The Future of Energy Storage in the United States is Bright As utilities, independent power producers, and large corporates shift away from fossil fuels and toward renewable energy sources, energy storage is becoming a key piece of the renewable energy solution in the United States. Unlike fossil fuels where generators can control the amount of energy supplied and when it is supplied, solar and wind power are intermittent resources that produce energy only when the sun shines or when the wind blows. Energy storage is therefore critical not only to solve this intermittency challenge, but also to permit generators to respond rapidly to fluctuations in demand, thereby increasing grid resiliency and reducing the need for peaking plants to backstop such resources during periods of high electricity demand. As a result, energy storage will play a key role in the future of renewables development in the United States.

Like other forms of renewable resources, the cost of storage, and of batteries in particular, has declined sharply over recent years, driven by expanding manufacturing capabilities and an increase in the storage technology learning curve. This reduced cost has led to an increase in deployment of storage solutions. Battery storage, for example, has increased rapidly in recent years and appears poised for explosive future growth. While the United States currently has a little more than one GW of installed battery storage capacity, market predictors estimate that number could grow to more than seven GW of utility-scale and grid-connected battery storage by 2022. Indeed, Wood Mackenzie Power & Renewables' latest report on energy storage projects that energy storage deployments will grow thirteenfold over the next six years. Global Energy Storage Outlook 2019: 2018 Year in Review and Outlook to 2024. Within the United States, this growth will likely come in key markets such as California, although other states such as Hawaii, Arizona, Texas, Minnesota, and Colorado are also jumping on the energy storage train. Growth in storage projects will also be driven by utilities adopting storage as a capacity solution and as solar-plus-storage projects become increasingly more popular. Indeed, in February, Arizona's largest utility, Arizona Public Service ("APS"), announced plans to install an additional 850 megawatts of energy storage by 2025, the largest procurement by a U.S. utility thus far, in an effort to shift customer delivery of solar power into the evening, when it becomes more valuable for the grid—a solution that is both cleaner and cheaper than relying on natural gas peaker plants. However, a recent fire at an APS storage project, which resulted in the hospitalization of four firefighters, will be a key challenge for the storage industry to tackle as it charts its path forward.

In addition, policy support will open new markets for storage in 2019 and beyond. Federal Energy Regulatory Commission Order 841, unanimously approved in February 2018, which directs regional wholesale market operators to clarify how storage can participate in the markets based on its unique attributes, will be a key storage policy driver. Moreover, in May 2018, the Department of Energy's Advanced Research Projects Agency committed $30 million in funding for long-term energy storage innovation. Additionally, several states have passed legislation aimed at increasing energy storage or have announced energy storage targets or incentives. In New York, for example, Governor Cuomo recently announced $280 million in incentives for energy storage projects as a way to accelerate growth within the industry and drive down energy storage deployment costs. New York's goal is to lead the nation in energy storage deployment, with a target of 3,000 MW by 2030. This confluence of events bodes well for the future of storage in the United States and will likely result in more renewable resources coming online and a continued shift away from fossil fuels.


Germany Introduces Obligation to Install Need-Controlled Nighttime Identification of Wind Turbines Wind energy has been a success story in Germany up to now. In 2018, Germany's wind power generation, both onshore and offshore, totaled nearly 60,000 MW, accounting for more than 20 percent of German electricity production. As discussed in a recent Jones Day Talks podcast, both operators of and investors in wind farms should be aware, however, of a recent amendment to the German Renewables Energies Act ("EEG"), which will increase costs of operations for many wind farms in Germany.

On December 21, 2018, the seventh amendment to the EEG was enacted. The most relevant change to come out of this amendment is the new obligation to equip wind turbines with need-controlled nighttime identification. Prior to this amendment, wind turbines in Germany with a height of 100 meters or more were required to be marked by flashing signals at night for aviation security reasons. However, the amendment requires that after July 1, 2020, plant operators will be obligated to install need-controlled nighttime identification to ensure that the signals only start flashing at night when an aircraft actually approaches. This obligation applies to both new and existing installations and therefore will require that existing wind farms be retrofitted. Moreover, it applies not only to onshore wind farms, but also to certain offshore farms, namely those in the territorial sea, in zone one of the exclusive economic zone of the North Sea and those in the exclusive economic zone of the Baltic Sea.

This obligation is not to be taken lightly. First, the penalty for noncompliance is costly. During any period of noncompliance, the feed-in tariff will be reduced to the monthly market value for the period that the operator of the wind farm remains in violation, meaning that the operator will lose the right to receive the so-called "market premium" for the power generated during any period of noncompliance. Next, this new requirement affects a majority of the wind turbines currently in operation in Germany. Indeed, according to estimates, it will affect approximately 18,000 wind turbines in Germany. Put another way, 60 percent of the approximately 30,000 wind turbines currently operating in Germany will need to be retrofitted to comply with this obligation.

The costs of retrofitting will depend on which technology is used. Until now, only rather expensive radar systems were legally permitted, at a cost of around 100,000€ per turbine. The amended EEG expressly provides, however, that equipment for the use of transponder signals from aircraft can also be used. This solution is considerably more cost effective, as according to the explanatory memorandum to the law, the costs for these receivers are approximately 30,000€ for an entire wind farm. Unfortunately, this transponder technology is not yet approved and although the general administrative regulation for the marking of aviation obstacles is likely to be adapted soon, wind farm operators who want to use the transponder technology for retrofitting should keep a close eye on developments with respect to the approval of such technology.

It is also important to note that permits must be obtained to retrofit a nighttime identification system. The device must be approved by German Air Traffic Control for nighttime identification. Prior to use on a turbine at a specific location, the approval of the responsible aviation authority is also required. In addition, from an emission control law perspective, the installation will often be an ancillary installation to the wind turbine which requires, prior to installation, a notification of change in accordance with Section 15 of the Federal Emission Control Act. Of course, the determination of which permits will be required ultimately depends on the concrete technical solution in the individual case.

Given the rather ambitious timeframe for the implementation of this retrofitting obligation, an extension option has been incorporated into the law, pursuant to which the Federal Network Agency can extend the implementation period if the necessary technical equipment is not available in the market in sufficient quantities. The Federal Network Agency may, upon application, also allow exceptions in individual cases, in particular for smaller wind farms, if the fulfilment of the obligation is economically unreasonable. This is a discretionary decision of the Federal Network Agency for individual cases and the criteria under which such exemptions may be granted are not yet clear.