On 13 December 2018 the New York Public Service Commission (PSC) approved energy storage targets of 1,500 MW by 2025 and long-term goal of deploying 3,000 MW by 2030, setting the stage for New York’s target to be the highest deployment target in the world. The approved target is to be met by a combination of competitive solicitations for large-scale assets to be issued by utilities and incentive programs for small-scale systems. Days after the approval of the energy storage mandate, the Governor of New York called for achieving 100% clean energy in the state by 2040. If approved, the target would become the most aggressive clean energy mandated in the United States.
- The approval by the New York PSC will establish an interim energy storage target of 1,500 MW by 2025 and a long-term aspirational goal of 3,000 MW by 2030.
- The plan calls for the state’s six major electric utilities to issue competitive solicitations for 350 MW of front-of-the-meter energy storage to be deployed in 2022.
- In addition to the $40 million incentive program announced in November 2018, a $310 million program will be administered by the New York State Energy Research and Development Authority (NYSERDA) to incentivize third-party development while wholesale market mechanisms in NYISO are finalized.
- The call for achieving 100% clean energy by 2040 in New York could set the state market on track for the most aggressive mandate in the United States, significantly increasing demand for both renewable energy and energy storage over the next two decades.
- The approval of the energy storage target is projected to kickstart front-of-the-meter energy storage deployment in New York as regulators aim to meet the aggressive mandate, while the call for 100% clean energy will begin the next phase of development for long-term renewable energy planning.
IHS Markit Analysis:
The original New York energy storage roadmap called for a 1,500 MW target by 2025, with the PSC now approving an even more aggressive long-term goal. Approval of the 3,000 MW target sets New York on track to adopt the most ambitious goal for energy storage in the United States and indeed the world. While the 2030 target is ‘aspirational’, it shows how New York is significantly outpacing recent policy updates in other Northeastern markets such as New Jersey and Massachusetts. The energy storage mandate is aligned with the state’s target of achieving 50% clean energy by 2030 and will be used as an important step towards achieving 100% clean energy by 2040, should regulators and lawmakers approve such a mandate. The storage mandate will be met via a combination of competitive solicitations by utilities and a bridge-incentive program to accelerate the adoption of energy storage, accelerate cost reduction and set a framework that supports compensation of energy storage services.
The ambitious target is flanked by ordering New York’s six investor owned utilities (IOUs) to directly procure at least 350 MW of energy storage via competitive solicitation, with projects targeted to enter service by the end of 2022. Utilities are to utilize non-wire alternatives, renewable energy standards and other state initiatives to facilitate and accelerate energy storage procurement. To summarize the procurement order:
- Consolidated Edison is required to procure 300 MW, with the remaining IOUs mandated to procure 10 MW each. IOUs will have to submit initial procurement plans within 60 days of the order.
- RFPs are to be issued in 2019 with target deployment dates before then end of 2022. Contract terms are to be up to seven years, with utilities retaining full control of contracted assets during the duration of the term.
- Utilities are to recover costs for contract assets via ratepayers. As an incentive, utilities will be allowed retain 30% of revenues that exceed contract costs on an annual basis, passing the rest along to ratepayers.
- Utilities are not to own energy storage assets unless the market is unable to provide viable solutions.
To accelerate the adoption of stand-alone energy storage developed by third-parties in New York, an incentive program with $310 million in funding will be launched in 2019. This is in addition to the $40 million incentive program announced for energy storage paired with PV. The stand-alone incentive is considered necessary due to the lack of opportunities for energy storage assets to stack multiple revenues streams across both distribution and transmission connected systems, while the New York Independent System Operator (NYISO) finalizes its market rules in accordance with Federal Energy Regulatory Commission (FERC) Order 841. To summarize the incentive program:
- The incentive is to compensate for a range of attributes and initiatives, including values for emissions, capacity, mitigating renewable energy curtailment, and generally accelerating cost reductions for energy storage. NYSERDA is to development a final implementation plan with 60 days of the PSC approval.
- Incentives are to be designed so that they decline in value overtime to account for future reductions in costs for energy storage technology.
- In conjunction with the incentive for energy storage paired with PV, the $350 million incentive program is projected to support 500 MW of behind-the-meter and front-of-the-meter energy storage by 2022.
Following the approval of the energy storage mandate, the Governor of New York called for targeting 100% clean energy in the state by 2040, doubling the state’s current goal of 50% by 2030. Approval of the mandate would set New York on target for the most aggressive clean energy mandate in the United States, outpacing targets in both Hawaii and California that aim for 100% clean energy by 2045. Details of how the 100% target will be reached are to be developed in the first quarter of 2019. For its part, the Solar Energy Industries Association (SEIA) will be pushing regulators and lawmakers in New York to include commitments of deploying 6 GW of solar by 2023 through further utility-scale solicitations and customer-sited market mechanisms such as the evolving Value of Distributed Energy Resources (VDER) rate design. What’s clear is that such a mandate will have a significant impact on demand for renewable energy and energy storage over the long-term in New York, establishing an aggressive roadmap for the next two decades. Implementing such aggressive and long-term targets confirms expectations and assumptions made by IHS Markit across recent forecasts. In terms of energy storage deployment, IHS Markit expects New York to be one of the top 3 states over the coming 5 years, while almost 3.5 GW of new solar PV is forecasted to be installed from 2018 through 2022.