Reducing emissions from consumer energy storage using retail rate design

Highlights: • Models induced emissions from storage minimizing retail electricity costs. • Tests impact of rate design, building type, and system resource mix on emissions. • Rate design modifications can reduce ESS induced emissions by more than half. • Real-time energy rates reduce emissions per MW h-dispatched compared to flat rates. • Demand and energy charges affect emissions by changing ESS dispatch quantity. -- Abstract: Minimizing retail electricity costs via demand charge management and energy arbitrage is a common application of behind-the-meter energy storage systems (ESS). Research suggests that ESS tend to increase grid emissions, but some speculate that retail rate design could lessen its impact. This paper tests that theory. In this analysis, we pair five years of historic data from ISO New England (ISO-NE) and the PJM Interconnection with 15 commercial building load profiles to reveal how different rate designs influence emissions from ESS. We find that demand and energy charges can be configured to lessen the emissions impact of ESS in some markets and reduce net system emissions in others. Minimizing different types of demand charges requires different quantities of ESS dispatch: some can be minimized in hours while others require days. Time-varying energy charges increase dispatch compared to flat charges because the ESS is used for demand charge management and energy arbitrage. Separately, time-varying energy charges reduce emissions per MW h-stored compared to flat charges, all else equal. Unfortunately, a rate design that minimizes emissions in one market might increase emissions if implemented in another. This confounds the creation of universal solutions and highlights the need for approaches tailored to specific markets.