TOOLKIT Behind-The-Meter Battery Energy Storage: Frequently Asked Questions

What Is Behind-The-Meter BESS refers to customer-sited stationary system (e.g., utility-scale storage systems), Battery Energy Storage? storage systems that are connected to the in many ways, including who owns the distribution system on the customer’s side systems, where they are installed, and Energy storage broadly refers to any of the utility’s service meter.1 BTM BESS, the size and number of systems installed. technology that enables power system along with DG and other grid assets These characteristics influence the role of operators, utilities, developers, or deployed at the distribution level, are BTM BESS on the grid. Figure 2 outlines customers to store energy for later use. A broadly referred to as distributed energy a few key characteristics of BTM BESS battery energy storage system (BESS) is resources (DERs). Figure 1 provides and how they impact the integration of an electrochemical device that charges or some examples of DER (including a BTM BESS into the power system. collects energy from the grid or a distrib- BTM BESS) that are increasingly being uted generation (DG) system and then deployed in power systems around the As of the time of this writing, the primary discharges that energy later to provide world as technology costs decline and cost-effective battery chemistry available or other services when needed. 2 customer interest grows. for BTM applications is lithium-ion. The BESS can provide grid and customer trend toward lithium-ion has been driven, services, acting as both a load (while BTM BESS differ from front-of-the-meter in part, by steep price declines in the price charging) and a generation asset (while storage systems, both interconnected at the of lithium-ion technologies—over 89% discharging). Behind-the-meter (BTM) distribution system and the transmission from 2010 to 2020—with further price

Figure 1. A selection of DERs customers can deploy BTM in combination with, or apart from, distributed solar photovoltaics (PV) Source: (O’Shaughnessy et al. 2017). Note: This report only covers BTM battery energy storage, although it can interact with other DERs.

1. Customer-sited, off-grid battery storage systems, which are not connected to the grid, are not covered in this fact sheet. Additionally, while electric vehicles can act as BTM storage systems and provide services to the customer and power system, this fact sheet does not cover them. 2. For additional information on various technology options for energy storage, see Kim et al. (2018).

www.greeningthegrid.org | www.nrel.gov/usaid-partnership Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 2

VISIBILITY: SITING AND OPERATION: SIZE AND QUANTITY: System operators and utilities have Utility-scale systems are sited and BTM systems have smaller limited visibility into the BTM system dispatched to meet power system capacities, but there operation (i.e. they only see the needs. BTM systems are installed and are more of them. difference between customer demand operated to meet customer needs. and storage operation).

PROBLEM: PROBLEM: PROBLEM: This complicates their integration as Customer needs are not necessarily This can impact planning exercises utilities struggle to process applications. aligned with power system needs. and regular operating practices.

SOLUTION: SOLUTION: SOLUTION: Well-designed interconnection Well-designed compensation Well-designed interconnection processes can help streamline this mechanisms and other policy requirements can ensure sufficient process while ensuring they do not instruments can help align interests, metering and telemetry equipment negatively impact the power system. ensuring BTM systems are deployed installed to help utilities; however, the and operated to benefit all power burden these requirements can system stakeholders. represent for installing customers should be carefully considered.

Figure 2. Unique characteristics of BTM BESS, resulting issues, and solutions declines anticipated (Frith 2020).3 These reductions, improving energy resilience, more information, see “Compensation price declines, in turn, have spurred a and mitigating power quality. For addi- Mechanisms for BTM Storage.” growing interest in the adoption of BTM tional information, see Zinaman Additionally, depending on the presence BESS and the implications of integrating et al. (2020). of utility or third-party programs, BTM BESS into power system operations. customers may be interested in Customer Bill Savings: investing in BTM BESS and granting This fact sheet provides a brief overview BTM BESS is often paired other power system stakeholders access of stationary BTM BESS. with DG to reduce energy to their systems in exchange for payments bills and/or enhance (see “What Emerging Business Models Why Do Customers compensation. Bill Can Support BTM BESS Deployment?”). Adopt BTM BESS? reduction is primarily achieved through demand charge reduction (lowering the Customer Reliability BTM BESS adoption is mainly influenced maximum power consumed, typically and Resiliency: Customers by customer decisions, as the systems are per month) and energy arbitrage (shifting may be interested in having installed on customer premises, provide electricity consumption from high to reliable access to power savings or other benefits to the customers, low energy cost periods). The ability of after a disruption to the and customers are typically the principal customers to reduce their bills depends grid, particularly if these interruptions investors in the system. The primary on what a customer pays for electricity occur relatively frequently or the customer drivers for customer adoption of BTM (the retail tariff rate) and what they faces steep consequences for interruption BESS to date are opportunities for bill are paid for exports (the sell rate). For in supply (e.g., a hospital) (Anderson

