ESS vs. gas peaker plants: Maine study factors in social costs

gas plant in Maine
Cousins Island Large Gas Power Plant in Yarmouth, Maine. © Eric Broder Van Dyke | Dreamstime.com

The cost/benefit comparison of a new battery-based energy storage systems (ESS) vs. a new gas peaker plant involves a substantial number of technical variables, but if social cost is not considered, then the calculus is badly skewed, according to a new study comparing ESS vs. gas peaker plants.

“If you consider the social and environmental costs and the human health impact costs of air emissions from gas peakers, then at least in this analysis for New England, and for Maine in particular, the batteries come out looking cheaper,” reckons Todd Olinsky-Paul, Senior Project Director of the Clean Energy States Alliance (CESA) and contributing editor of Battery Storage for Fossil-Fueled Peaker Power Plant Replacement: A Maine Case Study.

The study, co-produced by CESA and Strategen Consulting, was presented to the Maine Governor’s Energy Office as stakeholder input to help inform Maine’s development of a 200-megawatt utility-scale energy storage procurement program, CESA says. CESA presented their findings in an April 30 webinar.

“The purpose of this analysis and report is to demonstrate to the State of Maine and other states how energy storage can cost-effectively replace fossil-fueled peaker plants, helping states to meet their decarbonization goals,” Olinsky-Paul stated in the study, dated April 2024.

“Although the report does take Maine as a case study, it really shows for all the six New England states — at least — and probably for other regions as well, that battery storage can compete cost effectively with gas peakers and can be a best least-cost solution for retiring old fossil fuel peaker plants,” said Olinsky-Paul in the webinar.

Numerous states have energy storage procurement programs, as well as fossil fuel peaker replacement initiatives, including New York and Massachusetts.

“What we’re seeing is that renewables and storage are increasingly going to be looked to as a replacement for expensive and polluting fossil fuel peaker plants,” Olinsky-Paul stated.

ESS vs gas peaker plants: Three key takeaways

Eliasid Animas, a consultant at Strategen Consulting, noted these three key takeaways when in conducting this analysis:

1. Batteries are an economical alternative to replace the aging [gas generator] industrial fleet in Maine.

2. New peakers are also a viable alternative for the old peakers from a market perspective, but they come with higher social costs. “These mean higher environmental and health costs for the surrounding communities,” Animas said.

3. “It will be very important to consider how the new capacity is counted in the framework of the ISO, which will impact the deployment and procurement of new batteries,” Animas said.

ESS benefits

“It turns out that energy storage — specifically [with] lithium-ion batteries — is a very good alternate — and cleaner — technology to substitute for these fossil fuel peaker plants, because batteries can ramp up and down very quickly. In fact, they’re more accurate and faster than the [gas] plants that they can replace,” Olinsky-Paul said.

“They can also run more often [to] stack various applications; they can provide banking services, for example, and maybe they’re also providing frequency regulation or they’re also providing resilience services or they’re also providing black start capability. There are numerous other things that [ESS] can provide as ancillary services,” Olinsky-Paul said. “And you’re not going to get the pollution that you would get with the fossil fuel peakers.”

However, falling battery prices have not completely toppled the cost/benefit analysis with gas just yet. “There are going to be a lot of times when batteries will be cheaper than gas plants, and there will be times when batteries may be more expensive than gas plants. It’s going to depend on a lot of variables,” said Olinsky-Paul.

Those variables:

“It’s going to depend on the capacity market revenues that you can get. It’s going to depend on the costs of things like pipelines and fuel, and of course, it’s going to depend on the cost of energy storage continuing to come down,” Olinsky-Paul noted. “And, importantly for this analysis, it depends on what you include when you do these cost benefit analyses. In these comparisons, if you don’t include the cost of emissions of pollution from the gas plants, then the gas plants still look pretty good.”

Gas peaker plant social costs overlooked

gas peaker plant map
Clean Energy Group’s Peaker Plant Mapping Tool allows users to access basic operating and emissions information for the U.S. fleet of fossil-fuel peaker power plants, along with demographic information about populations living near each power plant. Here is the Low Income Percentile view. The data indicates significant racial and economic disparities in the communities that are most burdened by peaker plant emissions. All information included in the tool is based on data made available by the U.S. Environmental Protection Agency through the agency’s Power Plants and Neighboring Communities Mapping Tool (2021 operating and emission data).
Gas peaker plant emissions table

Many states have executed studies of the cost/benefit of ESS versus gas peakers, but the social cost variable has often been overlooked. This cost includes medical treatment for residents who breathe dirty air in areas where gas peaker plants are located.

“There’s a lot of pollution, nitrogen oxides, sulfur oxides, and fine particulates [emitted from gas peakers]. And these pollutants cause human health impacts and environmental impacts in the regions right around where the plants are located. Of course, they’re also producing carbon dioxide which contributes to global warming,” observed Olinsky-Paul.

These gas peaker plants are often cited in populated areas and disproportionately in poor and underserved communities.

“This obviously brings up concerns about environmental equity,” Olinsky-Paul said.

Similarly, the concept of a special state subsidy carve-out for low and middle income (LMI) residential storage only emerged a few years ago but is now in the forefront of many state energy planning boards.

Impact of ISO models on ESS duration

The study notes that the analysts “used data from ISO-NE, the Energy Information Administration (EIA), the National Renewable Energy Lab (NREL), and Standard & Poor’s (S&P) data to create the sensitivities needed to understand the impact of variation in future technology costs, fuel costs, market rules, incentives, and taxes.”

“The analysis considers not only the relative costs of various new capacity assets, but also looks at the revenue impacts of performance requirements in the current regional capacity market as well as future performance requirements should ISO-New England switch to an Effective Load Carrying Capability (ELCC) model for its capacity market,” Animas explained.

Since ISO-New England, which includes Maine, is expected to change its model, longer duration ESS would be encouraged over short duration battery installations, Animas observed.

“Under an ELCC model, shorter-duration storage resources would be derated for purposes of bidding into the capacity market, while longer-duration resources would be valued at close to their nameplate capacity,” Animas said.

“The analysis also included sensitivity testing of the impacts on net costs of variables including future technology cost decline rates, fuel costs, carbon policies, and electrification progress. These values were taken from public sources such as NREL, EIA, and ISO-NE. The expected scenario assumes an advanced rate of technology development for both storage and peakers, based on historical market progress,” Animas explained in the study, noting that more conservative assumptions increase the net cost of storage in both the QC [Qualifying Capacity ISO model] and ELCC cases, resulting in a different outcome.

“While current rules incent the two-hour duration, ISO-NE is considering modifying its capacity accreditation rules to an effective load-carrying capability (ELCC) framework, in which short-duration storage is likely to receive diminishing valuation and payments,” Animas continued.

Currently, Maine boasts approximately 50 MW of BESS capacity, with an additional 225 MW slated to come online by 2025. The longest duration of installed resources is two hours, “which is currently enough to participate in the ISO-NE forward capacity market (FCM),” according to Animas.


Charles W. Thurston is a contributor to Solar Builder.

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