Managing the Future of Energy Storage: Implications for Greenhouse Gas Emissions

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Institute for Policy Integrity New York University School of Law




With rapidly advancing technology and declining manufacturing costs, energy storage systems are becoming a central element in many energy policy debates. Policymakers see storage as a potential solution to the challenges that stem from the intermittency of certain renewable resources, such as solar and wind. Storage systems are therefore considered key to hastening the clean energy revolution, and are at the nexus of energy and climate change policy. Reductions in greenhouse gas emissions are often a stated goal of policymakers encouraging energy storage installation. Energy storage systems, undoubtedly, will be a key part of the future of the electric grid. They have the potential to provide many benefits to the grid, such as lowering the price of electricity at peak demand times, and deferring or avoiding new capacity investments. However, contrary to the prevailing wisdom, energy storage is not guaranteed to reduce emissions, and may, in fact, increase emissions if policies are not designed carefully. Further, while this oft-cited (but not guaranteed) benefit of storage dominates headlines in policy discussions around the country, many other types of benefits that energy storage systems can provide are not well recognized in policymaking. This report seeks to be a resource to policymakers interested in maximizing the benefits of energy storage. It highlights the underappreciated benefits of energy storage and discusses the ways in which current policies are failing to encourage socially optimal deployment of storage technology. As policymakers start to rely more heavily on energy storage systems to achieve clean energy goals and other improvements to the grid, it is helpful to first understand the ways that the current regulatory and policy landscape fails to reward storage systems for the variety of benefits they provide to the grid, including ancillary benefits such as frequency regulation. Further, policymakers must keep in mind that the greenhouse gas impact of energy storage depends primarily upon whether the type of generation used to charge the storage is cleaner than the type of generation avoided when the storage is used; otherwise, storage could produce pernicious results. Policy reforms that account for the range of benefits provided by storage, including reduced air pollution, are required at both state and federal levels. This report recommends that policymakers focus on: • Accurately pricing externalities caused by greenhouse gases; • Eliminating entry barriers for energy storage systems; and • Eliminating barriers to multiple value streams. This report outlines what is needed to realize each of these three goals and provides an overview of state and federal actions currently under way.

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