    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

         POWERING AMERICA: THE ROLE OF ENERGY STORAGE IN THE NATION'S
                               ELECTRICITY SYSTEM

    =======================================================================

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON ENERGY

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 18, 2018

                                   __________

                               Serial No. 115-152

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                  _________

                    U.S. GOVERNMENT PUBLISHING OFFICE

     35-498                  WASHINGTON : 2019

                        COMMITTEE ON ENERGY AND COMMERCE

                              GREG WALDEN, Oregon
                                     Chairman
    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
    MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
    STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
    ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
    CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
    GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
    LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
    DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
    ADAM KINZINGER, Illinois             PETER WELCH, Vermont
    H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
    GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
    BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
    BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
    LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
    BILL FLORES, Texas                   JOSEPH P. KENNEDY, III,
    SUSAN W. BROOKS, Indiana                 Massachusetts
    MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, California
    RICHARD HUDSON, North Carolina       RAUL RUIZ, California
    CHRIS COLLINS, New York              SCOTT H. PETERS, California
    KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan
    TIM WALBERG, Michigan
    MIMI WALTERS, California
    RYAN A. COSTELLO, Pennsylvania
    EARL L. ``BUDDY'' CARTER, Georgia
    JEFF DUNCAN, South Carolina
                             Subcommittee on Energy

                              FRED UPTON, Michigan
                                     Chairman
    PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOE BARTON, Texas                    JERRY McNERNEY, California
    JOHN SHIMKUS, Illinois               SCOTT H. PETERS, California
    ROBERT E. LATTA, Ohio                GENE GREEN, Texas
    GREGG HARPER, Mississippi            MICHAEL F. DOYLE, Pennsylvania
    DAVID B. McKINLEY, West Virginia     KATHY CASTOR, Florida
    ADAM KINZINGER, Illinois             JOHN P. SARBANES, Maryland
    H. MORGAN GRIFFITH, Virginia         PETER WELCH, Vermont
    BILL JOHNSON, Ohio                   PAUL TONKO, New York
    BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
    LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
    BILL FLORES, Texas                   JOSEPH P. KENNEDY, III,
    MARKWAYNE MULLIN, Oklahoma               Massachusetts
    RICHARD HUDSON, North Carolina       G.K. BUTTERFIELD, North Carolina
    KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex
    TIM WALBERG, Michigan                    officio)
    JEFF DUNCAN, South Carolina
    GREG WALDEN, Oregon (ex officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................     1
        Prepared statement...........................................     3
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     3
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, opening statement......................................     5
        Prepared statement...........................................     6
    Hon. Jerry McNerney, a Representative in Congress from the State
      of California, opening statement...............................     7
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, prepared statement........................    95

                                   Witnesses

    Zachary Kuznar, Director, CHP, Microgrid, and Energy Storage
      Development, Duke Energy.......................................     9
        Prepared statement...........................................    12
        Answers to submitted questions...............................   101
    Mark Frigo, Vice President, Head of Energy Storage, North
      America, E.ON..................................................    16
        Prepared statement...........................................    18
        Answers to submitted questions...............................   105
    Keith E. Casey, Ph.D., Vice President, Market and Infrastructure
      Development, California Independent System Operator............    29
        Prepared statement...........................................    31
        Answers to submitted questions...............................   111
    Kushal Patel, Partner, Energy and Environmental Economics, Inc...    35
        Prepared statement...........................................    37
        Answers to submitted questions...............................   116
    Kiran Kumaraswamy, Director, Market Applications, Fluence........    51
        Prepared statement...........................................    53
        Answers to submitted questions...............................   122

                               Submitted Material

    Statement of the National Rural Electric Cooperative Association.    98
    Statement of the Edison Electric Institute.......................   100

         POWERING AMERICA: THE ROLE OF ENERGY STORAGE IN THE NATION'S
                               ELECTRICITY SYSTEM

                                  ----------

                            WEDNESDAY, JULY 18, 2018

                      House of Representatives,
                                Subcommittee on Energy,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9:03 a.m., in
    room 2322, Rayburn House Office Building, Hon. Fred Upton
    (chairman of the subcommittee) presiding.
        Present: Representatives Upton, Olson, Barton, Latta,
    Harper, McKinley, Kinzinger, Griffith, Johnson, Long, Bucshon,
    Flores, Hudson, Walberg, Walden (ex officio), Rush, McNerney,
    Peters, Green, Doyle, Castor, Welch, Tonko, Schrader, and
    Kennedy.
        Staff Present: Samantha Bopp, Staff Assistant; Kelly
    Collins, Legislative Clerk, Energy/Environment; Wyatt
    Ellertson, Professional Staff Member, Energy/Environment;
    Margaret Tucker Fogarty, Staff Assistant; Mary Martin, Chief
    Counsel, Energy/Environment; Sarah Matthews, Press Secretary,
    Energy/Environment; Drew McDowell, Executive Assistant; Brandon
    Mooney, Deputy Chief Counsel, Energy; Brannon Rains, Staff
    Assistant; Annelise Rickert, Counsel, Energy; Peter Spencer,
    Senior Professional Staff Member, Energy; Austin Stonebraker,
    Press Assistant; Madeline Wey, Policy Coordinator, Digital
    Commerce and Consumer Protection; Hamlin Wade, Special Advisor,
    External Affairs; Rick Kessler, Minority Senior Advisor and
    Staff Director, Energy/Environment; John Marshall, Minority
    Policy Coordinator; Alexander Ratner, Minority Policy Analyst;
    and Tuley Wright, Minority Policy Advisor, Energy/Environment.

       OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Upton. Good morning, everybody.
        So, on this day a year ago, the Energy Subcommittee
    launched its ``Powering America'' hearing series focused on the
    Nation's electricity system. And, over the past year, the
    committee has explored important topics such as wholesale power
    markets; electric generation; infrastructure, both transmission
    and distribution; reliability; and technological innovation.
    And this hearing is the 11th in the series and explores the
    important topic of large-scale energy storage.
        Electricity is indeed a fundamental and essential part of
    our everyday lives and the interruption of which has far
    reaching impacts on our livelihood, health, welfare, national
    security, and everything else. That is why it is important to
    utilize all forums of tools and technologies, including energy
    storage, to help ensure our nation's electric grid is reliable
    as well as resilient.
        For example, one electric utility who serves Michigan
    recognized the value of energy storage early on. In 2002, AEP,
    American Electric Power, demonstrated the use of a sodium
    sulfur battery for the first time in the U.S., and by 2008 they
    had deployed three 2-megawatt batteries across the U.S.
        Large-scale energy storage has benefits and unique
    attributes that can improve the reliability and resiliency of
    the Nation's electric grid. Energy storage can help manage peak
    electricity load, provide essential reliability services such
    as voltage and frequency controls, improve reserve capacity,
    and provide black start capability.
        The electricity industry is responsible for planning and
    preparing for disruptions to the supply of electricity. And in
    2017 the Atlantic hurricane season was unprecedented. Multiple
    storms in close succession slammed into the Gulf Coast, Puerto
    Rico, U.S. Virgin Islands. These storms left blind catastrophic
    damage, which resulted in major disruptions of electricity to
    millions of Americans across the country.
        And when power outages occur, electricity providers can use
    energy storage as a black start resource to restore electricity
    quickly. Black start is when a power plant is turned back on
    after an outage with the help of a transmission system. Because
    energy storage resources have a reserve of electricity
    available, they can provide the necessary power to bring other
    power plants back online. This is important because in
    emergency situations associated with electricity outages access
    to electricity from the transmission system is often not
    possible.
        Demand for electricity varies depending upon a variety of
    factors, including the time of day, season, and region. An
    example of this is during the warmer summer months a greater
    amount of electricity is consumed through air conditioning
    compared to cooler spring or fall. During these times of peak
    electricity consumption, more expensive generation units are
    generally used to meet the increased demand. Energy storage
    allows for electricity to be stored during off-peak times when
    electricity is less expensive and then deployed during these
    periods of high demand. The ability for energy storage to
    energy time-shift can reduce costs for electricity providers,
    which can lead to savings for consumers.
        So today's panel of witnesses represents different aspects
    of the electricity industry when it comes to storage.
        Thanks for taking the time to join with us today.
        And I was going to yield to Mr. Hudson, but he is not here,
    so I will yield back my time and recognize the ranking member
    of the subcommittee, Mr. Rush, for 5 minutes for an opening
    statement.
        [The prepared statement of Mr. Upton follows:]

                     Prepared statement of Hon. Fred Upton

        On this day, 1 year ago, the energy subcommittee launched
    its ``Powering America'' hearing series focused on the Nation's
    electricity system. Over the past year, the Committee has
    explored important topics such as wholesale power markets,
    electric generation, infrastructure--both transmission and
    distribution, reliability, and technological innovation.
    Today's hearing is the eleventh hearing in this series and
    explores the important topic of large-scale energy storage.
        Electricity is a fundamental and essential part of our
    everyday lives, and the interruption of which has far-reaching
    impacts on our livelihoods, health, welfare, and national
    security. This is why it is important to utilize all forms of
    tools and technologies, including energy storage, to help
    ensure our nation's electric grid is reliable and resilient.
        For example, one electric utility, who serves my home State
    of Michigan, recognized the value of energy storage early on.
    In 2002, AEP demonstrated the use of a sodium sulfur battery
    for the first time in the U.S. By 2008, AEP had deployed three
    2 megawatt batteries across the United States.
        Large-scale energy storage has benefits and unique
    attributes that can improve the reliability and resiliency of
    the Nation's electric grid. Energy storage can help manage peak
    electricity load; provide essential reliability services such
    as--voltage and frequency control; improve reserve capacity;
    and provide black start capability.
        The electricity industry is responsible for planning and
    preparing for disruptions to the supply of electricity. The
    2017 Atlantic hurricane season was unprecedented--multiple
    storms in close successions slammed into the Gulf Coast, Puerto
    Rico, and the U.S. Virgin Islands. These storms left behind
    catastrophic damage which resulted in major disruptions of
    electricity to millions of Americans across the Nation.
        When power outages occur, electricity providers can use
    energy storage as a ``black start'' resource to restore
    electricity quickly. Black start is when a power plant is
    turned back on after an outage without the help of the
    transmission system. Because energy storage resources have a
    reserve of electricity available, they can provide the
    necessary power to bring other power plants back online. This
    is important because in emergency situations associated with
    electricity outages, access to electricity from the
    transmission system is often not possible.
        Demand for electricity varies depending on a variety of
    factors, including the time of day, season, and region of the
    United States. An example of this is during warmer summer
    months, a greater amount of electricity is consumed through air
    conditioning compared to cooler spring or fall months.
        During these times of peak electricity consumption, more
    expensive generation units are generally used to meet the
    increased demand. Energy storage allows for electricity to be
    stored during offpeak times when electricity is less expensive,
    and then deployed during these periods of high demand. The
    ability for energy storage to ``energy time-shift'' can reduce
    costs for electricity providers, which can lead to savings for
    consumers.
        Today's panel of witnesses represent different aspects of
    the electricity industry when it comes to energy storage. Thank
    you for taking the time to join us today and I look forward to
    your perspectives on how energy storage improves the nNation's
    electric grid.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. I want to thank you, Mr. Chairman, for holding
    this critical and timely hearing.
        Mr. Chairman, as we have discussed throughout this
    ``Powering America'' series of hearings, the domestic energy
    landscape is changing drastically in fundamental ways. As we
    move toward a more decentralized energy economy, storage offers
    tremendous opportunities to integrate cleaner, renewable energy
    resources in order to build a more efficient, resilient, and
    effective electric grid.
        With the evolution, Mr. Chairman, of various technology, in
    addition to the increased production costs, energy storage
    offers a uniquely flexible technology that can be utilized to
    meet the changing demands of customers of utilities as well as
    of the grid as a whole.
        Energy storage, Mr. Chairman, is an incentive, in that it
    provides consumers more control over when and how they use
    energy while also helping them save money. With storage
    technology, Mr. Chairman, utilities are able to defer or even
    completely avoid making huge investments in other more costly
    physical assets such as wires, poles, transformers, and
    substations, while still meeting the needs of energy consumers.
        Additionally, Mr. Chairman, energy storage can help make
    the grid more resilient during severe weather events and
    provide emergency power during times of disaster. Storage
    technology can play a vital role in rebuilding electric
    networks necessary for local communities and is a cost-
    effective alternative to other traditional options.
        This is true whether it be for establishing power for rural
    or isolated communities or helping to quickly turn the lights
    back on for residents of Puerto Rico and the Virgin Islands
    after a disastrous hurricane like Maria. In fact, this
    technology can be used to establish microgrids and minigrids,
    or it can be utilized in fully distributed generation networks.
        Mr. Chairman, even with all these tremendous benefits that
    energy storage offers, there are still significant obstacles
    impeding the emergence of this budding industry, including
    economic, regulatory, and market barriers.
        Mr. Chairman, there must be a strategic and calculated
    effort by the Federal Government in order to fully develop this
    technology and appreciate its enormous benefits. Specifically,
    there must be more Federal funding to help offset the lack of
    investment from the private sector in electricity storage
    research, development, and demonstration.
        Additionally, we must consider, Mr. Chairman, development
    of a Federal energy storage roadmap, similar to those
    established by some States, in order to increase coordination
    among the various private initiatives, the national labs, and
    other Federal agencies.
        Finally, while FERC Order 841 was issued to ensure fair and
    equal access for storage resources to compete in wholesale
    power markets, we must go even further on the Federal level. In
    each of their testimonies, almost all of the witnesses agree
    that we must do more to remove barriers to grid and market
    access, allow storage to compete in all planning and
    procurement processing, and provide appropriate value and
    compensation for the unique flexibility that storage
    technologies provide.
        Mr. Chairman, energy storage has the potential to
    fundamentally transform the way we produce and use electricity
    in a way that benefits the Nation as a whole, but we must be
    willing to make the necessary commitments and the necessary
    investment in this technology for it to do so.
        With that, Mr. Chairman, I want to thank you, and I yield
    back.
        Mr. Upton. The gentleman yields back.
        The chair would recognize the chairman of the full
    committee, Mr. Walden.

      OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF OREGON

        Mr. Walden. Good morning, Mr. Chairman.
        And to our members and our panelists, thank you for being
    here.
        Today we continue our series on ``Powering America,''
    taking a closer look at what a lot of people think to be the
    next big game-changer, and that is the Nation's, in the
    electricity sector, large-scale battery storage.
        For years, companies have been working to develop and
    pioneer battery storage technology that is both cost-effective
    and scalable. We are now at the point where that technology is
    coming to fruition and being deployed on the grid in a
    meaningful way.
        The potential benefits of battery storage are substantial.
    Batteries allow us to store energy when demand and prices are
    low and release the energy when demand and prices are high.
    This not only optimizes the way our electricity system works,
    it also lowers electricity costs, meaning that American
    families can keep more money in their pockets after paying
    their monthly electricity bills.
        So we have a lot of work to do here. My home State of
    Oregon has been ahead of the curve when it comes to recognizing
    the benefits of energy storage. Many of our electric utilities
    are integrating energy storage projects.
        The Pacific Northwest is home to the Department's Pacific
    Northwest National Laboratory, where researchers work to
    advance and develop energy storage technologies for grid-scale
    deployment. PNNL has tens of thousands of square feet of
    laboratory space dedicated to accelerating the development of
    energy storage technologies.
        In 2015, PNNL opened their Advanced Battery Facility, which
    was built to bridge the gap between fundamental battery
    research and commercial-scale battery development. I recently
    toured that facility, I guess about a year ago now, with
    Secretary Perry. It was really impressive.
        Clearly, there is great potential in the role that large-
    scale battery storage can play in the Nation's electricity
    system, but, before that potential is fully realized, there are
    a number of barriers and challenges that still need to be
    tackled. These challenges range from technological limitations
    and costs to wholesale market participation rules.
        In order to address some of the challenges faced by energy
    storage, FERC recently issued Order No. 841 directing the RTOs
    and ISOs to amend their market rules in order to better
    accommodate the participation of electric storage technologies.
    As you know, right now, grid operators are in the process of
    implementing the requirements and directives contained in Order
    No. 841, which is something this committee will continue to pay
    attention to as things move forward.
        Last fall, as part of the Energy Subcommittee's ``Powering
    America'' hearing series, we examined technology's role in the
    electricity system. Energy storage was a main topic of
    discussion at that hearing, and, during that hearing, we heard
    from a witness who provided an example of how market rules can
    create barriers to competition for energy storage in wholesale
    electricity markets. That witness described an RTO/ISO rule
    with a definition of a storage product that only accommodated
    older storage technologies, such as storage that used a
    flywheel. This outdated definition did not allow for newer,
    more advanced energy storage technologies, such as lithium-ion
    batteries, to participate and be fully compensated in the
    wholesale electricity markets.
        So today's hearing gives us an opportunity to better
    understand the barriers such as this, and I look forward to
    discussing further potential solutions. So I want to thank all
    of you for coming today.
        I will say in advance, we have another hearing with the
    Federal Trade Commissioners going on downstairs that I will be
    going back and forth with. But thank you for your testimony.
        With that, I would yield the balance of my time to the
    gentleman from North Carolina, Mr. Hudson.
        [The prepared statement of Mr. Walden follows:]

