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Energy affordability is top of mind for many state legislative and regulatory bodies. As part of those energy affordability considerations, conversations and proposals are increasingly contemplating who should be allowed to own the batteries that keep the grid running. Utilities, independent developers and customer-owned systems can all deliver various grid services. The states that let all three compete for the same projects tend to land the lowest prices for ratepayers. The states that restrict or prioritize a singular ownership model run the risk of higher rates for ratepayers.<\/p>\n
That is the caution regulators should carry into every storage docket: a policy that favors utility ownership over private developers, or the reverse, trades a competitive market for a guaranteed one, and someone always ends up covering the difference. Minnesota’s newest battery program shows what that looks like when that caution goes missing.<\/p>\n
COMMENTARY<\/strong><\/p>\n The Minnesota Public Utilities Commission approved a plan this year letting the utility own up to 200 megawatts of batteries, backed by a $430 million budget. Third-party developers never got the chance to compete for that same work.<\/p>\n MnSEIA, SEIA, and the Coalition for Community Solar Access say the plan shifts financial risk onto ratepayers while shutting out cheaper third-party ownership alternatives. SEIA calls it the only utility-owned virtual power plant of its kind in the country with a cost-benefit ratio below one. Ratepayers will be forced to cover that gap regardless of how the batteries perform.<\/p>\n This math traces back to how utility regulation works. A regulated utility earns a fixed return on whatever capital it invests. A bigger, costlier battery system earns a bigger return than a cheaper one that solves the same grid problem. An ownership target locks that price in because no competing bid ever gets the chance to challenge it.<\/p>\n States already have a model for setting targets well. A renewable portfolio standard sets a target for how much clean energy the grid needs. It does not name who has to own the plants that supply it. Utilities, independent developers or co-ops can all vie to meet that goal.<\/p>\n A utility-ownership target or incentive for storage breaks that pattern. It names the owner before anyone else can bid on price or performance.<\/p>\n Encore Renewable Energy owns and operates a portfolio of battery projects in Vermont, with dozens of other projects in development in New York, Illinois and Colorado. Utilities pay for predictable peak-load reduction: they predict the load events, and the batteries discharge accordingly to manage the most challenging and expensive hours of demand. Revenue is also generated from other services the battery performs, like energy arbitrage and ancillary services, markets a rate-based utility battery cannot enter, since its return already comes through the rate base.<\/p>\n If there are unexpected costs or performance issues, the independent owner absorbs that cost, not the ratepayers. It never reaches a customer’s power bill. Private capital takes on that risk so ratepayers do not have to.<\/p>\n Pricing structures can vary as much as ownership does. Some contracts pay the developer for performance, the way Encore’s Vermont projects do. Others use a fixed-fee model instead: the utility takes all the project’s revenue and pays the developer one set amount, while the developer still owns the asset and carries its performance and technology risk. Either approach can pair with any ownership structure. Deal terms and who owns the asset are separate questions, each with more than one fair answer.<\/p>\n None of this shuts out utilities. They still have a real operational role. Coordinating thousands of small batteries sitting behind customers’ meters, and calling on that combined capacity when the grid needs it, puts a utility in position to act at a scale no single developer can match. The batteries themselves can still belong to the customers or developers who installed them.<\/p>\n The same holds for grid maintenance: utilities keep the poles and wires running and respond when a storm knocks out power across a county, better than any developer could. None of that requires owning the batteries that support it.<\/p>\n States can fix the ownership-target problem by setting a target for total storage capacity and requiring every project to win that capacity through competitive bidding (with utilities included in the bidding).<\/p>\n New Hampshire just expanded utility-ownership authority in a similar way, though its new law points at gas and nuclear plants rather than batteries. The new law lets utilities own up to 10% of their peak load in new generation, with no single unit larger than 5 megawatts.<\/p>\n The bill drew similar objections around energy affordability; it shifts financial risk onto ratepayers and narrows a competitive market before competition can start.<\/p>\n Let utilities run the grid they know how to run. Let private developers take on the risk they know how to manage, and let price decide who builds what. That’s what keeps energy affordable, and it’s the standard every state’s storage policy should be measured against.<\/p>\n \u2014Chad Farrell<\/em><\/strong> is founder and president of <\/em>Encore Renewable Energy<\/em><\/a>, a Vermont-based developer and owner\/operator of solar and energy storage projects across the U.S.<\/em><\/p>\n<\/div>\n Energy affordability is top of mind for many state legislative and regulatory bodies. As part of those energy affordability considerations, conversations and proposals are increasingly…<\/p>\n","protected":false},"author":1,"featured_media":98548,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[2611],"tags":[],"class_list":["post-98547","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buzz-headlines","wpcat-2611-id"],"_links":{"self":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/posts\/98547","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=98547"}],"version-history":[{"count":0,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/posts\/98547\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/media\/98548"}],"wp:attachment":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=98547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=98547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=98547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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