State Clean Energy Policies Underpin ISO-NE Energy Storage Market

The six states in New England constitute attractive opportunities to develop clean energy and energy storage facilities in the long term, despite the certainty that such projects will not be economic undertakings without substantial subsidies until at least 2028 or 2029.

Political Goals

This apparent anomaly is down to strong political will across the states within the regional ISO New England (ISO-NE) grid to do whatever is necessary to accelerate their transition to clean power economies.  All but one, New Hampshire, have firm goals and laws for achieving zero-carbon targets, creating reliable demand for Renewable Energy Certificates (RECs), which will provide added financial incentives for projects.  

Confidence in these policies – and the political determination to maintain them over the next two decades - will be crucial to securing targeted near-term investment in energy storage, because regional energy and capacity prices are not expected to reach levels required to make such projects economic until at least the late 2020s.  

Connecticut plans to have 300MW of energy storage and operation by 2025 and 1GW by 2031, for example, while Maine is looking to bring 300 MW of capacity on stream by 2026 and 400 MW by 2031. Massachusetts is targeting 1GW of storage by 2026.  

"You have to trust that these goals are stable in order to invest, and we think that they are," commented Brent Nelson, Managing Director of Markets & Strategy at specialist consulting firm Ascend Analytics.

Clean Peak Standard

The standout financial incentives within the ISO-NE region is the Clean Peak Standard (CPS) program in Massachusetts, which allows qualifying generational resources, including storage, to earn additional revenues over four-hour periods at a time of high demand.  

The CPS also incorporates a “ratcheting structure” up to 2030, which mitigates the risk of too much supply of green energy at these times (and some sources of supply missing out) by increasing the volume of required credits when there is excess supply, which Ascend Analytics forecasts will cause prices to stay close to the prescribed caps. Ascend Analytics also expects the program to be restructured and hours to be shifted as critical periods on the grid evolve with renewables and storage buildout.  

The consulting firm estimates the program will deliver internal rates of return for energy storage projects of at least 15% to 20% by the end of the decade.  

“We do see the CPS as being a very significant source of value for projects inside Massachusetts,” confirmed Nelson. “It has really supercharged the market there.”

To read the full story, login into Voltility.net. Article written by Andrew Cavenagh, June 26, 2023.

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