                     Prepared statement of Hon. Greg Walden

        Today we continue our ``Powering America'' hearing series
    by taking a closer look at what a lot of people think will be
    the next big game changer for our nation's electricity sector,
    large-scale battery storage. For years, companies have been
    working to develop and pioneer battery storage technology that
    is both cost effective and scalable and we are now at the point
    where that technology is coming to fruition and being deployed
    on the grid in a meaningful way.
        The potential benefits of battery storage are substantial.
    Batteries allow us to store energy when demand and prices are
    low and then release that energy when demand and prices are
    high. This not only optimizes the way our electricity system
    works, it also lowers electricity costs, meaning that American
    families can keep more money in their pockets after paying
    their monthly electricity bills.
        Storage also allows for a more reliable and flexible
    electricity system. By strategically placing large-scale energy
    storage at various locations across the system, grid operators
    have more tools available at their disposal to protect the grid
    from power disruptions. Additionally, battery storage can help
    lower congestion on the transmission system and can even serve
    as an alternative to building out expen
        My home State of Oregon has been ahead of the curve when it
    comes to recognizing the benefits of energy storage and many of
    our electric utilities are integrating energy storage projects.
    The Pacific Northwest is home to the Department of Energy's
    Pacific Northwest National Laboratory (PNNL), where researchers
    work to advance and develop energy storage technologies for
    grid-scale deployment. PNNL has tens of thousands of square
    feet of laboratory space dedicated to accelerating the
    development of energy storage technologies. In 2015, PNNL
    opened their, ``Advanced Battery Facility'' which was built to
    bridge the gap between fundamental battery research and
    commercialscale battery development.
        Clearly, there is great potential for the role that large-
    scale battery storage can play in the Nation's electricity
    system, but before that potential is fully realized there are a
    number of barriers and challenges that are still being tackled.
    These challenges range from technological limitations and
    costs, to wholesale market participation rules.
        In order to address some of the challenges faced by energy
    storage, FERC recently issued Order No. 841 directing the RTOs
    and ISOs to amend their market rules in order to better
    accommodate the participation of electric storage technologies.
    Right now, grid operators are in the process of implementing
    the requirements and directives contained in Order No. 841,
    which is something that this Committee will continue to pay
    attention to as things move forward.
        Last fall, as part of the Energy Subcommittee's ``Powering
    America'' hearing series, we examined technology's role in the
    electricity system--energy storage was a main topic of
    discussion. During that hearing, we heard from a witness who
    provided an example of how market rules can create barriers to
    competition for energy storage in wholesale electricity
    markets. This witness described an RTO/ISO rule with a
    definition of a storage product that only accommodated older
    storage technologies, such as storage that utilized a flywheel.
    This outdated definition did not allow for newer, more advanced
    energy storage technologies, such as lithium-ion batteries, to
    participate and be fully compensated in wholesale electricity
    markets. Today's hearing gives us an opportunity to better
    understand barriers such as this, and I look forward to
    discussing further potential policy solutions.
        Joining us this morning is a panel of witnesses with
    extensive and varied experience developing, operating, and
    regulating large-scale energy storage. I would like to thank
    them for being here and I look forward to hearing their
    perspectives on how energy storage can strengthen the grid and
    benefit consumers.

        Mr. Hudson. Thank you, Mr. Chairman and Chairman Upton and
    Ranking Member Rush.
        I just want to take a moment to thank Duke Energy and Mr.
    Zachary Kuznar for joining us at the hearing today to talk
    about the important role energy storage can and will play in
    increasing reliability for our constituents.
        Duke Energy, based in Charlotte, North Carolina, is one of
    the largest electric power holding companies in the United
    States that are leading the way to modernize the energy grid
    and generate cleaner energy.
        As both a grid manager and operator, I look forward to
    hearing about how utilities like Duke Energy can leverage
    energy storage and other grid assets to deliver affordable and
    reliable power for our customers.
        And, with that, Mr. Chairman, I will yield back.
        Mr. Upton. The gentleman yields back.
        The chair recognizes Mr. McNerney for an opening statement,
    5 minutes.

     OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. McNerney. I want to thank the chair.
        And I appreciate the opportunity to talk about energy
    storage. I spent my career developing wind energy technology
    for about 20 years before coming here, and we have only dreamed
    about being here today, when we were talking about a realistic
    application of storage for renewable energy. So we see that
    that is one of the possible beneficiaries of storage.
        But the problem was that the capital costs kind of would
    add to the capital costs of the equipment, so we have to find a
    way to make sure the capital costs continue to go down. And we
    know from manufacturing theory that when you double the
    manufacturing the price goes down by 10 percent. So we need to
    find incentives to make sure that the manufacturing curve
    continues to increase and we can become more affordable over
    time.
        I am also the co-chair, with Mr. Latta, who is not here
    this morning, of the Grid Innovation Caucus. And we see that
    storage is going to be a big player in where we move forward
    with our grids.
        Now, we have a lot of challenges. There is demand-side
    management, there are loads being shifted, there are cyber
    threats and so on. So we know that storage is going to play a
    very big role in these new developments and the new challenges
    we find ahead of us.
        So, again, I continue to look for ways, and I hope that you
    can not only inform us on the technology but how can we best
    incentivize the continuing technical development of solar
    technology.
        And so, again, I look forward to your testimony.
        I am going to be yielding to the gentleman from
    Pennsylvania, Mr. Doyle.
        Mr. Doyle. Mr. Chairman, I want to thank you, first, for
    calling this 9:00 a.m. hearing. We all appreciate that.
        Mr. Upton. Were you at the game last night?
        Mr. Doyle. No. No. I was somewhere else.
        Mr. Upton. It was the winning dugout, I want you to know.
    The American League had the winning Democratic dugout that they
    had a couple weeks ago.
        Mr. Doyle. Yes, that dugout has been pretty lucky these
    last few weeks.
        Mr. Upton. Yes.
        Mr. Doyle. Anyway, thank you, Mr. Chairman, for this
    hearing today. Energy storage presents an incredible
    opportunity to increase efficiency, grow and reliably use
    renewables, and provide resiliency to the grid.
        I have introduced H.R. 4649, the Energy Storage Tax
    Incentive and Deployment Act. This legislation would establish
    an investment tax credit for energy storageinfrastructure for
    utilities, businesses, and homes.
        And I understand, while this legislation is under
    consideration by the Ways and Means Committee, I think it is
    important to address options for reducing barriers to
    deployment and supporting the opportunities that energy storage
    presents.
        There is truly something for everyone with energy storage.
    This technology supports the deployment of renewables like wind
    and solar. It can be used as a standalone technology. It
    increases grid resiliency when responding to extreme weather
    events and times of peak energy demand. And it reduces
    infrastructure costs.
        It is important to fully realize this technology, and I
    look forward to working with my colleagues to support the
    expansion and the integration of energy storage throughout the
    grid.
        Mr. Chairman, I appreciate the time, and I will yield back
    to Mr. McNerney.
        Mr. McNerney. Well, I thank the gentleman for his remarks.
        Storage also has a real opportunity in terms of small
    businesses. I have seen small businesses in my community that
    are basing new business models on energy storage. So we have a
    lot to talk about here this morning.
        I yield back, Mr. Chairman.
        Mr. Upton. All time has expired on the opening statements.
        We are joined by five witnesses today.
        And thank you in advance for submitting your testimony for
    the record. We had a chance to look at it, at least some of us
    who didn't go to the ball game last night.
        We are joined by Zachary Kuznar, the Director of CHP,
    Microgrid, and Energy Storage Development for Duke Energy; Mark
    Frigo, V.P. and Head of Energy Storage, North America, E.ON;
    Keith Casey, Vice President of Market and Infrastructure
    Development, California Independent System Operator; Kushal
    Patel, Partner at Energy and Environmental Economics; and Kiran
    Kumaraswamy--pretty good, no?
        Mr. Kumaraswamy. Yes.
        Mr. Upton. --director of market applications, Fluence.
        So, welcome. Each of you will be recognized for 5 minutes
    to summarize your testimony, at which point we will be asking
    questions.
        Dr. Kuznar, we will start with you. Thank you.

      STATEMENTS OF ZACHARY KUZNAR, DIRECTOR, CHP, MICROGRID, AND
       ENERGY STORAGE DEVELOPMENT, DUKE ENERGY; MARK FRIGO, VICE
     PRESIDENT, HEAD OF ENERGY STORAGE, NORTH AMERICA, E.ON; KEITH
      E. CASEY, PH.D., VICE PRESIDENT, MARKET AND INFRASTRUCTURE
      DEVELOPMENT, CALIFORNIA INDEPENDENT SYSTEM OPERATOR; KUSHAL
     PATEL, PARTNER, ENERGY AND ENVIRONMENTAL ECONOMICS, INC.; AND
       KIRAN KUMARASWAMY, DIRECTOR, MARKET APPLICATIONS, FLUENCE

                      STATEMENT OF ZACHARY KUZNAR

        Mr. Kuznar. Great. Thank you. Is this on? There we go.
        Thank you, Chairman Upton, Ranking Member Rush, and members
    of the subcommittee. Thank you for having me here today.
        My name is Zachary Kuznar, and I currently serve as
    Director of combined Heat and Power, Energy Storage, and
    Microgrid Development at Duke Energy Corporation, which is
    headquartered in Charlotte, North Carolina. My team leads all
    energy storage development in our six regulated States in which
    we operate, which are North Carolina, South Carolina, Florida,
    Ohio, Indiana, and Kentucky.
        Duke Energy believes storage will play a significant role
    in how we operate, supply, and deliver energy for our 25
    million customers now and well into the future. We see
    tremendous value in energy storage investments and the benefits
    they can provide across our generation, transmission, and
    distribution systems.
        Storage allows us to dispatch energy during times of peak
    demand, enhance the reliability of our grid, provide energy
    security and backup power for customers who provide critical
    services for our communities, and enables increased flexibility
    for helping manage the continued growth of renewable generation
    on our electric system.
        This will become increasingly important as more solar
    connects to our system. North Carolina, for example, is number
    two in the country for solar generation, only behind
    California.
        We plan to expand our investment and our regulated
    footprint for our customers' benefit by building off our decade
    of storage experience, which includes 8 pilot projects and 40
    megawatts of commercially owned and operated assets. As the
    technology continues to mature and the cost of batteries
    continues to decline, we believe the time is right to increase
    our investments in this area. Over the next 5 years, we plan to
    deploy a minimum of 145 megawatts of storage across our
    regulated business, representing approximately $300 million of
    new investment, to continue to modernize our electric system.
        In 2017, we received approval from the Florida Public
    Service Commission to deploy 50 megawatts of battery storage
    projects in our Florida service territory. We are targeting
    applications to improve reliability, which will result in
    better overall customer experience, along with utilizing these
    storage assets to advance the flexibility of our system as
    solar generation continues to increase in our Florida
    footprint.
        In North Carolina, we have incorporated a minimum of 75
    megawatts of storage into our integrated resource planning
    process. Our first two projects in our western North Carolina
    service territory, totaling 13 megawatts, will be used to
    provide valuable backup power to communities and give us the
    ability to deliver grid services such as frequency regulation
    that will help us to incorporate and manage the increased
    growth of solar generation onto our system.
        We also continue to evaluate and explore projects in South
    Carolina as well.
        We recently received approval from the Indiana Utility
    Regulatory Commission to deploy 10 megawatts of battery
    projects in Indiana. One of the projects is a partnership with
    the Indiana National Guard at Camp Atterbury, where we will
    deploy 3 megawatts of solar along with a 5-megawatt energy
    storage asset at the base.
        During normal grid operations, the solar generation will
    send power to our electric grid to benefit all Indiana
    customers, while the battery device will provide frequency
    regulation to help stabilize the electric system. In the event
    of a grid outage, the battery will provide backup power,
    ensuring the base still has energy for critical infrastructure
    and services. This is a perfect example of how technologies
    like storage can provide both grid- and customer-sided
    benefits.
        We are also working with large customers such as the
    Department of Defense, cities, hospitals, and other first
    responders to evaluate similar partnerships.
        In Ohio, we have filed for 10 megawatts of storage as part
    of our electric security plan, and we are incorporating 2
    megawatts year over year in our Kentucky service territory. We
    believe these investments will grow well beyond the original
    145 megawatts we have announced.
        At Duke Energy, we serve as both the grid manager and
    operator, with a clear line of sight and understanding of how
    storage can be leveraged in conjunction with other grid assets
    to bring to bear the greatest benefits for the grid and our
    customers.
        The utility is in an ideal position to investment in and
    own and to capture these stacked benefit streams that storage
    can provide. Storage can be a more cost-effective mechanism to
    defer or forego a distribution upgrade, eliminate the need for
    wires, and provide resource flexibility to ensure reliable
    energy is delivered continuously.
        As a seasoned utility, we have firsthand experience
    managing these complex dynamics expertly in concert with the
    broader electric system. More importantly, with over a century
    of experience providing affordable, reliable electricity to our
    customers, Duke Energy is positioned to deploy this exciting
    new technology in a way that increases reliability and
    maintains the security of our critical infrastructure.
        I thank you again for the opportunity to discuss Duke
    Energy's energy storage plans with you today, as we feel this
    technology will provide essential benefits for our customers
    and for our communities.
        [The prepared statement of Mr. Kuznar follows:]

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        Mr. Upton. Thank you.
        Mr. Frigo?

                        STATEMENT OF MARK FRIGO

        Mr. Frigo. Good morning, Chairman Upton, Ranking Member
    Rush, and members of the subcommittee. Thank you for the
    opportunity to appear before you today.
        My name is Mark Frigo, and I am the Vice President and Head
    of Energy storage for E.ON North America. In that role, I am
    responsible for all aspects of our energy storage business. In
    my testimony today, I will discuss E.ON's effort to deliver
    this technology to customers across the United States.
        Since 2007, E.ON has invested more than $14 billion in
    renewable projects worldwide, with roughly half of that
    investment made in local communities right here in the U.S. As
    one of the U.S.'s largest owners of renewable power projects,
    with more than 3600 megawatts under operation, we have also
    taken a lead role in developing energy storage projects.
        Traditionally, electricity could not be stored. Our
    electric grid was developed as a just-in-time delivery system.
    However, the energy world has changed. It is a world with
    computers, smartphones, the cloud, rooftop solar on people's
    homes and businesses, and the explosive growth of electric
    vehicles. The grid as we know it, with large, centralized power
    plants delivering power via transmission and distribution, will
    be challenged to meet our nation's future energy needs.
        This is where energy storage comes into play. Low-cost
    energy storage has the ability to transform and meet the needs
    of the new energy world. E.ON is helping to lead that change.
        E.ON has 3 energy storage projects currently in operation,
    totaling approximately 30 megawatts, each uniquely designed to
    solve a specific problem.
        Iron Horse, our first energy storage project in the U.S.,
    is a combined energy storage and solar photovoltaic project
    located in Tucson, Arizona. Working with Tucson Electric Power,
    our team designed and built a 10-megawatt battery solution
    paired with a 2-megawatt solar PV array to stabilize Tucson's
    electric power grid.
        We continue to own and operate the project for use within
    Tucson Electric Power's system. It is our understanding that
    this energy storage project, along with another one that TEP
    has implemented, has significantly improved the situation
    within the greater Tucson area.
        Texas Waves, our other operational energy storage facility,
    is actually comprised of two 9.9-megawatt battery projects in
    West Texas, one co-located next to our Pyron Wind Farm and the
    other co-located next to our Inadale Wind Farm. Texas Waves is
    designed to provide ancillary services to the Electric
    Reliability Council of Texas market and can respond to shifts
    in power demand more quickly than traditional generating
    technologies, thereby improving system reliability and
    efficiency.
        These two projects went online in January of this year and
    have successfully responded during extreme weather and
    unplanned generation outages. These projects were able to
    respond to ERCOT's frequency regulation signal within
    milliseconds, helping ERCOT manage minute-to-minute
    fluctuations between load and generation on their grid and
    ultimately helping the citizens of Texas keep the lights on.
        Despite our successes in the market and its great potential
    to enhance the grid's reliability and resilience, energy
    storage remains an emerging technology. While that technology
    continues to evolve and costs continue to fall, more steps from
    both a policy and fiscal perspective are needed to unlock this
    technology's full potential to support the grid and save
    taxpayer money on their electricity bills.
        Energy storage should be part of a grid modernization and
    optimization effort to contribute to reliability and
    resilience. FERC Order 841 was a significant step forward to
    allow for energy storage participation on the grid in organized
    markets. But FERC must now ensure that the RTOs and ISOs over
    which it has jurisdiction faithfully and fully implement the
    order to allow energy storage into their markets to the benefit
    of customers.
        It is also important that utility commissions in states not
    included in organized markets ensure that the utilities they
    regulate evaluate energy storage resources as a viable and
    cost-effective tool in their utility planning process. Market
    rules should not only ensure participation but should be
    examined to ensure that interconnection processes do not
    constitute barriers to entry.
        Energy storage would also benefit from fiscal policy that
    rewards investment in this emerging technology for a limited
    period. For example, an investment tax credit for energy
    storage would encourage greater investment and faster
    deployment of energy storage solutions to help utilities,
    generators, and, most importantly, customers to unlock the many
    benefits of storage.
        In closing, energy storage is an incredibly useful
    technology that can meet the needs of the new energy world. It
    is a uniquely flexible technology that can be designed to meet
    the specific needs of customers and the grid. It increases grid
    reliability while enabling all the technological and
    sustainable advancements our country continues to enjoy. And,
    best of all, it can do all these things while saving
    ratepayers, your constituents, money.
        I urge you to adopt forward-looking policies to help unlock
    energy storage potential to keep the United States at the
    forefront of the new energy world.
        Thank you.
        [The prepared statement of Mr. Frigo follows:]

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        Mr. Upton. Thank you.
        Dr. Casey?