3. Note that this figure only refers to battery pack prices, which represent only a portion of total energy storage system costs. Additional cost categories include labor for installation, additional monitoring and telemetry equipment, and developer overhead to fund customer outreach and advertising programs. Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 3

et al. 2019; Elgqvist forthcoming). be indirectly encouraged through price load (charging). In Hawaii, a virtual Continuous cost declines in renewable signals. In South Australia, a virtual power power plant comprising BTM BESS and DG and energy storage have made them plant pilot project is under development other DER is planned to help provide a viable alternative and/or complement to aggregate 1,000 BTM BESS to act as frequency support to the grid, including to traditional diesel generators because a single 5-MW power plant. In addition fast frequency response. These services they can reduce the size of the diesel to providing services to customers, this are expected to become more critical as generator needed, do not rely on fixed fuel will be used to perform the small island grid transitions to higher supplies, and can generate revenue while energy arbitrage in the wholesale market, levels of in line with its the grid is operational. Customers may benefiting retailers, and help meet peak 100% target (HECO and OATI 2019). become increasingly interested in resilient demand, benefiting system operators solutions as climate change increases the (AGL Energy Limited 2018). Transmission and Distribution Upgrade frequency and intensity of natural disasters Deferral: Just as system operators need such as flooding and tropical storms, Ancillary services: The supply and to ensure sufficient generating capacity to causing increasing interruptions to demand of energy must be carefully meet demand in all hours of the year, there the utility grid (Fried, Hellmuth, and balanced to maintain the safe operation of must also be sufficient transmission and Potter 2019). the power system. To account for fluctua- distribution capacity to deliver that power. tions in the demand and supply of energy, As the loads on the utility grid grow, a Customer Power Quality: system operators procure a wide array of utility may need to upgrade the distribu- Many customers, in partic- ancillary services on timescales ranging tion and transmission system capacity. ular industrial customers, from milliseconds to several minutes Energy storage can defer the need for rely on an uninterrupted (Denholm et al. 2020). Energy storage additional transmission or distribution supply of high-quality technologies such as lithium-ion batteries capacity investments by charging during power. These industries, such as semi- are well-suited to provide ancillary low-demand periods and discharging to conductor manufacturers, may be willing services as they: (1) react exceedingly meet local demand during high-demand to invest in BTM BESS to ensure power quickly and accurately to signals, and periods, essentially reducing the power from the grid within very tight voltage or (2) can from being sources of that must be transmitted from centralized frequency tolerances. generation (discharging) to sources of resources during traditional periods of grid

Can BTM BESS Provide Power System Services? Text Box 1. Enabling Power System Services From BTM BESS In addition to the “customer-facing” Although BTM BESS can provide a wide variety of services to the power system, services described previously, BTM BESS enabling these may require additional infrastructure, more complex operating has the potential to provide a wide range practices, and changes to compensation mechanisms. “Implicit” approaches of additional services to other power such as using retail tariffs to incentivize certain behaviors may require more system stakeholders. The following is a advanced metering infrastructure and additional administrative oversight, as nonexhaustive list of services that BTM well as customer education programs, to enable and encourage customer BESS can provide to utilities and power participation. More “explicit” approaches such as directly dispatching DER, either system operators. While technically through aggregators or directly by utilities and power system operators, may capable of providing these services, addi- require additional metering, telemetry infrastructure, cybersecurity considerations, tional steps may be necessary to tap into and operational changes to ensure safe and reliable procurement of services this potential (see Text Box 1). For a more from BTM BESS. This additional metering or communication infrastructure, while in-depth description of these services, critical for service provision, may increase the price of the storage system beyond see Bowen et al. (2019) or Denholm what a customer can afford. et al. (2019). In New York, the transmission system operator is developing a “Dual Participation” Energy and Capacity: BTM BESS model that will allow DERs such as BTM BESS to provide services to customers, can provide both energy and peaking utilities, and the wholesale . The model attempts to address issues related to: (1) ensuring bulk power system reliability; (2) ensuring appropriate capacity services by discharging stored visibility into DER operation for all parties; (3) ensuring the DER has access to energy either from an associated DG the most value streams possible; (4) preventing double payment for services; system or imported earlier from the grid. and (5) “coincidence” (when a DER is contracted to provide conflicting services to Encouraging BTM BESS to perform multiple entities in the same time period) (Lavillotti 2019). These rules will ensure energy arbitrage or provide peaking customers can pursue value through both on-site services (bill reductions, backup capacity may rely on explicit signals power) and revenues through markets. from power system operators or may Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 4

