Policy Memo: Distributed energy storage can catalyze an equitable clean energy transition

In Brief:

Distributed energy storage can help support New York’s clean energy transition while providing benefits to low-income communities.

Deployment of energy storage could also help reduce reliance on highly-polluting peaker power plants, resulting in significant health benefits for local communities.

This policy memo advocates for a dedicated intervention for energy storage under New York’s Valuing Distributed Energy Resources (VDER) program.

 

To: New York State Governor Kathy Hochul

From: Aaron Rubin, Project Finance Associate, New Leaf Energy

 

Introduction

This memorandum proposes that the New York Public Utilities Commission (PUC) establish the framework for a community low-income energy storage program to drive the benefits brought through the existing Expanded Solar for All Program for community solar projects into the state’s emerging energy storage market. Such a program would expand the existing benefits and savings brought by community solar upstate into the urban downstate utility zones and increase the financial competitiveness of energy storage assets that are needed to displace existing peaker fossil fuel plants.

​​

Background

In New York City (NYC), there are no established incentives or mechanisms to shift the benefits of community renewable energy projects to disadvantaged populations. The density and cost of land in NYC are challenging to the development of traditional community solar projects that would benefit low-income subscribers. The New York PUC has already approved 40% of the post-2019 Clean Energy Fund investments to go directly to Disadvantaged Communities (New York Public Service Commission, 2021). Yet, without the availability of projects as noted for low-income community offtake nearby to New York City, it is unlikely that these funds can be utilized equitably across all low-income residents. This is exemplified by more than 95% of the existing 1 GW of community solar assets coming online upstate outside of the New York City metro area (NY Battery and Energy Storage Technology Consortium, 2023).

One other important consideration is the need for policy that increases local political support in NYC for deploying energy storage to hit the state’s energy storage deployment targets. In Staten Island, which features the bulk of NYC’s distributed energy storage development pipeline, projects have been blocked or stalled through the lengthy local zoning process primarily due to concerns about safety, noise, and costs on ratepayers (St. John, 2024). Introducing low-income community offtake programs through these storage assets could substantially shift public sentiment and local politics in favor of distributed energy storage projects and thus should be strongly considered (NY Battery and Energy Storage Technology Consortium, 2023).  

 

Recommendation

This memo recommends implementing a low-income community offtake program for distributed energy storage assets in New York that is monetized through the state’s Value of Distributed Energy Resources (VDER) program. This Policy will assist in ensuring the financial feasibility of the storage projects and ensure benefits to local communities are equitable if the following recommendations are considered.

1. Add Reliable Revenue Option through Low-Income Program for Storage Developers: High EPC (engineering, procurement, and construction) costs, expensive interconnection proposals per ConEd’s EO-2079/B-380 posting standards that require the construction of a concrete housing structure for the onsite transformers (Woo, 2023), and uncertainty surrounding securing IDA sales tax exemptions for the sites have all left returns on distributed energy storage assets relatively thin and unpredictable for developers looking to sell these assets to long-term owners. A community energy storage program could help add reliable revenue and address this, by offering offtake to VDER at a reasonably low 8% discount (relative to the 10% discount typically seen with VDER commercial offtake) while allowing project developers and owners to avoid subscription costs, churn, and management costs that are often associated with managing offtake on their own.
2. Substantial Savings for Low-Income Subscribers: With an assumed average residential electricity bill in NYC of roughly $307/month (Energy Sage, 2024), each subscription to low-income community storage projects at just a 6% discount rate would save roughly $295 per year for each residential account in NYC that subscribes. Low-income residential customers on Staten Island, where the majority of energy storage assets are in development, should be prioritized as the offtakers through the Program to ensure local support. Once storage has been deployed widely enough, the program should be established on an opt-out basis to ensure that low-income residential customers are automatically benefiting from the Program.
3. Encourage Peaker Plant Retirement:  A proposal for a low-income standalone community energy storage system program in NYC will allow the state to achieve a larger overall emissions impact as some of the dirtiest remaining peaker plants would be pushed off the grid by energy storage projects. These peaker plants are located primarily in disadvantaged communities in downstate New York near load centers and it is estimated that ~$1 billion in total savings could result from mitigating the environmental and health hazards associated with these plants (PEAK Coalition, 2024).  Furthermore, using the EPA’s emission factor for NYC non-baseload generation (eGRID, 2022), each 5 MW, 4-hr battery (energy capacity: 20 MWh) will avoid approximately 19,460 lb of CO2e emissions per cycle the battery is dispatched. Assuming roughly 200 battery cycles per year, each battery should reduce greenhouse gas emissions by a significant 3,892,000 lb of CO2e annually to go alongside the health benefits of retiring peaker plants.

    

Conclusion

In summary, the New York Public Utilities Commission should expand frameworks from community solar into a community low-income energy storage program. This will help expedite the needed deployment of storage in New York by enhancing local support for the assets and increasing the attractiveness of the Projects to developers. The Program will also shift the key benefits of community energy to the storage space, which is crucial for incentivizing the technology deployment needed to retire the peaker plants located in New York’s downstate and low-income communities.

 

References List

Energy Sage. (2024). Cost of Electricity in New York City, NY.

New York Department of Citywide Administrative Services. (2022). Strategic Guide to Deploying Energy Storage in New York City: Enhancing Renewable Energy, Resilience, and Reliability.

New York State Department of Public Service. (2024). New York’s 6 GW Energy Storage Roadmap: Policy Options for Continued Growth in Energy Storage Case 18-E-0130 in the Matter of Energy Storage Deployment Program.

New York State Energy Research and Development Authority (“NYSERDA”). (2024). Retail Energy Storage Program: Program Manual.

New York State Department of Taxation and Finance. (2024). New York State Sales Tax Exemption for Residential Energy Storage Equipment: Technical Memorandum TSB-M-24(1)S.

New York Battery and Energy Storage Technology Consortium, Inc. (2023). NY-BEST Comments re: Case 18-E-0130 - In the Matter of Energy Storage Deployment Program. 

New York Battery and Energy Storage Technology Consortium, Alliance for Clean Energy New York, Solar Energy Industries Association, & New York Solar Energy Industries Association. (2024). NY-BEST, ACE NY, SEIA and NYSEIA Comments: Case 18-E-0130 – In the Matter of Energy Storage Deployment Program.

PEAK Coalition. (2024). Accelerate Now! The Fossil Fuel End Game 2.0: Tracking New York City’s Peaker Power Plant Closures and the Clean Energy Transition.

State of New York Public Service Commission. (2021). Order Approving Clean Energy Fund Modifications.

St John, J. (2024). Long wary of batteries, New York’s now poised to go big on energy storage. Canary Media.

Sweeny, D., Kuykendall, T., and Duquiatan, A. (2023). Further rounds of US coal retirements loom over reliability concerns. S&P Global.

United States Environmental Protection Agency. (2024). Emissions & Generation Resource Integrated Database (eGRID 2022).

Woo, A. (2023). Design of 265/460 Volt Network Installations, EO-2079 Revision 13, Commonwealth Edison Company of New York, Inc.