                   STATEMENT OF KEITH E. CASEY, PH.D.

        Mr. Casey. Good morning, Chairman Upton, Vice Chairman
    Olson, Ranking Member Rush, and members of the committee. My
    name is Keith Casey. I am Vice President of Market and
    Infrastructure Development at the California Independent System
    Operator. Thank you for the opportunity to appear before you
    today to discuss the role of energy storage in organized
    wholesale electricity markets in California.
        California's clean energy policies are dramatically
    transforming the resource portfolio that serves electric load.
    California's ambitious renewable portfolio standard, greenhouse
    gas emission reduction goals, policies concerning the use of
    water for power plant cooling, as well as distributed energy
    resource and rooftop solar goals, have all contributed to a
    dramatic shift away from conventional power plants and to the
    deployment of new technologies such as battery storage and
    demand response.
        Today, renewables comprise about 33 percent of the total
    energy produced in our markets and are on track to meet 50
    percent of 2030, if not sooner.
        These high levels of renewables, which are predominantly
    solar, do, however, present operational challenges such as
    oversupply during the middle of the day when solar output is at
    its greatest and ramping challenges during the late afternoon
    and early evening when solar output declines but demand on the
    system is increasing.
        Today, these integration challenges are largely managed
    with natural-gas-fired generation, but achieving California's
    clean energy goals will require moving off of gas to cleaner
    resources such as energy storage that can absorb surplus solar
    output during the middle of the day and put it back on the grid
    later when it is needed. Storage can also mitigate the reliance
    on natural gas power plants for serving local electricity
    demand in transmission-constrained areas of the grid.
        Today, California operates with approximately 2,000
    megawatts of energy storage on its system. Most of this is
    legacy pumped hydroelectric generation, but, in recent years,
    134 megawatts of battery storage has been added to the ISO
    system.
        Development of battery storage is being driven primarily by
    State policy. The California Public Utilities Commission
    requires investor-owned utilities to procure 700 megawatts of
    transmission-level electricity storage, 425 megawatts of
    distributed electricity storage, and 200 megawatts of customer
    electric storage by 2020. And the utilities are making good
    progress in achieving that goal.
        Over the past several years, we have made numerous changes
    to our wholesale energy markets to enable storage resources to
    effectively participate. Most notably, we developed a specific
    storage resource participation model so that our wholesale
    market can optimally manage the state of charge of a storage
    resource. We also developed special participation rules for
    storage to provide other grid reliability functions and have
    evolved our transmission planning process to consider storage
    as an alternative to conventional wires and generation.
        Earlier this year, through our transmission planning
    process, we identified and approved two battery storage
    projects for meeting grid reliability needs. These projects
    will be treated as transmission assets, with their costs fully
    recovered through transmission rates.
        Currently, we allow storage resources, as well as other
    types of resources, to participate in the wholesale energy
    market even if they are connected to the distribution system.
    While the development is at a very nascent stage, we believe
    the future grid will be one where distribution and transmission
    networks are highly integrated, providing for bidirectional
    flow of energy versus the traditional grid, where power flows
    one direction from large, centralized power plants to end-use
    consumers.
        The grid of tomorrow will have a much more diverse set of
    smaller resources, with many located behind a customer's meter,
    and will have the potential to provide services to the host
    customer, the distribution network, and the transmission
    network.
        Getting there, however, will require overcoming a number of
    challenges. Most notably, how do you enable resources behind
    the meter to provide multiuse services to their host customer,
    the distribution, and transmission grid in a coordinated and
    verifiable way that ensures the services being paid for are
    actually being provided, are not operating at cross-purposes,
    and are not being double-counted? California is currently
    grappling with this multiuse concept.
        We are also examining how to allow storage resources that
    are approved as transmission assets and, therefore, able to
    fully recover their costs through transmission rates to also
    participate in the wholesale energy market and earn market
    revenues. FERC policy allows for this type of hybrid treatment,
    but I do not believe any ISO or RTO has currently implemented
    this hybrid model, so California may very well be the first.
        Finally, the ISO appreciates and supports the proposed
    reforms in FERC Order 841, which seeks to remove barriers to
    electric storage resources participating in the organized
    electricity markets. We are also working with our participating
    utilities to develop better ways to coordinate transmission and
    distribution system operation to enable energy transformation
    in an efficient, reliable, safe manner.
        This concludes my comments, and I will be happy to answer
    any questions you may have.
        [The prepared statement of Mr. Casey follows:]

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        Mr. Upton. Thank you.
        Mr. Patel?

                       STATEMENT OF KUSHAL PATEL

        Mr. Patel. Thank you, Chairman Upton, Ranking Member Rush,
    and members of the subcommittee, for inviting me to testify on
    today's topic of energy storage and its role in the Nation's
    electricity system.
        My name is Kushal Patel, and I am a Partner at Energy and
    Environmental Economics, or E3, which is a consulting firm
    based in San Francisco that focuses exclusively on energy
    issues. E3 advises a wide range of clients across the U.S.,
    including public agencies, wholesale system operators,
    utilities, project developers, technology companies, and
    investors.
        I lead E3's asset valuation practice, and, in that role, I
    provide the energy storage developers and investors with
    various kinds of analytical and strategic support for thousands
    of megawatts of energy storage projects throughout the U.S.,
    ranging from large pumped hydro projects to small customer-
    sided lithium-ion batteries.
        I also work with a number of other entities, like State
    public agencies, to analyze and think through the role of
    energy storage in our electricity system in the near and longer
    term.
        Energy storage has been called the Swiss Army knife of the
    electricity system because of the many services it can perform.
    E3 has rigorously analyzed energy storage for over 20 years,
    beginning with technologies like pumped hydro that have been
    part of our nation's electrical grid for decades, to current
    technologies like advanced lithium ion and flow batteries that
    are now just being deployed at scale, to emerging technologies
    that are still in the R&D phase.
        We have looked at energy storage providing services across
    multiple applications or use cases. One such a use case is
    participating directly in the wholesale markets, either as a
    standalone resource or paired with generation. Another is
    serving as a non-wires alternative that defers or avoids
    building costly transmission or distribution assets, which
    directly benefits utility ratepayers. And a third is as a tool
    for individual customers to reduce their own electricity bills.
        Significant barriers stand in the way of large-scale
    deployment of mature and emerging storage technologies. These
    barriers include high but declining technology costs and, more
    importantly, the limited ability for storage to earn revenues
    for the numerous services it can perform.
        Today, clear routes to market exist for only a handful of
    storage services, like frequency regulation. Other services
    cannot be readily monetized, like grid resilience benefits. And
    still others, such as those related to integrating larger
    amounts of renewable energy, may not become valuable until the
    future and then only in certain parts of the country. There may
    even be market rules and operational rules that hinder and
    prevent storage from providing multiple services and being
    multiuse.
        This means enabling policies and regulations are needed at
    both the Federal and State levels to address these barriers to
    ensure that storage is optimally utilized as well as
    compensated fairly on a level playing field with other
    technologies, which is challenging given the unique nature of
    energy storage.
        To this point, I recently collaborated with several New
    York agencies in the development of the New York Energy Storage
    Roadmap, which provides an excellent example of how
    policymakers can proactively address the opportunities and
    challenges energy storage represents.
        The roadmap, just released last month, is a first-of-its-
    kind, analytically driven set of policy, regulatory, and
    programatic actions and recommendations meant to help New York
    dramatically ramp up energy storage deployment beginning in
    2019. It was developed specifically to identify the most
    promising and cost-effective means of realizing New York's
    target of installing 1,500 megawatts of advanced energy storage
    by 2025.
        The roadmap found that value stacking--i.e., being able to
    perform and be compensated for multiple services, is essential
    for the long-term commercial viability of energy storage.
        This is especially relevant to the issue of dual-market
    participation, where storage is providing both wholesale market
    and distribution system services. For example, what should be
    the operational rules and market structure that maximizes the
    storage value by allowing it to provide both wholesale capacity
    services in a constrained urban load pocket like New York City
    as well as a distribution service like a non-wires alternative
    to a utility investment like building a large substation.
        So, to conclude, I believe the key to maximizing energy
    storage benefits for our electricity system is twofold. First,
    policies and rules must be established that allow storage
    assets to provide multiple services at the wholesale,
    distribution, and customer levels. Second, storage assets must
    receive fair and equitable compensation on a level playing
    field. These actions will both enable the optimal deployment of
    storage assets onto our electricity grid and create a stable
    environment for longer-term investing and financing.
        Energy storage is a complex set of technologies that goes
    far beyond batteries, and integrating them cost-effectively
    into the grid while maintaining safety, reliability, and
    affordability is no small task. I applaud this subcommittee's
    leadership in addressing this topic and look forward to
    providing my expertise wherever it might be helpful.
        Thank you.
        [The prepared statement of Mr. Patel follows:]

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        Mr. Upton. Thank you.
        Mr. Kumaraswamy?

                     STATEMENT OF KIRAN KUMARASWAMY

        Mr. Kumaraswamy. Thank you, Chairman Upton, Ranking Member
    Rush, and distinguished members of the subcommittee. My name is
    Kiran Kumaraswamy, and I am a Market Applications Director at
    Fluence, a Siemens and AES company. I am honored to testify in
    front of you today on the topic of energy storage and its role
    in the Nation's electricity system.
        Fluence is an electricity energy storage technology and
    services company jointly owned by Siemens and the AES
    Corporation. Fluence combines the engineering, product
    development, implementation, and service capabilities of AES
    and Siemens' energy storage teams and is currently engaging in
    an aggressive expansion of the business, backed by financial
    support of the two parent organizations.
        Energy storage allows us to meet the challenges related to
    the changing energy landscape, transforming the way we power
    the world by making better use of all the electricity
    infrastructure assets we are putting on the grid and utilizing
    the ones that we already have in place. With the introduction
    of energy storage, we finally have the technical capability to
    create unbreakable, resilient power networks that enable the
    interaction of microgrids, minigrids, and distributed
    generation.
        Renewable energy generation is leading us toward a cleaner,
    more sustainable future, but the variability of that generation
    and the influx of low-cost clean energy is shifting the way
    both generation assets and power markets operate. Energy
    storage is needed to achieve the full potential of renewable
    energy and to ensure all market participants are able to
    benefit from this incredible transformation.
        Energy storage is providing flexible peaking capacity today
    in California and has been deployed as a T&D asset in Arizona.
    Energy storage also has been proposed and selected in regional
    transmission planning processes in organized markets across the
    country.
        The economics of advanced energy storage have reached the
    point where storage is a more cost-effective alternative to
    traditional single-use infrastructure, such as natural-gas-
    fired peaking plants, and can provide critical grid services
    more effectively at a lower cost.
        Barriers to energy storage have taken numerous forms,
    including market rules that inadvertently exclude energy
    storage from revenue streams because the market rules were
    written with other technologies in mind.
        Fundamentally, policymakers can continue removing barriers
    to storage by focusing on three main policy goals: first,
    removing barriers to grid and market access; second, allowing
    storage to compete in all planning and procurement that happens
    across the country; and, third, appropriately valuing and
    compensating storage for the flexibility that it provides for
    our power network.
        California has led the way in ensuring storage can
    participate in markets by allowing energy storage to be owned
    by both utilities and third parties, allowing it to participate
    and earn multiple revenue streams, and ensuring that capacity
    market rules don't unduly discriminate against the
    characteristics of energy storage.
        Some States have chosen to set a storage target to increase
    adoption of technology and realization of potential benefits to
    ratepayers. This has had the beneficial effect of clarifying
    the benefits storage can provide to the State and providing
    confidence to developers that the State is committed to energy
    storage over the longer term.
        These storage targets, whether binding or aspirational, can
    be a key factor in encouraging utilities, regulators, and
    stakeholders to modernize their planning and procurement
    practices to take advantage of energy storage, as well as to
    focus State regulators on identifying and addressing barriers
    to storage deployment.
        States are also removing barriers to storage by including
    it in planning processes. A model in this regard is Washington
    State, where the commission has ruled that energy storage must
    be considered robustly in utilities' integrated resource plans
    and that generation procurement needs to happen via technology-
    neutral solicitations to maximize competition. By directing
    utilities to consider storage along with other investment
    options in generation, transmission, and distribution, State
    regulators are ensuring appropriate competition of solutions
    for electric grid reliability.
        States are leading by making storage part of the generation
    mix. Storage can save U.S. consumers tens of billions of
    dollars, but this can happen only if the Federal Energy
    Regulatory Commission makes energy storage part of traditional
    transmission planning processes.
        Federal policymakers have acted to remove barriers to
    storage. We are pleased that FERC finalized Order 841 to ensure
    fair and equal access for storage resources to compete in
    wholesale power markets. In addition, we are pleased that FERC
    finalized Order 845 to better enable storage to connect to the
    electric grid when co-located at existing power plants. We
    believe these are important policy initiatives at FERC that can
    create lasting wholesale market changes.
        Chairman Upton, thank you again for the opportunity to
    testify today. I would like to invite you and other members of
    the subcommittee to visit any of our storage facilities in the
    United States.
        Thank you.
        [The prepared statement of Mr. Kumaraswamy follows:]

