New York Energy Storage Roadmap – Cost Projections

On December 28, 2022, the New York State Energy Research & Development Authority (NYSERDA) and the New York State Department of Public Service (DPS) filed New York’s 6 GW Energy Storage Roadmap to the Public Service Commission (PSC) for consideration.  This post gives an overview of the roadmap and an initial assessment of the cost assessment methodology.

Everyone wants to do right by the environment to the extent that they can afford to and not be unduly burdened by the effects of environmental policies.  I submitted comments on the Climate Act implementation plan and have written over 250 articles about New York’s net-zero transition because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

New York Energy Storage Plan

The NYSERDA Energy Storage in New York web page gives an overview of New York’s plan:

In 2019, New York passed the nation-leading Climate Leadership and Community Protection Act (Climate Act), which codified some of the most aggressive energy and climate goals in the country.

  • 6,000 MW of Solar by 2025
  • 70% Renewable Energy by 2030
  • 9,000 MW of Offshore Wind by 2035
  • 100% Carbon-free Electricity by 2040
  • 85% Reduction in GHG Emissions from 1990 levels by 2050
  • 3,000 MW of Energy Storage by 2030, further increased to 6,000 MW of Energy Storage by 2030 by Governor Kathy Hochul

Energy storage will play a crucial role in meeting our State’s ambitious goals. Storage will help to integrate clean energy into the grid, reduce costs associated with meeting peak electric demands, and increase efficiency. Additionally, energy storage can stabilize supply during peak electric usage and help keep critical systems online during an outage.

The Roadmap proposes a comprehensive set of recommendations to expand New York’s energy storage programs to cost-effectively unlock the rapid growth of renewable energy across the State and bolster grid reliability and customer resilience. If approved, the Roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion, in addition to further benefits in the form of improved public health as a result of reduced exposure to harmful fossil fuel pollutants.

The Roadmap proposes the implementation of NYSERDA-led programs towards procuring an additional 4.7 GW of new storage projects across the bulk (large-scale), retail (community, commercial and industrial), and residential energy storage sectors in New York State. These future procurements, combined with the existing energy storage already under contract with the State and moving towards commercial operation, will allow the State to achieve the 6 GW goal by 2030.

Keep in mind that New York’s net-zero by 2050 plan is and always has been a political initiative developed by a small group and foisted upon the state by the emotion-driven innumerates of the New York Legislature.  Accordingly, the release of the Energy Storage roadmap warranted a press release from the Governor:

Governor Kathy Hochul today announced a new framework for the State to achieve a nation-leading six gigawatts of energy storage by 2030, which represents at least 20 percent of the peak electricity load of New York State. The roadmap, submitted by the New York State Energy Research and Development Authority and the New York State Department of Public Service to the Public Service Commission for consideration, proposes a comprehensive set of recommendations to expand New York’s energy storage programs to cost-effectively unlock the rapid growth of renewable energy across the state and bolster grid reliability and customer resilience. If approved, the roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion, in addition to further benefits in the form of improved public health because of reduced exposure to harmful fossil fuel pollutants. Today’s announcement supports the Climate Leadership and Community Protection Act goals to generate 70 percent of the state’s electricity from renewable sources by 2030 and 100 percent zero-emission electricity by 2040.

One phrase in this paragraph is the reason I wrote this post. It says “the roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion”.  I will show that what it really means is that we think we can claim that the costs will be nearly $2 billion dollars less than the astronomical total cost that we don’t admit to the public because it won’t reflect well on the narrative of the state’s Climate Act.

Chapter 3: Role of Storage Targets

New York’s 6 GW Energy Storage Roadmap (Roadmap) explains that “energy storage has the potential to play a critical role in supporting a deeply decarbonized New York electricity grid, through its ability to integrate large quantities of variable renewable energy and provide reliable capacity to meet growing peak demand”.  

The document describes the role of energy storage.  Note that the emphasis is on short-term storage for intra-day requirements for the 6 GW by 2030 target.

