ENERGY STORAGE

Information on 

Challenges to 

Deployment for 

Electricity Grid 

Operations and Efforts 

to Address Them

Report to Congressional Requesters

May 2018

GAO-18-402

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-402, a report to 

congressional requesters

May 2018

ENERGY STORAGE

Information on Challenges to Deployment for

Electricity Grid Operations and Efforts to Address 

Them

What GAO Found

Energy storage can be used in various ways to enhance the reliability, resilience, 

and efficiency of grid operations, according to studies GAO reviewed and 

stakeholders GAO interviewed. Such storage can be deployed throughout the 

electricity system and act as a generation, transmission, distribution, or 

customer-sited asset to provide various services, address operational challenges 

and needs, and potentially reduce costs, as shown in the figure below. For 

example, storage can help grid operators address supply disruptions and the

variability of renewable energy resources, such as solar and wind; relieve

transmission congestion; defer the need for transmission or distribution system 

upgrades; and provide backup power during a power outage.

Examples of Potential Storage Applications on the Electricity Grid 

Various factors affect energy storage deployment. These include industry and 

technology readiness, safety concerns and stringency of siting requirements,

increasing use of renewable resources, cost-competitiveness of storage and 

challenges with quantifying the value of storage, and the regulatory environment,

according to studies GAO reviewed and stakeholders GAO interviewed. For 

example, industry and technical challenges include uncertainty about the 

performance of certain technologies over time and in various operating 

conditions.

Federal and state policymakers have used various policies and other efforts to 

encourage the deployment of storage and address market barriers. For example,

the Department of Energy has undertaken various efforts, including research and 

development focused on improving factors that affect the cost and capacity of 

certain storage technologies. In addition, the Federal Energy Regulatory 

Commission has issued proposed and final rules to address market barriers to 

storage deployment in wholesale markets. Lastly, state policies and other efforts 

that aim to encourage the deployment of storage or to address market barriers

include establishing mandates and targets for storage adoption, revising 

planning requirements, and offering financial incentives and funding. View GAO-18-402. For more information, 

contact Frank Rusco at (202) 512-3841 or 

ruscof@gao.gov.

Why GAO Did This Study

Power plants’ electricity output must be 

matched continuously with demand, 

which varies depending on the time of 

day and year. To maintain a reliable 

supply of electricity, operators of the 

electricity grid—a complex network of 

power plants and power lines managed 

by utility companies and other 

operators—take steps to ensure power 

plants are available to generate 

electricity when needed. Increasingly, 

renewable sources of energy, such as 

solar and wind, are being integrated 

into the grid. 

Energy storage allows for electricity to 

be stored and used later when it is 

needed and could change the 

operating capabilities of the electricity 

grid. Batteries and other energy 

storage technologies can store energy 

in one form—such as chemical, 

mechanical, or thermal energy—and 

transform that energy to generate 

electrical power at a later time. 

GAO was asked to provide information 

on the role of energy storage in grid 

operations. This report describes 

(1) how energy storage can be used to 

enhance grid operations and 

performance; (2) factors that affect the 

deployment of energy storage for grid 

operations; and (3) federal and state 

policies and other efforts that address

the deployment of energy storage. 

GAO reviewed studies published from 

2012 through 2017; and interviewed 41 

stakeholders, including officials from 

government agencies and

representatives of industry and other

groups based on their knowledge of 

energy storage and grid operations.
Page i GAO-18-402 Energy Storage

Letter 1

Background 5

Energy Storage Can Be Used in Various Ways to Enhance the 

Reliability, Resilience, and Efficiency of Grid Operations 16

Various Factors Affect the Deployment of Storage for Grid 

Operations, Including Industry and Technology Readiness, 

Cost-Competitiveness, and the Regulatory Environment 21

Various Federal and State Policies and Other Efforts Aim to 

Encourage the Deployment of Energy Storage and Address 

Market Barriers 27

Agency Comments 40

Appendix I State Policies and Other Efforts Encouraging Deployment of Energy 

Storage 41

Appendix II Comments from the Federal Energy Regulatory Commission 44

Appendix III GAO Contact and Staff Acknowledgments 45

Table

Table 1: Examples of State Policies and Other Efforts 

Encouraging Deployment of Energy Storage 41

Figures

Figure 1: The Electricity Grid 6

Figure 2: Capacity of Energy Storage in Operation and Under 

Development by Technology Type 10

Figure 3: Capacity of Utility-Scale Battery Installations, 2003-2017 11

Figure 4: Capacity of Energy Storage in the United States 12

Figure 5: Map of Seven Regional Transmission Organizations in 

the United States 14

Figure 6: Examples of Potential Storage Applications on the 

Electricity Grid 16

Figure 7: San Diego Gas & Electric’s 30 Megawatt Escondido 

Energy Storage Facility 18

Contents
Page ii GAO-18-402 Energy Storage

Figure 8: Timeline of Key Federal Energy Regulatory Commission 

(FERC) Efforts to Address Market Barriers to the 

Deployment of Energy Storage Resources and Time 

Frames for Implementation, 2016 through 2019 34

Abbreviations List

CRS Congressional Research Service 

DOE Department of Energy

FERC Federal Energy Regulatory Commission 

GW gigawatt 

ISO independent system operator 

IRS Internal Revenue Service 

MW megawatt

PNNL Pacific Northwest National Laboratory

RTO regional transmission organization 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-18-402 Energy Storage

441 G St. N.W.

Washington, DC 20548

May 24, 2018

The Honorable Eddie Bernice Johnson

Ranking Member

Committee on Science, Space, and Technology

House of Representatives

The Honorable Chris Collins

House of Representatives

The Honorable Mark Takano

House of Representatives

Electricity is supplied through a complex network of power plants and 

power lines—the electricity grid—managed by utility companies and other 

operators. The operation of electric power systems involves a complex 

process of forecasting the demand for electricity, and scheduling and 

operating power plants to meet that varying demand. Generally, electricity 

cannot be easily stored, so power plants’ electricity output must be 

matched continuously with demand, which varies significantly depending 

on the time of day and year. To maintain a reliable supply of electricity, 

operators of the electricity grid take steps to ensure that power plants are 

available to generate electricity when needed. The ability to store 

electricity more easily could change the operating capabilities of the 

electricity grid.

The traditional model for generating and selling electricity in the United 

States is changing. According to the Department of Energy (DOE), the 

electric utility industry, regulators, and other stakeholders are working to 

understand the role of energy storage in grid operations and how to 

integrate it into the grid. Simultaneously, utilities in the United States are 

investing in an aging grid with a growing segment in need of replacement 

and modernization. One trend across the electric sector is a reduced 

reliance on large, central power plants and greater use of more diverse 

resource portfolios. The increasing use of variable energy resources such 

as wind and solar power, the interaction of distributed energy resources—

including energy storage—with traditional generation sources, and the 

Letter
Page 2 GAO-18-402 Energy Storage

changing role of electricity customers have increased the complexity of 

matching electricity supply with demand at all times.1

Batteries and other energy storage technologies can store energy in one 

form—such as chemical, mechanical, or thermal energy—and transform 

the energy to generate electrical power. Energy storage technologies are 

in various stages of development and deployment, and activities are 

under way in the United States and elsewhere to improve the economic 

and technical performance of storage options. Historically, electricity 

storage has consisted of pumped hydroelectric storage projects, which 

pump water to higher-elevation reservoirs when electricity demand is low 

and allow it to flow downhill through electricity-generating turbines when 

demand increases. Other energy storage technologies include

• electrochemical technologies such as batteries (lead acid, lithium ion, 

sodium sulfur, and flow);

• electromechanical technologies such as flywheels (mechanical 

devices that harness rotational energy to store and deliver energy) 

and compressed air energy storage (that uses electricity to compress 

air, then release it through a turbine to generate electricity later); and

• other forms of storage such as thermal storage.

The Federal Energy Regulatory Commission (FERC), which regulates 

interstate electricity transmission and oversees wholesale interstate 

electricity markets, plays a role in addressing barriers to competition in 

electricity markets as part of its statutory duty to ensure that market rates 

are just and reasonable and not unduly discriminatory or preferential. 

State entities, such as public utility commissions, regulate utility 

management, operations, electricity rate structures, and capacity 

acquisition within their state. Additionally, in some regions, regional 

transmission organizations manage electricity transmission and 

wholesale electricity markets. DOE conducts research and development 

and provides analytical support for federal and other efforts that support 

energy storage’s role in modernizing the electricity grid.

 1

Distributed generation systems are relatively small-capacity electricity generation 

systems, such as those installed at residences or other customer locations throughout the 

grid, generally at or near the site where the electricity will be used. 
Page 3 GAO-18-402 Energy Storage

You asked us to review issues related to the role of energy storage in grid 

operations. This report examines (1) how energy storage can be used to 

enhance grid operations and performance; (2) factors that affect the 

deployment of energy storage for grid operations; and (3) federal and 

state policies and other efforts that address the deployment of energy 

storage.

To address the first two objectives, we reviewed studies and documents 

from research institutions, such as DOE’s national laboratories, FERC, 

and stakeholder groups. The studies we reviewed were published from 

2012 through 2017, the five most recent years for which studies were 

available, and we identified them by conducting database and Internet 

searches and asking stakeholder groups for recommendations. 

Specifically, we searched sources including ProQuest and WorldCat, 

among others, and the websites of national laboratories. We selected 

studies to review based on their relevance to energy storage, its role in 

grid operations, and factors affecting deployment of storage for grid 

operations. We selected 29 studies from the Congressional Research 

Service (CRS); DOE; national laboratories; government-sponsored 

research; non-governmental organizations such as nonprofits and 

research institutes; industry associations; and peer-reviewed scientific 

and trade journals. We reviewed the methodologies of these studies and 

determined that they were sufficiently sound for describing the ways 

energy storage can be used to enhance grid operations and factors 

affecting deployment. We also reviewed other documents including FERC

proposed and final rules, guidance, and conference and meeting 

transcripts; reports from state agencies, DOE, and national laboratories; 

and industry papers and reports on topics relevant to our work. We 

identified the ways energy storage can be used to enhance grid 

operations and the factors affecting deployment often cited by 

stakeholders, studies, and documents. Given our methodology, we may 

not have identified every relevant study and every potential use of storage 

and factor that affects deployment of storage, therefore our findings may 

not be generalizable to all energy storage technologies but provide 

examples of such technologies.