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        Mr. Upton. Well, thank you all for your testimony.
        You know, many of us here on this panel, I mean, we have
    pursued the all-of-the-above energy strategy, and part of that,
    obviously, is renewables. And we have seen great advancement in
    wind and solar and other forms over the last number of years.
    But, of course, the one knock on renewables has always been
    what happens when the wind doesn't blow and the sun doesn't
    shine, what is going to happen to that power, whether it is in
    West Texas or Tucson or anyplace else.
        And so it really is exciting to hear the advancements that
    are made in energy storage, whether it is being an individual
    that has got that solar rooftop application or whether it may
    be in a big field outside of a nature center or a community
    college or a university or a military base. It really is
    exciting to see that, in fact, we can see those things happen.
        And, of course, many of us here, a number of us here, went
    down to Puerto Rico and the Virgin Islands, as well as those
    Members from Texas who experienced firsthand the awful
    hurricanes from a year ago and the real problems of getting
    that power back up to speed, particularly in Puerto Rico and
    the Virgin Islands.
        And I know that, Mr. Kumaraswamy, you talked a little bit
    in your testimony about how the hurricane season was certainly
    unprecedented. And I think that you all actually put in some
    electric infrastructure in the Gulf in advance. It wasn't in
    the islands directly impacted by the hurricane, I don't think,
    was it?
        Mr. Kumaraswamy. One of the islands was Dominican Republic,
    so----
        Mr. Upton. So it was impacted.
        Mr. Kumaraswamy. It was impacted.
        Mr. Upton. So did it perform as expected? Tell us a little
    bit about that.
        Mr. Kumaraswamy. Sure.
        So we did put two energy storage projects in the Dominican
    Republic, and both of those energy storage projects provided
    very critical frequency response to the local electricity
    system during the Hurricane Irma and Maria conditions.
        Conditions on the Dominican electric grid were very
    volatile during both hurricanes, as generation, transmission,
    and distribution networks were either damaged or shut down.
    Both of these energy storage arrays that we deployed responded
    as intended and helped to keep the grid operating through the
    storm, even with nearly 40 to 45 percent of the Dominican
    Republic's generation assets that were forced to shut down
    during Hurricane Irma and Hurricane Maria.
        Mr. Upton. In the Dominican Republic--so what we saw
    firsthand when we were down in Puerto Rico were, the downed
    power lines everywhere. There was a picture again, I think in
    the USA Today or perhaps Wall Street Journal, earlier this week
    about a bridge that we actually saw that was taken out.
        The cost to the ratepayers, to the consumers, as we have
    looked at additional storage capabilities, what is the actual
    either reductions in power rates--how does it financially
    benefit the consumers?
        Mr. Kumaraswamy. That is a good question. One of the things
    that I highlighted in my testimony also is that we find energy
    storage to be a much more cost-effective option as opposed to a
    single-use infrastructure asset like a natural-gas-fired
    peaking plant that runs for a fraction of the year, right? So,
    if you think about a natural-gas-fired peaking generation
    plant, typically they run 40 to 60 hours of the year, so you
    are really fractionally utilizing a capital asset, spending
    several millions of dollars on this asset for the next 20 to 30
    years and subjecting ratepayers for the cost recovery for all
    of these assets.
        We think that energy storage is a way more cost-effective
    option, because it is able to provide the peaking capacity when
    you actually need it for the electric grid, but it is also able
    to provide a whole range of other services that the grid needs,
    because energy storage assets are connected to the grid 24-by-
    7, in comparison to a natural-gas-fired peaking plant, which
    needs to be started up and shut down.
        Mr. Upton. So one of the exciting things that has been
    happening in Michigan--this was legislation that was adopted in
    a bipartisan way a number of years ago--is that in Michigan we
    now have a 15-percent renewable standard. And all the utilities
    are able to meet that, and they have done a really good job.
    The indications are that by 2040 or 2045, in fact, that 15
    percent is going to move up to perhaps as much as 40 to 45
    percent of the electricity consumed will be from renewables.
        So, to get to that point, obviously we need the storage.
    And I guess, though my time is expiring, I would like to know
    if there is one thing that we could do legislatively to help
    provide some incentives. How do we get all States to what we
    hope will be attained in Michigan, as it relates to perhaps
    legislation that might expedite the improvements of battery
    storage?
        Just real quickly, if you have any ideas, knowing that my
    time is expiring. But I have the gavel, and it hasn't come down
    yet.
        Mr. Kumaraswamy. Maybe I will just go very quickly.
        The easiest thing to do really is to ensure that energy
    storage is considered in the traditional planning and
    procurement processes, right? So, if it is related to
    traditional generation options that are being procured or
    transmission or distribution infrastructure that needs to be
    put in place, to the extent that you can consider energy
    storage as an option in that type of analysis, I think we have
    seen that putting that as an option really goes a long way in
    terms of enabling the utilities to better understand the
    benefits that the technology provides.
        Thanks.
        Mr. Upton. Yes.
        Any other quick comments?
        Mr. Frigo. No, I would wholeheartedly agree with that. All
    utilities need to put together an integrated resource plan. And
    I have seen this with the States, that has been done on a State
    level, which have pushed energy storage to basically mandate
    their utilities to really look to use energy storage in their
    system. So they have started to actively look at different ways
    across our system. And that is really what has jump-started it.
        So I think it is providing direction through a regulatory
    way to have utilities look at it as a tool within their system
    and to--also, the other big thing is through the
    interconnection process that you have throughout the U.S.,
    different in different markets, but to clear that path as well.
        Mr. Upton. Thank you.
        Mr. Rush?
        Mr. Rush. I want to thank you, Mr. Chairman.
        Mr. Kumaraswamy, you had indicated to the chairman that you
    were very involved in the Dominican Republic during the
    Hurricane Maria and you were able to stabilize the electricity
    network there in the Dominican Republic.
        Do you know anything about the Dominican Republic's next-
    door neighbor? Can you compare what happened to them with what
    happened in Haiti? Or do you have any insight into----
        Mr. Kumaraswamy. That is a good question also. The impact
    of the hurricanes was, to my knowledge, less than on the
    Dominican Republic. And so I can't quite answer the question of
    comparing how much it was impacted in the Dominican versus
    Haiti or Puerto Rico.
        But I think the real issue here is that energy storage is
    able to add resiliency to the electric system. And that is
    because it is able to provide frequency control for the
    electric grid in a manner that is very superior to some of the
    traditional resources that we have on the electric system that
    perform the same job.
        So, if you think about the traditional electric generators
    that we have, they are usually pretty slow in responding to
    changes in the system frequency. Because of the thermal inertia
    that they have, it takes a while for them to actually stabilize
    the grid frequency. In comparison, energy storage is extremely
    quick to provide the response, which means that it is able to
    arrest any frequency decline much faster, right?
        And so that is the nature in which the energy storage
    arrays that we deployed in Dominican actually acted. And so it
    should provide the same type of response wherever it is
    deployed.
        Mr. Rush. Well, thank you.
        Mr. Patel, you mentioned your work in helping to establish
    the New York Energy Storage Roadmap. In your opinion, could
    there also be a Federal energy storage roadmap? And, if so,
    what would a plan look like? And what would it require from
    Congress, FERC, the RTOs, ISOs, or some combination of each of
    these stakeholders?
        And the last part of the question is, what policies do you
    think are needed to help monetize storage benefits?
        Mr. Patel. Thank you, Ranking Member Rush. That is a great
    question.
        Like with any roadmap, there is a beginning, a road, and
    the end. And I think, for New York, it is basically trying to
    figure out exactly how to reach a fairly ambitious target set
    by Governor Cuomo, and there are a lot of things that can be
    done in the near term, in the long term.
        And I think, one of the big things about energy storage is
    that costs are coming down so fast, so the idea, then, is the
    timing element of identifying what are the highest-value
    applications now that can actually justify paying for itself
    and then how to actually take advantage of all the cost
    declines that are happening from technology providers and other
    people that are working hard on that and then incorporating
    that into the grid in a way that benefits all consumers and
    ratepayers.
        Knowing that the electricity grid and things like that have
    been set for a very long time and in a very particular way, so
    it takes time to, like Keith said, be able to make sure that
    you are paying for the services you are getting and also
    integrating it in a way that enhances resiliency and
    reliability and not that makes it worse.
        So, I think at the Federal level, I echo what we say here
    in the panel, is that the planning process and procurement has
    to change. Anyone who is in the energy industry is very excited
    about storage, including the utilities and everyone else. But
    the way that they do planning and procurement is very
    prescribed. So allowing more flexibility, looking at more
    assets, and things like that I think would be a very useful way
    for the Federal Government to help States and other entities
    that are regulated at the wholesale level to be able to think
    through how to utilize the storage in the most beneficial way,
    now in the next couple years but also in the long term,
    especially as we add more renewables and other types of
    resources.
        Mr. Rush. Mr. Chairman, since you are a fair chairman and
    since you took some extra time----
        Mr. Upton. You go right ahead. The gavel hasn't come down
    yet.
        Mr. Rush. All right.
        Mr. Upton. Are you yielding back?
        Mr. Rush. No, I'm not. I want to ask Dr. Casey a question.
        Dr. Casey, can you just assess the level of the working
    relationship or the quality of the working relationship that
    you have with the Department of Energy? Are they fully engaged
    in partnership with this whole effort around storage?
        Mr. Casey. The Department of Energy you are asking?
        Mr. Rush. Yes.
        Mr. Casey. Yes, I would say the Department of Energy is
    actually a leader in developing microgrids, advanced energy
    storage systems. They have a number of projects in California
    that we have been collaborating with, as have the California
    State agencies.
        So I think from a defense standpoint they view it as very
    imperative, from a resiliency standpoint, to maintain their
    operations. So I think they have been doing a terrific job in
    that regard.
        Mr. Rush. Thank you, Mr. Chairman.
        Mr. Upton. Mr. Barton.
        Mr. Barton. Thank you, Mr. Chairman.
        I have been on this committee quite a while. I have been on
    the subcommittee I think the whole time. Rarely do we have a
    hearing or something like this where I know nothing about it,
    but you have got me today. I know almost nothing about battery
    storage capacity for the grid, so I am really glad to have this
    hearing.
        I have got one parochial question, and then I have got a
    series of questions just on how you evaluate cost. The Brinkman
    book says that California ISO and the PJM ISO up in the Midwest
    have more capacity than Ercon, which hurts me as a Texan. I
    assume that is because Texas has such unlimited production
    energy capacity and coal-fired, natural gas fired, lignite--
    wind power, even solar power and nuclear power. Is that right,
    Mr. Frigo? Is that correct? Is that why Texas is lagging behind
    California?
        Mr. Frigo. Well, I think it is just a numbers game with
    demand. PJM encompasses several States, from Illinois ranging
    all the way to the east to New Jersey, and that is a very large
    area with a very large industrial, commercial, and residential
    base.
        So as I mentioned before in my testimony, the power system
    here in the U.S. is built on a just-in-time system. So you have
    to have generation available to meet demand. So if you have an
    area with a large demand, such as PJM, you are going to have a
    lot of generation. California is--you know, if you just look at
    its GDP by itself, it is a very large area. So that obviously
    has a significant amount of load to--that is needed and,
    therefore, you have a lot of generation as well.
        Texas has quite a bit of generation, but most of the load
    or demand, as you well know, is in the eastern part of the
    State with the major cities out in the western part of the
    State. It is more rural, and so you don't have as great a
    demand, but you do have a lot of wind power in the western part
    of the State.
        Mr. Barton. My Texas pride doesn't need to be hurt by that,
    is what you are telling me.
        Now I want to ask some questions about cost. What is the
    incremental added cost of storage versus standby generation?
    Because it would seem to me--and I listened to what you said.
    It seemed to me that it would be better to have a power plant,
    maybe it is an old one, but it has already been discounted and
    depreciated, that is there than the added cost of building a
    big battery powered storage facility. Am I wrong on that?
        Because, one of you said how much the costs are coming
    down. Is it more cost-effective now to have storage capacity
    that can't generate as opposed to an actual power plant that is
    on standby?
        IWhoever is smartest can answer that.
        Mr. Casey. Well, I for sure won't go first then, at least
    not on that criteria.
        I think the question you are asking is, if you have an
    existing power plant that is fully depreciated, would it make
    sense to add storage in place of it. And I think that really
    depends on the circumstance. But when you look at cost, I think
    part of the cost needs to, at least in the case of California,
    look at the environmental implications. California has a very
    aggressive goal to decarbonize its grid, which means they are
    looking for alternatives to relying on dirty, old convention
    power plants that are providing peak shaving capacity.
        Mr. Barton. Is it fair to say--and I am not against battery
    storage. Don't misunderstand. Or water storage or whatever
    storage is most cost-effective. But I am a little bit skeptical
    if we are doing this simply because we don't like natural gas
    power, we don't like coal power, we don't like nuclear power,
    because that would be an added cost that somebody's got to
    bear. Is that correct? It may be socially politically viable,
    but it is not economically the best decision.
        Mr. Casey. Yes. And, again, I would say--and, again, I
    think this is very much a matter of State policy. But if you
    have a State policy where you are focused on decarbonizing the
    grid and incorporating the cost when it comes to planning of
    the environmental cost of emissions, then when you look at it
    from that scope, adding battery storage to replacing an
    existing power plant can make sense from an economic
    standpoint.
        Mr. Barton. My time has expired. I will have a number of
    questions, I hope for the record, that they can answer on on
    how they value cost and the various algorithms, things like
    that.
        Thank you, Mr. Chairman.
        Mr. Upton. Mr. McNerney.
        Mr. McNerney. I thank the chairman. And I neglected to
    welcome our two Californians here this morning. Mr. Casey and
    Mr. Patel, welcome. Thank you for testifying. Thank you all.
    Very interesting testimony this morning.
        Mr. Casey, you mentioned that California is mostly
    compliant with FERC Order 841. What are some of the lessons
    learned from that implementation that could be brought to other
    States?
        Mr. Casey. Well, I think we are still learning. Battery
    storage in California is relatively new. Operationally, we have
    had just about 2 years of experience. I think the big thing is
    to really, as ISO/RTOs, to really engage with the storage
    resources that are participating, to understand what they are
    seeing. We have made refinements to our market model for
    battery storage based on feedback we have received from
    developers. So I think that is important.
        I also think, when it comes to the value proposition of
    storage in organized markets, I think California can check the
    box on every value category for storage. The challenge is how
    do you stack those values and not look at them in silos. So if
    you are looking at battery storage as a transmission
    alternative, what are the other values it could provide to the
    ISO? And I think that is kind of the next stage of market
    sophistication with battery storage is stacking those multiuse
    values.
        Mr. McNerney. And that goes into my next question of behind
    the meter storage. How do you value that? And is blockchains
    one of the potential solutions? And if it is, what about the
    energy implications of using blockchains?
        Mr. Casey. Yes. Well, behind the meter storage can
    actually, in the California ISO, participate in the wholesale
    market. It can do it as a demand response, which is what we
    typically see. So we never see the actual output of battery
    storage, but what we do see is a reduction in demand at the
    end-use consumer. So we have a number of applications where
    behind the meter storage is providing demand response
    capability.
        In terms of facilitating procurement of those types of
    resources, the California Public Utilities Commission does run
    an auction process where people can bid to offer those services
    and utilities buy them. I know they have talked about the
    potential for blockchain technology to help facilitate that.
    But I think it has all been very preliminary, so--I am not an
    expert on blockchain technology. I don't think it has been
    seriously considered in the context of behind the meter
    storage. But that is something we could certainly follow up
    with you on.
        Mr. McKinley. Can anyone on the panel address the
    blockchain energy question that we are using blockchains for
    residential mere valuation drive a large energy cost?
        No one on the panel?
        OK. Thank you.
        Mr. Kuznar, thank you for your testimony this morning. What
    incentives will encourage you to reach the 145-megawatt goal
    more quickly?
        Mr. Kuznar. I think a couple of things. One, we have got a
    lot of those projects kind of planned out. We actually want to
    grow beyond that. One thing that was touched upon, which we are
    really focused on and I would like to expound upon a bit which
    is going to help us, is the planning process. And one thing we
    have traditionally always done is looked at kind of a
    generation planning to meet our load and looked at what is the
    lowest cost generation. We have looked at transmission
    distribution.
        One of the projects that we are really rolling out and was
    just going to help us, I think, exceed that is coupling those.
    So when I look at battery storage, for example, I can put it
    out at distribution circuit and defer an upgrade. That could
    improve reliability. I could also use a fleet of those assets
    to peak shave. I could use it for frequency regulation. So how
    do we bundle those values together? And that has been one of
    our big focuses. But our plan is to execute on those and then
    exceed that number going forward.
        Mr. McNerney. Thank you.
        My next question is for Mr. Patel and Mr. Kumaraswamy. How
    would you properly value storage? How would you do it? I mean,
    you are telling us we need to figure out how to properly value
    storage. What are your recommendations?
        Mr. Patel. I can go first.
        We have done a lot of economic analysis at E3 on this, and
    it is challenging because storage is so flexible. So sometimes,
    as others have said it, it uses kind of a Pico replacement. So,
    instead of building a new combined cycle or combustion turbine,
    we are using it to avoid that. So it is providing that service.
    And other times I might be doing something for the distribution
    utility. And behind the meter, I might be doing something for
    the customer itself reducing their bills.
        So the idea, then, is to figure out exactly how that all
    works together and in a market participation model. So you are
    making sure that it is doing the things it is supposed to be
    doing, getting paid for it, but also making sure they can
    actually perform and do that.
        So I think that is--what values can actually be stacked
    realistically with the technology we have today. And then also
    going forward, you have those values change too. So it is, what
    we can do today and what is value today. Then also the grid is
    changing, so the values will change as well.
        So, maybe for some years some values will be very high and
    other years it will be very low. And then, how can you take
    advantage of that? Very big challenge.
        Mr. McNerney. In the interest of time, I am going to just
    ask--I will propose this as a question for the record for both
    of you, and anyone else that would like to answer that.
        Thank you. I yield back.
        Mr. Upton. Mr. McKinley.
        Mr. McKinley. Thank you, Mr. Chairman.
        I am maybe a little bit like Barton, just curious more
    about how this all operates. I can understand when I see a
    power plant, whether it is coal, nuclear, gas. But when we have
    battery storage, are they onsite with these facilities,
    tangential? Where are these lithium batteries? Because about 80
    percent of our storage is in lithium. Where are these and how
    secure are they?
        Mr. Frigo. I could probably answer that first.
        These lithium ion batteries actually can be used for--we
    talk about multiple applications. They can be used for multiple
    different things. They can be used for generation and they
    could actually be used as a transmission or distribution type
    of device. So depending on who you talk to, there is upwards
    of, call it 15 to 20 different applications. And we talked a
    little bit about them today.
        But they can be located depending on--it is very dependent
    upon the application. If it is a T&D, transmission and
    distribution deferral type of application that was mentioned
    earlier, you would locate it near the substation or the power
    line where you have the problem on. If you are using it more--
    --
        Mr. McKinley. OK. Maybe we need to have a followup with
    that.
        I think, Dr. Casey, you comment a little bit about it, is
    that you can't--I thought I heard you say you can't measure the
    outflow. Someone may have implied that. But I am just--PJM and
    California, between the two of them, 70 to 80 percent of all
    battery storage in America. How often is it used? How often are
    we drawing down on it? And when we do draw down on it, over an
    annualized basis, what is the equivalent? Is it an equivalent
    of a 1400-megawatt power station that could have been
    available? I am trying to get to quantify the demand and how we
    use our battery discharge.
        Mr. Casey. Well, in the case of California----
        Mr. McKinley. Go to the PJM.
        Mr. Casey. Well, I can't really speak for PJM, I am afraid.
        Mr. McKinley. OK. Well, try your California model.
        Mr. Casey. OK. In the case of California, we use the
    batteries we have in our market quite frequently. We are almost
    daily dispatching them. We have a systemic issue where we tend
    to have oversupply during the middle of the day with the solar
    output.
        Mr. McKinley. What I am driving toward, are we talking
    about over a year's time in California? They are a little
    different out there. But I am trying to figure out what is the
    equivalent for a power station? How many power stations have we
    avoided by using battery storage?
        Mr. Casey. Well, we have roughly----
        Mr. McKinley. What is the discharge? How much do we
    discharge in a year's time in California?
        Mr. Casey. We have roughly about 134 megawatts of batteries
    on our system. We operate those daily. So I would suggest to
    you that they operate at the equivalence of a power plant of
    that same size.
        Mr. McKinley. OK. So does the consumer save money by having
    battery operations in their grid system?
        Mr. Casey. Yes. They can in multiple ways. And I know some
    of the panelists are eager to speak to that. But it gets to
    this multiuse value, particularly if the battery is located
    behind the customer's meter. So I will defer to some of my
    colleagues.
        Mr. Kumaraswamy. Yes. It absolutely saves money for rate
    payers. I will give you one example. And I will also answer one
    of the previous questions.
        In 2014, the Southern California Edison, which is one of
    the utilities in California, they had a shortage of capacity in
    the Southern California region. And they had a solicitation
    that was technology-neutral, and they went to the market to
    actually get all types of resources. And in that process, they
    actually selected 100 megawatts of grid scale energy storage
    resource on an economic basis, which means that, to your
    previous question, the 100 megawatts of four-hour energy
    storage project is going to be operated like 100 megawatt
    peaking plant.
        Mr. McKinley. OK. Well, I know that we are using primarily
    lithium-ion batteries, but we know they are much more expensive
    than the nickel cadmium. Is there a reason that they just stay
    charged longer? They don't have a loss? What is the rationale?
    Because by far, people use lithium ion, but they are a more
    expensive battery to use.
        Mr. Kumaraswamy. I can probably take it also.
        The platforms that we have at Fluence are technology
    agnostic, but by far, most of the projects that we have
    deployed have been lithium-ion. And that is for a range of
    reasons, which include the lifetime cost of the overall project
    and the fact that you have an established supply chain behind
    this technology right now.
        And so if you think about where we can add value for
    utilities and for ratepayers, we think that lithium ion is the
    leading technology right now. But, again, that is the situation
    in present day today.
        Mr. McKinley. My time has gone over. My point is, that if
    lithium ion is 40 percent more expensive, if we went nickel
    cadmium, wouldn't we be able to lower the rates for the utility
    consumer?
        Mr. Frigo. Lithium ion is--there is actually different
    types of chemistries, and lithium ion is a general
    classification of batteries. And there is different actual
    chemistries, compositions, of which nickel manganese cobalt is
    actually one type of lithium ion battery. So it is actually a
    lithium ion battery.
        Mr. Upton. Mr. Peters.
        Mr. Peters. Thank you, Mr. Chairman. In response to Mr.
    McKinley, my colleague, I just had this article that SDG&E
    unveiled the largest lithium ion battery storage facility in
    2017. Thirty megawatts of the 130, I think, is probably this
    facility, equivalent of 20,000 customers for 4 hours.
        And I am really excited to hear all this innovation that is
    going on. I am excited to hear that batteries came back as part
    of a competition that was technology-neutral. I think we are
    heading for a lot of great opportunity here.
        My questions have to do with what is the role of the
    Federal Government as opposed to the State government.
        Mr. Frigo. Is that right?
        Mr. Frigo. Yes.
        Mr. Peters. Just in your testimony, it says market rules
    should, not only ensure participation, but should be examined
    to ensure that interconnection processes do not constitute
    barriers to entry.
        Can you explain that to me?
        Mr. Frigo. Sure.
        Mr. Peters. Is there a Federal role in that or is that a
    State role?
        Mr. Frigo. That is actually a market role. So PJM,
    California, ISO, they all have their different interconnection
    processes. Yes. So for us as an independent power producer,
    when we go to develop a new project, whether it be wind, solar,
    natural gas, energy storage, we have to go through the
    interconnection process which defines--the study the amount of
    megawatts we propose to put on the system, see how it impacts
    the system, and if there is any upgrades that are needed
    associated with that.
        And I will use an example. If you have 100-megawatt solar
    project in California and you are proposing to put, say, a 20-
    megawatt energy storage system or battery with that, it would
    be studied as a 120-megawatt facility, but in reality, it would
    not be operated as a 120-megawatt facility, because what you
    would be doing is you are actually taking some of that peak
    generation that is made during the high irradiation during the
    middle of the day and shifting it toward some shoulder peer. So
    you really need to study it more where for how it is going to
    be operated.
        So these are the rules from the interconnection process
    that we need to make sure that it gets studied as it is
    actually going to be operated.
        Mr. Peters. Is there some government thing that is standing
    in the way of that happening? That is what I want to
    understand. What is the impediment to doing that, Dr. Casey?
        Mr. Casey. Well, just to clarify, I am not familiar with
    interconnection. Not that it is in other ISO/RTOs. But in the
    case of California, Mr. Frigo's example, we would actually
    study that project as 100 megawatts, provided the plant
    facility operator agrees they will never go above that.
        So the point is, if they add a 20-megawatt battery, they
    have the potential to generate at 120. So long as they agree
    they will manage their facility and never go above 100, we will
    study it at 100. So that is an accommodation we made in our
    interconnection process. Maybe that type of accommodation needs
    to be done elsewhere.
        But to get at your more general question about the role of
    Federal versus----
        Mr. Peters. So just in that instance, this is something
    that the ISO takes care of?
        Mr. Casey. Yes.
        Mr. Peters. OK. Go ahead.
        Mr. Casey. Yes. I think part of the challenge here is,
    depending on the scale of the storage facility, if it is a
    smaller project that is developed on the distribution system,
    it can have state jurisdiction issues, particularly if it is
    being connected behind a customer meter.
        So when you talk about a Federal roadmap for storage, that
    might make sense in the context of large scale transmission
    connected. But I think more generally, these roadmaps, as New
    York has one, California has an energy storage roadmap, it is
    really recognizing that a lot of this is state policy. The
    Federal policy has to align with it, but there is a lot of
    state policy that has to align as well.
        Mr. Peters. OK. And then, Mr. Patel, you have got in your
    testimony storage assets must be fairly compensated. Again,
    that seems like it is something that the States and the ISOs
    handle. Is that right?
        Mr. Patel. Yes, that is right. I think, to Dr. Casey's
    point as well, and that seems the issue between the State and
    the Federal Government. And that's really something that has to
    be worked on. I think as a part of a Federal energy storage
    roadmap, that would be something that I think would be top of
