New York City, NY—Saddled with a large and aging fleet of fossil fuel-fired peak power plants, New York City and Long Island have emerged as the epicenter of battery peaker development in a state seeking to completely decarbonize retail power sales by 2040 while also slashing nitrogen-oxide emissions, a contributor to ozone pollution.
Downstate New York’s 11,081 MW of natural gas- and oil-fired generating capacity from simple-cycle, internal combustion, and steam turbine technologies includes 9,065 MW that has been in operation for 40 years or more, according to S&P Global Market Intelligence data. Most of the capacity older than 40 years old comprises steam turbines, while 2,839 MW come from gas and internal combustion turbines at least 40 years old.
Typically operating for 40 to 50 years, those peak generating stations explain why the New York ISO has, on average, the oldest generating facilities of all U.S. power markets, based on 2018 statistics.
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They also represent an enormous opportunity for energy storage developers seeking to deploy battery peakers. The New York grid operator’s interconnection queue shows 8,541 MW of potential storage resources, of which 5,575 MW are located in the ISO’s Zone J, covering New York City, or in Zone K, covering Long Island. Three-quarters of storage resources in the queue have proposed in-service dates by 2022.
Only around 51 MW of operating non-hydro storage existed in the state as of Feb. 13, according to S&P Global Market Intelligence data, and the proposed capacity goes well beyond New York’s targets, set in 2019, of 1,500 MW of storage by 2025 and 3,000 MW by 2030.
“The reason we are so excited is there is a need for four-, five-, six-hour batteries in the city to replace that [peaking] generation and balance [variable wind and solar resources],” Dan Vickery, energy storage manager at developer Sustainable Power Group LLC, said in an recent interview.
Known as sPower, the company, a joint venture of power plant operator AES Corp. and Canadian fund manager Alberta Investment Management Corp., has around 1,500 MW of lithium-ion battery storage projects under development in New York City, some of which could break ground next year. It is also developing solar-plus-storage projects in upstate New York.
Seeking revenue streams
Still, a lack of “long-term revenue certainty” for projects is impeding “more explosive energy storage development” in the region, said Michael Farrell, sPower’s senior manager of solar development.
Developers whose projects have been awarded contracts under recent utility solicitations can generate revenue by selling the rights to manage the facility to utilities, who then can get paid for selling the asset’s energy and services to the grid. Those are known as “dispatch rights.”
The solicitations were required by a 2018 order from the New York State Public Service Commission that the New York State Public Service Commission issued to create a roadmap for the state to achieve its storage targets. The order required Consolidated Edison Co. of New York Inc. to request 300 MW of grid-scale storage to operate by 2022. Five smaller utilities, including Con Edison subsidiary Orange and Rockland Utilities Inc. and Fortis Inc. subsidiary Central Hudson Gas & Electric Corp., were ordered to seek 10 MW of grid-scale storage each.
Through the solicitation, a “grid-scale [project] is really owned by a third party and we’re buying the dispatch rights on that for seven years to firm up the revenue stream,” Matthew Ketschke, Con Edison’s senior vice president of customer energy solutions, said in an interview.
Selling the dispatch rights provides fixed revenue streams for developers and lets utilities maximize energy revenues by optimizing the operations of the asset, according to the 2018 order. Developers who are awarded bids under the bulk storage solicitations are also eligible for “market acceleration bridge incentives” issued by the New York State Energy Research and Development Authority, or NYSERDA.
Con Edison is in talks with developers, but has yet to publicly announce projects awarded through its solicitation. The 2018 order called for at least 550 MW of bulk storage to be awarded utility contracts through last year’s solicitations, but that only covers a small portion of the overall projects in development.
Real and not-real
While the RFP was designed to give a degree of certainty to New York’s still emerging storage market, developers say more is needed.
“Call it a simplistic view on capacity and battery storage plays [but] that revenue certainty currently is not there,” sPower’s Farrell said. A resource adequacy program similar to California’s or a carbon price could help storage developers, he added. “I think it’s very likely something is going to happen in the next couple years because it sort of has to.”
In addition to revenue uncertainty, developers face additional permitting, interconnection and other hurdles before reaching construction, leaving utilities uncertain which projects may succeed.
“We’re going to shake out which ones are real, which ones are not, and which ones can interconnect,” said Con Edison’s Ketschke.
Shorter-duration lithium-ion battery projects will likely be the initial winners, given that they account for most of the proposed projects, but Con Edison and sPower agree on the need for longer-duration technologies as variable renewables proliferate and downstate thermal peakers retire.
“I think there will be a need for storage resources that are dispatched over a longer period of time as we see how the [generation fuel] mix on the system evolves,” Ketschke said.
For the original article, visit spglobal.com.
About sPower: Headquartered in Salt Lake City, Utah, sPower is a leading independent power producer (IPP) that owns and operates more than 150 renewable generation systems across the U.S. We operate a leading wind, solar and storage portfolio of nearly 2.0 GW, with 15 GW of projects under development. sPower is owned by a joint venture partnership between The AES Corporation (NYSE: AES), Fortune 500 global power company, and the Alberta Investment Management Corporation (AIMCo), one of Canada’s largest and most diversified institutional investment managers.
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