congestion. As BTM BESS are located on the distribution system, they are uniquely Text Box 2. vs. Net Billing for Energy Storage Systems suited to providing distribution deferral Two common frameworks for compensation mechanisms for electricity exported services. Faced with a potential $1.2 to the grid include net energy metering and net billing, both of which have different billion distribution upgrade, the New York impacts on the relative benefits of pairing storage with DG. utility ConEdison opted instead to defer the upgrade by relying on a portfolio of Under net energy metering, customers receive bill credits for electricity exports in investments, including customer-sited excess of on-site consumption. These credits can be used to offset consumption BTM storage, to reduce demand and from the grid in the current or future billing cycles. In this way, the power system remain within existing infrastructure itself acts as a form of financial energy storage, and, as such, net energy metering capacity limits (Schwabe, Statwick, and is unlikely to incentivize the pairing of BTM storage with DG. Tian 2018). The use of a broad set of Under net billing, customers are compensated for electricity exports at a nontraditional investments, such as DG, predetermined sell rate, while paying for consumption from the power system at BTM BESS, , or energy their normal retail tariff rate. The ratio of the sell rate and the retail tariff rate plays efficiency, to offset the need for traditional an important role in whether storage is incentivized. If the sell rate is lower than transmission and distribution investments the retail tariff rate (as is typically the case), customers pay more for consumption is known as non-wire alternatives. from the grid than they are rewarded for exports to the grid. This encourages customers to avoid consumption from the grid when possible by storing excess How Can Power System generation from DG for use at a later time, therefore incentivizing pairing their DG system with BTM BESS. Decision Makers Encourage the Adoption of BTM BESS? For more information on the impact of compensation mechanisms on BTM BESS, Policymakers, regulators, and other power see Zinaman et al. (2020). system stakeholders may be interested in encouraging the adoption and influencing the operation of BTM BESS, either in the California Public Utilities Commission Power offered financial assistance with interest of policy priorities (e.g., customer (CPUC) established mandatory energy purchasing BTM BESS in exchange for choice or decarbonization efforts) or as a storage targets for systems connected to limited control during certain hours of the means of providing valuable power system the transmission system and distribution year, allowing the utility to reduce oper- services. Customers, however, will adopt system, both behind and in front of ating expenses (Green Mountain Power and operate storage to match their own customers’ meters (CPUC 2013). These 2021b). Existing financial incentives for energy needs or objectives, which may goals, whether mandatory or aspirational, DG can also be expanded to include BTM or may not be aligned with the broader can send a clear message to developers BESS, either paired with DG or in stand- needs of the power system. Fortunately, and customers on the long-term support alone systems. there are several tools available to help for BTM storage, potentially bolstering nascent markets. Compensation Mechanisms for BTM align the interests of customers and other BESS: Compensation mechanisms power system stakeholders, including Financial Incentives for BTM BESS: govern: (1) what power flows between goal setting, financial incentives, and Providing financial incentives, such the customer, the DER system, and the compensation mechanisms. These offer a as low-interest loans, grants, or tax power system are allowed, tracked, powerful means for directing the adoption credits, can drive targeted adoption of and billed; (2) the rate customers pay and operation of BTM BESS to contribute BTM BESS among specific regions and for purchasing electricity from the to power system objectives. customer classes, particularly if there is a power system; and (3) the rate at which Setting Goals for BTM BESS: concern that BTM BESS is out of reach customers are rewarded for electricity Policymakers, regulators, and utilities may for low-income customers. For instance, sold back to the power system (Zinaman be interested in increasing the presence California regulators expanded financial et al. 2017). Compensation mechanisms of BTM storage on the grid, particularly assistance for BTM BESS for under- can be designed to reward exports by and among certain customer classes or in privileged customers in areas prone to incentivize the adoption of DG and are certain regions. Existing targets for wildfires as part of their broader mission in some jurisdictions being expanded to utility-scale storage, if present, can be to promote energy resilience and equity include DG plus BTM BESS (Zinaman, modified to include specific targets for (CPUC 2020). Incentives can also come Bowen, and Aznar 2020). Choices around BTM storage. For instance, in response with conditions to ensure that BTM BESS the design of compensation mechanisms to directives from policymakers to are being operated in ways that benefit can influence whether customers are increase the presence of energy storage multiple power system stakeholders. likely to pair energy storage with DG in line with environmental objectives, the For instance, the utility Green Mountain (see Text Box 2). Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 5