    mind of exactly, how it participates in the wholesale market.
    And if it was just participating in wholesale markets only, it
    is fairly straightforward. If it is only doing distribution of
    retail, it is also straightforward. But if it is doing all of
    those things, then it starts getting very complicated. And I
    think that is the role of the Federal Government, FERC, and
    others to figure out exactly how to manage that.
        Tthe easiest thing to do is say you can never do wholesale
    if you are doing distribution retail, and vice versa. But that,
    as we know, really diminishes the value of energy storage.
        Mr. Peters. Are you comfortable with the Federal Government
    prescribing through FERC some sort of national rule on that?
        Mr. Patel. I think it would be part of a pretty ongoing--I
    mean, it is already happening.
        Mr. Peters. OK. It seems like people are figuring it out
    without our help. But if you need our help, I want to know.
        It has been my impression, before my time runs out too, by
    the way, that basic research funding for energy is something
    that the Federal Government can contribute to but that the
    States are doing a pretty good job of figuring out ways to make
    efficient markets. And we love the competition between
    California and Texas. It got my California pride up right now.
        Mr. Chairman, I yield back.
        Mr. Upton. Thank you.
        Mr. Long.
        Mr. Long. Thank you, Chairman.
        Dr. Kuznar and Mr. Frigo, I have a question for both of
    you. What concerns me the most is when it comes to our
    electrical infrastructure is grid reliability, which I think
    that concerns most people, particularly ensuring customers in
    rural areas get dependable electricity delivered to them.
        How do energy storage technologies help your companies
    ensure rural areas get the reliable electricity that they need?
    Dr. Kuznar?
        Mr. Kuznar. Great. And I thank you for that question.
    Perfect example is, one of our projects that we just got
    approval for in Indiana is actually a very rural community. It
    is a radially fed line which was to really bring in an
    additional distribution feeder there to improve the
    reliability; was extremely difficult just due to the trees,
    terrain.
        So what we are actually doing is we are going to put a
    battery storage device out there, which, during a grid outage,
    will provide backup power to that community, give the crews
    enough time to fix the major outage and get them back up. So
    hopefully, they don't see there is any outage there.
        And I think that is just a perfect example of one of the
    tools that it provides. When we look at our makeup as a whole,
    we don't look at storage as a replacement for base-load
    generation. That is still extremely important for our business.
    But it provides us these abilities to improve reliability for
    rural communities, help us integrate solar and provide some
    peaking needs as well. But I think it is a perfect tool, an
    example, of how we can improve the reliability.
        Mr. Long. OK. And, Mr. Frigo, how do energy storage
    technologies help your companies ensure rural areas get the
    reliable electricity they need?
        Mr. Frigo. I think Dr. Kuznar answered that really well.
    When you hear the term ``microgrid,'' effectively, rural
    communities tend to be a microgrid because it is, as you
    mentioned, at the end of a long radial line, which is a radial
    line that is just a single line that goes off and ends. And
    from an electrical perspective, that tends to be a very weak
    part of the electric system as opposed to an area that weren't
    very well connected.
        So if you put energy storage toward the end of that radial
    line, it helps stabilize the grid so when you have extreme
    weather events, it improves the reliability so that it lowers
    the probability of the grid actually collapsing in those areas.
        Mr. Long. So energy storage technology can be used in
    microgrids to provide affordable and secure energy for
    communities?
        Mr. Frigo. Absolutely.
        Mr. Long. OK. I will stick with the two of you. I will let
    you go first, Mr. Frigo, this time.
        Can this technology ultimately lower rates for these
    customers?
        Mr. Frigo. Yes, they can lower rates. And I will give an
    example of something we are doing up in New York that helps
    lower the rates.
        So we are working with a large utility up in that State
    to--they have to build out their distribution system. The
    reason why they have to build out their distribution system is
    it is a bit of a weak system and it is in an area that is
    growing from a residential and a commercial perspective, so
    they see an increase in demand over the next 10 to 20 years.
        So in the past, they would just say, OK, let's go build
    some new transmission lines, new distribution lines, and
    upgrade a substation. But that can be a very costly affair. And
    so what they did is they looked at a non-wires alternative,
    i.e., energy storage which actually solved the same problem at
    a fraction of the cost of the alternative distribution.
        So that is one example where the cost of an energy storage
    system solved the same problem--or the cost of the energy
    storage system was lower than the alternative, which was to
    upgrade the distribution lines and the substation.
        Mr. Long. OK. Dr. Kuznar, do you agree that the technology
    ultimately can lower rates for customers?
        Mr. Kuznar. It can. And, I think one of the pieces that we
    really have to focus on that we are is just how we model that
    and build those cases.
        So a perfect example is the distribution upgrade, an
    example I gave.You might have an instance where, let's say, the
    distribution upgrade was $8 million. The battery might be--
    let's say it is a little more. Let's say it is $10 million. But
    if I am just building out that distribution upgrade, that is
    all it is doing. If I have got a storage asset, I can then
    utilize that for providing some regulation services. If I have
    a fleet, they can provide peak capacity.
        And then when you start adding those values together, you
    have got an asset that could do a lot more than just the
    traditional wire.
        Mr. Long. OK. I have several more questions here, but I
    think I will just submit them for the record, because--and
    hopefully, you can get with my staff on your answers, because
    in 8 seconds, I can't give you proper time to respond.
        So, Mr. Chairman, I yield back.
        Mr. Olson [presiding]. Thank you.
        Mr. Doyle, 5 minutes, sir.
        Mr. Doyle. Thank you, Mr. Chairman.
        This is a question for all of the panelists. I want you to
    talk a little bit about the effect you think an investment tax
    credit would have on investment and deployment of storage
    technology for your company or the industry in general. Maybe
    just start with you, Doctor, and go down the line.
        Mr. Kuznar. Right. And thank you for that question. I think
    a general investment tax credit will obviously lower the cost
    to the asset which could increase deployment. I think the only
    thing we would be interested in there is the utility is to be
    exempt from any tax normalization so we can kind of play on a
    level playing field. But, I mean, I think lowering the cost,
    you will see increased deployment.
        Mr. Frigo. Thanks, Mr. Doyle, for your efforts with the
    investment tax credit.
        It would accelerate the implementation of energy storage,
    no question about it. And how does that lower the cost to the
    end consumer? I can give an example. Our Iron Horse project,
    which actually is paired with a solar project, we were able to
    take the ITC because it was an integral part of that solar
    facility. The ITC that we were able to claim on that energy
    storage project we passed back to Tucson Electric Power in the
    form of a lower price, which they were able to provide in terms
    of lower prices for their customers. So there is a real example
    of it basically benefiting the end user.
        Mr. Casey. Yes. No question, it would accelerate
    development.
        I would note, again, in the case of California, that we do
    have State procurement mandates. So we have a mandate for the
    utilities to procure 1300 megawatts of battery storage by 2020.
    So that is the vehicle that is driving the storage development
    you are seeing in California.
        Mr. Patel. I also agree with the other panelists. In the
    New York storage roadmap, we saw that the solar plus storage
    applications were more cost-effective in the near term because
    of the ITC when you pair it. So it is just lower costs and,
    therefore, it becomes more cost-effective earlier, therefore
    you get more deployment.
        Mr. Kumaraswamy. Thank you, Congressman, for your work on
    H.R. 4649.
        For the record, I would just like to say that storage
    actually adds value wherever you add it to the electric grid,
    right? So whether it is paired with renewable resources or
    whether you pair it with some other traditional energy
    generation facilities or wireless options, storage is able to
    add value to the electric system, right?
        And so part of the problem that we have with section 48 of
    the ITC right now is that it wrongly sends a market signal that
    assumes that the value of storage has to be dependent on being
    co-located with a renewable facility, which disparts the market
    signal in terms of communicating the value that storage brings.
    And so broadening the definition to include energy storage as a
    standalone asset or as an asset that can be added to any type
    of option, whether it is traditional generation, operational
    wires would really provide the right market signal for
    developers, for regulators, for utilities to make sure that you
    are able to fully utilize the technology and deliver those
    benefits to ratepayers.
        Mr. Doyle. Great. Maybe just piggybacking on that, let me
    ask you all to--you know, the cost is the main barrier, right,
    to implementing the technology? So what other suggestions or
    recommendations do you have on how we can bring down cost?
        Mr. Kuznar. I mean, I think as you see increased
    deployment, the costs will come down as manufacturing continues
    to improve there. Again, I do think, though, when you look at
    the cost, again, it is how--at least from a utility's
    standpoint, how we traditionally modeled it. And I think if you
    kind of start looking at the values it provides from generation
    transmission or distribution, which is just a different process
    for us to use, that you are going to see cost-effective storage
    solutions in the very near term. We are already.
        Mr. Frigo. I was going to say, I think it is very important
    for the committee to look into electric vehicles, because
    electric vehicles are what is really driving the cost down for
    batteries that are being used in the grid. And, in fact, the
    batteries that we are currently using for grid solutions are
    actually being manufactured in the same facilities as electric
    vehicles. So we are really riding the coattails of that. So as
    electric vehicles go forward and expanded manufacturing
    capacity is made for them, we will see lower costs on the
    electric side as well.
        Mr. Doyle. Interesting.
        Anyone else?
        Mr. Kumaraswamy. I would just add, I fully agree with Dr.
    Kuznar's statement on increased deployment. And I think that is
    a role that this committee can play. I mentioned it in my
    testimony previously, through the Federal Energy Regulatory
    Commission, if there is a way in which energy storage can be
    considered as a mainstream transmission and distribution asset.
    We have seen examples of utilities deploying energy storage as
    a reliable T&D asset. How do we make this systematic change
    where all the utilities across the country are doing the same
    thing? Kind of evaluating these energy storage resources on the
    same hand today, evaluate the wires options.
        Because what we have seen is that when that process
    happens, and when the process happened in the generation side,
    there was a lot of learning that went through in terms of
    understanding the technology and understanding the benefits
    that the technology can provide to ratepayers, and that that
    discovery process needs to happen on the transmission and
    distribution side.
        Mr. Doyle. Thank you, Mr. Chairman.
        Mr. Olson. Thank you.
        Mr. Walberg, 5 minutes for questions, sir.
        Mr. Walberg. I thank the chairman.
        I thank the panel for being here. Interesting. Interesting
    discussion today.
        In my home State of Michigan, there is the Ludington pump
    storage facility. It has been described as one of the world's
    largest electric batteries. And I believe when it was built, it
    was also the largest pumped hydroelectric storage facility in
    the world. There is roughly 1870 megawatts of electricity that
    can seemly be dispatched at a moment's notice to help at peak
    demand.
        Pumped hydro facilities like Ludington seem to provide
    valuable assets to the grid. And to ratepayers, they are very
    unique, very specific.
        Mr. Patel and Dr. Kuznar, I would like you to address these
    questions, but anyone else that wants to jump in and add a
    little bit more, I would appreciate it. Could you please
    describe the unique assets that pumped hydro facilities bring
    to the table?
        Mr. Patel?
        Mr. Patel. Sure. I worked with several developers looking
    at pumped hydro, mostly on the West Coast. So, the biggest
    challenges they have are that we haven't built a new pumped
    hydro facility in this country in quite a long time. So the
    idea, then, is to basically get the regulators and other folks,
    you know, onboard with the values that it could provide. And,
    again, as we have talked about, a lot times, some of these
    values can be on the transmission side, some could be just from
    the wholesale markets. And in some jurisdictions, there may be
    no markets, so the utility has to basically buy in and monetize
    those values itself.
        So, the unique aspects are that it is a proven mature
    technology that has been in use for decades and can have really
    reliable performance and things of that nature. The downside of
    those technologies is that they are large and they require
    fairly big investment, so----
        Mr. Walberg. Dr. Kuznar.
        Mr. Kuznar. Great. Thank you. We also in North Carolina
    have a couple thousand megawatts of pumped hydro. And if you
    talk to our grid operators, they will tell you they can't live
    without it, just the way it gives them the flexibility.
        And I think what we are seeing with lithium technology is
    kind of the ability to give the operators more storage to give
    them more flexibility, but to do it in kind of smaller
    increments at specific locations that are needed, but also do
    it in a much quicker fashion.
        So instead of our pumped hydro facilities, total, I believe
    are a little over 2,000 megawatts. In this instance, we are
    able to kind of deploy these a little quicker 5, 10, 15, 20
    megawatt chunks on the best locations on the grid, which we
    feel it is needed. But the pumped hydro is a critical part of
    our infrastructure as well.
        Mr. Casey. And if I might, as the sole grid operator on the
    panel, we love pumped hydro. We have a little over 1,800
    megawatts of it on our system.
        I think in terms of what makes it somewhat unique relative
    to batteries is the duration of--in the case of California, we
    have a need to ramp up energy to manage the solar for spans of
    10 hours a day. And having the ability to have a big resource
    like a pumped hydro facility follow that profile, batteries
    typically have shorter discharge periods.
        But as was noted, new pumped hydro is very costly. It is a
    long lead time investment. And the open issue really is, as
    battery costs are declining, does it make sense to invest in
    these huge infrastructure projects. It is something California
    is grappling with right now.
        Mr. Walberg. Are there any more being developed?
        Mr. Patel. Yes, there are several. I personally worked on
    at least two in Oregon and Washington that total about 1,600
    megawatts. There is a couple proposed in California as well
    that are a couple thousand and then throughout Arizona and
    other places. So there are definitely ones that have gotten
    actually FERC licenses already, at least two that I am aware
    of, offhand. Nothing has been developed and no kind of
    contracts have been signed for those sites yet.
        Mr. Kumaraswamy. If I may, just want to add one comment
    that was not reflected, which is the speed at which you can
    actually deploy battery energy storage. One of the projects
    that we delivered at the beginning of last year to San Diego
    Gas and Electric, the speed at which the project was actually
    delivered to San Diego Gas and Electric was about 6 to 8
    months.
        So when the utility actually desired to procure storage to
    when the storage facility actually became operational was about
    6 to 8 months. And so that is one of the key advantages of the
    battery-based energy storage, is that you can really cut down
    the lead time to where it is actually bringing these assets
    onto the grid. So----
        Mr. Walberg. So would you conclude that the strength of a
    role for pumped storage facilities, hydro facilities, in the
    future is pretty limited or is it moving forward?
        Mr. Casey. I would say, in the case of California, it is an
    open question that is being studied and evaluated. So it is
    certainly on the table.
        Mr. Walberg. OK. Thank you. And I yield back.
        Mr. Olson. Thank you.
        Mr. Schrader, 5 minutes for questions, sir.
        Mr. Schrader. Thank you, Mr. Chairman.
        I guess first question, Mr. Frigo, following up on some of
    the discussion about what is the Federal Government's
    appropriate role. Everyone wants to get a tax credit. That is
    always wonderful. It lowers the cost, makes things wonderful.
        How long and when should the Federal Government intervene
    in some of these new technologies?
        We are spending money like drunken sailors here nowadays.
    Defense, nondefense mandatory, you name it. But at some point
    in time, there may be a reckoning. We may want to get fiscally
    responsible again.
        And, I think there is a place for the Federal Government to
    incentivize new technologies trying to get, you know, the cost
    down, make it worthwhile for private enterprise, nonprofits to
    engage.
        What is the timeframe for a technology to prove itself,
    perhaps? And when should the Federal Government start to back
    out to avoid market distortion?
        Mr. Frigo. That is a very good question. You need one for
    2.3 years or something like that. I think, the key is you only
    need it for the time for it to be competitive. And then at that
    point where it is competitive, then you shouldn't need to be
    able to have a tax credit anymore.
        Energy storage, I think, as we talked about, the costs are
    coming down significantly. My guess is that it would happen
    much sooner than, for instance, the ITC or the PTC for wind and
    solar.
        Mr. Schrader. OK.
        Mr. Frigo. So I think it is not that long, but I can't
    really tell you an exact amount of time.
        Mr. Schrader. Anyone else have a comment on that?
        Mr. Patel--or----
        Mr. Kumaraswamy. Yes. I actually have a comment. This was
    the same thing that I said earlier. We already have the section
    48 of the ITC that is being applied to energy storage. And the
    IRS actually had a process of getting feedback from
    stakeholders, and the process has stalled and is slowly
    beginning back up again.
        And so what we are talking about is an issue that is
    already existing, right? And so storage that is paired with
    renewable energy generation is able to get the investment tax
    credit today, subject to certain rules that are slightly fuzzy
    that are pending clarification by the IRS, right?
        And so what we are essentially seeing is that the value of
    storage to the grid is happening regardless of whether it is
    paired with renewable energy generation or not, right? Because
    when you have to fire up a natural gas fired peaking plant and
    provide the peaking capacity, and storage is able to provide
    that more cost-effectively, it is able to provide the same
    level of service in that application, right? And it may do so
    without being paired with a renewable energy generation
    facility, right?
        And so what we are really asking for is a much more
    broader, all-encompassing definition of the eligible sort of
    technologies that can qualify under the section 48. So----
        Mr. Schrader. Good, good.
        Mr. Patel. And I will add one last thing, if I may.
        Mr. Schrader. Sure.
        Mr. Patel. In New York, what we saw was that, there are a
    couple of kind of high-value applications that are cost-
    effective today. But, they are kind of unique because the costs
    are so high for energy storage. So one of the things we looked
    at there was, it doesn't make sense to accelerate the market by
    utilizing a bridge incentive or some other incentive to
    basically bring forward some of that development and then
    reduce some of these costs, that are less hardware but more
    what we call soft, which is permitting interconnection, getting
    developers in the State, things like that.
        So I think there is that push and pull of, you can just sit
    there and wait for the market to evolve and then take advantage
    of it in 5 to 10 years perhaps, or you can push it forward and
    take advantage of it sooner and then transforming the market,
    which we have seen in other technologies like solar and wind.
        Mr. Schrader. All right. Second question. I have got some
    utilities in my area of the world that are looking at hot water
    heaters as a battery, potentially. They store a lot of water.
    They cost a lot of money to keep them going 24/7. They are new
    smart devices that could be implemented by different utilities.
    You shut them off at different times.
        Are you guys exploring this technology? Do you know any
    entities that engage? Mr. Frigo, I guess.
        Mr. Frigo. Yes. Those are called demand response type of
    technologies. And that is what we call low-hanging fruit. That
    is the elimination of waste and being able to use your energy
    more effectively and efficiently. Absolutely, that is a tool
    that should be pursued across the U.S. in the electric system
    and by all utilities. And most of them are.
        Mr. Schrader. Very cool.
        Last quick question. One quick answer, and then I maybe get
    more complete answers later.
        With storage coming online here, it seems to me the
    traditional utility model is being disrupted in a big way. And
    what we pay folks for usually generation-type stuff, now we
    have storage, we have distribution. Is the utility world going
    through a renaissance about how they should be applying and
    charging people? And are the Federal Government and State
    governments keeping up with that change that is going on?
        I think that is really important, because we are no longer
    in the 20th century. We are in the 21st.
        Mr. Kuznar, real quick.
        I am sorry, Mr. Chairman.
        Mr. Kuznar. Yes. No. Definitely. Just with distributed
    generation in general. For years, it was just a one-way flow of
    electrons from large central power plants to homes and
    businesses. And now there is rooftop solar, there is storage,
    there is all these different services. So I would definitely
    say it is going through an interesting transformation.
        Mr. Schrader. I will leave it at that. And I thank the
    committee's indulgence. And I hope we address this issue. It
    would be something that we should be looking at as a committee,
    I think, going forward.
        Thank you very much, Mr. Chairman.
        Mr. Olson. I thank my friend. And misinformation about
    sailors like me is noted.
        Dr. Bucshon, 5 minutes.
        Mr. Bucshon. Thank you, Mr. Chairman.
        Earlier this year, I had the pleasure of touring
    Indianapolis Power and Lighting Company's battery energy
    storage system, which uses lithium ion batteries for frequency
    control and has the capacity of 20 megawatts. It was impressive
    to see in person, I have to admit. And I am happy to hear that
    Duke Energy will be adding more energy storage to the Hoosier
    State.
        As you are all aware, FERC has recently begun the process
    of addressing energy storage's role in the markets. But I would
    like to hear from you all on what barriers still remain for
    energy storage's access to the interconnection. And so I can
    start at--whomever wants to start.
        So the question is, are there still barriers that--to
    integrating the energy storage's role into the grid,
    essentially, and what are those barriers?
        Mr. Frigo. Yes. Thanks for the question. I think we touched
    on this a little bit earlier where we talked about that looking
    at energy storage and the specific application for which it is
    being used and then making sure that the relevant
    interconnection process that we have to go through, depending
    on where it is in the country, actually models that project for
    how it is going to be used, that Dr. Casey mentioned about how
    it is being used in California.
        So I think more direction to not so much the markets,
    because I think the markets are pretty on top of this. But also
    in those States that are not governed by a market, like many of
    the western states are off on their own, and any
    interconnection process that you have to go through there to
    make it easier for companies like us to be able to properly
    study the energy storage project that is being proposed.
        Mr. Kumaraswamy. Yes. I would probably just add two points
    that are still barriers. One is that we would definitely like
    to see FERC finalizing order 841, so they are still rehearing
    requests that are happening on both order 841 and 845. And so
    we have gone through a very extensive deliberation process to
    get to this point where we have an order. And so it is
    important for us to close that and get to the implementation
    stage of implementing the spirit of what FERC Order 841 really
    requires market operators to do.
        And then the second thing that I have said earlier is to
    have FERC require energy storage being considered in
    traditional transmission planning processes, right? And so FERC
    has direct jurisdiction over transmission. And how planning is
    conducted nationally. And so I think that would be an area of
    keen interest to make sure that storage is equally considered
    with traditional wires options in planning processes.
        Mr. Bucshon. Whomever.
        Mr. Casey. OK. If I might, the issue of considering storage
    in transmission planning has come up a lot. I can tell you, in
    the case of California ISO, we do. As I mentioned in my
    testimony, we approved two storage projects just this spring as
    alternatives to traditional wires. So there is an ability for
    ISO/RTOs to consider storage in its transmission planning
    process. Whether they all do or not, I don't know.
        We have also modified our interconnection process to
    accommodate energy storage. Storage is unique. It both
    generates and consumes. So trying to treat it like a
    conventional generator creates some issues, and we have made
    changes to our interconnection process to accommodate it. So I
    think in large part, we have done quite bit to accommodate
    storage, at least in our footprint.
        Mr. Kuznar. And I would just add to that, Congressman. In
    Indiana, for example, we got approval for those first 10
    megawatts. I think a big part of it is just education and
    getting--because we are regulated, so we have to get approval
    from the regulatory commission for us to invest in those assets
    to show that we are doing something that is cost-effective.
        And it is the education piece with the consumer counselors
    in the commission of we are using this. It is a little
    different. It got generation value, transmission value,
    distribution value, and it should be a tool that we could use
    if it is cost-effective. And we went to the BIC with a number
    of folks in Indiana and educated people there just on what is
    storage, what is the value. It is a little different. It is not
    just the generator. It has this T&D value as well. And I think
    that was just incredibly important to get their backing that
    this is good for people in Indiana.
        Mr. Bucshon. Yes. IWell, thank you. And I had another
    subcommittee hearing at the same time, so I apologize if you
    had to repeat some of that. But I think it is worth repeating
    this type of information, if there was some repetition.
        But because I think especially if--when people across the
    country are looking more and more at renewables, reliability of
    the energy supply and stuff becomes an issue, right? And I
    firmly believe that without some sort of energy storage, it is
    going to become a problem if we continue on the current pathway
    of where we are going with that, how we generate base load for
    energy. So thank you for your responses.
        I yield back.
        Mr. Olson. Thank you.
        Mr. Welch, 5 minutes for questions.
        Mr. Welch. Thank you. I thank the panel and thank the
    chairman and thank my colleagues.
        This is such a great issue--we can do something useful for
    once. And the energy storage industry is a big deal in Vermont.
    I just want to talk a little bit about that, then ask a few
    questions.
        In Vermont, we are starting to see what it could look like
    when--our largest utility, Green Mountain Power, is all in on
    this, they have an energy storage resource, including Stafford
    Hill Solar Storage Facility in Rutland. It is one of the first
    microgrids powered solely by solar and battery backup. And it
    was the first in the region to use battery storage to reduce
    peak power usage, saving $200,000 in 1 hour. In Vermont, that
    is like real money. The battery storage can also be used to
    power an emergency shelter at the Rutland High School.
        In 2015, GMP launched its first of a kind program to offer
    500 Tesla Powerwall batteries for $37.50 per month, a deal that
    included customers getting backup power for letting the
    utilities tap the batteries to manage systemwide or local peak
    conditions. That is so terrific, because we don't have to have
    these big backup generators. And we had a firsthand look at
    what happened. We had a big heat wave in July. And by
    leveraging these batteries and demand response resources, GMP
    was able to take the equivalent of 5,000 homes off the grid,
    saving customers about $500,000. We have got a couple of
    others. Dynapower in Waterbury.
        I am interested to learn more about what we can do to build
    off this type of work. And I want to talk about FERC Order 841
    that came out earlier this year. And as you know, that moves
    towards opening the U.S. wholesale energy markets to putting
    storage on an equal footing with generators and other grid
    resources.
        So I want to ask Mr. Frigo, does FERC Order 841 solve all
    your industries' problems, or what other barriers are there?
    And do current market designs adequately value and compensate
    storage for the flexibility it provides to the grid? And what,
    in your view, needs to be done?
        Mr. Frigo. Right. FERC Order 841 is a great, great start.
    But as my colleagues have mentioned, I think the big push now
    is to finalize that. I know there has been a number of
    stakeholders that have asked FERC for a rehearing on that. I
    think it is important to deny that rehearing and basically
    implement the order full on. If you are just delaying the
    order, you are delaying the implementation.
        Mr. Welch. Thank you.
        Mr. Frigo. So then you also have FERC Order 845, which is
    dealing with the interconnection. Push that forward as well.
        And I think, actually, another thing is there has been a
    number of States--this gets backs to the Federal-State
    relationship. There has been a number of States that have
    really pushed storage forward that I think the Federal
    Government can learn from. California is one. New York is one.
    And we have seen it recently with Massachusetts, and just
    recently New Jersey as well. There are things that these States
    are doing that could be adopted to the rest of the country.
        Mr. Welch. Thank you.
        And, Mr. Kuznar, what do you view as the main limitations
