GOV. CHARLIE BAKER
recently submitted a significant bond bill
to the Legislature calling for a $1.4 billion authorization for climate adaptation, mitigation, and infrastructure investment. While the dollar amounts grab the headlines, there is also an important and innovative piece of policy buried within the bill, establishing a clean peak energy standard (CPS). A clean peak standard is an innovative market-based approach to address one of our biggest energy challenges: the expensive process of meeting peak energy demand. The concept is similar to the state’s renewable portfolio standard (RPS), an established and successful program that uses market-pricing signals to create demand for renewable energy by requiring utilities to purchase a certain percentage of their load from clean power sources.
Reducing the peak load of the grid can have a big impact on energy prices. According to a 2016 study by the Department of Energy Resources, the top 1 percent of peak electricity demand hours account for 8 percent of electric energy costs, while the top 10 percent of hours account for 40 percent of overall electric energy costs.
The governor’s idea is to meet that demand with clean energy resources. This has the obvious benefit of lowering the emission impacts from dirty “peaker plants” and reducing the need to “overbuild” our energy system; it is also an efficient way to establish a long-term market for energy storage. Clean resources like solar and wind will likely need to be paired with energy storage so that they can be called upon during times of peak usage. The idea is that the clean peak standard, which would be implemented in 2020, should provide a framework that will send the appropriate price signals to facilitate investment into energy storage.
To date, the state has focused its effort on building the energy storage market mostly by supporting demonstration programs. This approach is useful for proving out new technologies and exploring different applications, but it doesn’t establish the market-pricing signals provided by the clean peak standard. What’s missing is a strategy to move from the demonstration projects to the new CPS.
It is expected that the CPS will have an “out” similar to the renewable portfolio standard in that utilities will have the option to pay an “alternative compliance payment” if the cost of procuring clean peak energy is too high.
Our concern is that when the clean performance standard is initiated, the market will not be ready for it. To solve this problem, the administration needs to think about a medium-term solution that would be a bridge between demonstration projects and the end market of the clean performance standard. One possible approach could be a rebate program for energy storage systems, which could fit the bill perfectly. Rebate programs have been successfully used to jump-start solar energy and electric vehicles, and would be a perfect solution to prime the market and drive down costs in anticipation of the clean performance standard. Indeed, the governor’s bill hints that this may be a solution by specifically authorizing the use of energy efficiency funds for energy storage.
Ken Driscoll is the founder and CEO of Solect Energy of Hopkinton.