Some jurisdictions are introducing more BTM BESS to interconnect that are likely which help ensure interconnecting systems complex retail tariff elements into their to cause issues. The three categories of are capable of appropriately reacting to compensation mechanisms, like time- rules outlined below can help jurisdictions power system conditions, as well as cover of-use rates or demand charges. These safely and efficiently interconnect BTM other important elements for DER such elements can be more likely to incentivize BESS while ensuring interconnecting as communication and cybersecurity pairing BTM BESS with DG, as complex systems are capable of meeting power protocols. Additional standards specific rates often offer more opportunities for system objectives. Many of the same rules to energy storage are currently under customers to reduce their bills with BTM and approaches already used to safely development. BESS relative to flat volumetric rates and reliably integrate other DERs like alone. Such complex tariff elements also distributed PV can also be implemented Technical review processes govern how help to align DER operation and consump- for BTM BESS. systems are reviewed for their potential tion with power system needs. However, impact on the grid by the utility before these benefits must be weighed against the Application processing determines the being allowed to interconnect. Some increased effort to administer such tariffs, information customers and developers regulators have allowed for expedited as well as a customer’s ability to reason- must provide the utility to submit a review processes in constrained portions ably respond to additional complexity. complete application and how the utility of the grid if the developer or customer must handle these applications once agrees to limit discharging back to the grid received. Finding ways to automate or (e.g., Hawaii’s Customer Self Supply tariff How Can Decision Makers streamline the application process can help option (HECO 2019)). Well-designed Promote the Efficient, Safe, utilities make the most of their limited technical review processes help utilities and Reliable Interconnection resources and ensure a relatively painless prioritize additional review for systems of BTM BESS? experience for adopting customers, most likely to cause issues, while allowing Interconnection is the process of safely removing a stumbling block for the accelerated interconnections for systems and reliably integrating a given DER into growth of BTM BESS and other DERs. unlikely to cause issues. This streamlined the broader power system. Poor intercon- process can enable the adoption of nection procedures can act as a barrier Grid requirements dictate the storage and help utilities use their limited to DER like BTM BESS by either: (1) behavior and capabilities of equipment resources more efficiently (Horowitz et al. presenting customers and developers with interconnecting to the power system, 2019). opaque and difficult-to-navigate appli- typically through model equipment and interconnection standards developed cation processes; (2) requiring too much What Are Some Key Safety effort on behalf of the utility to process by international bodies. Two important standards for DER such as BTM BESS Issues Surrounding BTM applications, leading to long delays for BESS? customers and developers; or (3) allowing are IEEE 1547-2018 and UL 1741 SA, As BTM BESS are sited on customer premises, it is important for these systems to operate safely. Two critical safety Text Box 3. Ensuring Safety for BTM BESS concerns for storage systems include The New York State Energy Research and Development Authority (NYSERDA) unintentional islanding and, for lithi- has developed a set of guidelines for reviewing and evaluating BESS, which rely um-ion batteries that make up the majority on utilizing codes, standards, and training. This includes guidance on the adoption of new BTM BESS installations, thermal of legislation and regulations for safe and reliable adoption of BESS, permitting runaway. considerations for residential and small commercial BESS, and an inspection checklist for code enforcement officers or third-party inspectors. In 2020, the New Unintentional islanding refers to York State Uniform Fire Prevention and Building Code, which outlines the required instances in which energy stored in the statewide guidelines for building construction and fire prevention, was modified to BTM BESS re-energizes a portion of the include the latest safety considerations for energy storage systems (NYSERDA distribution network without the knowl- 2020). edge of utilities. This can delay service restoration, damage utility equipment, Given the dense urban areas in New York, building-related requirements are and pose hazards to utility workers who provided for both “occupied” and “unoccupied” areas to minimize fire and chemical hazards to occupants and also minimize the conditions under which fires occur, assume a segment of the grid is not including ensuring adequate ventilation to prevent any gas and air buildup around energized (Enayati 2018). Although rare, modules, which can lead to fires (Gokhale-Welch and Stout 2021). In combination unintentional islanding can happen if an with existing codes, regulations, and industry standards, these provisions help energy storage system (or a distributed ensure the safe permitting, siting, and deployment of BESS. PV system) continues to export power to the grid during an outage. Many technical Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 6

requirements (e.g., IEEE 1547–2018) now stipulate specific measures to detect Recommended BTM BESS inspection procedures and frequency and prevent unintentional islanding, while explicitly allowing for intentional Fire detection and suppression systems islanding, such as BTM systems providing Firefighting measures posted on-site energy to a critical section of the grid during a major outage (e.g., in a microgrid Emergency stop protocol application). Ventilation