    of battery technology at this point? And can you update the
    committee on any new promising storage technologies that may
    address some of these limitations?
        Mr. Kuznar. Right. I think where storage technology is
    today is in a very good place. We started doing R&D projects
    almost 10 years ago. Where it has come from there to now from a
    control system standpoint to a reliability standpoint, it has
    improved dramatically.
        I think going forward, you look at most technologies that
    are commercially available. Lithium ion, they are finite in
    their duration. So I think, one thing as a utility we are
    always looking for is kind of longer duration batteries, one
    that can meet more of our peak. And that is something we are
    really keeping an eye on going forward.
        Mr. Welch. OK. One last question. I introduced a bill that
    would extend the electric vehicle credit. We are bumped up
    against the 200,000.
        And, Mr. Frigo, can you elaborate on how EV expansion can
    benefit storage?
        Mr. Frigo. Sure. So these batteries that we use for grid
    purposes, whether generation or transmission and distribution,
    are being manufactured in the same facilities as batteries for
    electric vehicles. And electric vehicles is the bulk of that
    manufacturing capacity right now. And so as you provide
    incentives for more electric vehicles to be bought, put on the
    road, to be implemented obviously increases the demand for the
    manufacturing capacity, which makes those battery providers
    expand that capacity, driving cost down, because you get
    economies of scale. And then the grid applications for the use
    of batteries just follows as a natural result.
        Mr. Welch. Thank you very much. I thank the panel.
        Mr. Chairman, I yield back.
        Mr. Olson. Thank you.
        Mr. Griffith, 5 minutes for questions, sir.
        Thank you very much. I appreciate it, Mr. Chairman.
        And I appreciate the panel being here today.
        Mr. Patel, I was glad to hear in your comments that you
    mentioned pump storage, and other people have asked about it.
    And while we have pump storage near my district--not yet in the
    district, although it is being looked at--one of the
    interesting concepts that has been talked about is taking
    abandoned coal mines and using those for pump storage
    facilities. Because, as you mentioned, one of the problems is
    it takes a lot of money. You got to land there where you are
    going down. You have electricity already running in there,
    oftentimes rail; if not rail, good roads. And it has already
    been secured, because nobody wants folks getting in there and
    getting lost in the mines or coming into some kind of a
    problem.
        So I would just point out that there is some potential
    there. Would you agree with that, Mr. Patel?
        Mr. Patel. Yes, absolutely. I think one of the projects I
    looked at is an old aluminum smelter. That is, obviously,
    existing. It has water rights. So, it is potentially a lower
    cost than something that is somewhere else.
        Absolutely, site value and those things really drives
    costs, and if they are lower and they can provide that same
    value at that lower cost, then it makes sense.
        Mr. Griffith. And we have a lot of opportunities in rural
    America to do that. And we have talked about microgrids. I am
    going to ask some questions about that too.
        Mr. Kumaraswamy, in your testimony, you referenced the
    interaction of microgrids as one of the benefits of energy
    storage being introduced to the grid.
        And you also talked about that, Dr. Kuznar.
        During previous hearings, we have discussed how microgrids
    could be a solution to quickly restore electricity after
    natural disasters like hurricanes. I am also interested in how
    microgrid technology could be used to provide power to rural,
    mountainous areas across the country. And can you expand on the
    benefits that you think microgrids provide to the grid? Also,
    what current limitations do you see associated with that
    microgrid technology?
        And then I will come to you, Dr. Kuznar.
        Mr. Kumaraswamy. So one of the solutions that we deployed
    for a utility in the southwest U.S., Arizona Public Service, we
    actually delivered a 2-megawatt energy storage project to them
    earlier this year. And it is in a city called the city of
    Punkin, which is on the outskirts of Phoenix metropolitan. And
    this was a city that was growing very moderately in terms of
    load growth, and they had figured out that it was actually way
    more cost-effective for them to add a battery storage project
    at the end of the radial feeder to serve the city and part of
    that town that was moderately growing than upgrading a long
    section of the transmission line, right?
        And so I think, as it relates to how we rebuild the network
    and how we think about modernizing the grid, energy storage has
    a very critical role to play in that.
        On the microgrid topic, we think that storage that is
    combined with solar or any other renewable sources has
    incredible potential in terms of increasing the resiliency in
    the way we actually power our network itself. So there is
    incredible potential. What we would like to, again, see is the
    open mindedness from utilities and transmission planning
    entities to actually include this as a resource to make this a
    mainstream asset while you are conducting this process.
        Mr. Griffith. And one of the things I would like to hear
    you all comment on, because I represent a mountainous district
    with lots of trees and mountainous areas, and I noticed when we
    were visiting Puerto Rico--and you have heard several others
    mention that in one of the places we visited, they used to have
    a hydropower facility, but they abandoned it, and now, of
    course, everything is wheeled into that particular rural,
    mountainous area of Puerto Rico. And I couldn't help but wonder
    what if they had kept that just for keeping the lights on in
    the hospitals and the school, using the school as a shelter in
    time of a disaster.
        Dr. Kuznar, do you have anything that you can add to that?
    And then talk about Duke.
        Mr. Kuznar. Yes. I mean, one of the main applications that
    we are looking at with storage is reliability for radially fed
    areas. You know, we are doing just--as you know, we are doing a
    project in Indiana, a radially fed town, poor reliability, 5
    megawatts, backup power. We are doing a number of projects in
    western North Carolina in the Asheville area, same exact
    instance. A lot of trees, mountains, bring down distribution
    lines. Provide----
        Mr. Griffith. It is the same mountains. Mine are just a
    little further north.
        Mr. Kuznar. A little further north, right. Backup power
    there. But, also, the unique part about storage, we are also
    going to use them, in conjunction with backup, to provide
    regulation services to help incorporate solar into our grid.
        So it is the stacked values we are looking at. But
    distribution reliability is a major use case we are evaluating.
        Mr. Griffith. So you think for areas like mine and your
    western part of North Carolina, this is a real opportunity to
    make sure that we have, particularly in times of ice, snow, et
    cetera, usually for us, or heavy rains resulting from a
    hurricane coming up the spine of the mountains, that microgrids
    is a really good way for us to go.
        Mr. Kuznar. Without question.
        Mr. Griffith. And, Mr. Frigo, 6 seconds. Did you want to
    add something?
        Mr. Frigo. Yes. Pump storage--and this is important to
    note, that we have been talking about batteries a lot here.
    Energy storage, I think most of us would agree, we are really
    technology-agnostic. There are multiple forms of energy storage
    that are all very useful.
        Mr. Griffith. And I see pump storage as just a big wet
    battery. Would you agree with that?
        Mr. Frigo. I would agree with that.
        Mr. Griffith. Thanks. I appreciate it.
        I yield back, Mr. Chairman.
        Mr. Olson. Thank you.
        Ms. Castor, 5 minutes for questions, ma'am.
        Ms. Castor. Thank you, Mr. Chairman.
        And thank you to the witnesses. It has been a very
    interesting hearing. You have given me hope that America can
    stay in the lead on battery storage and energy storage.
        And I think energy storage has so much potential to change,
    to modernize the way we produce energy, the way it is
    transmitted to our homes and businesses, I think at great
    benefit to our neighbors and businesses back home, first
    incorporating these clean, renewable energy sources, helping us
    to reduce carbon pollution, help to modernize the grid that is
    so outdated in so many places across the country. I think I see
    great potential for jobs, increasing competition, and the
    opportunity to build the more resilient grid. And you have
    heard a number of members talk about that in their trip to
    Puerto Rico.
        I think there has been an awakening after the last
    hurricane season on the importance of a more resilient grid and
    what microgrids and energy storage can provide, but we run
    into--as you have provided a long to-do list for policymakers,
    I think another one we have to face is that FEMA is totally
    hamstrung by the Stafford Act so that, when a community is
    demolished, a grid is annihilated by an extreme weather event,
    they can only build back what was in place before. Now, the
    Congress did give Puerto Rico a little more flexibility.
        But what are you seeing? Are you hearing this discussion
    among the industry about changes in that area, as well, Mr.
    Kumaraswamy?
        Mr. Kumaraswamy. Yes, no, that is a good question, and it
    is an important thing to acknowledge, about how the Stafford
    Act restricts what we can actually rebuild in Puerto Rico.
        One of our parent companies, the AES Corporation, actually
    provided a vision for rebuilding the Puerto Rico grid itself.
    We filed those comments with the Puerto Rico Energy Commission.
    And part of the plan actually envisions creating smaller
    minigrids and several minigrids and connecting them through a
    series of transmission lines, which we think would
    substantially reduce the cost for ratepayers there and also
    significantly increase the resiliency in terms of being able to
    serve power for people after disaster conditions like
    hurricanes.
        And I think that we need to really think about using the
    technological advancements like energy storage, which happen to
    be more modular, right, so that, like Dr. Kuznar was saying
    before, you can actually deploy them closer to load centers,
    unlike traditional assets which need to be sited much farther
    away because of water issues, because of emissions issues and
    stuff like that. And so energy storage does not have any of
    those attributes, right? So there is no fuel, no emissions, no
    water, no noise. It doesn't have any of these attributes that
    typically limit the infrastructure that we put on the electric
    grid.
        And they are also available in modular sizes, so that if
    you have--say you are closer to San Juan, you can actually put
    energy storage closer to the load centers and power those
    communities locally there, as opposed to producing electricity
    farther away and transmitting them.
        So I think we do need to carefully consider some of these
    advances.
        Ms. Castor. So the technology exists.
        Mr. Kumaraswamy. Absolutely.
        Ms. Castor. It is a matter of deployment and the high cost
    of doing that right now. But, otherwise, if we don't do it,
    taxpayers are going to be on the hook. If we build back what
    was there before and another storm comes through, taxpayers
    have to step up again to do this. So it would be smart policy
    to go ahead and do it right the first time.
        Mr. Kumaraswamy. Absolutely.
        Ms. Castor. Dr. Kuznar, Floridians are hungry for cleaner
    energy. And it was great to hear that North Carolina is leading
    the pack in solar energy, but, really, the State of Florida,
    the Sunshine State, has great potential, and we are not meeting
    that potential right now.
        I was very pleased to hear you are doing--that the public
    service commission has now authorized Duke and, I guess, FP&L
    for 50--not kilowatt-hours----
        Mr. Kuznar. Megawatts.
        Ms. Castor [continuing]. Megawatts, excuse me. But they are
    still calling it a pilot project. It doesn't seem like we have
    a commitment there.
        Tell me, are you committed, is Duke Energy committed, and
    the other utilities? What is standing in the way to do more,
    and how can you be encouraged to do more?
        Mr. Kuznar. Thank you for that question. We have been
    through this process--what we got approval for in December was
    700 megawatts of solar and 50 megawatts of storage, but our
    plan is to go well beyond that. That was just the first ask
    there.
        As part of this process, we have identified what we think
    are much more than 50 megawatts of storage on the grid. We
    worked with our transmission distribution planners to identify
    sites of poor reliability, where do we couple with solar, how
    do we help the integration of solar.
        So I would just say this is a first step in what we plan on
    doing in Florida. Because, as you said, the partnerships that
    we can have with critical infrastructure to provide grid
    services and backup power during an outage, we think, is going
    to be very important going forward.
        Ms. Castor. It absolutely will be. Thank you so much.
        I yield back.
        Mr. Olson. Thank you.
        Mr. Johnson, 5 minutes, sir.
        Mr. Johnson. Thank you, Mr. Chairman.
        Thank you, panelists, for being here with us today, by the
    way.
        Several members have talked about the challenges of rural
    America a little bit. I want to expound on that just a little
    bit more and maybe dig a little deeper.
        I represent rural eastern and southeastern Ohio. The
    terrain is hilly. Communities are often far apart from one
    another. And my district is home to very intensive energy
    development industries--coal, oil and gas. And as that
    production continues, particularly in the Utica and Marcellus
    Shale, the need for reliable power only increases as
    petrochemical operations come to this region of the country.
    But, thankfully, my district is also home to reliable sources
    of power, like coal-fired power plants.
        Some of you have pointed out that energy storage can be
    used for other applications as well, such as when a
    transmission line suddenly stops working.
        So, Mr. Kumaraswamy, your testimony touches on energy
    storage being used in this way. Can you further elaborate, how
    it can be helpful in rural settings?
        Mr. Kumaraswamy. Absolutely.
        So, when we size some of our transmission and distribution
    systems, we go through the same process that we go through for
    generation sizing, right? So we build them for peak conditions
    of the electric system, so we have to meet the summer peak
    demand for the utility, which typically happens in July and
    August in the Northeast. And so what we are actually doing is
    building a solution that you actually need only for 30 or 40
    hours of the year, right?
        And so we think that it is not the most efficient way of
    allocating capital, in terms of investing large capital into an
    asset that you would fractionally utilize. It just seems like,
    in every other commodity market, we are moving toward increased
    utilization and more efficient capital spending.
        And we think that energy storage, through its capability to
    be a modular solution, where you can actually add the right
    size capacity to the network when you need it, and then if the
    load continues to grow, you can augment the system with an
    additional set of battery modules, which is incredibly more
    helpful than a more lumpy capital asset like the traditional
    wire solutions.
        And so we are beginning to see this happen. And like Dr.
    Casey mentioned, CAL ISO has been leading the charge on this.
    We have seen energy storage being selected as a transmission
    asset through the regional market transmission planning
    process. And so what we would like to see is more of that
    happening, where the traditional T&D planning folks can
    actually use this technology that is available in the toolkit
    and regularly look at this as an option in which you can solve
    the reliability needs.
        Mr. Johnson. OK. All right.
        Dr. Kuznar, you mentioned that Duke recently filed for 10
    megawatts of energy storage as a part of its electric security
    plan in Ohio. Can you elaborate on the project and explain why
    Duke decided that energy storage was the best option for this
    particular situation?
        Mr. Kuznar. Right. So that is where we are currently going
    through that rate case and hearing right now. But what we have
    done is, in Ohio, it is interesting because, unlike our other
    States, we have no generation. So we are just a wireless
    utility in Ohio with transmission and distribution, where in
    Kentucky, Indiana, the Carolinas, and Florida, we have
    generation transmission and distribution.
        So what we are looking at for these projects in Ohio is
    similar, basically looking at areas--and we want to expand
    beyond this; it was kind of our first ask, but--with poor
    reliability. So we have some very rural, radially fed lines in
    Ohio, which to maybe potentially run a second feeder out there
    to improve the reliability is just not cost-effective, where
    now storage can give us this tool we can use to put down at
    these radially fed areas and increase the reliability for our
    customers.
        So that is really what the gist of the project is in Ohio.
        Mr. Johnson. OK.
        Well, thank you very much, gentlemen.
        I don't have time to ask my next question. It is too long.
    I yield back.
        Mr. Olson. Thank you.
        Mr. Tonko, 5 minutes for questions, sir.
        Mr. Tonko. Thank you, Mr. Chair.
        And thank you to our witnesses for offering great advice.
        A modernized grid will need to be smarter, more
    distributed, and certainly more flexible. Storage technologies
    will be essential to achieve that vision.
        In my home State of New York, NYISO, NYSERDA, and the
    Public Service Commission are all working together to integrate
    storage resources and remove barriers to the wholesale
    electricity market. As was noted by Mr. Patel in his testimony,
    earlier this year New York established a 1,500-megawatt storage
    goal by 2025 and made a commitment to financial support for
    project developers from the State's Green Bank.
        So, Mr. Patel, I know you helped develop the New York
    Energy Storage Roadmap. In your view, what are the most
    significant policy recommendations included in that report?
        Mr. Patel. Yes. Thank you for the question.
        There were a whole host of recommendations; it is a long
    report. But I think the biggest ones were, what I touched on
    earlier, and I think the other panelists as well, is the value
    stacking, had how to actually do that in practice.
        And, also, there are other initiatives going on at FERC,
    things like that, and how to accelerate that. So are there ways
    to, basically--it may be imperfect, until you can actually get
    full participation in the market and the New York ISO and
    others. Are there ways to allow the utilities or others to
    basically get those values sooner, maybe through--in New York,
    in particular, can you modify load on the utility side versus
    directly participating in the wholesale market. So that might
    be a bridge you can do in the next year versus waiting 3 or 4
    years until the wholesale markets are in the right place to
    allow for bigger participation.
        And I think the last big recommendation, of course, is the
    financial support that will be coming from the Green Bank and
    the Clean Energy Fund of New York. And those have proposed
    several hundred million dollars, which will obviously
    accelerate deployment.
        Mr. Tonko. Thank you.
        And, also, Mr. Patel, why is it important for States or
    grid operators to signal their commitment to storage through
    targets or incentives or policy? Why is that critical?
        Mr. Patel. Yes, no, another good question. I think the
    market is evolving, and, obviously, developers and other folks
    need a whole infrastructure supply chain, people on the ground
    to actually go out and figure out how to actually do this.
        So the States that are moving forward have committed to
    being the first of those there. California, New York, they have
    put some real money and effort into becoming the leaders in
    this space. So, obviously, that yields folks opening up offices
    and having more interest and actually getting out there and
    doing it first.
        Mr. Tonko. Thank you.
        Dr. Casey, I believe that California and New York have
    pretty much shared a similar approach. What lessons or advice
    would you have to other regions on how they might remove
    barriers within their markets?
        Mr. Casey. Well, I think the big lesson is recognizing the
    uniqueness of storage compared to conventional generation. I
    think, even in our case, there is a tendency to try to take the
    standard approaches we take with generation, like, through
    interconnecting the resource, as well as participating in the
    market. Well, they don't work for storage. Storage has unique
    operating capabilities, as FERC is recognizing.
        So being flexible in recognizing that they do have special
    needs and finding ways to accommodate that, I think that is the
    biggest lesson learned.
        Mr. Tonko. And, as Mr. Patel indicated, there are some
    opportunities that FERC can offer. Which would you prioritize,
    in terms of what FERC can do to move the process along?
        Mr. Casey. Well, I guess I have a slightly different view,
    in that I think FERC has done a lot. I know FERC allows storage
    to be treated as a transmission asset, to be considered in
    planning processes. Order 841 is, I think, a huge step forward
    in enabling wholesale market participation.
        So I am not sure how much more there is for FERC to do. I
    think it is incumbent on the industry and the ISOs and RTOs out
    there, the organized markets, to really look at, how do we act
    on the opportunities we have and getting them in place.
        Mr. Tonko. Great.
        And many State policies and mandates will drive growth
    moving forward. Is storage being sufficiently considered in
    State and utility resource planning efforts, such as resource
    adequacy and transmission and distribution planning?
        Mr. Casey. Yes, in the case of California, it definitely
    is. There is a whole focused effort, led by the State Public
    Utilities Commission, on, more generally, distributed energy
    resource planning, but storage is a big component of that.
        Mr. Tonko. Thank you.
        Mr. Kumaraswamy, I had a question for you, but you have
    already tackled it.
        But thank you all for being here.
        I yield back, Mr. Chairman.
        Mr. Olson. Thank you.
        And you all have made it. I will be the last member asking
    questions. But, like Chairman Emeritus Barton before the
    current vice chairman of the full committee, my Texas pride
    makes me respond to some comments that were made in this
    hearing earlier.
        The witty banter between Chairman Upton and Mr. Doyle about
    the All-Star Game last night in D.C., they failed to mention
    the MVP. His name is Alex Bregman. He plays third base for the
    World Series champion Houston Astros. He and another 'stro, as
    we call them, George Springer, hit back-to-back home runs in
    the 10th inning to win the game for the American League. Let
    the record show: Astros, Astros, Astros, MVP.
        Now let's get to business.
        My first question is for you, Mr. Frigo. As you know, sir,
    every air conditioner in Texas is cranking right now, hard. We
    are having 100-degree days all over the State. Had those for a
    couple weeks. There is no end in sight. Our ERCOT power grid is
    under severe stress. Our reserve margins are lower, and we have
    had some big retirements. Three days ago, we set a record for
    July power: 70 gigs of power. This week, we may break that
    record. ERCOT says we might hit 74 or 75 gigs. That is huge.
        Reliability can be a hypothetical at times, but right now
    at home it is as real as it gets. If the power goes out, that
    affects people on the extremes: the extremely young, the
    extremely old, and the extremely sick. It is life-threatening
    to them if the power goes out.
        I would like you to talk about what your storage projects
    in places like the Permian Basin can do for reliability. How
    can they protect the grid? What scale do you need to see more
    of an impact? Any thoughts about that, sir?
        Mr. Frigo. Yes. You are correct; today is a very hot day in
    Texas, and the grid is under tremendous stress. In fact, I was
    looking at our power curves just before this meeting started,
    and we have our two projects on standby right now. And they are
    probably being called upon as we speak to meet the frequency
    regulation, which is basically making sure the grid stays at 60
    hertz. Because if it goes above or below, you potentially could
    have a grid outage.
        And so that is where our storage is actually coming into
    play as we speak, by getting the frequency regulation back on
    track.
        Mr. Olson. How about the scale? What to increase the scale?
    How can we do that?
        Mr. Frigo. Well, unfortunately, we have ERCOT that is not
    under the jurisdiction of FERC. So they are on their own in
    terms of implementing their own planning process and looking
    for the future. Obviously, they do, I think, look--they are
    smart. They look at what the rest of the country is doing and
    take what works and implement it back.
        I think a lot of the things are on Texas's shoulders and on
    ERCOT's shoulders to basically implement many of the things
    that are being done throughout the country at ERCOT itself. The
    frequency regulation market is actually constrained now in
    terms of the amount of megawatts that could be put on. And so
    there have been efforts proposed to put in a fast frequency
    regulation market that is bigger that would allow for greater
    energy storage, but it hasn't passed thus far.
        Mr. Olson. Well, thank you.
        Mr. Kumaraswamy--is that close?
        Mr. Kumaraswamy. That is spot-on.
        Mr. Olson. Oh, boy. Spot-on for a thick Texas tongue, I
    will take that as a great compliment.
        One of the trends we are seeing in Texas, as you know, is
    an incredible boom in wind power. My home State is number one
    in America for wind power production. Wind power is great, but,
    as mentioned earlier, it has two problems. It blows hard at
    night where power is not needed, and the biggest wind is in
    extreme west Texas. As was mentioned earlier, we have to have
    that power in Houston, Dallas-Fort Worth, Austin, San Antonio,
    the big cities.
        Could you talk about how storage on batteries will mesh
    with natural gas power? And does that make other forms of
    energy work better, or does it replace them? And, finally, can
    battery storage with wind power or solar power actually become
    sort of baseload power, a quasi-baseload power? Is that
    possible?
        Mr. Kumaraswamy. That is a good question, and the answer is
    yes. There are actually enough examples that are happening
    across the country and internationally that showcase the value
    that storage can bring. At, like, 3 or 4 hours of duration, if
    you pad them with wind or solar, you can operate these
    renewable facilities as partially baseloaded facilities. And so
    there is incredible potential for you to do that.
        I actually want to second the view that Mr. Frigo said
    previously. In the Texas market, there are two things that I
    see, particularly. One is that there have been past attempts to
    reform the ancillary service market there, what is called the
    FAST, the Future Ancillary Service Team, the FAST acronym, and
    it didn't see light at the end of the day, and so it was
    stalled completely. We think those initiatives are extremely
    important, because you have to go to your place where you start
    integrating the speed at which storage can actually provide the
    service and not create artificial barriers in that market.
        And so, because it is nonjurisdictional, I think it is
    really ERCOT and the PUCT that have to resolve that issue. That
    is number one.
        Number two is that there have also been cases where energy
    storage was actually a more cost-effective option than proposed
    transmission projects and so utilities there have gone ahead
    with that, but because of several reasons they have not been
    approved to date.
        We think that, for the same reason that you indicated,
    which is the wind is in west Texas and the load is down south,
    it also creates transmission constraints while you are trying
    to move all of that power. And so storage can actually provide
    great value as a transmission asset. And I think it is upon the
    State to make sure that you are creating, then, the policy
    environment for that to actually happen.
        Mr. Olson. Well, thank you.
        Seeing no more members----
        Mr. Rush. Mr. Chairman?
        Mr. Olson [continuing]. Looking to ask questions--Mr. Rush.
        Mr. Rush. I have a question. And maybe any of the panelists
    could answer this, if I might.
        I am interested in how energy storage batteries, microgrids
    and minigrids, their application to undeveloped countries, in
    undeveloped countries. It seems to me that we are always
    looking for a marketplace, for a different, wider market.
        And so my question is, in the future of batteries, energy,
    do you see a wide application in the future for batteries and
    for, say, underdeveloped countries that are trying to develop a
    middle class, middle-class lifestyle? Is there any significant
    potential for the application of mini-grids in some of those
    countries? And, also, if you can touch on, is there any future
    for exporting energy based on stored energy?
        Mr. Frigo. That is a good question, Mr. Rush. E.ON is a
    big, global country. We have operations throughout the world.
    And, in fact, we have part of our company that is actually
    looking at this and working in some underdeveloped countries.
        What you see is a lot of the grids in those countries are
    very small, are not well-interconnected. Maybe there are one or
    two power plants in the entire country and limited
    transmissions distribution, so you have a number of smaller
    communities on the peripheries that are just not electrified.
        So one of the things that you see being used in
    underdeveloped countries and these rural communities is the
    formation of microgrids, what we talked about earlier. And in
    these microgrids, they will typically have maybe a wind turbine
    or two or maybe some solar. And this is where energy storage
    can also play part.
        We are working in Tanzania right now where we are looking
    at solar, pairing it with energy storage to meet the needs of
    some small communities that are not connected to the
    centralized grid. So that is definitely one example.
        In terms of your other question in terms of export power,
    it really depends on where you would site that storage. Storage
    is really used to solve a particular problem in a particular
    location. So you really wouldn't put it with the intention of
    exporting power farther away.
        Mr. Rush. Thank you, Mr. Chairman. I yield back.
        Mr. Olson. Thank you, my friend.
        One comment on your question is to remember the country
    called India. I was there this past March and talked with the
    leaders there. Their motto for energy is: Natural gas is the
    present, renewables are the future. That means batteries are
    the future.
        Great ally, great market--1.3 billion people who have been
    held back by energy since probably the last half-century, but
    now, with America opening up our exports of natural gas and
    oil, they are looking for a source of energy from us. They have
    air problems too.
        So thank you for bringing that up.
        OK. Seeing there are no further members wishing to ask
    questions----
        Mr. Rush. Mr. Chairman, I ask for unanimous consent to
    enter into the record the opening statement from Ranking Member
    Pallone.
        Mr. Olson. Without objection.
        [The prepared statement of Mr. Pallone follows:]