To address the third objective, we reviewed and described documentation 

of energy storage efforts at DOE and relevant FERC orders and proposed 

and final rules addressing the deployment of storage. In addition, we 

reviewed documentation of Internal Revenue Service efforts to solicit 

comments on regulations that affect how a tax credit can be used for 

storage projects. We identified state policies and efforts addressing 

storage deployment by reviewing documents from federal and state 
Page 4 GAO-18-402 Energy Storage

agencies, stakeholder groups, relevant databases, and industry news 

sources and asking stakeholders. To describe these state policies and 

efforts, we reviewed state government documents, reports, policies, and 

legislation. Given our methodology, we identified examples that illustrate 

the range of state policies and other efforts that may encourage the 

deployment of energy storage or that address market barriers; however, 

these examples do not represent a comprehensive list of all state policies 

and efforts.

For all of the objectives, we conducted interviews with officials and 

representatives of 41 stakeholder groups including federal and state 

government agencies, industry, and other stakeholders. Specifically, we 

interviewed officials and representatives from 4 federal agencies (DOE, 

FERC, CRS, and the Internal Revenue Service); 3 national laboratories 

(the National Renewable Energy Laboratory, the Pacific Northwest 

National Laboratory, Sandia National Laboratories); 8 state government 

agencies; 11 grid operators and utilities; 7 industry associations; 2 

nongovernmental organizations; and 6 other market participants, 

including storage project developers and consultants. We identified 

stakeholders that were knowledgeable about energy storage, grid 

operations, and state and federal policies and other efforts by reviewing 

prior GAO and CRS reports; the 29 studies from research institutions, 

such as DOE’s national laboratories, and other groups; and by asking 

stakeholder groups for recommendations. Because this was a 

nonprobability sample of stakeholders, views are not generalizable to all 

potential stakeholders. For interviews with state entities, we selected a 

nonprobability sample of four states that have policies encouraging 

storage deployment, which stakeholders identified as leading in the 

development and establishment of such policies, and that vary based on 

geographic location because factors affecting deployment tend to vary in 

different parts of the country. We also considered information on the 

extent of energy storage deployed in the state. Throughout the report, we 

use the following categories to quantify statements identified by studies 

and stakeholders: “some,” which we define as two to five studies and 

stakeholders collectively; “several,” which we define as six to 10 studies 

and stakeholders collectively; and “many,” which we define as more than 

10 studies and stakeholders collectively.

We conducted this performance audit from April 2017 to May 2018 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 
Page 5 GAO-18-402 Energy Storage

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

This section describes (1) electricity grid functions, operations, and 

planning; (2) energy storage operational characteristics, technologies, 

and deployment; and (3) the electricity regulatory framework.

The electricity grid involves four distinct functions: generation, electricity 

transmission, electricity distribution, and grid operations (see fig. 1). 

Electricity is generated at power plants by burning fossil fuels; through 

nuclear fission; or by harnessing renewable sources such as wind, solar, 

geothermal, or hydropower. Once electricity is generated, it is sent 

through the electricity grid, which consists of high-voltage, high-capacity 

transmission systems, to areas where it is transformed to a lower voltage 

and sent through the local distribution system for use by residential and 

other customers. Throughout this process, a grid operator, such as a local 

utility, must constantly balance the generation and consumption of 

electricity. To do so, grid operators monitor electricity consumption from a 

centralized location using information systems, and send minute-byminute signals to power plants to adjust their output to match changes in 

the demand for electricity.

Background

Electricity Grid Functions, 

Operations, and Planning
Page 6 GAO-18-402 Energy Storage

Figure 1: The Electricity Grid

As we previously reported, continuously balancing the generation and 

consumption of electricity can be challenging for grid operators because 

customers may use sharply different amounts of electricity over the 

course of a day and throughout the year.2 For example, in many areas, 

customer demand for electricity rises throughout the day and reaches its 

 2

GAO, Electricity: Status of Residential Deployment of Solar and Other Technologies and 

Potential Benefits and Challenges, GAO-17-142 (Washington, D.C.: Feb. 13, 2017). 
Page 7 GAO-18-402 Energy Storage

highest point—or peak demand—in late afternoon or early evening. 

Throughout the day, grid operators direct power plants to adjust their 

output to match changes in demand for electricity. Grid operators typically 

first use electricity produced by baseload power plants that are the least 

expensive to operate, then progressively increase the supply of electricity 

generated by power plants that are more expensive to operate as needed 

to match increases in electricity demand.3 As a result, providing electricity 

to meet peak demand is generally more expensive than during other parts 

of the day, because to do so, grid operators use power plants that are 

more expensive to operate. Peak periods are generally short and account 

for only a few hours per day and, overall, a small percentage of the hours 

during a year, but can significantly contribute to the overall costs of 

serving customers.

Grid operators conduct planning to assess the adequacy of existing grid 

infrastructure, identify capacity needs, and evaluate the cost and 

effectiveness of potential solutions to address these needs.4 As we 

previously reported, to ensure that grid infrastructure has sufficient 

capacity to meet future peak demand, grid operators typically develop 

forecasts of future electricity demand based on historical information 

about customer electricity use combined with assumptions about how 

customer demand will change in the future based on population growth, 

economic conditions, and other factors.5

Utilities deal with uncertainty partly by producing a range of forecasts 

based on demographic and economic factors, and by maintaining excess 

generating capacity, known as reserves. Models help utilities choose the 

least-cost combination of generating resources to meet demand. If 

demand forecasts are too high or low, a utility could end up with more or 

less generating capacity than it needs to serve its customers reliably, or it 

could end up with a mix of generating capacity that is not cost effective. 

These outcomes can affect electricity rates as well as the utility’s financial 

situation. To meet demand for electricity, utilities can construct new 

 3

A baseload plant is operated close to its maximum output all the time it is available for 

service and generally includes the units whose energy costs are among the lowest on the 

system. Peaker plants generally operate at a higher hourly cost and can rapidly be 

brought online or offline in response to changes in electricity demand.

4

Grid infrastructure includes the physical parts of the grid necessary to generate and 

transmit electricity. These parts include power plants, transmission lines, substations, and 

distribution lines, among other equipment. 

5

GAO-17-142. 
Page 8 GAO-18-402 Energy Storage

plants, upgrade existing plants, purchase power from others, build new 

transmission and distribution lines, and provide incentives to customers to 

reduce and shift their demand for electricity through energy efficiency or 

demand-response programs.6 In addition, utilities may use time-based 

pricing—prices that vary throughout the day and year to reflect the costs 

of serving consumers—to encourage consumers to lower their electricity 

use at times of high prices or shift their use to times of the day when 

prices are lower, which can lower their electricity bills.

Energy storage includes a number of different technologies that have the 

ability to store energy for use at a later time. Energy storage systems can 

be designed with a range of technologies, such as pumped hydro, 

compressed air, batteries, and flywheels, according to DOE.7 Each 

technology has its own performance characteristics that make it more 

suitable for certain grid services than for others. Specifically, compressed 

air and pumped hydro are capable of discharge times—the length of time 

that a storage device can discharge electricity—in tens of hours and have 

large capacities that can reach 1,000 megawatts (MW).8 According to 

DOE and CRS, storage projects involving these types of technologies 

generally have unique siting requirements, including specific geographical 

features, or long construction times. In contrast, other storage 

technologies such as batteries and flywheels are smaller in terms of 

capacity and have shorter discharge times, ranging from a few seconds to 

 6

By helping to reduce demand for electricity, energy efficiency programs can reduce the 

need for either new generating capacity or power purchases. Demand-response programs 

provide customers with financial incentives to reduce their electricity use during periods of 

peak demand.

7

Several different electrochemical battery technologies are available for commercial 

applications. Batteries and other energy storage technologies are in various stages of 

technology advancement. For example, lithium-ion batteries are a popular type of battery 

used for powering most small or mobile consumer electronics. Lithium-ion batteries are 

also being used in electric grids and electric vehicles because, among other factors, they 

are lightweight and have high energy and power densities compared with other 

commercially available batteries. Energy density of a battery or other energy storage 

technology is the ratio of energy stored to the mass or volume of the device. For example, 

energy density of a battery affects the distance a vehicle can travel with a given size 

battery. Power density is the amount of energy in a given device’s mass or volume that 

can be delivered in a given period of time. For example, power density of a battery affects 

how fast a vehicle can accelerate.

8

A megawatt is a unit of electric power. A battery with 1 MW capacity and a maximum 

discharge time at that capacity of, for example, four hours, can supply 4 megawatt-hours 

of electricity, after which it has to recharge to provide this service at a later time. 

Energy Storage 

Operational 

Characteristics, 

Technologies, and 

Deployment
Page 9 GAO-18-402 Energy Storage

several hours, and these technologies can generally be built without 

specific geographical features at the site. These energy storage systems 

are comprised of storage technologies and other system components 

such as inverters, wiring, temperature regulation, and other equipment.

According to DOE’s Global Energy Storage Database, about 24 gigawatts 

(GW) of grid-connected energy storage were in operation in the United 

States and about 2 GW of storage capacity was under development as of 

March 20, 2018.9 Pumped hydro comprises about 93 percent of this 

storage capacity in operation. Many of the operational pumped hydro 

systems in the United States were commissioned during the 1960s 

through the 1980s; the most recent became operational in 2012. See 

figure 2 for information about the proportion of energy storage capacity in 

operation or under development in the United States that comes from 

certain types of technology.

 9

One gigawatt is equal to 1,000 megawatts. According to DOE’s Global Energy Storage 

Database, storage capacity in operation includes projects that were in operation (24 GW) 

and projects that were offline or under repair (169 MW) as of March 20, 2018. Storage 

capacity under development includes projects that were under signed contract to be built 

(2 GW) and projects that were under construction (190 MW). In addition, about 5 GW of 

storage capacity has been announced, according to DOE’s database, but these projects 

are not under contract to be built or under construction. 
Page 10 GAO-18-402 Energy Storage

Figure 2: Capacity of Energy Storage in Operation and Under Development by Technology Type

Note: The data are from the Department of Energy’s (DOE) Global Energy Storage Database, as of 

March 20, 2018, and include projects in operation (operational and offline or under repair) or under 

development (under signed contract to be built or under construction). Electromechanical storage 

includes technologies such as flywheels (devices that harness rotational energy to store and deliver 

energy) and compressed air energy storage (that uses electricity to compress air, then release it 

through a turbine to generate electricity later). Electrochemical storage includes technologies such as 

batteries (lead acid, lithium ion, sodium sulfur, and flow).
Page 11 GAO-18-402 Energy Storage

While pumped hydro comprises the majority of energy storage in 

operation, batteries are driving the recent growth in energy storage. Since 

2013, the capacity of utility-scale (1 MW or greater) battery deployments 

grew by 283 percent (from about 185 MW to about 709 MW), though such 

utility-scale batteries comprised about 0.07 percent of utility-scale 

generating capacity on the U.S. electric grid, according to data from the 

Energy Information Administration.10 See figure 3 for information on the 

capacity of utility-scale battery installations each year from 2003 through 

2017.

Figure 3: Capacity of Utility-Scale Battery Installations, 2003-2017

Note: The Energy Information Administration uses the EIA-860M form to collect data on generating 

units with 1 megawatt or greater of combined nameplate capacity.

