Dive Brief:
- Developers have deployed 396 MW of energy storage capacity and awarded or contracted another 581 MW in New York since the state first set energy storage goals in 2018, the New York Department of Public Service said in an April 1 report.
- Excluding two pumped-storage hydroelectric facilities that predate the 2018 order, the aggregate energy storage capacity built to date is about 33% of the state’s original 2030 target of 3 GW and 65% of the state’s interim 2025 target as of March 31. In late 2022, New York proposed doubling its 2030 target to 6 GW of installed storage capacity.
- The storage buildout to date is dwarfed by 40.5 GW of proposed energy storage projects in the state’s interconnection queues, but the report noted that “an indeterminate number of these projects may never be built … due to the expense of interconnection, permitting, financing or for other reasons.”
Dive Insight:
In comments filed with the New York Public Service Commission last year, a group of New York utilities said reaching 6 GW of storage by 2030 would require an “all-hands-on-deck approach.”
Despite generous state incentives and recent storage cost declines, the latest state report shows New York is unlikely to meet its interim 2025 goal and would need to “stretch” to reach its 2030 target, Vanessa Witte, senior research analyst for energy storage at Wood Mackenzie, said in an interview with Utility Dive.
Witte said Wood Mackenzie is tracking about 2,400 MW of “announced projects” in New York that could be built in the next few years. However, these projects aren’t yet permitted or contracted, meaning there’s been “no real movement on development,” Witte added. The upshot is that much of the announced capacity is unlikely to come online in the next 18 months, she said.
The slow pace of New York’s storage buildout is partly due to the unfavorable economics of merchant bulk energy storage in comparison to markets like California or Texas, where developers’ profit margins can be higher, Witte said.
As costs increased earlier this decade due to supply chain bottlenecks and rising materials costs, New York energy storage developers’ already-thin margins came under pressure, making it “harder for utilities to get on board [with storage projects] and for developers to make their projects pencil,” Witte added.
New York’s April 1 report noted that “the still relatively high cost of the energy storage resources today, combined with uncertainties in monetizing its various value streams, has resulted in an uneven pace of deployment.”
The New York PSC has “approved initiatives to address [cost] issues, including utility procurements and upfront incentives,” the state said. As of March 31, 675 MW of storage has been awarded, contracted or deployed through the state’s Bridge Incentive program, which provides financial incentives for qualifying bulk energy storage projects larger than 5 MW, commercial retail energy storage systems no larger than 5 MW and single-family residential solar-plus-storage systems, the state said. These incentives are based on participating resources’ storage capacity and the amount of energy they provide to the grid.
Among projects participating in the Bridge Incentive program, the 60 retail front-of-the-meter solar-plus-storage systems tracked through March cost $463/kWh on average, the state said. The 22 tracked retail storage-only systems cost an average of $511/kWh, while the seven tracked bulk storage systems cost an average of $526/kWh. The state tracked smaller numbers of retail behind-the-meter storage-only and solar-plus-storage projects at average costs above $1,000/kWh, but the report cautioned that “higher installation costs on one project quickly affect the average cost” when the sample size is small.
Rising expenses in 2021 and 2022 prompted New York to add up to $300 million to its energy storage roadmap cost projections. But the state’s April 1 report notes that price increases abated last year, with “lithium-ion battery packs dropping 14% in price to $139/kWh from
2022 to 2023.” Looking ahead, the state cited BloombergNEF projections for total installed costs on “large turnkey four-hour AC energy storage [systems]” to fall to $175/kWh by 2030.
“Now that we’re in an environment of reduced costs … we do expect New York to move forward more quickly” on storage additions, with state financial incentives strengthening the tailwinds, Witte said.
“When I talk to developers in New York, the general feeling is that [the state] will hit overall storage targets,” but perhaps not on its self-imposed deadlines, Witte said. While “there are a lot of dependencies” that could affect the buildout over the next decade, including an interconnection queue that adds anywhere from two to six years to the typical bulk storage project’s timeline, the state is on pace to reach 6 GW by 2032 or 2033, she added.
Smaller-scale distributed storage resources, including residential solar-and-storage systems, could help pick up the slack in the short term, Hanna Nuttall, U.S. distributed storage analyst for Wood Mackenzie, said in an interview with Utility Dive.
“Developers are looking more at distributed [storage] given the issues with grid-scale,” Nuttall said. “Not to say that interconnection for distributed is easy, but it’s certainly not as costly as on the utility side.”