                 Prepared statement of Hon. Frank Pallone, Jr.

        Electricity storage is one of the most exciting topics in
    energy today and I'm glad the Subcommittee is exploring it.
    Under the leadership of Governor Phil Murphy, my home state of
    New Jersey recently set an aggressive target to add 2,000
    megawatts by 2030, including 600 MW in the next three years.
        Energy storage provides flexibility and key reliability
    services to the electricity grid. It can also be an essential
    compliment to renewable generation resources like solar and
    wind by storing excess power generated on a sunny or windy day.
    That stored power can then be quickly dispatched to the grid as
    needed when the sun isn't shining or the wind stops blowing.
        Grid-level energy storage comes in many different forms,
    from various types of batteries to molten salt storage. Our
    committee and the House of Representatives took an important
    step to promote another type of energy storage late last year
    when we overwhelmingly passed legislation to expedite
    closedloop pumped storage hydroelectric project licensing.
        Recently, the Federal Energy Regulatory Commission (FERC)
    issued an order that attempts to remove barriers to storage in
    U.S. wholesale energy markets. I applaud FERC for moving to
    place storage on an equal footing with generators and other
    grid resources. While FERC's Order 841 is not perfect, it is an
    important first step, and it could help promote deployment of
    an additional seven gigawatts of storage across the country.
        I already mentioned New Jersey's energy storage efforts,
    but the fact is that states and utilities around the country
    are moving to incorporate storage into the grid. There are many
    reasons that new storage projects are being planned or coming
    on line. In addition to providing reserve capacity, a number of
    these projects will also provide frequency regulation and
    voltage support that will make the grid more dependable.
        One of the main reasons we're seeing more of these storage
    projects pop up is the rapidly falling price for incorporating
    storage into the grid. Storage has become increasingly
    competitive with generation technologies for managing peak
    load. In fact, Pacific Gas and Electric just requested approval
    to replace three natural gas peaking plants with battery
    storage. Meanwhile, a Tucson, Arizona utility reportedly
    contracted for 100 megawatts of solar electricity coupled with
    30 megawatts of storage for less than $45 per megawatt hour--a
    price that's fully competitive with a new natural gas plant.
        So, what we are beginning to see is the potential for a
    truly transformative technology to take hold, one that can work
    with all types of generation. Combined with renewable energy,
    storage could help us meet our climate goals while also
    creating new American jobs. Storage is already employing
    thousands of people in the United States and has the potential
    to employ many more, while adding billions to our economy and
    saving money for millions of electric consumers across the
    country. That should be something both sides of the aisle can
    easily agree on.