Figure 4 shows how grid-connected storage of all technology types was 

distributed nationwide as of March 20, 2018, according to DOE’s Global 

Energy Storage Database.

 10The Energy Information Administration is the statistical agency within DOE that collects, 

analyzes, and disseminates independent information on energy issues. The capacity data 

is based on information from the EIA-860M form that includes information on generating 

units with 1 MW or greater of combined nameplate capacity.
Page 12 GAO-18-402 Energy Storage

Figure 4: Capacity of Energy Storage in the United States

Note: The data are from the Department of Energy’s (DOE) Global Energy Storage Database, as of 

March 20, 2018, and include projects in operation (operational and offline or under repair) or under 

development (under signed contract to be built or under construction). These data do not include 

about 5,256 megawatts (MW) of storage capacity for announced projects that are not yet under 

contract or construction in Nevada (3,000 MW); California (1,313 MW); Oregon, Pennsylvania, and 

Texas (870 MW); and other states (73 MW). All other storage includes electromechanical 

technologies such as flywheels (devices that harness rotational energy to store and deliver energy) 

and compressed air energy storage (that uses electricity to compress air, then release it through a 
Page 13 GAO-18-402 Energy Storage

turbine to generate electricity later); electrochemical technologies such as batteries (lead acid, lithium 

ion, sodium sulfur, and flow); and thermal storage.

Responsibility for regulating the electricity industry is divided between the 

states and the federal government. Most electricity customers are served 

by electric utilities on the retail level that are regulated by the states, 

generally through state public utility commissions or equivalent 

organizations. As the primary regulator of electricity on the retail level, 

state public utility commissions have a variety of responsibilities, such as 

approving utility investments in generation and distribution assets, the 

rates retail customers pay, and how those rates are set.11 Before 

electricity is sold to retail customers, it may be bought, sold, and traded in 

wholesale electricity markets that the federal government oversees 

through FERC.12 FERC is responsible for overseeing regional 

transmission organizations’ (RTO)13 development and operation of 

markets to ensure that wholesale electric rates are “just and reasonable”

and not “unduly discriminatory or preferential.”14 To do so, FERC reviews 

and approves RTO market rules and monitors the competitiveness of 

 11State regulators approve utility investments either in advance of construction or 

afterwards when the utility seeks to recover costs in the rates it charges customers. Some 

states have integrated resource planning processes to determine what facilities should be 

built. The purpose of integrated resource planning is to meet future power demand by 

identifying the need for generating capacity and determining the best mix of resources to 

meet the need on a least-cost, system-wide basis. The integrated approach considers a 

broad range of feasible supply-side and demand-side options and assesses them with 

respect to financial, economic, and environmental impacts.

12FERC is to be composed of five commissioners who are appointed by the President of 

the United States with the advice and consent of the Senate. FERC needs a quorum of 

three commissioners to conduct business. Commissioners serve 5-year terms and have 

an equal vote on regulatory matters.

13Different regions of the country use different approaches to ensure adequate electricity 

supplies. In some regions, entities called RTOs manage the system of electricity lines that 

comprise the grid and help ensure enough electricity is available to meet customers’

electricity needs in the future.

14This authority is granted under sections 205 and 206 of the Federal Power Act, 16 

U.S.C. §§ 824d-824e. While major sections of the country operate under more traditional 

market structures, two-thirds of the nation’s electricity is served in RTO regions. 

Independent operators of the transmission system can be referred to as RTOs or 

independent system operators (ISO). For the purposes of this report, we use the term 

RTOs to refer to both RTOs and ISOs. FERC does not regulate wholesale sales of 

electricity in the ISO market in Texas (the Electric Reliability Council of Texas) which is 

separate from the rest of the U.S. grid.

The Electricity Regulatory 

Framework
Page 14 GAO-18-402 Energy Storage

RTO markets.15 Figure 5 indicates the location of major RTOs that have 

developed in certain regions of the United States.

Figure 5: Map of Seven Regional Transmission Organizations in the United States

 15In addition, the North American Electric Reliability Corporation, which has been 

designated by FERC as the U.S. Electric Reliability Organization, establishes mandatory 

standards of reliability subject to FERC approval. RTOs, utility grid operators, and other 

participants in the electricity markets must take various actions to comply with these 

standards. According to the North American Electric Reliability Corporation, reliability is a 

function of resource adequacy and operating reliability; specifically, resource adequacy is 

the ability of the system to supply electricity to meet consumer demand; and operating 

reliability includes resilience and is the ability of the system to withstand sudden 

disturbances to system stability or unanticipated loss of components.
Page 15 GAO-18-402 Energy Storage

RTOs serve as grid operators by managing regional networks of electric 

transmission lines and also operate wholesale electricity markets to buy 

and sell services needed to maintain a reliable grid. These markets 

include

• capacity markets—auctions through which owners of power plants 

can be compensated for agreeing to make their plants available to 

provide electricity at a specified time in the future—designed to 

incentivize the building and retention of enough generation and other 

resources to meet future power demands;16

• energy markets for scheduling which power plants will generate 

electricity throughout the day to maintain the balance of electricity 

generation and consumption, and at what prices; and

• ancillary services markets,17 which are designed to maintain electric 

reliability and ensure that supply and demand remain in balance from 

moment to moment so that grid operators can deliver electricity within 

technical standards, such as at the right voltage and frequency.18

RTOs are responsible for developing and implementing market rules, 

approved by FERC, that provide the framework for the design and 

operation of wholesale electricity markets. RTO market operations 

encompass multiple services that are needed to provide reliable and 

economically efficient electric service to customers. Each of these 

services has its own parameters and pricing. The RTOs use markets to 

determine the providers and prices for many of these services.

In regions of the country without RTOs, electric utilities generally serve in 

the role of grid operator. In these regions, the local utility often integrates 

the delivery of electricity services—energy to maintain the balance of 

electricity generation and consumption, capacity to meet demand, and a 

range of ancillary services. Utilities in these regions may build and 

operate power plants to provide electricity to serve their retail customers. 

These utilities may also buy electricity from other power plant owners.

 16Only four of the seven RTOs have capacity markets. 

17Ancillary services generally involve resources—such as power plants and large 

consumers of electricity—being available on short notice to increase or decrease their 

generation or consumption.

18RTOs do not own transmission or generation assets, perform the actual maintenance on 

generation or transmission equipment, or directly serve end-use customers.
Page 16 GAO-18-402 Energy Storage

Energy storage can be used in various ways to enhance the reliability, 

resilience, and efficiency of grid operations, according to studies we 

reviewed and stakeholders we interviewed. Storage can be deployed 

throughout the electricity system and act as a generation, transmission, 

distribution, or customer-sited asset to provide various services, address 

operational challenges and needs, and potentially reduce costs. For 

example, storage can help grid operators address supply disruptions, 

relieve transmission congestion during periods of high demand, defer the 

need for transmission or distribution system upgrades, and provide 

backup power during a power outage. Figure 6 illustrates examples of 

potential applications across the electricity grid.

Figure 6: Examples of Potential Storage Applications on the Electricity Grid

Energy storage can support the reliability of grid operations by helping 

grid operators respond to fluctuations in electricity supply resulting from 

the variability of renewable energy resources, such as solar or wind, or 

disruptions to the grid, such as the loss of a transmission line or a 

generating unit. Specifically, according to some studies we reviewed, the 

fast-ramping nature of some storage technologies that can change 

generation output quickly—within a few seconds or minutes—makes 

them suitable for addressing short-term changes in variable energy 

generation resources (referred to as variable resources) such as when 

the sun sets and output from solar resources quickly declines. Moreover, 

Energy Storage Can 

Be Used in Various 

Ways to Enhance the 

Reliability, Resilience, 

and Efficiency of Grid 

Operations
Page 17 GAO-18-402 Energy Storage

storage can provide ancillary services needed to maintain system 

reliability and support the transmission of electricity. Specifically, 

according to some studies we reviewed, storage can provide frequency 

regulation services—which entail moment-to-moment reconciliation of the 

difference between supply and demand—to maintain the stability of the 

system.19 The services that storage provides can be performed by 

traditional assets but because certain storage technologies are fastramping they can be better-suited to provide certain services, according 

to several studies we reviewed and stakeholders we interviewed.

Systems with a large portion of generating capacity from variable 

resources can face reliability challenges because the intermittent nature 

of these sources can cause fluctuations in voltage and frequency, 

according to some studies we reviewed.20 Grid operators are adopting 

storage to support increasing use of renewable energy and address the 

associated challenges. For example, in 2017, San Diego Gas & Electric 

deployed a 30 MW energy storage facility at its Escondido substation to 

help improve regional reliability and support greater amounts of 

renewable energy in the region’s energy supply (see fig. 7).21 According 

to San Diego Gas & Electric, the Escondido storage facility is helping to 

enhance grid reliability and increase the use of renewable energy; the 

facility is capable of the equivalent of serving 20,000 customers over a 

period of 4 hours.

 19In the United States, grid frequency must be maintained at roughly 60 hertz or the grid 

becomes unreliable; for example, if the frequency falls below a certain level, generators 

can get damaged, which could ultimately result in blackouts. 

20In addition to grid frequency, another reliability requirement for electric grid operation is 

to maintain grid voltage within specified limits.

21San Diego Gas & Electric expedited ongoing plans to build the 30 MW project after the 

Governor of California declared a state of emergency in January 2016 related to the Aliso 

Canyon natural gas leak. To ensure reliability in the region due to limited operations of the 

Aliso Canyon gas storage facility after the leak, California regulators took a series of 

mitigation measures, including energy efficiency programs and an expedited procurement 

process for energy storage projects. 
Page 18 GAO-18-402 Energy Storage

Figure 7: San Diego Gas & Electric’s 30 Megawatt Escondido Energy Storage Facility

Similarly, in 2017, according to Tucson Electric Power documents, the 

utility installed two 10 MW battery storage projects to support its ability to 

achieve long-term renewable energy goals without compromising the 

reliability of service. According to representatives from the utility, the 

projects provide frequency control and voltage support and the 

deployment shortened the reaction time to system disruptions and 

supported the utility’s compliance with reliability standards in its role as 

balancing authority.22

Storage can also provide services that support resilience by helping the 

grid adapt to changing conditions and potentially disruptive events and, if 

a disruptive event occurs, to rapidly recover, according to several studies 

we reviewed and stakeholders we interviewed.23 Specifically, in the event 

of an outage during which power sources or power lines become 

 22A balancing authority is responsible for balancing loads and resources so that frequency 

remains at or near 60 hertz, or 60 cycles per second.

