The topic of energy storage has been front and centre in the energy world in the past twelve months. As discussed previously (here and here), energy storage has been referred to by many commentators as a "game changer" because it will greatly improve the efficient use of electricity resources (generation, transmission, distribution). In this article, we explore recent storage developments in Canada, the U.S. and beyond that have occurred since we introduced this topic last year.
To provide some background on where energy storage stands today, GTM Research reported that the U.S. energy storage market alone is expected to increase tenfold to US$3.2 billion from 2016 to 2022, according to a recent report of the U.S. Energy Storage Monitor. One possible reason for the anticipated increase is that the cost to implement storage technologies has dropped significantly, making it more cost-effective. According to a recent McKinsey article, the average battery-pack costs are down from approximately US$1,000 per kilowatt-hour (“KWh”) in 2010 to less than US$230 per KWh in 2016. Another possible reason is the growing understanding that storage can significantly improve the efficient use of renewable energy since it provides a mean for intermittent energy to be stored for use at another time. In this regard, the National Energy Board (“NEB”) of Canada has identified the pairing of grid-scale electricity storage and renewable electricity generating technologies as a strong candidate to transform the energy system. By supporting a larger share of renewables in the electricity grid, the NEB suggested that energy storage could improve grid-stabilization and buffer peak electricity demands. A third possible reason to explain the expected increase in storage deployment is that many governmental authorities are putting in place legislation, regulations, policies, and programs to incent storage developments. Taking these factors together, it is no surprise that energy storage has generated tremendous interest from across the energy sector. We expect this interest to grow.
How Canada is advancing energy storage
As many anticipate the role that energy storage will increasingly play in the grid, we are beginning to see some legislative changes being made in Ontario and Alberta to encourage storage development. For instance, Ontario’s net metering regulation (O Reg 541/05) was amended in July 1, 2017 in order to allow renewable energy generation facilities of any size with an energy storage component to be eligible for net metering whereas this was previously not permitted (as discussed here). In Alberta, the provincial government announced last November the introduction of a “capacity market” for electricity which experts believe will likely spur the development of renewable projects paired with energy storage due to their potential to create capacity value. Alberta’s capacity market is expected to be in place by 2021.
The NEB's July 2016 Market Snapshot on energy storage in Canada reported that over 50 megawatts (“MW”) of battery capacity is expected to be operational in Canada by 2018, accounting for 81% of the total electricity storage market. Flywheel accounts for another 11% of the total electricity storage market.
There are a number of storage projects that are currently under development in Ontario. For example:
- Powin Energy has recently partnered with Hecate Energy to build, deliver, and install Canada's biggest energy storage project with a total capacity of 12.8 MW and 52.8 megawatt-hour (“MWh”) at two sites in Ontario. The projects were all contracted with the Independent Electricity System Operator (“IESO”) as part of their procurement process and are expected to be on-line by the end of September 2017. The six projects, split across two sites in Kitchener and Stratford, will deploy energy storage for frequency regulation, voltage control, and reactive power support.
- Convergent Energy + Power has completed construction on its 7 MW energy storage project strategically located in local utility PUC Services territory in Sault Ste. Marie. IESO will monitor in the next three years the ability of the technology to collect, store, and release energy into the grid when required. If successful, it is possible that IESO may deploy the technology across the province to provide more reliable, effective, and affordable energy across the grid over time.
- Northland Power is currently building a 400 MW pumped storage facility in Marmora, Ontario. The roughly CA$900-million project will feature a closed-loop configuration of an existing open pit mine and a new upper reservoir that will use off-peak power to pump water up into the reservoir and then release it back down into the mine during on-peak periods to generate electricity. Pumped-storage hydroelectricity (PSH) facilities are considered a growing contributor to grid reliability, according to the NEB.
- In a more urban setting, Toronto Hydro piloted a pole-mounted energy storage system in Toronto in August of 2016. The system was developed by Ryerson University using eCamion battery technology. The storage unit, mounted on the top of an existing hydro pole, employs lithium-ion batteries that charge during off-peak hours and discharge during peak hours into the grid. Toronto Hydro reported initial success of the system in reducing strain on the local transformer. If successful, the unit could become a standard that is rolled out with all new installations on over 175,000 poles across the city.
- NRStor Inc. (an energy storage project developer in Toronto), in partnership with Opus One Solutions (an electrical grid software engineering firm), launched a new company, MPOWER Energy Solutions, to distribute the Tesla Powerwall across Canada. The Tesla Powerwall, first introduced in May 2015, is a home battery designed to allow homeowners to store electricity generated by solar panels during the day and to go off-grid during peak periods when energy prices are high. It can also provide backup power for the home. The Powerwall 2.0 is now available in Canada and has generated widespread interest, though there has been some criticism in regards to the high cost to purchase and install the system.
As these examples show, Canada’s energy storage market is beginning to take off. We will next explore how the U.S. has continued to build on its growing market in the past year.
