Utah law expands energy-storage markets to meet growth of renewables



On March 29, 2016, Utah signed into law the Sustainable Transportation and Energy Plan Act (SB 115), which establishes utility investments in battery storage, electric vehicle infrastructure, and several clean energy programs. The new law seeks to boost energy storage solutions to improve the reliability and cost-efficiency of the electric grid, and joins a list of state legislatures and utility commissions enacting similar measures, including California, New York, and Texas. These new policies are expanding market opportunities for storage technology as increased generation from intermittent renewable supplies also spur growth in front-of-the-meter, utility-side storage to manage daily load curves. At the same time, utility ratepayers are increasingly recognizing behind the meter, customer-side storage as a means to lower energy bills and ensure reliability by depending less on the grid.

At the state level, California has created a robust storage market spurred by its mandate for electric utilities to procure five percent of peak-load capacity worth of energy storage by 2020. Oregon became the second state to enact an energy storage mandate in June 2015. Similarly, in 2016, New York introduced its Grid Modernization Act with provisions to deploy storage and peak-shaving technologies, while Hawaii introduced a bill allowing energy storage tax credit, with property criteria for qualification.

In addition, the Federal Energy Regulatory Commission (FERC) has implemented regulations to increase opportunities for energy storage projects in the ancillary services market. Notably, FERC Order 755, which requires wholesale markets to implement a pay-for-performance formula for frequency regulation, has been a major stimulus for progress in the energy storage market. The recent extension of federal renewable tax credits will also energy storage in relation with growth in renewables. The Department of the Treasury and Internal Revenue Service (IRS) are considering regulations to address the extent to which energy storage may qualify for the ITC.

Moving forward, new regulatory policies – particularly at the state level – will expand opportunities for new storage technologies. Currently, established energy storage technologies, such as thermal storage, pumped hydropower, and compressed air energy storage have a greater share in the energy storage market. However, regulatory changes are opening markets for newer technologies, such as lithium-ion batteries, flywheels, and sodium-sulfur battery systems, which are emerging to provide better operational flexibility and faster response.