23The National Infrastructure Advisory Council defines infrastructure resilience as the 

ability to reduce the magnitude and/or duration of disruptive events. The effectiveness of a 

resilient infrastructure or enterprise depends upon its ability to anticipate, absorb, adapt to, 

and/or rapidly recover from a potentially disruptive event.
Page 19 GAO-18-402 Energy Storage

unavailable, storage can respond quickly to provide backup power or 

black start services—the provision of the power necessary to restore a 

generation plant when power from the grid is unavailable during a major 

outage. In addition, storage can also support microgrids—systems that 

can connect and disconnect from the grid depending on operating 

conditions—that could maintain power for a small area independent of the 

grid. For example, in 2015 a Vermont utility installed a 4 MW energy 

storage system in conjunction with a 2.5 MW solar project at a school that 

serves as an emergency shelter. In case of grid failure or an extended 

emergency, the facility can separate from the rest of the grid and operate 

independently. In addition, in 2016 in Massachusetts, the Sterling 

Municipal Light Department installed a storage system that can isolate 

from the main grid in the event of a power outage and provide emergency 

backup power to the Sterling police station and dispatch center, a facility 

providing first responder services. In the event of an outage, the 2 MW 

storage system could provide the police station with up to 12 days of 

power, according to the utility.

Storage also has the potential to improve efficiency of grid operations and 

help reduce operating costs, according to studies we reviewed and 

stakeholders we spoke with. For example, storage has the potential to 

reduce costs by capturing energy generated during low-cost periods to be 

used to meet demand later during more expensive periods, according to 

studies we reviewed. Specifically, energy time-shift, also referred to as 

arbitrage, involves utilities purchasing inexpensive electric energy, 

available during periods when prices or system marginal costs are low, to 

charge the storage system so that the stored energy can be used or sold 

at a later time when the price or costs are high. In addition, storage can 

help make the capacity of variable resources more consistent by storing 

electricity during periods of high generation, such as a sunny afternoon, 

and releasing it later during periods of high demand, such as the early 

evening. Moreover, storage can provide similar energy time-shift by 

storing excess energy production from renewable sources, which could 

otherwise be curtailed.24

Storage also has the potential to reduce costs by avoiding or delaying 

investments in infrastructure. Specifically, storage may be used to reduce 

the capacity demands on existing generation, transmission, and 

 24Curtailment is a reduction in the output of a generator from what it could otherwise 

produce given available resources.
Page 20 GAO-18-402 Energy Storage

distribution infrastructure. As a result, according to many studies and 

stakeholders we interviewed, utilities may be able to avoid or delay 

investments in generation, transmission, and distribution infrastructure 

that would otherwise be necessary to maintain adequate supply.25 For 

example, in 2017, a utility that serves customers in Massachusetts 

announced plans to install a 6 MW energy storage system with an 8-hour 

duration alongside a new diesel generator on Nantucket Island to provide 

backup power and postpone the need to construct a costly submarine 

transmission cable to bring electricity from the mainland to meet 

anticipated growth in electricity demand. In some cases, an investment in 

a storage system could be a more cost-effective way to manage peak 

demand, and in such cases, utilities could reduce the need for operation 

of peaking resources or investment in new peaking resources, such as a 

natural gas plant.26

Additionally, according to many studies we reviewed and stakeholders we 

interviewed, storage can help customers reduce demand charges. 

Demand charges are fees included on electricity bills in many parts of the 

country to cover the cost of ensuring that sufficient generation and 

transmission resources are available to serve customers during periods of 

peak demand.27 Energy storage provides an opportunity for potential 

 25According to DOE, storage can be used to increase throughput of existing transmission 

capacity by reducing congestion and offsetting unhelpful electrical effects, and can reduce 

the need for new transmission capacity through a constrained portion of the transmission 

system. This requires that the storage device be located downstream from transmission 

constraints and that it be charged at night when the transmission system is not heavily 

loaded. Using storage, more electricity can be transmitted using the same infrastructure 

and the need for additional transmission capacity is reduced. Outside of congestion and 

capacity issues, energy storage can also play a role in deferring transmission upgrades for 

system stability purposes. For example, it may provide voltage support or a fix for an 

unreliable transmission interconnection.

26Throughout the day, grid operators direct power plants to adjust their output to match 

changes in demand for electricity. Grid operators typically first use electricity produced by 

plants that are least expensive to operate; operators then increase the use of electricity 

generated by more expensive power plants, as needed to match increases in electricity 

demand. As a result, providing electricity to meet peak demand is generally more 

expensive than during other parts of the day, because to do so, grid operators use power 

plants that are more expensive to operate.

27Because system operators must ensure that resources are available for any level of 

electricity usage even when resources are not being utilized, demand charges are 

generally assessed based on an individual consumer’s peak electricity usage during a 

certain time frame, then billed at various rates, including a fixed rate, for an entire year. 

For consumers who pay demand charges, reducing electricity consumption during periods 

of peak demand may reduce the demand charge for an entire year. 
Page 21 GAO-18-402 Energy Storage

savings by helping a customer to manage their peak demand. Using 

storage can also allow some utilities to avoid charges that they might 

incur when purchasing wholesale electricity to serve their customers 

during a system’s peak demand; this could allow them to pass savings on 

to their customers in the form of lower rates. For example, although the 

Sterling, Massachusetts, Municipal Light Department installed its storage 

system to provide emergency backup power, the primary benefits of the 

project since its installation have resulted from using it to reduce peak 

demand which has reduced the utility’s transmission charges, and, in 

turn, has allowed it to reduce rates paid by its customers, according to 

utility representatives.

Studies we reviewed and stakeholders we interviewed identified a variety 

of factors that affect energy storage deployment. These factors include 

industry and technology readiness, safety concerns and stringency of 

siting requirements, increasing use of renewable resources, the costcompetitiveness of storage and challenges with quantifying the value of 

storage, and the regulatory environment.

Grid operators and utilities have limited experience with storage and face 

technical challenges integrating storage into existing systems, according 

to studies we reviewed and stakeholders we spoke with. For example, 

according to some studies and stakeholders, grid operators may not have 

experience planning for the integration and operation of storage and they 

may not consider it as an option. The models that grid operators typically 

use to help make decisions about investments in generation, transmission 

and distribution infrastructure are based on traditional resources with 

better-understood capabilities. Moreover, storage can be more 

challenging to integrate than other resources, such as solar, because it 

changes its function in the system from charging—consuming electricity—

to discharging—generating electricity, according to some stakeholders.

Various Factors Affect 

the Deployment of 

Storage for Grid 

Operations, Including 

Industry and 

Technology 

Readiness, CostCompetitiveness, and 

the Regulatory 

Environment

Industry and Technology 

Readiness
Page 22 GAO-18-402 Energy Storage

Because storage must provide power when called upon but also must be 

recharged from another resource at a later time, tools that planners rely 

on must keep an accurate accounting of the amount of energy stored and 

available to supply power to meet demand. According to one stakeholder, 

installation of storage requires grid operators to develop operating 

requirements and identify control and mitigation strategies for proper 

coordination with larger grid operations. In addition, existing utility 

systems may not be designed to incorporate storage and may require 

customization to integrate storage, according to several stakeholders.

Industry and technical challenges affecting deployment of storage include 

uncertainty about the performance of certain storage technologies over 

time and in various operating conditions. Energy storage systems 

generally are expected to last for a decade or more, but the actual 

degradation of battery storage under various conditions is still largely 

unknown, according to some studies we reviewed and stakeholders we 

spoke with. The electric utility industry has historically been slow to adopt 

new technologies and, unless new storage technologies prove highly 

reliable, utilities may be slow to deploy these assets, according to several 

studies we reviewed and stakeholders we spoke with.

Although the adoption of storage has been increasing, safety codes and 

standards for storage are still under development, and questions have 

been raised about safety risks and how to mitigate those risks, according 

to studies we reviewed and stakeholders we interviewed.28 Efforts are 

under way to ensure that safety codes and standards address energy 

storage systems, but these types of standards tend to lag behind the 

 28According to DOE, various codes and standards are developed by entities such as the 

Institute of Electrical and Electronics Engineers and the National Fire Protection 

Association. These codes and standards cover energy storage system safety and are 

intended to cover any and all aspects of the system including: design, manufacture, 

installation, construction, commissioning, operation, and maintenance of the system and 

its component parts. More specifically, they include standards that address installation in, 

on and adjacent to buildings or private and public areas; renewal or refurbishing or 

decommissioning of the system or its components; and incident response. The details and 

criteria of codes and standards applicable to energy storage systems cover a wide range 

of topics, each of which may vary depending on system size, type of system or chemistry 

used, and location of the system inside, on, adjacent to or otherwise in proximity to a 

building or private or public space. These topics include, but are not limited to, signage, 

clearances, first responder access, protection from natural and manmade hazards, fire 

detection and suppression, ventilation, exhaust and thermal management, and electrical 

safety.

Safety Concerns and 

Stringency of Siting 

Requirements
Page 23 GAO-18-402 Energy Storage

development of storage technologies, according to some studies and 

stakeholders. Until existing codes and standards are updated, or new 

ones are developed and adopted, entities seeking to deploy energy 

storage or needing to verify a storage system’s safety may face 

challenges with applying existing codes and standards, according to 

some studies we reviewed.

In addition, concerns about the operational safety of large storage 

systems as a fire hazard can be a barrier to their deployment in urban 

areas or in proximity to other grid resources such as substations, and 

local entities such as fire departments may not allow the deployment of 

storage on certain sites. Moreover, local jurisdictions and emergency 

responders, along with storage system installers, insurers, and others 

may not have a complete understanding of the hazards associated with 

storage and best approaches to addressing these hazards, such as the 

appropriate fire protection measures, according to some studies and 

stakeholders. In addition, local entities’ review of energy storage systems, 

for example, can add additional time to the permitting process, given that 

these entities may not be familiar with storage systems and potential 

safety concerns, according to some studies.

On the other hand, in some locations siting requirements may be less 

stringent for some types of energy storage projects than for other 

resources such as a large power plant that must comply with more 

stringent environmental requirements, according to some studies and 

stakeholders. In some cases, according to some studies, the permitting 

process may be simpler for storage projects and construction timelines 

considerably shortened for a variety of reasons, including that energy 

storage systems do not need to complete modifications to comply with air 

quality standards because they do not produce emissions. In addition, 

certain storage projects require a much smaller footprint than 

conventional power plants, whereas building new power plants or 

transmission lines can involve large land requirements.

