Massachusetts' grid battery cost issue looms – what does Watts think about it?

from CFACT

David Wojik

Massachusetts just passed a law requiring large utilities to purchase up to 1,500 MW of batteries by July of this year. It should cost billions of dollars, require an immediate interest rate hike, and therefore draw a lot of attention. Net-zero storage is finally having a fan.

Battery purchases total an incredible 5,000 MW, with most purchased over the next few years, so prices will continue to rise. Law is a study of ambiguity, so there will be a lot of confusion along the way.

Two articles by Laurie Belsito of the Massachusetts Fiscal Alliance provide a good overview of the complex issues involved. The first, written before the bill passed, was titled “Proposed Battery Law Costs Billions and Does Nothing.” Check it out here:

https://www.massfiscal.org/op-ed-the-actual-costs-legislature-climate-bill

This article focuses on the cost of the entire 5,000 MW, saying:

“The number of batteries is somewhat unclear. The bill provides for the purchase of 5,000 megawatts (MW) of batteries, but that is the discharge capacity, which is how quickly the battery can be depleted. Storage capacity is what matters, measured in megawatt hours (MWh) in units. Specifying molecular weight is like buying juice based on how quickly it is poured rather than how much is in the bottle.

The bill does include a range of storage capacities, which limits costs somewhat. Most batteries are so-called medium-term batteries, which means they can be fully discharged for 4 to 10 hours. The duration of almost all grid-scale battery systems today is four hours, so for simplicity's sake let's first assume that the entire 5,000 MW is purchased with four-hour batteries.

This provides 20,000 MWh of storage space. Current operating costs for battery systems are approximately $500,000 per megawatt hour. The total cost is $10 billion, or about 17% of the current state budget. If you buy a 10-hour battery, the cost jumps to $25 billion or $25 billion. The bill also effectively requires longer-lasting batteries, making the cost even higher.

Ten billion, twenty-five billion, maybe more, who knows? This is very vague and I doubt the legislators who voted for this madness understand the numbers.

There is a lot more in the article that is worth reading.

Belsito's second article analyzes the looming complexities for utilities rushing to purchase 1,500 megawatts. It's titled “Amid Dizzying Unknowns in New Energy Law, Rates Are Certain to Increase” and here it is:

https://www.massfiscal.org/amid_glaring_unknowns_in_new_energy_law_rate_increases_definite

Below are three excerpts that characterize the analysis. There is a lot more in the article.

1. “This is certainly going to be a very complex process, and the new law provides little guidance. A big question we face is who will end up paying for things we previously found that would not bring us much benefit , billions of dollars will only buy you a few more hours of energy at best, a big rate hike is a given, but it's unclear which taxpayers will be hit and how those price increases will be distributed among them.

2. “One thing to consider is that the law requires that this massive battery storage purchase be made jointly by “each distribution company” in the state. The law is unclear whether this includes municipal power utilities, which are not technically corporations. If it does exclude them, municipal electricity customers could be off the hook as they pay billions of dollars.

Assuming most of us are using just investor-owned utilities, the big question is how will the costs be divided among them? The new law is silent here. They might do this based on customer equity, such as total retail sales. Or they might do it based on relative demand for batteries, in which case customers of one utility might see larger rate increases than customers of another.

Another complication is that these rate increases must be applied for and approved by the state Department of Public Utilities. It could be a lengthy process, but the bill itself gives the state a significant deadline. Rushing to spend billions is never good policy, but now our elected state representatives and governor are approving this law only a week after a majority won re-election, and the Senate approved it days earlier. Presumably, while the purchasing process is done jointly, rate increases will be made on an individual utility case basis, especially if the rate increases vary widely.

There’s also the chicken or the egg dilemma. Rate increases should be based on battery costs, but utilities cannot complete purchases to determine costs without raising rates. Maybe they would make the purchase of the contract conditional on receiving the necessary rate increase. Amid the uncertainty, one thing that's certain is that your bills are going to go up.

3. “With the rate increases that power companies must submit, these staggering costs and who will pay them will start to come into focus. Affected ratepayers should demand an explanation because these thousands are extremely large. , expensive and dangerous batteries will dot the landscape of our communities with no apparent purpose.

I can't wait for these rate hike requests to come in. People will eventually see the absurdity of costly renewable energy battery backups. I and others in the Net Zero Reality Alliance have been writing about this issue for years. See https://www.cfact.org/netzerorealitycoalition/. Until now, the question has been academic, but it is an urgent reality.

The astronomical cost of backup batteries is a problem that extends far beyond Massachusetts. We should all be paying close attention to this storm of questions.

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