[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:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
        
    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:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    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:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
        
    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:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    
    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:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    
    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:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]