As mentioned previously, storage can help address reliability issues 

associated with the variability of renewable energy generation resources 

making them attractive to grid operators. Consequently, the increased 

use of solar and other renewable energy resources has in turn 

encouraged the installation of storage, according to some studies we 

reviewed and stakeholders we interviewed. According to the Energy 

Information Administration, utility-scale solar installations grew at an 

average rate of 72 percent per year between 2010 and 2016, faster than 

Increasing Use of 

Renewable Resources
Page 24 GAO-18-402 Energy Storage

any other generating technologies. Moreover, increasing use of these 

resources is expected to continue, which could drive the adoption of 

storage deployment in the future, according to some studies we reviewed 

and stakeholders we spoke with. The Energy Information Administration 

estimated in January 2018 that nearly half of the approximately 25 GW of 

new utility-scale electric generating capacity added to the grid in 2017 

used renewable technologies, particularly wind and solar.

Moreover, according to some studies and stakeholders, states with 

aggressive renewable portfolio standards—such as Hawaii, which aims to 

achieve 100 percent renewable sources by 2045—will need to adopt 

storage resources to meet those goals. In addition, California’s 

renewables portfolio standard includes targets of 33 percent by 2020 and 

50 percent by 2030. According to some stakeholders and documents we 

reviewed, California is experiencing excess solar and wind generation 

and curtailment at certain times of the day and year and, as the state 

moves toward a target of 50 percent renewables, storage could help 

address these challenges. According to some stakeholders we spoke 

with, long-duration technologies will support greater integration of 

renewable energy on the grid. As mentioned previously, pumped hydro 

and compressed air energy storage can provide long duration storage, 

and other technologies, including flow and lithium ion batteries, have the 

potential to provide for long duration storage, according to some studies 

we reviewed and stakeholders we spoke with.29

Grid operators’ decisions to invest in energy storage must consider both 

costs and benefits. While the cost of some technologies has fallen in 

recent years, the cost of storage systems—including all the system 

components, installation, and integration costs—is still high when 

compared to more traditional resources available to electric utilities, 

according to many studies we reviewed and stakeholders we spoke with. 

On the other hand, the adoption of storage for certain purposes, such as 

supporting increased use of renewable resources or providing backup 

power, includes potential benefits such as reducing greenhouse gas and 

other harmful emissions, or enhancing the resilience of the grid.

 29Flow batteries differ from conventional batteries in that energy is stored in the electrolyte 

(fluid) instead of the electrodes. The electrolyte solutions are stored in tanks and pumped 

through a common chamber separated by a membrane that allows for transfer of 

electrons—flow of electricity—between the electrolytes. Some flow batteries are 

commercially available while other types are under development.

Cost-Competitiveness and 

Challenges with 

Quantifying the Value of 

Storage
Page 25 GAO-18-402 Energy Storage

While the cost of lithium-ion batteries has declined in recent years, the 

storage device is one component of a storage system, and estimates of 

the device’s share of the total cost of an energy storage system range 

from about 25 percent to 50 percent of the total costs, according to 

studies we reviewed. According to some stakeholders, the cost of the 

system components and other costs to integrate storage with the grid can 

be substantial and are not declining as quickly as the cost of storage 

devices. In addition to the cost of the storage device, other system 

component costs include power conversion electronics, software, and 

monitoring and control systems, among others, that are essential to 

maintain the health and safety of the entire system, according to some 

studies.

Moreover, valuing investments in energy storage must consider both the 

cost and benefits, but assessing the potential benefits and costs of 

storage can prove challenging, according to several studies we reviewed 

and stakeholders we spoke with. These challenges identified in these 

studies and by these stakeholders include the following:

• Quantifying benefits. Benefits can be difficult to quantify, as they 

depend on the application, location, and ability to capture multiple 

benefits. Specifically, the compensation for services that storage can 

provide reflects local market conditions, and these vary across 

regions. In addition, the value of certain storage applications can be 

harder to quantify than for others. For example, if a utility is 

considering deployment of storage in order to defer an investment in a 

transmission and distribution infrastructure upgrade, then determining 

the value of the storage asset involves analyzing the avoided cost of 

that investment, which is quantifiable. However, it is more difficult to 

quantify the value of less tangible benefits of storage, such as 

improvements to operational flexibility and grid resilience, which are 

not monetized and therefore are difficult to quantify.

• Life expectancy. For certain storage technologies, much is still 

unknown about their useful life, which depends on the number of 

charge and discharge cycles, among other things. Reliable estimates 

of the expected life of an asset are necessary for accurately 

estimating lifecycle costs and benefits. Given the fact that battery 

technologies are evolving, the lack of data makes it more challenging 

for utilities to estimate expected costs and benefits to justify their 

investment expense.

• Limited information on cost. Sufficient information on the cost of 

storage systems is not readily available, limiting utilities’ ability to 
Page 26 GAO-18-402 Energy Storage

include storage in modeling and investment decisions, according to 

some stakeholders. Energy storage price and cost data vary among 

sources because of aggregation to protect proprietary interests, which 

unit is chosen to present price and cost data, and limited information 

about how projects operate. Specifically, information on the 

operational conditions, specifications, and performance of energy 

storage systems is difficult to obtain. In addition, according to some 

studies we reviewed, uncertainty exists about the future cost outlook 

and pace of technological maturity.

The regulatory environment can pose barriers to the deployment of 

energy storage. Specifically, market rules and regulations do not always 

clearly address whether entities may own and operate storage assets and 

how, if at all, the cost of investments in storage assets can be recovered, 

according to several studies we reviewed and stakeholders we 

interviewed. In addition, each RTO establishes the rules in a different 

way, and their implementation of reforms to accommodate storage varies, 

according to studies and documents we reviewed and stakeholders we 

spoke with. According to a FERC document, under current market rules, 

resource bidding parameters—the physical and operational constraints 

that a resource identifies when submitting offers to sell services in 

electricity markets—vary greatly among the RTOs.30 Moreover, state 

regulators and RTOs may be slow to change their policies and rules to 

address energy storage, and delays in such changes hinder deployment, 

according to some studies we reviewed.

In RTO regions, some states do not allow utilities to own generation 

assets, and when storage is classified as a generation asset, an electric 

utility can be prevented from owning storage. Moreover, when market 

rules do not clearly define what type of asset they consider storage to be, 

this can make it difficult to determine whether storage can participate in 

the market or to receive compensation, making storage in that market 

financially unviable, according to some studies and stakeholders. One 

RTO, the California Independent System Operator (ISO), has established 

participation models to accommodate resources, such as storage, that 

 30Electric Storage Participation in Markets Operated by Regional Transmission Organizations and 

Independent System Operators, 157 FERC ¶ 61,121, 81 Fed. Reg. 86,522 (Nov. 30, 2016).

Regulatory Environment
Page 27 GAO-18-402 Energy Storage

are operationally unique.31 In addition, uncertainty exists about the ability 

of storage project owners to recover costs of storage used for multiple 

applications, according to documents and studies we reviewed and 

stakeholders we spoke with.

Moreover, the variation in rules and regulations across regions makes it 

difficult for energy storage project developers to navigate different 

potential markets because each has its own characteristics, stakeholders, 

regulations, and market designs, according to some stakeholders. 

Storage project developers must keep abreast of the activities of multiple 

regulatory agencies and the variation by region makes potential revenue 

streams difficult to predict. In addition, according to one study we 

reviewed, the inconsistency of rules adds a level of complexity for project 

developers that want to deploy storage resources across multiple markets 

because they must conduct separate analyses to determine the 

regulatory outlook, market requirements, and profit potential in each 

region.

Federal and state policymakers have used a variety of policies and other 

efforts to encourage the deployment of storage and address market 

barriers. For example, DOE has undertaken various efforts in response to 

several challenges to the deployment of storage, but funding to continue 

these efforts is uncertain. In addition, FERC has taken steps to address 

market barriers to storage deployment in wholesale markets but the final 

impact of these steps depends on implementation by RTOs. Moreover, 

the Department of the Treasury and the Internal Revenue Service (IRS) 

are considering changes that could clarify the eligibility of energy storage 

for a tax credit. Lastly, state policies and other efforts aim to encourage 

the deployment of energy storage or to address market barriers; these 

include establishing mandates and targets for storage adoption, revising 

 31Depending on the physical characteristics of the storage resource and the service the 

owner of the storage resource intends to provide in the California ISO markets, storage 

resources can participate as non-generator resources, pumped storage hydro units, or as 

a demand-response entity. The California ISO defines non-generator resources as 

resources that operate as either generation or load and that can be dispatched to any 

operating level within their entire capacity range but are also constrained by a megawatthour limit to (1) generate energy, (2) curtail the consumption of energy in the case of 

demand response, or (3) consume energy. Electric storage resources connected to the 

distribution system within the California ISO’s balancing authority area may also 

participate in the California ISO markets through a distributed energy resource 

aggregation or as a participating generator through a wholesale distribution access tariff.

Various Federal and 

State Policies and 

Other Efforts Aim to 

Encourage the 

Deployment of 

Energy Storage and 

Address Market 

Barriers
Page 28 GAO-18-402 Energy Storage

interconnection rules and planning requirements, and offering financial 

incentives and funding.

According to documents we reviewed, DOE has undertaken various 

efforts in response to the challenges to deploying energy storage 

identified in a 2013 report,32 including challenges concerning the safety 

and reliability of such storage, its acceptance by industry, the regulatory 

environment, and cost-competitiveness.

• Efforts to Address Safety and Reliability Challenges. In 2017, 

DOE developed, through its Pacific Northwest National Laboratory 

(PNNL) and Sandia National Laboratories, the DOE safety roadmap, 

which established a goal to foster confidence in the safety and 

reliability of energy storage systems.33 The roadmap built on previous 

efforts including an Energy Storage Safety Forum that Sandia held in 

2017 for stakeholders to share information and identify future needs.34

The objectives of the roadmap include research and development, 

codes and standards, and collaborative resources with a focus on 

electrical safety, fire and smoke hazard detection and mitigation, 

health and environmental hazards, natural and man-made disasters, 

ventilation and thermal management, and system controls. The 

roadmap aims to cover the development of energy storage systems 

through their decommissioning or refurbishment and includes design,

installation, commissioning, operation and maintenance, repair, 

decommissioning, and reuse.

DOE has also supported efforts to develop and deploy energy storage 

safety codes with industry groups, according to documents we 

reviewed. For example, DOE established working groups focused on 

safety and standards, including the Energy Storage Systems Safety 

Working Group, which aims to facilitate the timely development and 

deployment of safe energy storage systems by implementing the DOE 

 32DOE, Grid Energy Storage (December 2013). 

33In June 2016, PNNL led a workshop on behalf of DOE’s Energy Storage Program that 

focused on the reliability of energy storage systems and included stakeholders from 

industry, utilities, and government to develop a strategic roadmap of issues facing the 

reliable operation of energy storage technologies.

34Previous DOE efforts also include sponsoring an energy storage safety workshop in 

2014 and, with stakeholder input, development of a DOE Energy Storage Safety Strategic 

Plan in 2014.

