Applicants submitted a strike price that reflects the revenue they need in order to make the project worth building. Once the batteries enter the market, NYSERDA will calculate a monthly reference rate for what a battery should have earned in its part of the grid, based on real market pricing.
“If the wholesale markets are lower than what the project needs, then NYSERDA tops us up,” said Amit Barnir, vice president of network infrastructure at Zenobē, a U.K.-based storage developer that won a contract for its 100-MW battery development in Burns, New York. “On the flip side of that, if we are generating more than what the project needs, we actually pay back NYSERDA.”
That design is intended to protect ratepayers, NYSERDA noted.
This market-based incentive pushes battery owners to bid low enough to win a contract, though if they undercut the real cost of their projects, they’ll likely struggle to make money in the long term. Battery operators also can earn more money by outperforming the regional reference case through savvy location and trading strategy, so they have an incentive to maximize their participation in New York’s grid.
“You are settled on a zonal level, but the project earns revenues at a nodal level,” Barnir said. “So picking the right node is critical for being successful in this program, from our perspective.”
Zenobē, for instance, chose to develop its battery near a 100-MW solar plant that is being built by power company AES. That solar power will feed into the same substation that the battery hooks up to, so Zenobē will be especially well positioned to charge up on cheap solar power and discharge it during peak hours that fetch a higher price.
NYSERDA announced a portfolio of 719 MW of renewables contracts at the same time as its battery selections, so there will be more clean energy for batteries to store in the future.
This buildout should put downward pressure on energy prices for New Yorkers. In markets where they compete, batteries handily undercut peaker plants by arbitraging electricity, instead of having to burn fuel to generate it. New York City, in particular, still relies on many decades-old fossil peakers that are expensive, are inefficient, and pollute their surrounding neighborhoods. A state environmental rule called for shutting down those plants, but the city has struggled to build local battery capacity to replace them.
The problem isn’t that batteries wouldn’t be valuable in New York; it’s that the existing rules made it nearly impossible to finance them. NYSERDA’s plan aims to solve that by promising 15 years of predictability, with minimal outlay from the ratepayers. It’s been a long time coming, but now New York could position itself as a battery leader in a region that has been slow to adopt this grid technology.