Figure 5 illustrates the role of energy storage in shifting generation to meet load, based on Roadmap analysis of the New York electricity system under portfolios consistent with the Climate Act. On days with excess solar, the modeled battery storage system charges from excess solar power concentrated in the middle of the day. Battery storage then helps the system to maintain reliability in events when load is high, and overnight when wind generation is low. Alternately, on low renewable output days, storage can charge from other resources, including imports, and reduce the need for more expensive firm resources.

Figure 5. Energy Value: Storage Dispatch in Modeled Analysis of the New York Electric System in 2040

The Roadmap document claims that it is appropriate to increase the energy storage deployment target of 3 GW by 2030 to 6 GW.  It states:

The analysis performed for this Roadmap (see Section A.1 in Appendix A) estimates that deployment of 6 GW of storage by 2030 will yield an estimated $1.94 billion (net present value) in net societal benefits to New York, due to increased delivery of renewable energy and reduced reliance on other more expensive firm capacity resources. These benefits reflect the value of avoided electricity system expenditures. Further societal benefits, not quantified here, would include improved air quality in communities impacted by fossil generation.

Furthermore, the analysis highlights the opportunity to leverage federal incentives to build out most of the expected 2040 storage deployments earlier, given that these credits could phase down as early as 2032. This Roadmap analysis finds that nearly all the 12 GW of storage chosen in the modeling is deployed by 2035, to meet system needs and maximize cost-effectiveness by capturing the federal Investment Tax Credit. Figure 6 illustrates these analytical findings, indicating that the projected 2040 quantity of 12 GW could be fully deployed as early as 2035 in order to maximize this opportunity. This context underscores the importance of an increased 2030 target of 6 GW in order to position New York to pursue such an accelerated opportunity.

Figure 6. Statewide Battery Storage Capacity Targets and Storage Deployment to Meet System Needs

Appendix A Storage Capacity Expansion Analysis

Appendix A documents the analysis conducted for the Roadmap.  It turns out that the analysis is basically the 2022 updated Integration Analysis for the revisions to the Scoping Plan.  The Appendix summarizes the approach but often refers to the Appendix G Scoping Plan documentation for specifics.  My experience with that reference information is that it is not nearly as comprehensive as implied by this document.

NYSERDA relies on Energy and Environmental Economics (E3) for the modeling analyses that provide the basis for the Roadmap.  E3 has a capacity expansion model, RESOLVE, and loss of load probability model, RECAP.  RESOLVE “optimizes long-term generation and transmission investments subject to reliability, technical, and policy constraints.”  RECAP performs “loss-of-load probability simulations to determine the reliability of resource portfolios and the contribution from each resource within it.”   The models “develop least-cost electricity generation portfolios that achieved New York’s Climate Act goals with the new 6 GW storage by 2030 target and meet New York’s long term energy needs.”  However, note that these models simplify the New York generating system so they do not do as good a job projecting the future system as the New York Independent System Operator (NYISO) models.

The E3 modeling for the Integration Analysis was used to estimate loads and costs starting in 2020.  That means that it is possible to check the model predictions against observations.  The Roadmap states: “Current costs are about 10% higher than those assumed in the 2018 Storage Roadmap and about 40% higher than that assumed in the 2021 Integration Analysis”.  In my opinion a 40% difference in cost over a few years does not lend any credibility to costs out to 2050.

The Roadmap notes reasons for the energy storage cost projection differences:

Over the past year, supply chain constraints, material price increases, and increased competition for battery cells have driven up the cost of energy storage technologies, particularly lithium-ion batteries. Many of the drivers of cost increases are expected to persist until at least 2025. These cost increases may impact the cost of any new programs designed to procure storage to be installed by 2030. In addition to cost increases, difficulties in the timely completion of interconnection processes, high interconnection costs, and downward pressure on capacity revenue create a challenging environment through the development and operational lifecycle of a storage project. Financial support will therefore be crucial for the state to achieve the 3 GW and 6 GW deployment goals.

One of my major concerns with the Scoping Plan projections was the overly optimistic projections of energy cost reductions which I believe were used to claim lower costs of the net-zero transition.  Despite the failure to project current costs in the 2021 Integration Analysis, the Roadmap doubles down saying that “Cost declines are assumed to begin in 2025 as manufacturing capacity expands, and benefits of scale and innovation are realized”.  The document does not explain why the concerns noted above are going to turn around so quickly or, for that matter, why given global competition for the same rare earth metals necessary for the energy storage won’t see those conditions persist for many years.