DOE Has Undertaken 

Various Efforts to Address 

Challenges Affecting 

Storage Deployment, but 

Funding to Continue these 

Efforts Is Uncertain
Page 29 GAO-18-402 Energy Storage

safety roadmap through collaboration with stakeholders. In addition, 

as part of these efforts, a DOE working group on codes, standards, 

and regulations monitors the development of standards and model 

codes and provides input to those activities. Additionally, DOE 

coordinates with industry-led and international code-setting agencies 

such as the National Fire Protection Association and the International 

Code Council, as well as companies that conduct testing. In addition, 

PNNL published several resources including an inventory of codes 

and standards, an overview of the development and deployment of 

codes and standards, and a compliance guide.35 The compliance 

guide prepared by PNNL and Sandia, which includes safety codes 

and standards, aims to facilitate the timely deployment of storage

systems and assist with documenting compliance with current safetyrelated codes and standards and verifying compliance with codes and 

standards.

• Efforts to Support Industry Acceptance. DOE has provided 

technical assistance and funded demonstration projects to help 

utilities and other entities install, procure, and evaluate storage 

projects, according to documents we reviewed. For example, DOE 

provided funding and technical support in the deployment of a storage 

project at an emergency shelter in Vermont that can separate from the 

rest of the grid and operate independently in case of an emergency. 

DOE also supported the development of documentation and tools to 

assist utilities in the design, deployment, and operation of energy 

storage systems including valuation models, procurement guidelines, 

commissioning procedures, and data acquisition guidelines. In 

addition, Sandia published guidance to provide information for 

municipalities on the elements that should be included in a solicitation 

for procurement and installation of an energy storage project and a 

handbook to provide information and tools to guide investors’ 

evaluations of energy storage opportunities.36 DOE has a proposal 

under way for a study to gather pricing information for energy storage 

technologies that will be used as part of future updates to the 

 35Pacific Northwest National Laboratory, Inventory of Safety-related Codes and Standards 

for Energy Storage Systems (September 2014); Overview of Development and 

Deployment of Codes, Standards and Regulations Affecting Energy Storage System 

Safety in the United States (August 2014); and Energy Storage System Guide for 

Compliance with Safety Codes and Standards (June 2016).

36Sandia National Laboratories, Energy Storage Procurement Guidance Documents for 

Municipalities (September 2016) and DOE/EPRI Electricity Storage Handbook in 

Collaboration with NRECA (September 2016).
Page 30 GAO-18-402 Energy Storage

handbook. DOE also held a financial summit in June 2017 to provide 

information to the financial community on solicitations and contracts. 

In addition, to evaluate storage projects, DOE and the Washington 

Department of Commerce established a memorandum of 

understanding to have PNNL characterize and analyze the technical 

and economic attributes of storage projects. DOE also supports new 

deployments through funding, including the Grid Modernization 

Laboratory Consortium awards aimed at integrating conventional and 

renewable sources with energy storage.

• Provide Technical Assistance to Regulators. According to 

documents we reviewed, DOE has hosted workshops and provided 

technical assistance for several state public utility commissions and 

other entities aimed at providing them with information on storage 

technology development, project procurement, and valuation. In 

addition, in 2012 Sandia developed guidance for state regulatory 

authorities and planning personnel to provide information about 

opportunities for energy storage to play a greater role in the electricity 

grid.37

• Research and Development to Improve Cost-Competitiveness.

DOE’s Energy Storage Program’s research and development 

activities focus on improving materials and system factors that affect 

the cost, efficiency, and capacity of certain energy storage 

technologies, including flow batteries.38 DOE’s fiscal year 2018 

budget request includes a performance goal to improve the costbenefit ratio of storage to compete with current peak generation 

resources and, by 2020, increase to 5 percent the commercial use of 

grid-scale storage to buffer renewables.39

A DOE advisory committee in 2016 conducted an assessment of DOE’s 

energy storage-related research, development, and deployment programs 

 37Sandia National Laboratories, Evaluating Utility Procured Electric Energy Storage 

Resources: A Perspective for State Electric Utility Regulators – A Study for the DOE 

Energy Storage Systems Program (Albuquerque, NM: November 2012).

38According to DOE, the Energy Storage Program performs research and development on 

a wide variety of storage technologies including batteries, flywheels, power electronics, 

control systems, and software tools for storage optimization and sizing. 

39The fiscal year 2019 budget request does not include the performance goal for 

improving the cost-benefit ratio of storage and increasing commercial use of grid-scale 

storage to buffer renewables.
Page 31 GAO-18-402 Energy Storage

that produced 15 recommendations.40 The recommendations included, 

among others, improving the visibility of DOE’s efforts; addressing the 

need for storage models and studies of market impediments; and 

providing additional funding and resources for energy storage research, 

development, and deployment programs.

While DOE has undertaken a range of efforts over the past several years 

to address challenges to deployment, future funding of these efforts is 

uncertain. In 2017, DOE allocated $31 million to work on energy storage 

within its Office of Electricity Delivery and Energy Reliability.41 DOE’s 

fiscal year 2018 budget request proposed reducing this funding by about 

74 percent, to $8 million, and proposed eliminating, among other efforts, 

work related to

• engagements with states, utilities, and storage providers for 

conducting tests and trials;

• engagements with state and federal regulatory officials on efforts to 

understand regional market barriers to deployment;

• validation of system performance and analysis of regional use cases; 

support to states and regional entities for the procurement, 

commissioning, and analysis of deployed systems;

• the development of enhanced tools and data for sharing with industry 

for the development and use of grid-scale batteries; and

• participation in both industry-led and international codes and 

standards development.42

 40Department of Energy, Electric Advisory Committee, 2016 Storage Plan Assessment, 

Recommendations for the U.S. Department of Energy (September 2016). The Energy 

Storage Technologies Subcommittee of the Electric Advisory Committee was established 

in March 2008 in response to a requirement of the Energy Independence and Security Act 

of 2007. According to the subcommittee, the 2016 assessment is intended to meet two 

requirements of the 2007 act: (1) to develop five-year plans for integrating basic and 

applied research so that the United States retains a globally competitive domestic energy 

storage industry for electric drive vehicles, stationary applications, and electricity 

transmission and distribution; and (2) to assess, every 2 years, the performance of DOE in 

meeting the goals of the plans and make recommendations to the Secretary of Energy on 

programs or activities that should be established or terminated to meet those goals. 

41In addition to these efforts, DOE’s Office of Energy Efficiency and Renewable Energy 

conducts research on solar energy and hydropower through the Solar Energy 

Technologies and Water Power Technologies offices, respectively, which include efforts 

related to energy storage. 

42Department of Energy, FY 2018 Congressional Budget Request, Vol. 3 (May 2017).
Page 32 GAO-18-402 Energy Storage

Because fiscal year funding through March was provided under 

continuing resolutions, energy storage funding remained on par with fiscal 

year 2017 levels for the first half of the fiscal year, and the Consolidated 

Appropriations Act, 2018, increased funding for energy storage to $41 

million. However, DOE’s fiscal year 2019 budget request again proposes 

reducing the funding for energy storage work to $8 million.43 According to 

DOE’s fiscal year 2019 budget request, DOE plans to focus on 

accelerating the development of new materials and technologies that can 

lead to improvements in the cost and performance of utility-scale energy 

storage systems and accelerate the adoption of energy storage systems 

into the grid infrastructure.

FERC has taken several steps to address market barriers to energy 

storage deployment, but the impact of these efforts will depend on 

implementation by RTOs. In March 2018, FERC published a final rule that 

aims to address barriers to integrating storage into organized wholesale 

markets. The rule requires that RTOs establish participation models 

consisting of market rules that recognize the physical and operational 

characteristics of electric storage resources to facilitate their participation 

in the RTO markets.44 In prior years, FERC issued several orders that 

also aimed to address barriers to storage participation in organized 

wholesale electric markets. For example, FERC Order 792—issued in 

2013—revised the definition of a small generating facility in the pro forma 

Small Generator Interconnection Agreement—which establishes the 

terms and conditions for interconnection of resources no larger than 20 

MW—to specifically include energy storage devices. In addition, FERC 

Order 755—issued in 2011—required RTOs to compensate frequency 

 43Department of Energy, FY 2019 Congressional Budget Request, Vol. 4 (February 2018). 

In the fiscal year 2019 budget request, the Office of Electricity Delivery and Energy 

Reliability—which includes the energy storage program’s funding—is split into two 

accounts totaling $157 million (a decrease of about 30 percent from $228 million); this 

includes $61 million for grid reliability (Electricity Delivery) and about $96 million for 

cybersecurity, energy security, and emergency response. 

44Electric Storage Participation in Markets Operated by Regional Transmission 

Organizations and Independent System Operators, 162 FERC ¶ 61,127, 83 Fed. Reg. 

9,580 (Mar. 6, 2018) (to be codified at 18 C.F.R. pt. 35). In the notice of proposed 

rulemaking, the Commission also proposed reforms related to distributed energy resource 

aggregations. In the final rule, the Commission did not take final action on these reforms 

but determined that FERC will continue to explore these reforms and hold a technical 

conference to gather additional information to help determine what action to take. Several 

entities have requested clarification or a rehearing on the final rule.

FERC Has Taken Steps to 

Address Market Barriers to 

Storage Deployment, but 

the Final Impact of these 

Efforts Depends on 

Implementation by RTOs
Page 33 GAO-18-402 Energy Storage

regulation resources in a manner that acknowledges the performance of 

faster-ramping resources, such as batteries and flywheels.

Additionally, in May 2018, FERC published a final rule that revised the 

definition of a generating facility in the pro forma Large Generator 

Interconnection Procedures and pro forma Large Generator 

Interconnection Agreement—which establishes the terms and conditions 

for interconnection of resources larger than 20 MW—to explicitly include 

electric storage resources.

45 FERC also published guidance in February 

2017 on the ability of electric storage resources to provide transmission or 

grid support services at cost-based rates, while providing other electric 

storage services, such as power sales, at market-based rates.46

According to some studies we reviewed and stakeholders we spoke with, 

FERC orders have helped alleviate some of the barriers to storage 

participation in wholesale markets, but the impact of these orders 

depends on RTO implementation. Moreover, RTO implementation of 

FERC’s requirement to establish participation models to accommodate 

storage may not occur until the end of 2019 or later. Figure 8 shows the 

timeline of key FERC efforts that aim to address market barriers to the 

deployment of storage and time frames for implementation from 

November 2016 through 2019.

 45Reform of Generator Interconnection Procedures and Agreements, 83 Fed. Reg. 21,342 

(May 9, 2018) (to be codified at 18 C.F.R. pt. 37).

