The Maine study considers factors in social costs

Comparing the costs and benefits of new battery-based energy storage systems (ESS) with a new gas-storage plant involves a significant number of technical variables, but if social costs are not taken into account, the calculus is heavily skewed, says one expert, new study comparing ESS with gas-storage plants .

“When you take into account the social and environmental costs and the impact of peaker emissions on human health, at least in this analysis for New England, and especially for Maine, batteries look cheaper,” says Todd Olinsky-Paul. Senior Project Director of the Clean Energy States Alliance (CESA) and Contributing Editor of Battery Storage for Fossil-Fueled Peaker Power Plant Replacement: A Maine Case Study.

The study, co-produced by CESA and Strategen Consulting, was presented to the Maine Governor’s Office of Energy as a stakeholder input to help develop Maine’s 200-MW utility-scale energy storage procurement program, CESA says. CESA presented its findings during a webinar on April 30.

“The purpose of this analysis and report is to show Maine and other states how energy storage can cost-effectively replace fossil-fuel peaker plants, helping states meet their decarbonization goals,” Olinsky-Paul said in the April 2024 study r.

“While the report does use Maine as a case study, it actually shows for all six New England states — at least — and likely for other regions as well, that battery storage can effectively compete on cost with gas peakers and can be at least best solution. -a cost-effective solution to phasing out old fossil-fuel peaker plants,” Olinsky-Paul said during the webinar.

Many states have energy storage procurement programs as well as fossil fuel cap replacement initiatives, including New York and Massachusetts.

“We see renewables and storage increasingly being seen as a replacement for expensive and polluting fossil fuel peaker plants,” Olinsky-Paul said.

ESS vs gas peaking plants: Three key takeaways

Eliasid Animas, consultant at Strategen Consulting, highlighted three key findings when conducting this analysis:

1. Batteries provide a cost-effective alternative to replacing Maine’s aging industrial fleet (gas generators).

2. New peaks are also a viable alternative to old peaks from a market perspective, but come with higher social costs. “This means higher environmental and health costs for surrounding communities,” Animas said.

3. “It will be very important to consider how new production capacities are calculated under ISO, which will impact the implementation and ordering of new batteries,” Animas said.

ESS benefits

“It turns out that energy storage – in particular (using) lithium-ion batteries – is a very good alternative – and cleaner – technology to replace fossil-fuel peaker plants, because battery charge levels can rise and fall very quickly. They are actually more accurate and faster than the (gas) power plants they can replace,” Olinsky-Paul said.

“They can also launch more frequently (to) stack different applications; they may provide banking services, for example, and perhaps they also provide frequency regulation, they also provide resiliency services, or they also provide jump start capabilities. There are many other things that (ESS) can provide in support services,” Olinsky-Paul said. “And it won’t cause as much pollution as fossil fuel peaks would.”

However, falling battery prices have not yet completely invalidated the cost-benefit analysis for gas. “There will be many times when batteries will be cheaper than gas plants, but there will also be times when batteries will be more expensive than gas plants. It will depend on many variables,” Olinsky-Paul said.

These variables:

“It will depend on the revenues that can be obtained from the capacity market. This will depend on pipeline and fuel costs, and of course whether energy storage costs continue to decline,” Olinsky-Paul noted. “And, importantly for this analysis, it depends on what you include when you do your cost-benefit analyses. If these comparisons exclude the costs of emissions from gas power plants, gas power plants still look pretty good.”

The social costs of the peak gas installation were omitted

Many states have conducted cost-benefit studies of ESS versus peak gas, but the social cost variable has often been overlooked. This cost includes medical care for residents who breathe dirty air in areas where gas peaking plants are located.

“There are a lot of pollutants, nitrogen oxides, sulfur oxides and fine particulate matter (emitted by gas peaks). These pollutants affect human health and the environment in regions near the plants. Of course, they also produce carbon dioxide, which contributes to global warming,” Olinsky-Paul noted.

These top plants are often replaced in populated areas and disproportionately in poor and underserved communities.

“This obviously raises concerns about environmental equity,” Olinsky-Paul said.

Similarly, the concept of specially carving out state subsidies for storage in low- and moderate-income (LMI) residential buildings emerged only a few years ago, but is now the focus of many state energy planning boards.

The impact of ISO models on the duration of ESS

The study noted that analysts “used data from ISO-NE, the Energy Information Administration (EIA), the National Renewable Energy Laboratory (NREL), and Standard & Poor’s (S&P) data to determine the sensitivity necessary to understand the impact of variability in future technology costs , fuel costs, market rules, incentives and taxes.”

“The analysis not only considers the relative costs of various new capacity assets, but also considers the impact of performance requirements on revenues in the current regional capacity market, as well as future performance requirements in the event of an ISO-New England transition to capacity to move cargo efficiently (ELCC) for its capacity market,” Animas explained.

As ISO-New England, including Maine, is expected to change its model, longer-duration ESSs are recommended instead of short-duration battery installations, Animas noted.

“Under the ELCC model, shorter-duration storage resources would be discounted for the purpose of competing for capacity market share, while longer-duration resources would be priced at a level closer to their nameplate capacity,” Animas said.

“The analysis also included sensitivity testing of the impact of variables, including future rates of decline in technology costs, fuel costs, emissions policies and electrification progress, on net costs. These values ​​were taken from public sources such as NREL, EIA and ISO-NE. The expected scenario assumes an advanced rate of technology development for both storage and peaking, based on historical market progress,” Animas explained in the study, noting that more conservative assumptions increase the net cost of storage in both the QC (Qualifying Capacity ISO) model and ELCC, which gave a different result.

“While current regulations require a two-hour duration, ISO-NE is considering modifying its capacity accreditation rules to introduce an Effective Load Carrying Capacity (ELCC) framework, under which short-term storage will likely be subject to decreasing pricing and lower fees,” Animas continued.

Currently, Maine boasts approximately 50 MW of BESS capacity, with an additional 225 MW of capacity expected to come online by 2025. The longest operating time for installed resources is two hours, “which is currently sufficient to participate in the ISO-NE capacity market (FCM ),” says Animas.

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Charles W. Thurston is a contributor to Solar Builder.

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