Appendix B: Storage Program Cost Analysis

This Appendix “summarizes the inputs, assumptions, and analysis methodology underpinning the estimates of incremental program costs associated with achieving the proposed 2030 target of 6 GW of short-duration storage”.   The Roadmap states:

The total cost of these proposed procurement programs is estimated at between $1.0 billion and $1.7 billion. This equates to an estimated increase in customer electric bills of 0.32% – 0.54% (or $0.34 – $0.58 per month for the average residential customer) on average across New York for the 22-year period during which these programs would make payments to awarded projects. The range of these projections reflects future uncertainties, most notably those associated with energy and capacity prices.

The way this is written it suggests that the energy storage costs will be manageable because it will only be at most $0.58 per month.  However, Appendix B states:

For the proposed bulk storage procurement program, program costs are calculated as the incremental revenue, on top of revenue that storage assets can realize through commercial operation in the existing energy markets, that would allow such assets to reach their cost of capital. This methodology is broadly consistent with that applied to cost studies under the Clean Energy Standard.66 Key assumptions and inputs include the costs of storage projects, the estimates of market revenue available to them, available federal incentives and the cost of capital.

This approach is disingenuous at best.  They are not providing all the program costs only the costs above what they think an energy storage owner will have above the expected “incremental” revenue.  That incremental revenue has to be paid by someone and that someone is the ratepayers of the state.  As I understand it the “incremental revenues” are composed of at least the subsidies that are being proposed for energy storage that are like renewable energy credits.  Those subsidies are not paid for in the NYISO’s wholesale energy market but are buried in utility rate cases.  Moreover, it is not clear if the Roadmap includes energy storage specific wholesale energy market payments as other “incremental” revenue.  In any event, the insinuation that the energy storage cost is only going to be “between $1.0 billion and $1.7 billion” is clearly misleading and inaccurate.

Conclusion

There is a lot to unpack in the Roadmap and I will follow up with future posts.  Even at first glance there are issues.  Not only does the study rely on the poorly documented Integration Analysis as its basis but it also replicates its shell game con for hiding the true costs.  In the Scoping Plan costs are compared to a Reference Case that includes already “incremented programs” and in this Roadmap costs are presented relative to “incremental revenues”.  In both instances the result is a deceptive cost estimate that does not include all the costs for the citizens of New York.

It gets worse.  The continued increase in subsidized resources in the NYISO’s wholesale energy market will on average suppress market prices which will result in the need for larger subsidies to make renewable developments viable.  Gresham’s Law of Green Energy is named after Sir Thomas Gresham, a 16th-century British financier who observed that “bad money drives out the good.”. In this context  subsidized renewable resources will drive out competitive generators, lead to higher electric prices, reduce economic growth, and likely lead to the need to subsidize competitive generators who provide critical resources but are no longer viable.  Finally, keep in mind that almost all project development costs are funded through NYSERDA non-recourse loans. In open capital markets that is the most expensive money there is to finance. 

The Roadmap claims “the roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion”.  The only reductions are relative to very high projected costs.  It appears that the Hochul Administration goal is hide the expenditure of hundreds of billions of dollars under hundreds of programs and subsidies making it intentionally impossible to capture the total costs to consumers.  The true “Total Cost” of the Climate Act will be hidden forever from the public by design. 

Author: rogercaiazza

I am a meteorologist (BS and MS degrees), was certified as a consulting meteorologist and have worked in the air quality industry for over 40 years. I author two blogs. Environmental staff in any industry have to be pragmatic balancing risks and benefits and (https://pragmaticenvironmentalistofnewyork.blog/) reflects that outlook. The second blog addresses the New York State Reforming the Energy Vision initiative (https://reformingtheenergyvisioninconvenienttruths.wordpress.com). Any of my comments on the web or posts on my blogs are my opinion only. In no way do they reflect the position of any of my past employers or any company I was associated with.

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