will have to reexamine their own electric efficiency plans and consider energy storage as a dominant efficiency measure.
Looking to take advantage of new battery storage initiatives? Contact us today to get started.