Thermal runaway refers to a process Siting considerations unique to electrochemical energy storage systems in which the temperatures within Signage with 1-2-3 stepwise procedures for potential issues the storage system increase to a critical such as leaked fluid, off-gassing, damaged container, etc. point beyond which internal chemical reactions create a self-sustaining process Figure 3. Select examples of safety measures and considerations for BTM BESS of heat generation that can ultimately lead to fires or an explosion. Thermal runaway Customers may ultimately be less inter- utilities or developers pay for access to a is especially a concern for lithium-ion ested in ownership of an energy storage customer’s energy storage system during batteries, and this danger can be system than accessing the services that periods where the storage system would compounded in BTM BESS that may be energy storage can provide to them (such otherwise be unutilized. housed in dense urban areas and may not as backup power). Such customers may The utility Green Mountain Power in come equipped with the same extensive not have the means or desire to invest in a Vermont utilized both of these business fire suppression equipment as utility-scale storage system but would be willing to pay models when looking to reduce its demand systems. Technical standards governing a small addition to their normal electricity charges from the transmission system the testing, installation, operation, and bills in exchange for specific services operator (Green Mountain Power 2021b; maintenance of these systems can help to like accessing stored power during 2021a). It offered to pay customers with mitigate such safety issues (e.g., NFPA grid outages. Additionally, utilities and existing storage systems and to subsidize 855 in the U.S.). See Text Box 3 for infor- developers typically have better access storage purchases for customers interested mation on how New York state has sought to capital to invest in energy storage in storage, in exchange for using those to approach safety considerations for systems, and they would also be interested BTM assets during system peaks each energy storage systems. Figure 3 shows in having access to other services energy month. When not used by the utility, example safety measures for BTM BESS storage can provide when not servicing customers could use storage to help installations that can be implemented to customers. Under energy-storage-as-a- lower their utility bills and during system reduce the risk of fire and other hazards. service business models, developers or utilities own and operate BTM BESS in outages. exchange for paying the upfront costs What Emerging Business Additional business models have evolved of the storage system. Customers, in to utilize BTM BESS for the provision Models Can Support BTM exchange for regular monthly payments, of power system services. Although BESS Deployment? will have access to the services of the individual systems may have unutilized BTM BESS’s high upfront capital costs energy storage system for the rest of the capacity, customers often do not have combined with its ability to provide a time, using the system to reduce bills or the sophistication or scale to offer their wide-ranging set of services to many power critical loads during grid outages. services to markets or power system oper- different power system stakeholders has ators. Virtual power plants have evolved prompted the development of business Alternatively, customers may invest in to aggregate these systems on behalf of models that allow different actors to share energy storage but only use a fraction of such customers and coordinate them to act in the benefits and costs of these systems. the energy storage’s capabilities (e.g., as a single plant (see Figure 4). Although The process of pursuing multiple value using it to reduce demand charges during barriers and questions still exist (see Text streams from a power system asset at a billing cycle or for backup service provi- Box 4), such business models can help different times and on different timescales sion). In these cases, customers may be the power system operate more efficiently is referred to as “value-stacking.” Value- interested in allowing other stakeholders and improve the coordination between stacking can be important for assets such access to the storage system when they are transmission and distribution system oper- as energy storage to help recoup the high not using it, in exchange for reduced bills ators while yielding additional financial upfront capital investments required. or regular payments. Under bring-your- own-device (BYOD) business models, benefits for customers. Aggregation can happen across broad swaths of the power Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 7

Virtual Power Plant Utility Grid

BTM Storage FTM Storage

Figure 4. Illustrative example of virtual power plant aggregation sector, such as when providing energy, and monitoring BTM BESS. These can be manner. Additional barriers include poor peaking capacity, or frequency services, or addressed through solid interconnection performance, inadequate communication can be concentrated to specific regions in practices, which can allow utilities infrastructure, and insufficient cyberse- the power sector experiencing issues, such to quickly process applications while curity for the BTM BESS (see this fact as in non-wire alternative applications. ensuring BTM BESS behave in a reliable sheet for more information on DERs

