Senators Propose Making Energy Storage Property Eligible for ITC & CREBs
Last week, Senators Jeff Bingaman (D-NM), Ron Wyden (D-OR), and Jeanne Shaheen (D-NH), introduced legislation that would add grid-connected energy storage property to the list of technologies eligible for the federal investment tax credit (the "ITC"). Under the Storage Technology for Renewable and Green Energy Act of 2010 (the "STORAGE 2010 Act"), eligible energy storage property would include hydroelectric pumped storage and compressed air energy storage, regenerative fuel cells, batteries, superconducting magnetic energy storage, flywheels, thermal energy storage systems and hydrogen storage. Systems that can sustain a power rating of at least one megawatt for a minimum of one hour would be eligible for a 20% tax credit under the ITC program. Should the bill become law, the tax credit would provide significant assistance to intermittent energy resource developers that are seeking new ways to shape and firm their projects' output.
The STORAGE 2010 Act would limit the available credits to $1.5 billion, and no single project may be allocated more than $30 million.
Importantly, the bill creates special extended deadlines for hydroelectric pumped storage facilities. Whereas the majority of energy storage property considered under the bill would be required to be placed in service within two years of the date the ITC was allocated, pumped storage facilities would have three years to secure required licenses and permits, five years to begin construction, and eight years to be placed in service.
Compressed air energy storage systems would enjoy similar extended deadlines- i.e., would be reqired to begin construction within three years and be placed in service within five years.
The bill would also allow grid-connected energy storage property to qualify for Clean Renewable Energy Bonds under section 54C of the Internal Revenue Code. The full text of the bill can be viewed here.
FERC Determines That Battery Storage Devices Qualify as Transmission Facilities. Is the Door Open for Other Energy Storage Devices?
In late January, FERC issued an order in response to a filing by Western Grid Development LLC that asked FERC to declare that Western Grid's proposed battery storage devices are transmission facilities eligible for certain rate incentives. Western Grid described its battery technology as 10 to 50 MW sodium sulfur batteries that would be installed at strategic places on the California ISO transmission grid in order to provide voltage support and protect against transmission overloads. In a description that seemed significant to FERC, Western Grid stated that its batteries would only enhance transmission reliability at the California ISO's direction, and that the batteries would not operate or participate in energy markets or provide electricity for commercial sale.
FERC examines energy storage devices on a case-by-case basis because storage devices don't fit squarely within the traditional transmission, distribution, or generation categories of assets. In this case, FERC gravitated to the notion that the battery devices would not provide capacity or energy to be sold in the energy market, and that Western Grid would not retain any revenues outside of the transmission access charge (unlike generators). For these and other reasons, FERC distinguished Western Grid from similar filings (see Nevada Hydro II--pumped storage), and determined that Western Grid's technology will act enough like transmission assets to warrant eligibility for transmission rate incentives. FERC's approval of rate incentives, however, was conditional upon the California ISO approving Western Grid's projects in the transmission planning process.
Although FERC repeated numerous times that its decision was based on the "specific circumstances and characteristics" of Western Grid's projects, the order shows potential for energy storage devices. If such devices can show that they act sufficiently like traditional transmission assets (like capacitors), they may be able to obtain very valuable transmission rate incentives. Whether this opens the door for compressed air energy storage and pumped hydro (but see Nevada Hydro II) is still up in the air, but rest assured that these questions will be at FERC before too long.
Department of Energy Funds Research for Hydropower
On Friday, May 15th, The Department of Energy amended its April 15th Funding Opportunity Announcement, adding new research areas eligible for receipt of grants from the $40 million appropriated by Congress to investigate advanced water power energy generation technologies. All of the added categories are aimed at funding hydropower related research with the following goals:
--Studying how hydropower—both conventional and pumped storage—can meet current and future transmission needs. DOE is seeking an industry-led partnership with NGOs, government agencies, and/or universities to model the interactions of conventional and pumped storage hydropower projects on the transmission grid with the goal of shaping future policy decisions, as well as developing a better understanding of how current and future hydropower fits in with different market structures. The bottom line is that this research would increase the understanding of hydropower’s value in the overall national energy portfolio as well as the understanding of hydropower’s roll and integration into variable renewable energy sources. The total possible grant for this study is $3m over two years—and is expected to be awarded to one applicant.
--Monitoring and evaluating the effectiveness of novel approaches to environmental impact mitigation at hydroelectric facilities. DOE is expecting to grant awards of $500,000 to $750,000 to up to six industry participants for this purpose—with the overall goal of identifying novel environmental mitigation measures that are more effective and efficient than their traditional counterparts as well as measures that are widely applicable across the industry in the United States. These studies must be either industry-led, or industry partnerships with utilities, technology developers, consulting companies, private research institutes, or governmental laboratories or universities.
--A request for proposals to increase academic research in areas related to conventional hydropower or pumped storage hydropower. DOE recognized that academic research and graduate training opportunities in these areas are stagnant or declining, and is asking for proposals from universities, research institutes, foundations or non-profit organizations to manage a competitive fellowship program to support graduate students studying topics in these areas. This is a solicitation for managing a grant program, and the funding ($1 million for FY2009 and equivalent funds for 2010 and 2011 subject to future appropriations) appears to not be aimed at funding graduate research directly, but at creating a steering committee to guide future grants and increase academic research.
These funding opportunities come at a time when pumped storage is receiving increasing interest. A quick review of applications filed with FERC indicates there over thirty pumped storage projects planned nationwide—mostly in the western half of the country. Pumped storage is an attractive technology because it allows for load balancing by pumping water uphill to a storage facility during low load periods and use of that stored water power during periods of high demand.
Installation of conventional hydropower facilities at existing irrigation impoundments is also receiving increased attention because retrofitting such facilities would result in exploiting this unused resource without the need to create new impoundments. The Electric Power Research Institute cites a conservative estimate of 16,000 megawatts of additional generating capacity could be developed through installation of hydropower at existing dams--and notes that the actual resource may be much greater because this estimate is based on only 2,500 of the 79,000 non-hydropower dams in the United States. Regardless, this represents at least a 20% increase over existing hydropower generating capacity in the United States.
DOE’s funding announcement will support the development of both of these resources, and seems to be a recognition of the role hydropower can play in meeting the nation’s future energy needs. The complete text of the announcement is available here.
