VIA ELECTRONIC FILING. September 22, 2014

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1 VIA ELECTRONIC FILING September 22, 2014 Hon. Kathleen H. Burgess Secretary to the Commission New York State Public Service Commission Empire State Plaza, Agency Building 3 Albany, New York Re: Case 14 M 0101 Proceeding on the Motion of the Commission in Regard to Reforming the Energy Vision NY BEST Comments on the DPS Staff Straw Proposal Dear Secretary Burgess: On behalf of the New York Battery and Energy Storage Technology Consortium ( NY BEST ) please find enclosed for filing with the New York State Public Service Commission, our comments on the Department of Public Service (DPS) staff Straw Proposal submitted to the Public Service Commission (PSC) pursuant to Case 14 M 0101,Track 1 Policy Issues. NY BEST and our 135 member organizations from across New York State and beyond appreciate the opportunity to provide these comments and we stand ready to assist the DPS staff and PSC in establishing a policy framework that incorporates distributed energy resources, such as energy storage, as a primary tool in the planning and operation of an interconnected modernized power grid. If you have any questions or require additional information regarding these comments, please contact me at (518) Respectfully, William P. Acker Executive Director Enclosure 1

2 NY BEST COMMENTS ON DPS STAFF STRAW PROPOSAL CASE 14 M 0101 PROCEEDING ON THE MOTION OF THE COMMISSION IN REGARD TO REFORMING THE ENERGY VISION (TRACK ONE POLICY ISSUES) INTRODUCTION The New York Battery and Energy Storage Technology Consortium ( NY BEST ) is a notfor profit industry trade association that serves as the voice of the industry for over 135 member organizations on matters related to advanced batteries and energy storage technologies. Our membership covers the full span of activities related to research, development, production and deployment of energy storage devices, and currently includes technology developers ranging in size from small start up companies to global leaders such as General Electric, leading research institutions and universities, Brookhaven National Lab and numerous companies involved in the electricity and transportation sectors. Our mission is to catalyze and grow the energy storage industry and establish New York State as a global leader in energy storage. We do this by: (1) serving as a center for communication, education and interaction amongst stakeholders; (2) leveraging New York s world class intellectual and manufacturing capabilities and market leadership; (3) supporting and accelerating the commercialization process from research and development to products and widespread deployment; and (4) advocating for policies that promote the energy storage industry. NY BEST S APPROACH TO REV As we have previously articulated to the Commission, NY BEST supports the NYS PSC s efforts to transform New York s electric industry with the objective of creating marketbased, sustainable products and services that drive an increasingly efficient, clean, reliable, and customer oriented industry. NY BEST applauds your leadership in transforming the State s electric grid to a more modern, efficient, reliable and clean system. 2

3 NY BEST envisions over the longer term the electric grid to be a bidirectional, transactive, and situationally aware system that supports the following principles: Transactive nodes across the grid, with bidirectional interconnections and prosumers (producer consumers) buying and selling energy products and services with locational and temporal granularity; The elimination of barriers to entry, allowing new technologies to participate in the electric grid and ensuring that batteries and energy storage are not excluded; The valuation of products and services based on transparent and standardized methodologies, procedures and processes through the unbundling of the costs and benefits of energy resources in providing products and services to the grid, ensuring that each DER s value streams are appropriately and fairly captured; and The elimination of competitive barriers so that each resource can participate on a level playing field. Ensuring that Distributed Energy Resources (DER), such as energy storage, are fully evaluated prior to the selection of any generation, transmission or distribution asset. NY BEST COMMENTS ON REV STRAW PROPOSAL NY BEST agrees with the DPS staff finding that the central vision of REV increasing the use and coordination of Distributed Energy Resources (DER) via markets operated through a Distributed System Platform (DSP) is achievable and offers substantial customer benefits. We appreciate the efforts of the DPS staff and the Commission to transform the State s electric grid into a modern, clean, efficient, and resilient system. NY BEST supports the general goals outlined in the REV Staff Report as well as in the Straw Proposal and we applaud this leadership initiative. Further, NY BEST believes that energy storage can and should play a major role in the transformation of the electric grid, and the Straw Proposal appears to support our position. 3

