In This Issue: Battery and Energy Storage Systems
2023 was a banner year for energy storage in the United States. Statistics reported by Wood Mackenzie show that in 2023 alone, energy storage deployment across all sectors (e.g., residential, C&I, utility-scale) reached 8,735 MW (25,978 MWh) an 89% increase over 2022. This growth can be tied to multiple factors, including the Inflation Reduction Act's extension of the Investment Tax Credit to standalone energy storage, decreases in component costs, and increasingly supportive state and federal policies.
As explored in this edition of Climate Law Matters, the versatility of energy storage resources will play a critical role in the transition away from fossil fuel dependence. Energy storage's flexible operating characteristics make it uniquely positioned to balance volatility on the grid, providing significant reliability benefits and enabling greater deployment of intermittent resources. In some jurisdictions, energy storage is being explored as a transmission asset, which could help support the existing grid or provide an alternative to constructing new transmission facilities. Energy storage, as a category, encompasses a diverse array of technologies that are capable of scaling up or down in size to meet a myriad of energy needs from car batteries to utility-scale projects poised to replace fossil fired peaking units.
However, energy storage's unique features bring with it its own share of challenges. In most states, rate design has not been updated to reflect the operational characteristics of energy storage, leading to charges that may not fully reflect the benefits and costs of these technologies. Many local and state permitting processes have not been updated to address energy storage. At the wholesale market level, despite the fact that we are nearly six years removed from Federal Energy Regulatory Commission Order No. 841, market rules to adequately compensate and incentivize energy storage resources are still being refined. While great strides have been made, there is still a long way to go before energy storage is a seamlessly integrated part of the clean energy transition.
In this edition of Climate Law Matters, the Foley Hoag Energy
and Climate team takes a deep dive into the world of energy
storage. We cover an overview of developments in energy storage
technology and the environmental justice implications of energy
storage projects, and provide an update on the state of energy
storage permitting in Massachusetts. On the transactional side, we
examine the effects of a recently announced tariff rate hike on the
M&A market for battery energy storage systems. Our team also
discusses a contentious topic in the energy storage industry
– wholesale distribution tariffs – and provides an
update on electric vehicles (EVs).
Read the full report here.
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