Proactively planning and operating energy storage for decarbonization: Recommendations for policymakers

Abstract

Energy storage is poised for explosive growth as a result of technological innovation, expanded state mandates and incentive programs, and new participation models developed under Federal Energy Regulatory Commission Order 841. If storage is done right – charged using clean power, and discharged when grid needs are high and dirtier power can be displaced – it can be a key part of a low-cost, clean grid. But a growing body of literature suggests that storage could actually increase greenhouse gas (GHG) if not managed and incentivized properly.Optimizing storage to drive decarbonization, particularly in states with climate goals and renewable portfolio standards (RPS), will require a coordinated effort from grid operators, policymakers, utilities, developers and other stakeholders. Some key actions that need to be taken include incorporating carbon pricing into state and Independent System Operator (ISO) actions, developing market products to reward storage for supporting renewable energy, tailoring instruments like rate design, incentive programs, regulation, and grid planning/procurement, and providing storage with a GHG signal for co-optimization.These recommendations leverage findings and lessons from existing studies and can be applied to ensure other innovations like electric vehicles, distributed energy resources and thermal storage also have a pathway to decarbonization.