What Are Important Barriers to Address for BTM BESS? Text Box 4. BTM BESS and Aggregation Barriers As a relatively new energy asset, a critical Many more BTM systems must be coordinated and dispatched to provide barrier for the widespread adoption of equivalent levels of services relative to utility-scale systems. Aggregation is the BTM BESS is its high costs, which process of combining multiple smaller assets to act as a larger asset for the may prevent it from being cost-effective provision of specific power system services. Such aggregation can be important for many customers. As technological for extending access to additional sources of value for BTM BESS, particularly for innovations continue and manufacturing system services to utilities and power system operators. capacity increases globally, these BESS Aggregation of DER, such as BTM BESS and DG, is a fairly new concept; best costs are expected to decline. However, practices for rules governing DER are still being developed. Such rules might despite these cost declines and the many bar or enable aggregations of DER: (1) in different locations within the power opportunities BTM BESS affords, key system; (2) of different technology/types; and (3) of different ownership types. technical, regulatory, and financial barriers Stakeholders should work together closely to determine what sorts of restrictions can continue to impede the development of DER aggregation are important to enforce, which may depend on both the local of a BTM BESS market. Addressing these power system context as well as the service being provided. barriers can enable customers to deploy BTM BESS sooner while ensuring bene- Under FERC Order 2222, regulators in the United States have attempted to fits to multiple power system stakeholders. expand the role of BTM assets (including storage) on the power system (FERC 2020). This regulation directs market operators to offer participation models for Technical barriers include difficulties in aggregated resources that allow the BTM assets to provide all power system adequately interconnecting, coordinating, services of which they are technically capable. Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 8 and cybersecurity). These issues can be customer assets may need to be replaced customers and developers when deciding addressed by ensuring compliance with sooner (NREL 2021). to deploy BTM BESS. Similarly, storage up-to-date grid requirements. Utilities may in effect be barred from providing and regulators can and often do make Poor installations, or use of uncertified system services due to language or rules compliance with such requirements equipment, can also hamper system designed for more traditional assets such a precondition for interconnection. performance and prevent it from as conventional generators. Developing Adequate communication infrastructure adequately providing services to either rules and regulations in a technology-ag- is particularly important for jurisdictions customers or the power system. This can nostic manner (or updating existing rules) looking to provide services to the power impact adopting customers by not meeting can help ensure that new DER like BTM system with BTM BESS. See Section 6 of expected performance and reducing BESS can equally provide and be compen- Zinaman et al. (2020) for a more in-depth revenues or bill savings they might have sated for all system services of which they discussion on the role of interconnection anticipated. This can also impact the are technically capable (Bhatnagar et al. practices and grid requirements in power system if it leads to reliability 2013). ensuring DER capabilities. or safety issues. If quality concerns are pervasive in a given market, it can lower Financial barriers involve those that An additional concern for BTM BESS investor confidence and create a poor make financing for BTM BESS difficult owners is degradation, which refers to a reputation for BTM BESS, impacting for adopting customers. Financing can wide range of mechanisms and processes future market development. Regulators be critical for the adoption of BTM that can affect BESS performance over can help the development of a BTM BESS BESS given its high capital costs. This its lifetime. Degradation occurs in all market by providing customers, investors, is a particularly relevant barrier if power energy assets, including all types of and utilities with quality assurance system objectives involve encouraging energy storage, solar PV, and others. through regulations aimed at ensuring a the adoption of BTM BESS among Degradation in battery chemistries, minimum standard for the installations, particular customer classes such as among including lithium-ion, can have a wide performance, and safety of any equipment low-income customers. While the issue variety of physical and chemical causes that is allowed to interconnect.4 of upfront capital can be addressed in part that are still under investigation. While by access to loans and other incentives, all energy assets will degrade over their Regulatory barriers primarily take the alternative or complementary approaches lifetimes, the rate of degradation for BESS form of ambiguity in the applicability can include incentivizing novel business is influenced by several factors, including of existing rules or incentives. Existing models that help various power system the temperature in which it is operating, incentives or rules for DERs can often stakeholders share the costs and benefits operating windows, and charging and be expanded with minor modifications to of BTM BESS. These can include discharging rates (Edge et al. 2021). include stand-alone BTM BESS or BTM third-party, or utility-owned and -operated Lithium-ion BESS can typically last 10 BESS coupled with DG systems. Clearly BTM storage. An additional barrier for years with minor impact on performance; including BTM BESS in such rules and customers considering pairing BTM BESS however, depending on these factors, regulations can help reduce uncertainty for with solar PV installations is the two

