September 24, 2020

Top Three Energy Storage Challenges (Part 2)

By Jon Carbajal, Director, Energy Storage

This is a continuation of our previous blog post (which detailed energy storage progress and opportunities in New York state) and is the fourth installment in our New York Energy Series. The series looks at the opportunities and challenges for large energy users in New York who want to reduce their energy spending and meet their sustainability goals. Here we cover the top three energy storage challenges. Click here to check out other posts in the series.


The New York adage, ‘If you can make it there, you can make it anywhere’ seems especially apt in describing the challenges inherent in deploying batteries because there are so many conditions that challenge project development. The first step in solving such challenges is identifying them. Here we identify the top three challenges one can expect to encounter when undertaking an Energy Storage Systems (ESS) project in New York State.

Remaining Challenges for Energy Storage

Every technology and its market have their problems, or to be more polite, their challenges. ESS in the New York landscape is no different.


Safety risks are the single biggest factor adding friction to the deployment of more ESS capacity. Today’s most cost effective ESSs are based on lithium-ion battery chemistries with inherent fire safety concerns. Many of the best ESS use cases are situated in dense urban environments like NYC, where power delivery is constrained. Therefore New York has some of the strictest permitting regulations in the world, because community safety risks remain paramount. After a multi-year process involving inter-agency and private-public working groups, NYC established prescriptive ESS permitting guidelines[1], removing permitting uncertainty for one of the toughest jurisdictions. In addition to NYC guidelines, the Department of State has given guidance on the remaining state battery requirements, per an emergency order from the governor[2]. While this gives the industry more clarity on the higher standards required of ESS equipment providers and additional local installation requirements for fire mitigation, it imposes a cost burden. Finding ESS host sites that can physically meet these requirements and a hardware vendor that will deliver to required testing standards can prove challenging. As the supply chain adjusts and installations become more available, these challenges can be overcome. But one should still be prepared for a rigorous design, permitting and inspection process for ESS projects in NY.

Regional Variability and Commercial Uncertainty

The New York marketplace can be difficult to navigate. Geographic diversity, consumers’ load profile variability and physical site constraints can drastically affect the profitability or lack thereof for siting an ESS technology on a given property. So while New York is a relatively strong market for storage, its viability is still not a guarantee. There is often a stark difference between upstate and downstate markets since transmission capacity is quite limited between the regions. While site acquisition, installation and permitting can be relatively easy upstate, the level of incentives and other earning mechanisms tend to be quite limited. Downstate areas have a higher demand for such flexible ESS power presenting more lucrative incentive programs and savings opportunities but also present much more difficult siting constraints. The general lack of transmission capacity prohibits the import of cheaper upstate ESS power into the downstate regions. One result of the power grid limitations manifests when highly-localized Non Wire Alternative (NWA) programs[3] appear, especially in the downstate area. Overall the ESS opportunity landscape is not a straightforward one to navigate in New York.

Cost Control

Finally, another significant constraint to energy storage deployments today is simply their cost. This isn’t necessarily unique to New York, but it is more pronounced as an overall constraint on storage deployments. The state recorded the average total installed cost for customer-sited projects behind a consumer’s utility service at $1,279 per kWh in 2019.[4] This seems quite steep when compared to industry research estimates for large scale lithium-ion ESS systems that are hovering above $300 per kWh installed. Installation cost control can help increase deployment of ESS solutions in the state. While storage is a necessary tool to balance the intermittent nature of renewable resources, it is unlikely to fully meet peak demand as envisioned by policymakers at current prices.

The Path Ahead for Storage in New York

As 2020 draws to a close, it’s fair to say the New York energy storage market continues to grow faster than expected, albeit still modestly. There have been some bumps along the road, but it’s clear the state, regulators, agencies, utilities and private developers alike are benefiting from a learning-by-doing approach. Taken together this is giving the region a competitive advantage based on practical experience along with functional rules, processes, and tariffs that accommodate ESS resources.

Going forward, it appears the state is still well on its way to meeting storage targets despite a slowdown of construction due to COVID-19 shut-downs. We’d expect 2021 to see a wave of backlogged projects becoming commercially operational as many who have secured a NYSERDA incentive or utility NWA funding have yet to be interconnected. Given all this progress towards CLCPA mandated storage goals, we believe it’s unlikely there will be further incentives from the state. Instead, NY storage stakeholders will likely seek new market-based programs and further cost reductions to help ensure future project viability. To make up for lost revenue opportunity, investors must come to understanding NYISO’s roll out of its Energy Storage Resource (ESR) program that enables true dual-participation for ESS assets. On the other side of the profitability equation, system owners will also need total costs to decline further by selecting competitive technology vendors and managing installations.

It’s likely ESS deployment rates will recover and even speed up as the market becomes more transaction driven and less incentive based, with clear market requirements emerging now. New York State might even consider revising its ESS targets upward to challenge the state’s energy users and the supply industry. In the meantime if you’d like to learn more, sign up for our mailing list, and send us your energy storage questions and someone from our energy team will get back to you.