46Utilization of Electric Storage Resources for Multiple Services When Receiving CostBased Rate Recovery, 158 FERC ¶ 61,051, 82 Fed. Reg. 9,343 (Feb. 6, 2017). In 

November 2016, FERC held a technical conference on storage that included discussion of 

storage and its potential uses and ways to avoid over-compensating resources performing 

multiple functions simultaneously. The guidance aims to clarify that providing both cost 

and market-based rate services and receiving associated revenues is permissible and to 

address concerns about the potential for double-recovery of costs from ratepayers, 

adverse market impacts, and RTO independence from market participants.
Page 34 GAO-18-402 Energy Storage

Figure 8: Timeline of Key Federal Energy Regulatory Commission (FERC) Efforts to Address Market Barriers to the 

Deployment of Energy Storage Resources and Time Frames for Implementation, 2016 through 2019

Note: The Commission cannot finalize rules and issue an order without a quorum, which it did not 

have from February 2017 through August 2017.

a

Electric Storage Participation in Markets Operated by Regional Transmission Organizations and 

Independent System Operators, 157 FERC ¶ 61,121, 81 Fed. Reg. 86,522 (Nov. 30, 2016).

b

Reform of Generator Interconnection Procedures, 157 FERC ¶ 61,212, 82 Fed. Reg. 4,464 (Jan. 13, 

2017).

c

Utilization of Electric Storage Resources for Multiple Services When Receiving Cost-Based Rate 

Recovery, 158 FERC ¶ 61,051, 82 Fed. Reg. 9,343 (Feb. 6, 2017).

d

Electric Storage Participation in Markets Operated by Regional Transmission Organizations and 

Independent System Operators, 162 FERC ¶ 61,127, 83 Fed. Reg. 9,580 (Mar. 6, 2018) (to be 

codified at 18 C.F.R. pt. 35).

e

Reform of Generator Interconnection Procedures and Agreements, 83 Fed. Reg. 21,342 (May 9, 

2018) (to be codified at 18 C.F.R. pt. 37).

According to FERC’s final rule, RTO implementation of the requirement to 

establish participation models could take 21 months from the publication 

of the final rule. RTOs will need to develop the participation models, 

obtain input through their stakeholder review processes, and may need to 

update modeling and dispatch software.
Page 35 GAO-18-402 Energy Storage

Treasury and the IRS are considering changes that could clarify the 

eligibility of energy storage for a business tax credit under section 48 of 

the Internal Revenue Code, according to IRS documents.47 Currently, 

customers who install storage systems may be eligible for this tax credit 

when they use the storage system to store energy from renewable energy 

systems more than 75 percent of the time;48 however, at this time there is 

no federal tax incentive for stand-alone storage.49 Since 2011, the IRS 

has issued some written determinations that the storage portion of a 

renewable energy system would be eligible for the credit. However, only 

the specific taxpayer addressed by a determination can rely on it as 

precedent.50

In October 2015, Treasury and IRS solicited comments from the public on 

how to define certain types of property that qualify for this tax credit, 

including whether property such as storage devices may also be 

considered energy property.51 According to IRS documents, comments 

filed in response requested revisions to the tax credit that include, among 

other things, providing a technology-neutral definition of energy storage 

property, providing a specific list of types of energy storage property that 

 4726 U.S.C. § 48 (2018).

48IRS regulations provide that solar and wind energy property eligible for the energy credit 

under 26 U.S.C. § 48 may include storage devices. Storage systems that are charged by 

a renewable system more than 75 percent of the time are eligible for a portion of the 

credit; only systems charged by the renewable energy system 100 percent of the time 

may claim the full 30 percent tax credit. 26 C.F.R. §§ 1.48-9(d)(3), (d)(8)(h)(1), (e) (2018).

49A bill has been introduced in Congress to amend the tax code to allow the tax credit to 

be used for energy storage without regard to the charging source and for stand-alone 

storage. Energy Storage Tax Incentive and Deployment Act of 2017, S. 1868, 115th Cong. 

§ 2(b) (2017).

50See 26 U.S.C. § 6110(k)(3) (2018). Written determinations are the IRS Chief Counsel’s 

letters to, or memorandums regarding, specific taxpayers. Private letter rulings are issued 

to taxpayers who request (for a fee) answers to technical questions about tax 

consequences of particular transactions. IRS provided us with four private letter rulings 

that it has issued regarding energy storage as property eligible for credit under section 48. 

In addition, the IRS issued another private letter ruling in March 2018 regarding similar 

issues under section 25D of the Internal Revenue Code, which governs residential energy 

efficient property.

51Specifically, this notice requested comments on the definition of certain equipment using 

solar energy; certain equipment used to produce, distribute, or use energy derived from a 

geothermal deposit; qualified fuel cell property; qualified microturbine property; combined 

heat and power system property; qualified small wind energy property; and equipment 

using the ground or ground water as a thermal energy source. 

IRS May Revise 

Regulations to Clarify the 

Eligibility of Storage for a 

Tax Credit
Page 36 GAO-18-402 Energy Storage

qualify for the credit, and determining that storage is eligible for the credit 

on a stand-alone basis. According to some stakeholders we interviewed, 

the requirement for storage to be paired with renewable energy to obtain 

the tax credit is limiting because there are other potential applications and 

benefits storage can provide to the grid that are unrelated to renewable 

energy integration. Additionally, one stakeholder we spoke with said that 

regions with relatively small renewable energy resource capacities are 

unable to receive federal support for energy storage, even though it may 

benefit their grid.

Through interviews with stakeholders and our review of documents, we 

identified examples of state policies and other efforts that have 

encouraged the deployment of energy storage or aim to address market 

barriers. Appendix I includes a detailed list of state policies and other 

efforts encouraging deployment of energy storage we identified. In 

summary, these policies and other efforts include:

Mandates and Targets. Several states have established or proposed 

mandates or targets that require or encourage electric utilities to procure 

a specific amount of energy storage capacity. States have taken a range 

of approaches to implementing these mandates and targets. For 

example:

• The California Public Utilities Commission requires investor-owned 

utilities to collectively procure 1.3 GW of energy storage by 2020.

• Oregon is in the process of implementing a requirement for certain 

utilities serving more than 25,000 retail customers to procure energy 

storage systems with at least 5 megawatt hours of energy storage 

capacity by January 1, 2020.

• The Massachusetts Department of Energy Resources adopted a 200 

megawatt-hour energy storage target for electric distribution 

companies to collectively meet by January 2020.

• In November 2017, New York State enacted legislation requiring the 

state public service commission to adopt an energy storage target. In 

January 2018, the Governor of New York announced an energy 

storage goal of 1.5 GW by 2025.

• A number of other states are also considering the adoption of targets 

for storage capacity in the state.

State Policies and Other 

Efforts Include Mandates 

and Targets, Revision of 

Rules and Planning 

Requirements, and 

Financial Incentives and 

Funding
Page 37 GAO-18-402 Energy Storage

Mandates and targets that require or encourage utilities to procure energy 

storage can help create certainty in the market for energy storage by 

assuring that there is a demand for storage, according to some 

stakeholders we interviewed. Additionally, according to one document we 

reviewed, mandates and targets may impact deployment by encouraging 

the development of model regulatory frameworks that serve as examples 

to other states. States with storage mandates and targets may also serve 

as case studies to demonstrate the impact of energy storage deployment 

on a large scale and provide the industry with operational experience, 

examples of how to best integrate storage, and opportunities to evaluate 

storage.

Changes to Interconnection Rules. Some states have changed or are 

considering changes to interconnection rules to account for energy 

storage.52 States are taking a number of approaches to revising 

interconnection rules. For example:

• In 2015, Hawaii’s Public Utility Commission made changes to 

interconnection standards and energy policies to provide for the 

interconnection of energy storage to the grid.

• The Arizona Corporation Commission is developing statewide 

interconnection rules for distributed generation. Draft rules include 

interconnection requirements for energy storage systems and 

Commission officials told us that stakeholders are debating the scope 

and nature of those requirements.

Planning. Some states allow for the inclusion of energy storage in 

integrated resource and transmission planning processes; grid operators 

and utilities undertake these planning processes to ensure that the grid 

infrastructure has sufficient capacity and grid operators are able to meet 

future power demands. For example:

• The New Mexico Public Utility Commission’s integrated resource 

planning rules require investor-owned utilities to evaluate all feasible 

energy resources as part of their resource planning process. When 

the Commission’s integrated resource planning rules were originally 

implemented, energy storage was not commercially feasible; 

 52Interconnection rules include the technical procedures for allowing generation and other 

resources to connect to the grid.
Page 38 GAO-18-402 Energy Storage

however, the state commission recently amended these rules to 

include energy storage as a resource in planning.

• The Oregon Public Utility Commission directed Portland General 

Electric to address energy storage in its future integrated resource 

plans.

• Washington’s Utilities and Transportation Commission directs utilities 

to demonstrate that, when considering a new resource acquisition, 

their analysis should include an evaluation of the costs and benefits of 

a storage alternative. The Commission also directs utilities procuring 

resources to issue requests for proposals that are technology neutral, 

allowing energy storage to bid.

Several states are also incorporating storage into broader energy 

planning efforts, including conducting research to identify the benefits of 

and opportunities for storage in the state. For example:

• North Carolina passed legislation directing the North Carolina Policy 

Collaboratory, at the University of North Carolina, to conduct a study 

on energy storage to address how and if storage may benefit 

consumers, the feasibility of storage in the state, and policy 

recommendations.

• Massachusetts has also undertaken a number of efforts including 

launching the Energy Storage Initiative, an initiative administered by 

the Massachusetts Department of Energy Resources and the 

Massachusetts Clean Energy Center to facilitate the deployment of 

storage and provide environmental and ratepayer benefits. As part of 

this initiative the 2016 State of Charge report was released and, 

among other things, identified barriers to energy storage adoption in 

the state and made recommendations to increase deployment of 

storage, setting a target of 600 MW of energy storage capacity by 

2025.

Financial Incentives and Funding. Several states offer financial 

incentives including tax credits, tax exemptions, and rebate programs that 

encourage the deployment of residential, commercial and industrial 

energy storage systems by offsetting costs. For example:

• California’s Self Generation Incentive Program—designed to help 

reduce emissions, demand, and customer electricity costs—provides 

rebates to support existing, new, and emerging distributed energy 
Page 39 GAO-18-402 Energy Storage

resources installed on the customer’s side of the utility meter. This 

program is open to many different technologies, but according to the 

California Public Utilities Commission, the largest share of funding is 

allotted for energy storage projects.53

• In 2017, Maryland established a state tax credit for a percentage of 

certain installed costs of energy storage systems on residential and 

commercial property.

• Legislation has also been proposed in New York that would create a 

state tax credit for residential energy storage systems equal to 25 

percent of costs up to $7,000.

A number of states offer funding for energy storage pilot and 

demonstration projects. For example:

• Massachusetts launched a $20 million grant program to pilot energy 

storage use cases to increase deployment of storage.