Figure 5. Lithium-ion battery process from electric vehicles

4. For an overview of how quality concerns around DER can impact market outcomes and how system stakeholders can address these concerns, see Karandikar et al. (2020). Although this report refers specifically to distributed solar PV, many of its lessons and approaches can be broadly applied to BTM storage as well. Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 9 technologies’ different lifespans, with • Developing a set of similar or uniform as batteries that are no longer sufficient solar PV lasting in excess of 25 years designs for lithium-ion batteries can for transportation applications may still and BTM BESS lifespans closer to 10 drastically simplify the recycling be able to adequately function in BTM years. This requires customers to plan process, and batteries should be roles for many years before service quality for replacing the BTM BESS within the designed with ease of disassembly deteriorates. paired system’s lifetime. in mind. References • Similar or uniform designs can aid What Are the Recycling and in reuse applications by enabling AGL Energy Limited. 2018. Virtual Power Plant in South Australia: Stage 2 Public Report. Technical Update. Reuse Considerations for automated disassembly and diagnostic ARENA Advancing Renewables Program. South Australia: Battery Systems? processes. AGL & ARENA. https://arena.gov.au/assets/2017/02/ virtual-power-plants-in-south-australia-stage-2-public- Many BTM BESS are composed of mate- • Support for research and development report.pdf. rials that are classified as hazardous for and analyses to address investor Anderson, Kate, Eliza Hotchkiss, Lissa Myers, and Sherry both the environment and human health, uncertainty and increase the lifetime Stout. 2019. Energy Resilience Assessment Methodology. raising concerns about how these systems NREL/TP-7A40-74983. Golden, CO: NREL. https://www. value of battery materials in the early nrel.gov/docs/fy20osti/74983.pdf. are handled, transported, stored, recycled, stages of the recycle and reuse battery and disposed of after their useful life has Bhatnagar, Dhruv, Aileen Currier, Jacquelynne Hernandez, market (e.g., determining the value of, Ookie Ma, and Kirby Brendan. 2013. Market and Policy been exhausted. Lithium-ion batteries, and markets for, reused and recovered Barriers to Energy Storage Deployment. SAND2013- which make up much of the stationary 7606. Albuquerque, NM: Sandia National Laboratories. lithium-ion battery materials, or https://www.sandia.gov/ess-ssl/publications/SAND2013- and mobile battery energy storage market developing refurbishment processes and 7606.pdf. share, can be considered hazardous due to improving recycling technology) (see Bowen, Thomas, Ilya Chernyakhovskiy, and Paul the toxicity of its materials (e.g., cobalt in Section 2.3.1 of Curtis et al. (2021) for Denholm. 2019. Grid-Scale Battery Storage: Frequently Asked Questions. NREL/TP-6A20-74426. Golden, CO: some battery chemistries), depending on more information). local regulations. Lithium-ion batteries can NREL. https://www.nrel.gov/docs/fy19osti/74426.pdf. also be considered hazardous due to the • Ensuring a high quality of the end CPUC. 2013. Order Instituting Rulemaking Pursuant recycled product (e.g., lithium), by to Assembly Bill 2514 to Consider the Adoption of reactivity or flammability of their electro- Procurement Targets for Viable and Cost-Effective lytes (see thermal runaway under “What carefully avoiding material contamina- Energy Storage Systems. Decision 13-10-040. http:// tion wherever possible. docs.cpuc.ca.gov/PublishedDocs/Published/G000/M079/ Are Some Key Safety Issues Surrounding K533/79533378.pdf. BTM Storage BESS?”). Furthermore, • Clear, consistent, and stringently some battery technologies rely on rare ———. 2020. “Energy Storage Rebates for Homes enforced regulation across jurisdictional and Critical Facilities Available NOW.” Fact Sheet. earth metals that may be expensive or levels surrounding the safe handling, Self-Generation Incentive Program. San Francisco, CA: destructive to source, driving additional California Public Utilities Commission. https://www. transport, storage, and disposal of cpuc.ca.gov/uploadedFiles/CPUCWebsite/Content/ economic and environmental consider- battery components can help drive News_Room/NewsUpdates/2020/SGIP_factsheet_124020. pdf. ations for recycling and repurposing used the development of robust economic 5 batteries. Although less frequently used recycling practices. Curtis, Taylor, Ligia Smith, Heather Buchanan, and for BTM applications, lead-acid batteries, Garvin Heath. 2021. A Circular Economy for Lithium-Ion Batteries Used in Mobile and Stationary Energy nearly ubiquitous in the transportation • Policies to incentivize the reuse or recy- Storage: Drivers, Barriers, Enablers, and U.S. Policy sector today, offer a success story to cling of batteries over their disposal. Considerations. NREL/TP-6A20-77035. Golden, CO: NREL. https://doi.org/10.2172/1768315. emulate for the recycling of lithium-ion Figure 5 highlights the major steps in the batteries, which have come to dominate Denholm, Paul, Trieu Mai, Rick Wallace Kenyon, Ben process of recycling lithium-ion batteries BTM applications and are the primary Kroposki, and Mark O’Malley. 2020. Inertia and the from electric vehicles. Power Grid: A Guide Without the Spin. NREL/TP-6A20- chemistry for electric vehicles (ESMAP 73856. Golden, CO: NREL. https://www.nrel.gov/docs/ fy20osti/73856.pdf. 2020). Some considerations for bolstering In addition to recycling, the reuse of the reuse and recycling of battery systems lithium-ion batteries can minimize nega- Denholm, Paul, Yinong Sun, and Trieu Mai. 2019. An Introduction to Grid Services: Concepts, Technical include (ESMAP 2020; Curtis et al. 2021): tive impacts and reduce the overall costs Requirements, and Provision from Wind. NREL/TP-6A20- associated with battery manufacturing. 72578. Golden, CO: NREL. https://www.nrel.gov/docs/ • The collection of spent batteries can fy19osti/72578.pdf. Reusing batteries from be effectively managed by the same applications in BTM stationary applica- Edge, Jacqueline S., Simon O’Kane, Ryan Prosser, Niall entities that are responsible for their D. Kirkaldy, Anisha N. Patel, Alastair Hales, Abir Ghosh, tions may prove particularly beneficial, et al. 2021. “Lithium Ion Battery Degradation: What You distribution. Need to Know.” Physical Chemistry Chemical Physics 23 (14): 8200–8221. https://doi.org/10.1039/D1CP00359C.

