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Power & Pipes

FERC, CFTC, and State Energy Law Developments

As we reported in December 2018, to jumpstart the energy storage market as envisioned by Governor Andrew M. Cuomo, the New York Public Service Commission (NYPSC) issued an order establishing an aggressive 3 GW energy storage goal by 2030, with an interim target of 1.5 GW by 2025, and directing investor-owned electric utilities (IOUs) to engage in competitive procurements for energy storage. The IOUs will issue draft requests for proposals (RFPs) this summer following a stakeholder process that kicks off on March 29.

The order also directed the New York State Energy Research and Development Authority (NYSERDA) to work with the Department of Public Service (DPS) and the IOUs to develop bridge incentives to implement the New York State Energy Storage Roadmap. On March 11, NYSERDA filed its Energy Storage Market Acceleration Bridge Incentive Implementation Plan (MABI) and accompanying program manuals. The MABI includes storage market acceleration incentives totaling $280 million, with $130 million for retail incentives and $150 million for bulk incentives in conjunction with the IOU procurements. Retail and bulk storage projects will need to meet certain technical and operating requirements, such as safety and minimum round-trip efficiency parameters, to qualify for the incentives. The MABI reserved $70 million authorized by the NYPSC for bridge incentives for future allocations based on DPS guidance.

The retail storage incentives will be available for storage projects that operate primarily to reduce a customer’s electric demand to off-peak periods and discharge during peaks to relieve grid constraints. Those incentives will be offered to retail customers who pay the Systems Benefit Charge and install new standalone energy storage systems or systems paired with onsite generation up to five megawatts (MW) that meet the eligibility requirements set by MABI. Under the declining megawatt hour (MWh) block design, the retail cash incentives start at $350 per kilowatt hour (kWh) of installed energy storage capacity and step down in subsequent blocks as project economics improve to promote a self-sustaining market. The incentive amount for each approved project will be based on the full stated incentive level under the applicable block for up to the first four hours of the system’s installed energy capacity and will decline to 50% of the incentive rate for hours five and six.

The MABI’s bulk storage incentives are designed to compensate new energy storage systems over 5 MW for benefits over the 20-year life of the asset, including cost savings and reductions in carbon emissions during peak periods. Developers of qualified projects up to 20 MW can lock in incentive levels starting at $110/kWh in 2019 and declining to $50/kWh in 2025 based on the date of an approved application. The incentive levels for qualified projects over 20 MW are based on the year the project will enter the NYISO transmission queue “class year” study: $85/kWh (2019) and $75/KWh (2021-2022). The full stated incentive level, which is subject to the project achieving commercial operation by the deadlines established in the program manual, will be offered to projects providing wholesale capacity service, while only 75% will be available to projects providing energy arbitrage or ancillary services. NYSERDA made clear that it will reexamine the initial retail and bulk storage incentive levels and block sizes as needed based on market factors.

While projects awarded contracts pursuant to IOU procurements are ineligible for the MABI bulk incentives, NYSERDA plans to coordinate with IOUs to integrate MABI funding as part of the economic evaluation of bids in IOU solicitations. Each IOU will establish a specific mechanism with NYSERDA to reimburse the IOU for the portion of the bid award funded through NYSERDA’s bulk storage incentives. The deployment of MABI funding to support the upcoming procurements will be addressed at the March 29 stakeholder meeting with the goal of launching the MABI incentives ahead of the first IOU draft RFP expected in late May.