• The Washington Clean Energy Fund supports demonstration projects, 

including projects at utilities working with the Pacific Northwest 

National Laboratory to support understanding approaches to integrate 

and optimize storage control systems and development of a 

framework for evaluating the technical and financial benefits of 

storage.

In addition to the efforts described above, we found that several states 

have proposed or undertaken a range of other efforts that may encourage 

the deployment of energy storage or address market barriers. For 

example, the Arizona Corporation Commission required two electric 

utilities to develop residential battery storage programs in order to lower 

customers’ energy use during peak demand. In addition, Maryland’s 

Public Service Commission initiated a grid modernization rulemaking that, 

 53Qualifying technologies include wind turbines, waste heat to power technologies, 

pressure reduction turbines, internal combustion engines, microturbines, gas turbines, fuel 

cells, and advanced energy storage systems. According to the California Public Utilities 

Commission, California’s Self-Generation Incentive Program will reserve 80 percent of 

these incentives for energy storage projects and 20 percent of its incentives for generation 

projects. While evaluation of this program has shown it is effective in reducing demand 

and customer bills, it has not reduced greenhouse gas emissions. Evaluators believe that 

this is the result of rate designs that are misaligned with peak marginal emissions hours, 

which prevent customers from receiving signals that would lead to reductions.
Page 40 GAO-18-402 Energy Storage

among other things, will define residential energy storage, determine a 

classification for storage in the Commission’s rules, and create criteria to 

evaluate storage investments. Similarly, state legislation directs Oregon’s 

Public Utility Commission to create a framework for utilities to use when 

conducting storage evaluations. Moreover, the California Public Utility 

Commission has approved rules that increase the ways for energy 

storage systems to obtain revenue for multiple uses, or grid services, for 

example, from frequency regulation, capacity, or other services.

We provided a draft of this report to DOE, FERC, and IRS for review and 

comment. In its comments, reproduced in appendix II, FERC generally 

agreed with our findings. DOE and FERC provided technical comments 

which we incorporated as appropriate. IRS did not provide written or 

technical comments.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Energy, the Chairman of FERC, the 

Commissioner of IRS, and other interested parties. In addition, the report 

is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff members who made major 

contributions to this report are listed in appendix III.

Frank Rusco

Director, Natural Resources and Environment

Agency Comments
Appendix I: State Policies and Other Efforts 

Encouraging Deployment of Energy Storage

Page 41 GAO-18-402 Energy Storage

Through interviews with stakeholders and our review of documents, we 

identified examples of policies and other efforts that have encouraged the 

deployment of energy storage or aim to address market barriers, 

including the establishment of mandates and targets for storage adoption, 

the revision of interconnection rules and planning requirements, financial 

incentives, and funding. Table 1 describes examples of a range of state 

policies and other efforts that may encourage the deployment of energy 

storage.

Table 1: Examples of State Policies and Other Efforts Encouraging Deployment of Energy Storage

Policy or Effort State Status Description 

Mandates 

and Targets

Arizona P The Arizona Corporation Commission has proposed a target of 3,000 

megawatts (MW) of deployed energy storage capacity by 2030. Eligible 

technologies would include the following categories: electrochemical,

mechanical, thermal, and gravitational. The target would encourage a variety of 

sizes, ownership structures, and technologies, to be deployed in a prudent and 

responsible manner. 

California ✓ The California Public Utility Commission adopted an energy storage mandate 

requiring investor-owned utilities to collectively procure 1,325 MW of storage by 

2020.

Massachusetts ✓ The Massachusetts Department of Energy Resources adopted a 200 

megawatt-hour storage target for electric distribution companies to collectively 

meet by January 2020.

Nevada ✓ The Public Utility Commission must determine whether it is in the public interest 

to establish biennial targets for the procurement of energy storage by utilities.

New York ✓ The Public Service Commission directed investor-owned utilities to have at 

least two energy storage projects deployed and operating at no fewer than two 

distribution substations or feeders by the end of 2018. 

✓ The Public Service Commission must establish an energy storage program and 

set a storage installation target for 2030. In January 2018, the Governor of New 

York announced an energy storage goal of 1.5 GW by 2025.

Oregon ✓ Oregon is in the process of implementing a requirement for certain utilities 

serving more than 25,000 retail customers to procure energy storage systems 

with at least 5 megawatt hours of energy storage capacity by January 1, 2020.

Vermont P House Bill 501 would direct the Department of Public Service to develop a 

policy recommendation and targets for storage capacity.

Changes to 

Interconnection 

rules 

Arizona P The Arizona Corporation Commission proposed draft interconnection rules that 

include requirements for energy storage systems, and Commission officials told 

us that stakeholders are debating the scope and nature of those requirements.

Colorado P The Colorado Public Utility Commission will consider adding energy storage in 

an upcoming rulemaking proceeding on interconnection rules.

Hawaii ✓ Hawaii’s Public Utility Commission made changes to interconnection standards 

and energy policies to provide for the interconnection of energy storage to the 

grid.

Appendix I: State Policies and Other Efforts 

Encouraging Deployment of Energy Storage
Appendix I: State Policies and Other Efforts 

Encouraging Deployment of Energy Storage

Page 42 GAO-18-402 Energy Storage

Policy or Effort State Status Description 

Nevada P The Nevada Public Utility Commission opened an investigatory docket to 

explore energy storage technologies and interconnection issues.

Planning Massachusetts ✓ The Massachusetts Department of Energy Resources and the Massachusetts 

Clean Energy Center launched the Energy Storage Initiative to facilitate the 

deployment of storage and provide environmental and ratepayer benefits.

New Mexico ✓ The Public Utility Commission amended Integrated Resource Planning rules to 

include energy storage as a resource for utility planning purposes.

North Carolina ✓ North Carolina directed a study on energy storage to address how and if 

storage may benefit consumers, the feasibility of storage in the state and policy 

recommendations.

Oregon ✓ Oregon’s Public Utility Commission directed Portland General Electric to 

address energy storage in future integrated resource plans.

Washington ✓ The Washington Utilities and Transportation Commission’s policy statement 

directs utilities to demonstrate when considering a new resource acquisition, 

that their analysis of options includes a storage alternative.

Financial Incentives California ✓ The Self-Generation Incentive Program provides rebates for energy storage 

systems.

Florida ✓ A partial property tax exemption was adopted for solar, wind, or geothermal 

storage devices.

Hawaii P Senate Bill 665 would create a state tax credit for energy storage systems.

Maryland ✓ A state tax credit was established for a percentage of certain installed costs of 

energy storage systems on residential and commercial property.

Massachusetts P House Bill 2600 would allow municipalities to exempt storage systems from 

property tax, adopt a sales tax exemption for storage systems and direct 

establishment of a rebate for Massachusetts-based companies installing and 

manufacturing storage systems.

Nevada ✓ The Nevada Public Utility Commission is required to establish, as part of an 

existing solar incentive program, incentives for the installation of energy storage 

systems.

New York P Assembly Bill 6235 would create a state tax credit for residential energy storage 

systems equal to 25% of cost (up to $7,000).

South Carolina P Senate Bill 44 would adopt an 80% tax exemption for distributed energy 

resources, including energy storage

Funding Massachusetts ✓ The Department of Energy Resources announced a $20 million grant program 

under which it supported 26 energy storage projects totaling 32 MW of storage.

New Jersey ✓ The New Jersey Clean Energy Program provides grants for energy storage 

projects integrated with behind-the-meter renewable energy projects at nonresidential customer sites.

New York ✓

✓

The Public Service Commission approved a 10-year, $5.322 billion Clean 

Energy Fund, including a portfolio focused on addressing barriers for energy 

storage.

New York State Energy Research and Development Authority made available 

$15.5 million to support certain energy storage demonstration projects.
Appendix I: State Policies and Other Efforts 

Encouraging Deployment of Energy Storage

Page 43 GAO-18-402 Energy Storage

Policy or Effort State Status Description 

Washington ✓ A Clean Energy Fund was created to expand clean energy projects and 

technologies, including energy storage. The fund includes about $112 million for 

clean energy projects from 2013 through 2019.

Other Arizona ✓ The Arizona Corporation Commission ordered two electric utilities to develop 

residential battery storage programs and a program to facilitate energy storage 

technologies to help customers lower their energy use during peak demand.

California ✓

✓

Local governments must make documents and forms for advanced storage 

permitting public and accessible online beginning in September 2018.

The California Public Utility Commission has approved rules that increase the 

ways for energy storage systems to obtain revenue for multiple uses or grid 

services, for example, from frequency regulation, capacity or spinning reserve 

services.

Connecticut ✓ The state’s energy plan includes promoting the development of microgrids and 

energy storage technologies. 

Maryland P The Public Service Commission initiated a grid modernization rulemaking to 

include: defining residential energy storage, how it is classified in the rules, and 

criteria for evaluation of storage as a grid investment.

New York ✓

P

The Public Service Commission approved a plan to (1) establish compensation 

values for battery storage systems when combined with eligible forms of 

distributed energy resources and (2) requires utilities to work with the state to 

integrate storage into the electric grid.

Senate Bill 1225 would create a self-directed program for promoting, among 

other things, renewable energy, microgrids, fuel fells, and energy storage 

technologies.

Oregon ✓ Public Utility Commission staff are directed to develop a framework for utilities 

to use in conducting storage evaluations.

Pennsylvania P House Bill 1412 would authorize all distribution companies to propose energy 

storage and microgrid pilot programs.

Washington ✓ The Utilities and Transportation Commission released an energy storage policy 

statement citing energy storage as a key technology for utilities to comply with 

the state’s energy policy and that investor owned utilities should be working to 

pursue cost effective energy storage opportunities.

Legend: 

✓ = established

P = proposed/under investigation as of May 16, 2018.

Source: GAO analysis of documents and studies. | GAO-18-402

Note: We reviewed documents and studies identifying and describing state policies and other efforts 

including reports from stakeholder and industry groups; and state government documents, reports, 

policies, and legislation. Given our methodology, we identified examples that illustrate the range of 

state policies and other efforts that may encourage the deployment of energy storage or address 

market barriers but the table does not represent a comprehensive list of state policies and efforts.
Appendix II: Comments from the Federal 

Energy Regulatory Commission

Page 44 GAO-18-402 Energy Storage

Appendix II: Comments from the Federal 

Energy Regulatory Commission
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 45 GAO-18-402 Energy Storage

Frank Rusco, (202) 512-3841 or ruscof@gao.gov.

In addition to the contact named above, Karla Springer (Assistant 

Director), Antoinette Capaccio, Janice Ceperich (Analyst-in-Charge), 

Philip Farah, Kristen Farole, Paul Kazemersky, and Daniel Kojetin made 

key contributions to this report. Also contributing to this report were 

Tara Congdon, R. Scott Fletcher, Cindy Gilbert, and Dan C. Royer.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101974)
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