How the U.S. is advancing energy storage on the state level in the regulatory space
According to GTM Research, the U.S. energy storage industry deployed 71 MW and 234 MWh of capacity in Q1 2017, which was the largest quarter ever – a 944% increase compared with Q1 2016 – in terms of energy storage installations. 21 states now have 20 MW of storage projects proposed, in construction, or deployed and 10 states have pipelines of more than 100 MW. Upcoming legislative and regulatory changes may lead to substantial increases in energy storage installations in parts of the U.S. A table showing recently proposed legislation on energy storage can be found here with some highlighted in greater details below.
- California is the preeminent leader of energy storage development in the U.S., though other states are catching up. California was the first state to pass an energy storage legislation in 2013, AB 2514, which requires California’s three investor-owned utilities (“IOU”) to install 1,325 MW of energy storage by 2024. An additional 500 MW was added to the IOU’s procurement obligations in 2016 through AB 2868. California also has a Self-Generation Incentive Program (“SGIP”) that provides rebates for, amongst other qualifying distributed energy systems, behind-the-meter storage. The total SGIP budget authorized through 2019 is over US$566 million. California has been considering new legislation that would establish a state wide system of rebate programs to subsidize the cost of installation of customer-sited energy storage. If passed, the new legislation would require the Public Utilities Commission (“PUC”) to conduct a proceeding to determine an annual dollar amount to fund the Energy Storage Initiative for the period between 2018 and 2027 to be collected by electrical corporations.
- Oregon followed California’s lead and implemented a state wide energy storage mandate, through HB 2193 on June 10, 2015, which requires each Oregon utility to have a minimum of 5 MWh of energy storage in service by January 1, 2020. Earlier this year, Oregon PUC released guidelines for state utilities to use when submitting proposals that will meet the state’s energy storage requirements under HB 2193.
- On March 9, 2017, New York passed Assembly Bill A6571 which amends existing legislation by adding a section respecting “Energy Storage Deployment Program.” The purpose of this program is to encourage the installation of qualified energy storage systems. The amendment also requires the state to establish a target for such installations by no later than January of 2018.
- On May 4, 2017, Maryland became the first state in the U.S. to approve an energy storage tax credit through Senate Bill 758. An energy storage system installed on a residential property is eligible for up to US $5,000 of tax credit while an energy storage system installed on a commercial property is eligible for the lesser of US$75,000 or 30% of the total cost. The state has capped the aggregate amount of tax credit at US$750,000 per year. Applications that qualify are to be approved on a first-come, first-served basis. The tax credit would apply to systems installed between January 1, 2018, and December 31, 2022.
- On June 30, 2017, Massachusetts announced that it will set a 200 MWh energy storage target to be achieved by January 1, 2020 in accordance with Governor Baker’s comprehensive energy diversity legislation. The target, set by the Department of Energy Resources, builds upon Governor Baker’s Energy Storage Initiative, a US$10 million commitment to analyze opportunities to support Commonwealth storage companies and develop policy options to encourage energy storage deployment.
- New Jersey implemented the Renewable Electric Storage Program which is a program that offers an incentive of US$300/KWh of energy capacity. The maximum incentive for each project is the lesser of US$300,000 or 30% of the total cost of the project, while the maximum incentive for each entity is US$500,000. The Board of Public Utilities approved 13 behind-the-meter storage projects totaling nearly 9 MW in capacity in 2015. Six projects were approved in 2016 and one has been approved so far in 2017. The program is presently not accepting any new applications.
Given the apparent embrace of energy storage seen in the initiatives described above, it would not be surprising if other U.S. states that have not yet adopted legislation on energy storage do so in the near future.
How the Private Sector is advancing energy storage globally
We are also observing ever-increasing private sector investments in energy storage around the world. Bloomberg New Energy Finance forecasts the global energy storage market may be valued at $250 billion or more by 2040. In particular, we highlight two recent activities that have received major media coverage in this month alone.
On July 6, 2017, Tesla won a tender to build in 100 days the world’s largest battery, charged by renewable energy, in South Australia. This announcement came in the wake of an increasing number of blackouts experienced in South Australia, including one last year that left many homes in some areas without power for weeks. The 129 MWh project comprises the world’s largest lithium-ion energy storage system ever and will be charged by a 99-turbine wind farm. The South Australian state government hopes that the battery will improve grid reliability, provide enough power for more than 30,000 homes, and provide emergency backup power in the event of a blackout.
On July 11, 2017, AES Corp (an American energy firm) and Siemens AG (a German engineering firm) announced that they will join force to create a 50-50 joint-venture for energy storage. The deal is expected to close in Q4 2017. The joint-venture, dubbed Fluence, will be operated independently of its two owners and will be based in Washington, D.C. AES and Siemens currently account for about 17% of installed energy storage globally. If the collaboration succeeds, it will be the most geographically distributed grid storage development venture. The two companies together claim 463 MW deployed across 48 projects in 13 countries.
It appears that energy storage may in fact be on its way to being a “game changer” in Canada, the U.S. and internationally in the energy space. We will continue to cover developments in this area as they unfold.