        Mr. Olson. And it looks like my colleague from Texas, Mr.
    Green, has slipped in here.
        We have talked all about the Astros, Gene. Do you want to
    add some comments about battery power?
        Mr. Green. And don't forget Altuve getting a hit last
    night, and Springer helped scoring the run. Although I was
    worried when our pitcher, Morton, let a home run get away from
    him. But thank you, Mr. Chairman.
        And I thank our colleagues who are here. I know you all
    didn't want to have--although between Pete and I, we are both
    Astros fans because, if you couldn't tell it, we are both from
    Texas.
        I want to thank the chair for this, because when it comes
    to renewables, while were a still great success in the last
    decade, the sun doesn't always shine and the wind doesn't
    always blow. But advances in energy storage have the potential
    to lead to a grid with a expanded renewable portfolio. And I am
    glad our witnesses are coming here today.
        For those of you on the panel who operate or construct
    storage facilities, what was the regulatory process to build
    these facilities, and what improvements would you like to see?
        Mr. Kuznar. I can start. So----
        Mr. Green. Was it a problem with FERC or----
        Mr. Kuznar. Right. So, we operate in a number of different
    markets. It is a new technology. And so the way we have modeled
    it in our traditional planning processes that at least our
    commissions are used to seeing. If you look, we operate in
    Ohio, Indiana, Kentucky, North Carolina, South Carolina, and
    Florida. And so, at Duke, we have a lot of different
    commissions overseeing those States. And we are regulated, so
    they must approve those projects.
        So I think, one of our just initial goals that we needed to
    tackle was just how do we model storage, how do we show that it
    is an economic investment for us, and how do we educate and get
    approval from our commissions.
        Mr. Green. OK.
        Do you feel, Mr. Kumaraswamy--pardon. Having a name like
    ``Green,'' it is easy. But, in your testimony, you talk about
    investment tax credit. And I know what we--do you feel the
    single-year tax credit extension framework that is currently
    used on a year-to-year basis works for the development of
    storage projects that require lots of permitting and
    environmental reviews?
        Mr. Kumaraswamy. Yes, no, that is a good question. I think
    we talked about this previously, but one of the things that I
    wanted to highlight is that section 48 of the investment tax
    credit currently applies for energy storage when it is paired
    with renewable energy generation.
        There has been some ambiguity about that process, and the
    IRS has actually invited comments on that procedure. And they
    have not provided formal guidance on the topic. But one thing
    that we see is that energy storage provides value wherever it
    is put on a grid, right? Whether it is co-located with
    renewables or whether it is paired with traditional generation
    facilities or when it is used as a wires option, right, so
    while it is replacing traditional T&D infrastructure asset.
        So it is able to add value wherever it is added to the
    grid. And so thinking about energy storage as a class by itself
    and extending the current section 48 rules to apply for that
    would be what we would like to see.
        Mr. Green. OK.
        I represent an area that is in ERCOT. And the expansion of
    wind power has been overwhelming. Not as much solar, but I
    think the State is going to get into that. And I don't think we
    would have built most of that without the investment tax
    credit.
        And the same with storage. When I look at information that
    ERCOT has much less storage capacity than some of the other
    areas, does anybody know why that would be? Because compared to
    California or compared to even PJM, the storage capacity is
    much smaller.
        Mr. Frigo. I can answer that, Mr. Green.
        Mr. Green. OK.
        Mr. Frigo. ERCOT, which is not under the jurisdiction of
    FERC, has, effectively, a pilot frequency regulation market
    that energy storage is well-positioned to participate in.
    Currently, it is maxed out at 65 megawatts for regulation up
    and then 35 megawatts for regulation down. And, basically, that
    is markets already saturated with the existing storage there.
        Mr. Green. OK.
        Mr. Frigo. So what ERCOT needs to do--and this is one of
    the things that has been proposed to ERCOT--is to expand that
    market so that more energy storage could come onto the grid.
    And that is something that initially got rejected and will
    probably be revisited, I guess, in the future.
        Mr. Green. OK. Because last year--I know Congressman Olson,
    it is not his district now--we didn't have a lot of wind
    damage, but when you get 55 inches of rain, it has an impact on
    pipelines, on everything else. And we didn't lose power like
    Puerto Rico or other States that were hit with high winds, but
    it would be great to have that storage capacity that maybe some
    of the plants--and the nuclear power plant continued. Our coal
    plants could not because all the coal was underwater,
    literally, in the storage area.
        Mr. Chairman, I know I am out of time, but I appreciate the
    time.
        Mr. Olson. Well, thank you.
        And one more time, seeing there are no further members
    wishing to ask questions and no one wanting to brag about the
    Houston Astros, I would like to thank all the witnesses for
    joining us today.
        Before we conclude, I would like to ask unanimous consent
    that we submit the following documents for the record: Number
    one is a letter from the National Rural Electric Cooperative
    Association, and the second, a letter from the Edison
    Electrical Institute.
        Without objection, so ordered.
        [The information appears at the conclusion of the hearing.]
        Mr. Olson. And pursuant to committee rules, I remind
    members that they have 10 business days to submit additional
    questions for the record.
        And I ask the witnesses submit their responses within 10
    business days upon receipt of the questions.
        Without objection, this subcommittee is adjourned.
        [Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

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