4 In reviewing the DPS Staff REV Straw Proposal, NY BEST has identified several issue areas that we believe require additional information and/or modifications. We view these issues as critical to realizing the full potential of DERs, such as energy storage, and to successfully achieving the goals of REV. These items are discussed in more detail below. I. Context and Overview (Comments Apply to the Full Straw Proposal and specifically to II. B, IV. B, V.E) The Energy Storage Context To put NY BEST s comments on the REV Straw proposal into context, we first wanted to share some brief observations with the Commission to help illuminate the unique nature of energy storage, the important role energy storage can play in REV and challenges the energy storage industry is seeking to overcome. Today, both load and generation are becoming rapidly more variable due to the increasing penetration of DERs, with on peak and off peak concepts being redefined. An aging grid infrastructure, low natural gas prices, a rapid escalation in renewables and on site generation deployment, and the advent of advanced communications, IT, metering, control and other smart grid technologies are combining to create the need for substantially higher levels of dynamic flexible capacity on the grid. For example, California is projecting that the increase in variable energy resources could require as much as 4,600 MWs of flexible resources in a 33% RPS scenario and a maximum 1 hour ramp of 11,600 MWs under a 50% RPS scenario. Key characteristics of energy storage resources include not only their total capacity but also include their response times, ramp rates and flexible operating range. Importantly, NY BEST recognizes that flexibility is difficult to assess, model, analyze and evaluate given legacy methodologies used at both utilities and grid operators. These methodologies are not yet able to fully optimize DERs, which encompass numerous technologies with different performance characteristics and application capabilities. In addition, market designs, in many cases, preclude the use and optimization of DER assets across the grid. As a result, new methods must be developed to evaluate and procure flexible capacity. 4

5 NY BEST believes that energy storage is one of the keys to solving the flexibility problem across the grid from flexible peaking resources to meet flexible dispatch needs, seasonal capacity, management of daily peak and demand swings, highly responsive reserve and regulation, renewables integration and more. The benefits of storage are numerous and broad, including: Bulk energy services o Off to on peak energy time shifting and firming, on peak intermittent energy smoothing and shaping, arbitrage, and capacity Management of ramping requirements o Resulting from variable output generation from wind and solar Ancillary services o Frequency regulation, reactive power and voltage support, reserves (spinning, non spinning, supplemental), black start Transmission and distribution infrastructure o Congestion relief, upgrade deferral, minimization of line losses, voltage support, resiliency, transportable distribution level overload mitigation, peak load shifting downstream of distribution system, variable distributed generation integration, microgrid formation Customer energy management o Power quality, reliability, resiliency, demand charge management and retail time and price shifting, variable generation integration/back up power/ups Energy storage is a unique resource that is able to provide many benefits across a broad spectrum of applications, as well as throughout the grid. Energy storage technologies provide a variety of solutions with different technologies being utilized to meet quantity, quality, and operational needs. These varied applications also provide different combinations of benefits and value streams. In addition, energy storage is able to provide services to the grid when and where they are needed; there are no must run, uneconomic energy or renewable curtailment issues associated with storage. Energy storage deployments also cross over asset classes in that benefits can be realized across the transmission, generation, distribution, and/or behindthe meter (demand/end use) portions of the electricity system. In fact, it is precisely all of 5

6 these attributes that give energy storage its strengths and ability to provide flexibility to grid operations across a wide range of applications. Benefits stacking (i.e., the ability to receive revenue from providing multiple compatible applications) is, thus, important to the value proposition for energy storage both to fully realize benefits and to properly compensate providers. However, current market designs generally preclude energy storage from providing multiple benefits using the same storage device. In many cases, there are also competing value streams so that maximizing multiple benefits requires complex planning and operations, including the use of optimized modeling tools. In addition, much depends on the values by location and access to information which can be exceedingly difficult to obtain, if not impossible. Thus, one of the critical overarching issues for NY BEST is how energy storage projects will capture value streams, including across multiple jurisdictions (e.g., load zones within a utility, across utilities, between utilities and NYISO) under the new REV construct. II.A.,B.,C. DSP Market Vision (Comments also apply to VI. Mitigating Market Power) Fully Integrated DSP Could Reduce Market Animation The REV Straw Proposal recommends that existing investor owned utilities serve in the role of DSP. While we recognize and agree with staff s reasoning with regard to this recommendation, we are concerned that the Straw Proposal does not sufficiently address the market power and conflict of interest concerns that could result from a single entity, such as the utilities, acting as DSPs. Our concern is that without clear rules of engagement that allow for a level playing field and open and transparent competition, the DSPs will have inherent market power concentration that could result in a scenario analogous to an air traffic controller that also owns an airline. To overcome the concentration of market power, NY BEST urges the Commission to establish clear rules for the DSPs to ensure that DER providers, in addition to selling services directly to the DSP, are able to sell services directly to customers, directly to the NYISO and also allow the DSP or 3 rd parties to aggregate DERs to sell to the NYISO. Without 6

