Incentives for energy storage spread worldwide

Clarification and correction appended.

Last October, California became the first government to require its utilities to store a significant slice of the power they produce, instead of using it all right away. Now a growing roster of states and countries is taking up versions of the same idea, creating rules or incentives that will place storage in homes in Japan and Germany, at wind farms in Puerto Rico, along transmission lines in Ontario, and at individual buildings in Manhattan.

Every region has a somewhat different problem. The fact that energy storage is being applied to each is a sign that batteries are getting cheaper and better, and that the overseers of the power grid are beginning to rewrite the rules to accommodate energy storage, several industry experts said.

Research firm IHS recently forecast that the globe will install more than 40 gigawatts of grid-connected energy storage by 2022, designed to partner with a growing portfolio of renewable energy.

"The drivers are different in every case," said Haresh Kamath, program manager for energy storage at the Electric Power Research Institute (EPRI).


What they have in common, he added, is "people are turning to storage as a solution." EPRI estimates that the price of lithium-ion battery packs -- the type used in electric vehicles -- will by 2020 be a quarter of the price they were in 2010.

None of the programs is as large or comprehensive as the one in California. The state's Public Utilities Commission required that the three main utilities collectively phase in 1.3 GW of storage by 2020. Not coincidentally, that is the same year when the state is due to get 33 percent of its power from renewable sources, like wind and solar farms, that are intermittent and work best with the grid if their energy can be stored.

In a twist, half of the assets are required to be owned by private industry -- a rule that will likely make California a proving ground for the young energy-storage industry. The mandate also requires that storage happen all over the electric grid, including on transmission lines, on distribution networks and within buildings.

Other programs, while smaller in scope, are significant.

New York

Across the continent in New York state, power officials in January announced that they would create incentives to trim the load on the grid by 100 megawatts, partly by storing electricity in individual buildings.

Most of the action will be in and around New York City, in order to address two power headaches. First, transmission lines from power plants upstate are constantly congested as they enter the "load pocket" of the Big Apple, Kamath said. About 64 percent of the state population lives in the New York City metropolitan area.

Second, the Indian Point nuclear power plant, which sits just north of New York City on the Hudson River, faces an uncertain future. The license for one reactor expired in 2013, and another reactor is set to expire in 2015. But the Nuclear Regulatory Commission permitted them to continue operating while it considers a license renewal application. If the reactors eventually go offline, they would remove 2 GW of electricity that supplies 20 percent of the city's power.

Energy storage is just one path that New York is pursuing, along with measures to improve energy efficiency and use demand response, which makes power more expensive at times of peak demand. But the subsidies for storage are especially high: $2,100 a kilowatt for battery storage and $2,600 for thermal storage. Thermal storage is a relatively simple matter of storing energy, often in the form of ice, at night when power is cheap and releasing that energy during the day when power is expensive.

The New York Battery and Energy Storage Technology Consortium called the program "a clear indication that New York will be a leader in the deployment of energy storage."


Just north of New York, the Canadian province of Ontario late last year published a road map for its energy use, including a claim that it would begin to procure 50 MW of energy storage by the end of this year, including batteries and other storage technologies, such as flywheels and compressed air.

The projects will be quite large, 500 kilowatts and greater, and will favor those that pair with renewable energy plants. The province expects to close its last coal plant this year and to have 20 GW of renewable power online by 2025.

Ontario's predicament is its scattered population: It has nearly eight times the land area of New York but has 6 million fewer people, making power delivery a challenge.

"The most important part [for Ontario] it is looking at is 'where do we actually have congestion and traffic issues to date, and how can batteries alleviate this?'" said Dean Frankel, an analyst for Lux Research Inc.


This nation has installed record levels of rooftop solar by way of feed-in tariffs -- an approach that has also locked in high electricity rates for homeowners. In May 2013, the German government began offering them €25 million ($34.8 million) in energy-storage subsidies.

This may pay off in several ways. For homeowners, the subsidy -- 30 percent of the cost of storage equipment when installed in a house with solar panels -- will result in using more free electricity from the panels on the roof and less of the expensive power from the grid.

But the program also requires that some stored power gets shipped back to the utility, which may help keep the power grid reliable. According to the German Federal Ministry of the Environment, adding substantial energy storage to the grid could increase grid capacity by 66 percent while lowering the need for production by 40 percent.

Puerto Rico

Wind and solar farms involve a difficult trade-off for islands. On one hand, renewables are an attractive alternative to natural gas or coal, which must be shipped from the mainland at high prices. On the other, these on-again, off-again sources strain the power grid, which on an island is small. Having just a few power plants and a small base of energy consumers makes it difficult to match production and consumption and keep the grid balanced and operating.

In December, the U.S. territory of Puerto Rico ventured a solution to this problem by requiring that all new utility-scale renewable energy projects add storage equal to 30 percent of their capacity. The island plans to add 600 MW of low-carbon power in 2014, which will grow the proportion of renewable power on the island from 1 percent of the power mix to 6 percent.

The one problem is that such a requirement "makes the renewable energy that much more expensive," Kamath said.


On Monday, the Japanese government announced that it would make available 10 billion yen ($98.3 million) in subsidies to homeowners and businesses. The government will pay up to two-thirds of the cost of a lithium-ion battery system.

Japan's move into storage arrives as it becomes one of the world's fastest-growing markets for solar. The island nation installed a whopping 9.4 GW of solar in 2013 alone, according to the U.S. Department of Energy. The country is in the slow, agonizing process of finding new energy sources and reorganizing the grid in the aftermath of the 2011 Fukushima Daiichi nuclear meltdown.

South Korea

In South Korea, the problem the government is trying to solve is one of geography: Most power plants are in the country's southwest, while most industry is in the northeast, Kamath said.

The details of South Korea's energy-storage plans are hazy. They are targeted at midsized commercial users that could use 3 KW to 10 KW batteries that could power a business for two to four hours, Kamath said.

Clarification: Information has been added reflecting the regulatory status of the Indian Point nuclear power plant.

Correction: An earlier version of this story had a reporting error that stated that federal licenses to operate the Indian Point nuclear power plant in New York expire in 2016. Rather, the license for one reactor expired in 2013, and another is set to expire in 2015. The Nuclear Regulatory Commission permits reactors to continue operating until it considers the renewal application.

Twitter: @DavidFerris | Email:

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