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Energy storage companies now can apply for $280 million in incentives allocated by New York’s state government.
Gov. Andrew Cuomo made energy storage a key pillar of his strategy to secure 100 percent carbon-free electricity by 2040, because it can replace fossil-fueled plants to deliver power on demand. So far, grid battery projects in the state have appeared as pilots or one-offs; a thriving, sustainable business environment has not emerged with today’s market rules and battery project pricing.
New York leaders hope the new “bridge incentive” will fix that. The theory is that the funding will monetize some of the value of storage that companies cannot get compensation for yet. By supporting the early growth of the market, the bridge will get the industry to a sustainable place, phasing out as deployments grow.
The scale and structure of the targets were published in March, but the funding went live during the week of Earth Day. Though the numbers are not new, their sheer size demands attention.
“At a minimum, this funding will support 1.8 gigawatt-hours of additional storage by 2025 across all three segments [residential, commercial and utility-scale], and thus will be integral in supporting New York's storage target of 3 gigawatts by 2030,” said Brett Simon, senior energy storage analyst at Wood Mackenzie Power & Renewables.
If that level of deployments comes to fruition, it would easily launch New York into the upper echelons of state storage markets.
The program divides the funds between two categories. “Bulk” projects, which are bigger than 5 megawatts and serve the wholesale market or distribution services, receive $150 million. “Retail” projects, smaller than 5 megawatts and sited among customers, get $130 million. The applications are available online via the New York State Research and Development Authority (NYSERDA).
"Let's get projects built now"
The retail money will be disbursed in blocks, with the incentive decreasing as deployments progress. Retail developers who get in on the first batch of 100 megawatt-hours will receive $350 per kilowatt-hour, but successive projects take less funding.
Bulk incentives decline annually, starting at $110 per kilowatt-hour for systems 20 megawatts or less and $85 per kilowatt-hour for systems larger than 20 megawatts.
This outcome was never guaranteed for New York. The state’s energy leaders initially were cautious about distorting the market by using state funds and policies to encourage energy storage. Speaking to GTM in the summer of 2017, then-New York Energy Czar Richard Kauffman expressed concern about a "centrally planned" approach to building the grid of the future.
Ultimately, Cuomo signed a bill calling for a storage target and prioritized storage in his 2018 State of the State address, where he allocated funds "to jump-start the market."
New York's energy agencies haven't given up on market structures, but they recognized that changing wholesale market rules takes time, and they don't want to sit idle until that happens.
"Let's get projects built now," said Jason Doling, assistant director for distributed energy resources at NYSERDA.
Accelerating early deployments will bring down soft costs, making it easier to hit the governor's 2030 target, Doling noted. Additionally, the incentive acts as a temporary stand-in for the dual market participation structures that are under development at the New York Independent System Operator and should come online in the early 2020s.
"There are unmonetized benefits that are out there that the incentive is helping to compensate for," he said of the bulk storage projects.
The $280 million comes from utility bill surcharges that had been collected but not yet allocated. Long Island customers did not pay that surcharge, so storage funding for that region is coming from $53 million from the Regional Greenhouse Gas Initiative.
NYSERDA holds another $70 million in reserve for future funding; the organization will monitor the initial results and target that money to areas that promise "the most significant market uptake," Doling said.