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Out of Charge: The Barriers to Energy Storage New England Electricity Restructuring Created and How to Remove Them

Out of Charge: The Barriers to Energy Storage New England Electricity Restructuring Created and How to Remove Them

Ian Oxenham

Unchecked climate change will have disastrous consequences for humanity and the global environment.[1] The world’s current greenhouse gas (GHG) emissions pathway will likely lead to 4˚C of global warming.[2] That level of warming could make over half of all living species extinct, sink hundreds of coastal cities beneath the ocean, render parts of the Earth virtually uninhabitable, and kill billions of people.[3] Curbing climate change requires substantial reductions in Carbon Dioxide (CO2) emissions from burning fossil fuels.[4]

            Replacing fossil fuel power plants with zero-emission sources of renewable energy such as wind and solar is a cost-effective means of reducing CO2 emissions.[5] Increasing the use of wind and solar energy will also reduce air pollution that kills tens of thousands of Americans every year.[6] However, they are also intermittent sources of energy: they are only available when the sun shines or the wind blows.[7] Intermittency limits the share of electricity demand wind and solar can feasibly meet without energy storage.[8]

            Energy storage is thus “a core climate solution.”[9] Indeed, energy storage is essential to integrating “solar and wind at the scales needed to meet our climate goals.” [10] Energy storage can also replace the most polluting power plants that only run when demand for electricity is at its highest.[11] Likewise, energy storage can help existing power plants to operate more efficiently, thereby reducing their emissions.[12] Energy storage thus provides numerous environmental benefits by reducing fossil fuel emissions.[13]

            Energy storage can also help make electricity cheaper by avoiding the need to build expensive new power lines and power plants to satisfy periods of high electricity demand.[14] Indeed, energy storage could collectively save electricity consumers hundreds of millions of dollars annually.[15] However, maximizing these savings—and energy storage’s environmental benefits—requires that energy storage projects are paid both for the value of the power lines and power plants they replace.[16] If energy storage projects can only receive compensation for one or the other, investors will only build a small fraction of the energy storage projects they otherwise would.[17]

            Unfortunately, most New England states have passed electricity restructuring statutes that create legal barriers to the same entities owning or controlling both power plants and power lines.[18] As this Note will show, these laws create significant legal barriers to energy storage projects receiving compensation for the full range of services they can provide. In doing so, such laws place artificial constraints on energy storage economics that severely limit the amount of energy storage private actors can deploy.

            This Note will analyze these barriers and suggest ways that New England policymakers could remove them. Part I will detail the environmental and economic benefits of energy storage. Part II will provide an overview of electricity restructuring and other relevant aspects of electricity regulation. Part III will analyze how the current legal status quo impacts energy storage in New England states with restructuring statutes. Part IV will analyze potential statutory changes legislatures could make and regulatory actions public utility commissions could take to remove or bypass these barriers.

[1] James Hansen et al., Assessing ‘‘Dangerous Climate Change’’: Required Reduction of Carbon Emissions to Protect Young People, Future Generations and Nature, PLOS One, Dec. 2013, at 15.

[2] David Wallace-Wells, The Uninhabitable Earth, N.Y. Mag. (July 9, 2017), http://nymag.com/daily/intelligencer/2017/07/climate-change-earth-too-hot-for-humans.html.

[3] Hansen et al., supra note 1, at 6–7; Wallace-Wells, supra note 2; See Paddy Manning, Too Hot to Handle: Can We Afford a 4-Degree Rise?, Sydney Morning Herald (July 9, 2011), http://www.smh.com.au/environment/too-hot-to-handle-can-we-afford-a-4degree-rise-20110708-1h7hh#ixzz2LyOvFCeo (noting that possibly less than one billion humans could survive on an Earth that is 4˚C warmer).

[4] Intergovernmental Panel on Climate Change, Summary for Policymakers, in Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 10–12 (Ottmar Edenhoferet et al. eds., 2014); See Hansen et al. supra note 1, at 1 (noting that CO2 emissions from burning fossil fuels are the principal driver of climate change and arguing that humanity must reduce these emissions).

[5] See Intergovernmental Panel on Climate Change, supra note 14, at 20 (noting that using more renewable energy is a cost-effective way to reduce emissions); Wind Explained: Wind Energy and the Environment, U.S. Energy Info. Admin., https://www.eia.gov/energyexplained/index.cfm?page=wind_environment (last updated Nov. 23, 2016) (noting that wind is a zero-emission source of energy); Solar Explained: Solar Energy and the Environment, U.S. Energy Info. Admin., https://www.eia.gov/energyexplained/index.cfm?page=solar_environment (last updated Aug. 31, 2017) (noting that solar is a zero-emission source of energy).

[6] Mark Z. Jacobson et al., 100% Clean and Renewable Wind, Water, and Sunlight (WWS) All-Sector Energy Roadmaps for the 50 United States, 8 Energy & Envtl. Sci. 2093, 2093 (2015).

[7] Kevin B. Jones, Benjamin B. Jervey, Matthew Roche, & Sara Barnowski, The Electric Battery: Charging Forward to a Low-Carbon Future 9 (2017).

[8] Id.

[9] Id. at 4.

[10] Id. at 9.

[11] Janice Lin & Giovanni Damato, How Storage Can Help Get Rid of Peaker Plants, Greentech Media (June 28, 2010), https://www.greentechmedia.com/articles/read/energy-storage-vs-peakers.

[12] Mass. Dep’t of Energy Res. et al., State of Charge: Massachusetts Energy Storage Initiative 94–95 (2016).

[13] See id. at 3 (“[E]nergy storage is an economically and technically viable solution for alleviating . . . environmental challenges . . . .”).

[14] Judy Chang et al., The Brattle Grp., The Value of Distributed Electricity Storage in Texas: Proposed Policy for Enabling Grid-Integrated Storage Investments 9–11 (2014).

[15] Id. at 12; Mass. Dep’t of Energy Res. et al., supra note 13, at 77.

[16] Chang et al., supra note 15, at 17.

[17] Id. at 8.

[18]See, e.g., Me. Rev. Stat. Ann. tit. 35-A, § 3204 (2017) (generally prohibiting investor-owned utilities that deliver electricity power over power lines from owning non-nuclear power plants, except for those it needs to perform its delivery functions “in an efficient manner”); N.H. Rev. Stat. Ann. § 374-F:3 (2017) (requiring “functional separation” of electricity delivery from electricity generation); Mass. Gen. Laws ch. 164 § 1A (2017) (prohibiting utilities that deliver electricity from owning or controlling non-nuclear power plants).

 
 

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