7 this capability, the DSP could exercise ultimate control over the revenue streams for the DERs. Given that there is no competition for the DSPs, if the DSPs are also given control over the market dispatch of DERs and if DSPs are further allowed to own DERs, the DER providers could be severely marginalized. In addition, the Staff Straw proposal appears to put into each DSP s hands a great deal of responsibility for implementation of a variety of requirements, and it is unclear exactly how those requirements will be overseen and enforced. We urge the Commission to establish specific requirements for the DSP functions especially in regard to various planning requirements, plan implementation, procurement processes, consistency across all of the DSPs, enforcement of the planning requirements, etc. Furthermore, NY BEST asks that the Commission evaluate how new entrants may be able to form new DSP s that can provide competition to the existing DSP s in certain territories. This might include neighborhoods, villages, towns, or counties that want to become more involved with their energy decisions. Additionally, NY BEST believes it is important to note that the Straw Proposal s discussion of Grid Operations (p.13) should incorporate energy storage as a part of the discussion on intelligent grid facing equipment. Importantly, as grid operators face increasing issues such as Phase Imbalance resulting from more DERs on the grid, energy storage presents a meaningful and effective solution to addresses these concerns. We urge the staff and the Commission to incorporate this role for energy storage in its approach to grid operability. III. Enabling New Roles for Key Participants (Comments also apply to Section V.E) Capturing Locational Value Locational and temporal granularity in pricing is critical to creating the most value from DERs and realizing their full benefits. NY BEST is concerned that the Staff Straw proposal does not sufficiently address the ability of DERs, such as storage, to provide capacity and energy to the grid and receive locational value for those services. 7

8 Specifically, the Straw Proposal states that REV should create bi directional power flow from DERs, which is the key premise upon which the proceeding is based. However, in the section describing products from DER, capacity and energy are not listed. NY BEST is concerned that the staff s discussion of two potential models for the DSP (p of the Straw Proposal) fails to recognize that creating multiple avenues for DER products will provide the most robust, fair and financially viable market. NY BEST suggests that services provided by DERs should be able to be: (1) aggregated by the DSP to sell to the NYISO; (2) purchased by the DSP for need within their distribution area; (3) sold directly by the DER to the NYISO; and (4) sold directly to customers through bi lateral agreements. NY BEST is concerned that the model proposed by staff (DSP acting as aggregators to the NYISO), does not allow for the value of injecting power at a particular location to be fully realized. We believe it is important that DER benefits currently not valued in the NYISO markets are allowed to be monetized to create a broad DER asset base. NY BEST urges the Commission to address this in the design of the energy storage tariffs proposed by staff. In addition to interacting with the DSP, we believe that the Commission should encourage bilateral agreements and that such agreements will help animate the markets. IV.B. Gauging Feasibility Benefit Cost Analysis Capturing the Benefits of Storage NY BEST strongly supports the concept of a more comprehensive benefit cost analysis (BCA) in relation to achieving the goals of REV and to ensure that the multiple benefits of DERs such as storage are appropriately captured. However, we are very concerned with the staff s proposed approach to BCA as outlined in the Straw Proposal. NY BEST believes that the BCA methodology should be independently developed through an open transparent stakeholder process and that the BCA methodology should be standardized across DSPs. As described in the Straw Proposal, it appears that staff is 8

