A new economic study found that front-of-the-meter battery storage systems in Massachusetts “significantly outperformed” behind-the-meter systems despite significant programs and incentives supporting BTM storage.
The study authors said the economic advantage of FMT storage would be even greater in states with less robust BTM incentives. However, they emphasized that BTM systems typically provide resilience benefits that aren’t easily quantified, which may justify the higher costs for some customers.
The report was written by American Microgrid Solutions and commissioned by the Clean Energy Group; it is intended to help the Cape and Vineyard Electric Cooperative evaluate its storage options.
It compared one, 2-MW FTM battery with five smaller BTM batteries, with equal capital costs between the FTM and BTM options. “Commercial-scale BTM battery storage is the most expensive type of battery system at this time,” the authors wrote.
They noted that large FTM batteries “benefit from economies of scale, can execute lucrative tolling agreements with utilities and can more easily access wholesale energy markets,” while small residential storage systems “benefit from off-the-shelf, fully commercialized components that do not require custom engineering and design, and do not typically encounter costly interconnection barriers.”
“Commercial-scale [BTM] systems, which typically fall into the 60- to 200-kW range, often require custom engineering and design and may encounter interconnection barriers, but do not enjoy easy access to utility tolling agreements and wholesale energy markets,” the authors added.
The report found the payback period for an FTM battery to be about 14 years, compared to a 19-year payback period for BTM storage, assuming 20 years of continued state incentives. The BTM payback period increased to about 24 years when the duration of incentives was cut to five years.
Cumulative 20-year revenue and cash flow was estimated to be about $1.6 million for FTM storage, compared to about $300,000 for BTM storage with 20 years of incentives. The study noted that FTM storage is heavily dependent on the rates it is paid via contracts with electric utilities, while BTM storage systems “rely heavily on incentives and subsidies.”
While BTM storage is supported by the federal investment tax credit (ITC) and Massachusetts state programs including the ConnectedSolutions, SMART and Clean Peak programs, FTM resources with utility contracts are eligible only for the ITC, the authors said.
Overall revenues could change significantly if the assumptions related to state policy or utility contracts are altered, the authors found. Reducing the tolling rate paid by utilities by 20% lowered the 20-year cash flow by $1.3 million, while reducing the duration of state incentives to just five years resulted in a negative cash flow of nearly $500,000.
Although FTM storage outperformed BTM storage in the modeling, the study noted that BTM storage can provide significant reliability benefits by supplying backup power during outages.
“The differential between net costs of the FTM system versus the BTM systems effectively establishes the cost of providing backup power to the facilities,” the authors wrote. “The ‘resilience premium’ on the BTM systems averages $13,300 per site per year, or $66,500 annually for five sites, assuming state performance incentives continue at their present values for 20 years.”
They also noted that FTM systems may be more susceptible to interconnection barriers “because they are typically much larger than their BTM counterparts and have no capability to manage loads ‘behind the meter’ to limit reverse flow,” adding that interconnection uncertainty can “make forecasting financial returns for FTM batteries challenging.”
Battery storage projects make up about half of the ISO-NE interconnection queue, with more than 15 GW of storage seeking to interconnect.
The ISO-NE queue has been frozen since June 2024 as the RTO transitions to its new cluster study process, which was mandated by FERC Order 2023. The order is intended to help address interconnection backlogs and barriers across the country. (See FERC Approves ISO-NE Order 2023 Interconnection Proposal.)
ISO-NE’s first cluster study, which will be conducted under transitional rules, is scheduled to begin Oct. 10. Interconnection customers have until then to submit executed cluster study agreements, and stakeholders should get a better sense of which projects intend to proceed with the interconnection process following the deadline. The cluster study will take 270 days, and the restudy process will take 90 days.
