Utilities prep for project development on heels of Maryland's first energy storage pilot
Maryland has been moving towards a cleaner, more resilient power grid, increasingly incorporating distributed energy resources like solar and storage and spurred on by the state’s robust Renewable Portfolio Standard.
As part of this overarching imperative, Maryland’s four investor-owned utilities (IOU) last year solicited proposals for an energy storage pilot program following the passage of energy storage legislation in 2019. The Energy Storage Pilot Project Act required the Maryland Public Service Commission to establish an energy storage pilot program, with each state IOU directed to solicit offers to develop at least two different models for energy storage projects capped at a cumulative capacity of 10 MW.
The goal of the legislation was to allow state regulators to evaluate the best use of energy storage, and to identify the regulatory reforms and market incentives necessary to facilitate the future deployment of storage across the state.
“One of the more important aspects of the legislation was that at least one of the projects offered should be owned by the utilities, but some could not be owned by the utilities, so we had to consider various models,” said David Bloom, Manager of Energy Acquisition at Baltimore Gas & Electric (BGE), at a recent roundtable hosted by the Clean Energy Group.
The four different project models include a Utility-Only, Third-Party, Third-Party Ownership, and a Virtual Power Plant. Other suggested models would allow for customer or third-party-owned energy storage.
“Even more importantly, the projects should all have dual purposes and the primary purpose for these projects is focused on distribution grid reliability,” Bloom said. “And that’s frankly where the vast majority of the value comes from for these projects-- to support the cost- benefit analysis. But the dual purpose aspect also contemplated the value added from participating in the PJM wholesale markets. That dual purpose is critical and really guided the utilities throughout this process.”
In early 2020, joint Exelon utilities BGE, Delmarva Power & Light (DPL) and Potomac Electric Power Company (Pepco), opened up an RFP process for proposals to align with the four models, with 17 vendors submitting 73 bids for six projects.
“The experience through the RFP was very informative for all the parties involved, both for the utilities and the vendors,” Bloom said. “This was going to be the first time for the utilities to engage in the PJM market this way with an energy storage resource. We had a lot of questions ourselves to make sure that we were seeking a project that was going to meet our needs, as well as having it function and being able to optimize the value in the PJM wholesale market.”
The projects
The state’s PSC accepted six proposals submitted by BGE, DPL, and Pepco, with winning bids coming from Ameresco, Hitachi Power Group, Sunverge, MESA Veterans Power, A.F. Mensah and AlphaStruxure.
“We were very excited about that,” Bloom said. “We were anxious to get a lot of the work underway to then complete contracts with the vendors, begin permitting, and then the actual construction of these projects.”
The awarded projects--some expected to become operational as early as February 2022--include:
BGE's BESS at Fairhaven Project, a utility-owned 2.5 MW lithium-ion battery system sited at the Fairhaven substation in Anne Arundel County
BGE's Chesapeake Beach Project, a third-party owned 1 MW lithium-ion battery energy storage system at Chesapeake Beach
Pepco's National Harbor Project, a utility-owned, third-party operated 1 MW battery storage system at National Harbor
Pepco's Bus Depot Project, a third-party owned and operated 1 MW battery storage system at an electric bus depot in Silver Spring
DPL's Ocean City Project, a utility-owned and operated 1 MW battery storage system sited at a residential beachfront community on a barrier island
DPL's Elk Neck Project, a third-party owned and operated 0.5 MW VPP on a peninsula in Chesapeake Bay
“Very importantly, we then began to consider how to enter the PJM new service interconnection request process,” Bloom said. “As of now, all the projects have entered that queue and we’re currently working through the interconnection queue process. We do expect that process to be completed sometime in mid-2021. Once that is complete and the construction is also completed, the projects will be able to meet that primary function of distribution grid reliability, but then even more exciting is that we’ll be able to compete in the PJM wholesale market.”
Chad Dixon, Senior Consultant at Customized Energy Solutions, said the greatest value to utilities lies in the distribution system benefits of the projects.
“Specifically, the utilities needed to have the battery available for certain times of need, either during a peak time, but also looking at backup power,” Dixon said. "If you've been watching PJM at all, you know that that capacity market has been a bit of a hot-button issue, and we are currently in the process of potential big changes there. But with regard to how these batteries are modeled, we did consider the 10-hour rule--the rule that states that batteries and limited duration resources are valued in the capacity market based on the output that they can sustain for a period of 10 hours. That's not great for a one-hour resource, but ELCC may change that.”
Last year, PJM's Markets and Reliability committee approved an Effective Load-Carrying Capability (ELCC) package in response to the Federal Energy Regulatory Commission’s order on how regional transmission organizations value energy storage in wholesale power markets. The move was touted by the U.S. Energy Storage Association (ESA) as offering the fair value and predictability needed for energy storage operators to enter the Mid-Atlantic market.
The approach would create a reliability-agnostic valuation of energy storage, determining the contribution that storage of various durations makes to system reliability in a manner that allows for a more 'apples-to-apples' comparison to fuel-based generation and other resources.
In the meantime, Exelon utilities have been executing contracts with project vendors and completing integration plans for the battery systems. The utilities also plan on exploring future energy storage opportunities.
"This is a pilot program, and while I’m not a pilot myself, my pitch is that pilots like to take off," Bloom said. "My hope is that with the utilities’ experience, we will see more of these projects built here in Maryland. Having the utilities own and operate them is a great opportunity, also recognizing that the way the pilot is structured there is opportunity for third-party ownership, so both of those models are part of this first pilot program. We do hope to see more growth here in the future."