9 proposing each DSP would establish its own BCA. We believe this would be chaotic and undermine the Commission s goals to increase DER participation in the market. NY BEST also has some specific recommendations on the approach to the BCA framework. In forming the Cost Benefit framework, NY BEST would like to stress the need for fidelity in the tools utilized by the REV process in order to capture the potential benefits that may be gained by the utilization of storage and DER. Whether storage/der is placed on the customer side of the meter or on the utility side of the meter and shared with the consumer, analysis of the devices, their impact, prioritization of primary and secondary applications, charging and discharging controls typically requires a tool with the fidelity to capture how the device would truly be operated on the system and at a timescale necessary to accurately model what is happening on the system. The fidelity of the tool is focused on the timeframe where variable, renewable technologies are moving too quickly to be accurately assessed on an hourly basis. In addition, the sophistication is needed because often, multiple variables need to be weighed in order to assess when a device is going to turn on, off, charge, or discharge. In order to capture impacts to the grid and simulate how devices will react, and then compile that into financial benefits, higher fidelity or sophisticated tools are required in the BCA frameworks. NY BEST urges the DPS staff and Commission review the California AB 2514 Storage process as it combined efforts of multiple stakeholders. That process began with the belief that lack of modeling capability in this area would inhibit stakeholders from reaching a consensus. However, since that time, new complex tools have been developed and focus on assessing the benefits of storage (See especially the work done by DNV GL and Pacific Northwest National Labs (PNNL)). NY BEST recommends that tools with the proper sophistication and fidelity be used to conduct the benefit costs analysis and that DPS staff review reports from California s AB 2515, Phase II Process of cost benefit analysis and consider adopting some of the best practices developed during that process. We also recommend that the Commission set a schedule with clear timeframes for the BCA stakeholder process. 9

10 V.B. Building the DSP Market Demonstration Projects Utilize New York s Testing Assets NY BEST encourages the Commission to utilize New York Testing Centers of Excellence for 3 rd party demonstration of the technologies and communication platforms that will be integral to achieving the goals of DSP concepts and functionality. Facilities such as the BEST Test & Commercialization Center in Rochester, New York, as well as others, have the validation and assurance capabilities to help ensure that the platforms being proposed to support the DSP will seamlessly deliver on their promised services and potential. In addition to in lab capabilities, the BEST Test and Commercialization Center also has the capability to perform field testing and validation of the same platforms and technologies. Given that the State has invested in the creation of the BEST Test and Commercialization Center and other testing facilities throughout the State, we encourage the Commission to leverage these facilities to ensure success of the technologies and platforms selected to support the initiative. V.E. Building the DSP Market Tariffs Tariff Design Is Critical For Energy Storage The Straw Proposal recommends that an immediate process should be undertaken to develop demand response tariffs for all service territories, including tariffs for storage and energy efficiency. NY BEST supports the concept of tariffs. However, we are concerned with the limited discussion in the Straw proposal about the tariffs and how the tariffs will be designed and applied. We are particularly concerned about if and how the BCA framework will be factored into the design of the tariffs. Ideally, NY BEST believes that tariffs established to achieve the REV goals should: be standardized across DSPs and technologies; unbundle costs and benefits of storage; provide for locational and temporal granularity (Because benefits can differ with location down to individual distribution circuits, the degree of locational granularity is important); 10

11 allow flexibility to respond to market and load conditions; and address existing tariffs structures that hinder deployment of DERs. provide medium to long term visibility to tariffs that allow DERs to sign long term contracts. Importantly, however, NY BEST understands that the Commission wishes to move forward with tariffs as a near term action, and some of the more complex goals we have articulated above may be difficult to achieve in the short term without significant additional data and analysis. To address this, NY BEST recommends that the Commission consider taking a phased approach to tariffs. While we urge to the Commission to strive to achieve our desired goals in the longer term, NY BEST suggests the Commission consider a more simplified approach initially. For example, the Commission could adopt an approach similar to that taken in the Indian Point Contingency Plan, whereby incentives have been established to put DER equipment in place to address immediate system issues. This is one potential model that could be modified, streamlined and built upon to also incentivize in front of the meter storage and other types of DERs. The Commission, working with the utilities could identify areas of concern throughout the state which also present a likely favorable opportunity for DERs. This type of approach would provide an avenue for DERs to address system concerns across utility territories. VII.B. Implementing REV Near Term Actions NY BEST Recommends Additional Near Term Actions NY BEST appreciates the staff s interest in moving forward with early actions to increase the market penetration of DERs and we applaud the staff s goal to increase the DER asset base. NY BEST recommends some modifications to the actions outlined in the Straw Proposal, as well as suggests additional near term actions that could be taken by the Commission. First, the Straw Proposal suggests that each utility should determine and indicate which of the most significant capital projects are likely candidates for deferral or avoidance through the procurement of DER alternatives. NY BEST views this approach as too limiting to 11

