Virginia focus on storage spurs third party developers to push for better competitive bidding

Related Documents:
Virginia SCC Storage Order
Dominion and Appalachian Power Joint Reponse to Virginia SCC
Able Grid Energy Virginia SCC Comments

The Virginia SCC is soliciting comments from Virginia’s two incumbent utilities Appalachian Power and Dominion Energy, as well as energy storage industry leaders as the board prepares to establish incentives, regulations and interim targets to jumpstart the state’s storage market.

This action follows the passage of the Virginia Clean Economy Act earlier this year which requires Dominion Energy to add 2.7 GW of storage capacity to its portfolio and Appalachian Power to add 400 MW to its portfolio, both by 2035. The legislation specifically calls for regulations, programs and mechanisms to deploy energy storage including competitive solicitations, behind-the-meter incentives, non-wires alternatives programs and peak demand programs.

The Virginia SCC docket is specifically seeking comments regarding interim targets for both utilities, updates to existing utility planning to meet those targets, potential limits on storage development, and competitive programs and mechanisms to incentivize storage development. The SCC will also decide whether these regulations and incentives, once adopted, will apply to non-utility storage companies and projects. The commission will be accepting comments until 14 August 2020.

In a joint response to the SCC, Appalachian Power proposed incremental storage targets of 25 MW by 2026, and 150 MW by 2031 while Dominion proposed targets of 250 MW by 2026 and 1.2 GW by 2031. These targets are notably lower than recommended targets from other respondents, however, the utilities argue that by “back-end loading the interim targets, customers will likely benefit from any advancements in rapidly-evolving energy storage technology and from projected decreases in costs.”

“Back-end loading the interim energy storage targets will also track with the expected increasing penetration of intermittent renewable resources, such as wind and solar, over the next 15 years,” the utilities continued in their comments.

Virginia AEE executive director Harry Godfrey countered that by implementing more progressive early targets, the SCC can help spur the deployment of storage in front of and behind the meter as a non-wires alternative and as a substitute for conventional peaking power plants.

“Ultimately, catalyzing a robust, competitive storage market in Virginia will benefit the Commonwealth’s economy, save ratepayers money, and reduce emissions,” Godfrey wrote.

In order to meet their interim and final targets, both Dominion and Appalachian confirmed that they plan to utilize competitive bidding for all procurements over USD 100,000 and neither utility is pushing for a limit on storage development.

“The regulators should not mandate or limit the deployment of any particular type of energy storage resource,” the utilities wrote. “Energy storage is a rapidly-changing market, so the regulations should allow for flexibility in choosing the best solution to serve the needs of the grid and customers.”

However, storage developer Able Grid Energy is pushing for the SCC to require that utilities procure all storage via competitive bidding. The VCEA itself is contradictory on that matter. On one hand, it appears to only mandate that 35 percent of the storage capacity for each utility come from projects either owned or constructed by third party developers.

“At least 35 percent of the energy storage facilities placed into service shall be purchased by the public utility from a party other than the public utility or owned by a party other than a public utility with the capacity from such facilities sold to the public utility.”

However, it also reads that “all of the energy storage facilities located in the Commonwealth shall be subject to competitive procurement.”

Able Grid is also pushing for all procurements to include the option of project purchase or power purchase and to require utilities to detail how criteria other than price will be used in competitive procurement.

“Able Grid asks the commission to provide clarity to private companies regarding the anticipated pace of energy storage procurements over the next 25 years to enable companies to make investment decisions accordingly,” Able Grid Energy’s Sam Lines wrote. “We believe our company is representative of the type of company the VCEA works to attract to the state, and we operate across the U.S. working continuously to ensure we maximize return for investors and invest capital prudently.”

While the outcome of the SCC’s new docket will remain unclear until the comment solicitation process is completed, AEE’s Godfrey notes that the state is poised to capitalize on the storage market through the upcoming programs and incentives to be enacted by the SCC.

“This is a pivotal moment for the energy storage market in Virginia,” Godfrey said. “At 3.1 GW, the storage targets enacted in the VCEA are some of the most ambitious in the country. It is critical that the commission establish clear and near-term interim targets that create market certainty and attract the storage industry to invest and grow in Virginia. The interim targets and regulations that the SCC is developing will play a critical role in helping shape this storage market.”