5. Following the convention laid out in ESMAP (2020), we define recycling and reuse as two separate activities, where recycling refers to “the retrieval of specific elements in a produced technology for subsequent use in other technologies, perhaps, including other batteries,” and reuse refers to “putting the battery technology as a whole to a second use that is quite distinct from its primary production purpose,” such as using EV batteries in stationary storage applications. Behind-The-Meter Battery Energy Storage: Frequently Asked Questions 10

Elgqvist, Emma. forthcoming. Battery Storage for HECO and OATI. 2019. “Hawaiian Electric and Open Schwabe, Paul, Patricia Statwick, and Tian Tian. 2018. Resilience. NREL/TP-6A20-79850. Resilient Energy Access Technology International Plan for Innovative Grid “Exploring New Models for Utility Distributed Energy Platform. Golden, CO: NREL. Services Wins PUC Approval.” Press Release. Newsroom. Resource Planning and Integration: SMUD and Con August 29, 2019. http://www.hawaiianelectric.com/ Edison.” Fact Sheet FS-6A20-70365. Golden, CO: NREL. Enayati, Babak. 2018. “IEEE Standard 1547-2018 Clause hawaiian-electric-and-open-access-technology-internation- https://www.nrel.gov/docs/fy18osti/70365.pdf. 8: Islanding.” Workshop presented at the Grid of the al-plan-for-innovative-grid-services-wins-puc-approval. 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Written by Thomas Bowen and Carishma Gokhale-Welch, National Renewable Energy Laboratory

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This work was authored, in part, by the National The Energy Storage Toolkit offers curated resources and guidance on integrating commercially avail- Renewable Energy Laboratory (NREL), operated by able energy storage technologies into the power system. Alliance for Sustainable Energy, LLC, for the U.S. Department of Energy (DOE) under Contract No. The USAID-NREL Partnership addresses critical challenges to scaling up advanced energy systems DE-AC36-08GO28308. Funding provided by the United through global tools and technical assistance, including the Renewable Energy Data Explorer, Greening States Agency for International Development (USAID) the Grid, the International Jobs and Economic Development Impacts tool, and the Resilient Energy under Contract No. IAG-17-2050. The views expressed Platform. More information can be found at: www.nrel.gov/usaid-partnership. in this report do not necessarily represent the views of the DOE or the U.S. Government, or any agency thereof, including USAID.

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