12 achieving the goals of REV and urge the Commission to require utilities to evaluate DER alternatives for capital projects meeting a specified threshold. Secondly, NY BEST believes that substantial additional data and information needs to be generated by utilities and made available to DER providers. Ideally, this analysis needs to be in depth and locational based. NY BEST recommends a near term utility initiative to map the grid at all levels to identify areas of congestion, areas of development opportunity and the like to enable the mapping of DERs, and aggregation of DERs, to the grid. This type of analysis could be simplified even further initially by requiring utilities to identify major zones that would immediately benefit from the addition of DERs. In addition, NY BEST members have identified the need for time resolved usage data (e.g., sub hourly). While some of this data may not exist or be easily generated, we would suggest the Commission consider requiring aggregated smart meter data be made available as well as power quality information. Thirdly, NY BEST encourages the Commission to continue and potentially expand existing incentive programs and Request for Proposals/Information(RFP/RFI) in the near term to assist in increasing the penetration of DER assets on the grid. Specifically, we recommend that the Commission consider adopting a similar approach for energy storage as it has done with solar, by combining incentives with long term revenue streams for energy storage assets. This could also be done through encouraging project selection under the current RFP/RFIs from Con Edison and LIPA and then expanded to other utilities and locations. This approach would recognize the benefits provided by energy storage, assist in monetizing those benefits and increase the grid s operational efficiency. Fourth, there is a currently a lack of standardized tools and methodologies for modeling energy storage as well as other DERs, either on a stand alone basis or in combination. Current utility modeling tools are not able to value storage as a flexible resource, nor can they value diverse services offered to the grid by a given storage resource. As a result, these models are not able to design appropriate incentive mechanisms/tariffs to compensate DERs for the provision of those services. NY BEST urges the Commission to require the DSPs to develop and deploy a full suite of standardized tools capable of 12

13 analyzing and valuing storage within the context of a locational driven distribution plan as proposed in the Staff Straw Proposal. Finally, NY BEST encourages the Commission to include action on DER interconnection issues as a near term action. Currently DER providers face lengthy and costly processes that are not standardized across utility territories. This creates unnecessary obstacles to DER deployment and interferes with the goals of increasing the penetration of DERs. We urge the Commission to establish specific requirements for utilities to meet with respect to interconnection of DERs to the grid. General Issues Terminology and Wholesale Market Interaction In reviewing the Straw Proposal, NY BEST noted that various terms and definitions were not always consistently used throughout the document. We ask that the definition of DER consistently incorporate energy storage, including: behind the meter, distribution, and sub transmission level. NY BEST also encourages the continued coordination between the retail and wholesale markets. This need has been heightened by emerging jurisdictional concerns between retail and wholesale markets across a wide array of issues, including interconnection. Given that storage can easily provide numerous services to both markets, important considerations include: the streamlining of interconnection requirements between jurisdictions, tariff related issues when storage participates in both retail and wholesale markets, high installation costs when telemetry and metering are both required to participate in both wholesale and retail markets, the rates charged for energy purchased appropriately assessed at the wholesale and retail levels, and resource aggregation across jurisdictions. Coordination between markets will be important for bidirectional, nodal, situationally aware grid to evolve into a dynamic, flexible power system. CONCLUSION NY BEST applauds the DPS staff and the Commission for the time and effort that has been invested in the REV process to date. We greatly appreciate the opportunity we have had to 13

14 participate in the various stakeholder working group meetings and to provide input directly to DPS staff. The Straw Proposal demonstrates that DERs offer tremendous benefits for the State s goals of transforming the electric grid and creating a modern, clean, efficient, reliable system of the future. With the appropriate design of the DSP, BCA and tariff structure, NY BEST believes the goals of REV will be achieved and we look forward to assisting in making that happen. NY BEST appreciates the opportunity to provide these comments and we stand ready to assist with the Commission as the REV proceeding continues. Respectfully submitted, William P. Acker Executive Director NY BEST 1450 Western Ave, Suite 101 Albany NY