Energy Storage and the South African

Municipal Electricity DistributorAugust 2017

Manager DSM and SSM: Paul Vermeulen

Evolving Electricity Distribution business

• Municipal DSOs must contain costs and accommodate a future that includes a significant proportion of variable renewable generation.

• They require 3 key ‘behind the Eskom meter’ grid management tools to do this:

– Access to dispatchable generation

– Control of flexible loads

– Energy storage, which features as both of the above at a time and a place that suits the DSO

2

The South African environment

City Power alone has

authorized over 7 MW of

private PV power on its

grid.

The cost of Eskom

power has increased by

over 500% over the last

10 years and is showing

no sign of slowing down.

Today, the average

Eskom energy cost is

89,8 c/kWh

Municipal DSO’s will also

procure their own PV

power plants to contain

costs

PV LCOE approaching Eskom price

3

77% or 69 cents of this cost is energy. Next year this will be 87 cents

per kWh -

Bid 4 PV cost is 70 cents per kWh, virtually fixed for the next 20 years

R1,14

For

2018/19 ?

Bid window 4 PV cost

Load profile challenge

Dispatched vs Self dispatched renewable energy

- Self-dispatched power does not eliminate morning and evening peaks

- Most PV installations are self dispatched unless an element of battery storage included

- Hybrid Photovoltaic Electricity System is the preferred option and meets customer + utility needs

- Dispatched generation is likely to be gas fired but is restricted by the limited availability of gas

City Power is still

liable for the morning

and evening peak

energy costs and

excessive network

demand charges.

Energy storage is the

antidote!

Evolving Electricity Distribution business

• By virtue of ‘stacking’ the value of energy storage increases the deeper down the distribution value chain it is deployed

• In South Africa, the split of national energy sales volumes is roughly 60% Eskom and 40% Municipal distributors

• The split of customer numbers is however 40% Eskom and 60% Municipal

• Therefore the majority of the country’s distribution assets are in the hands of Municipalities

• More than half of the benefits to be reaped from Energy Storage facilities will therefore be within the municipal DSOs.

5

The South African environment

Eskom Network Access Charges

6

For various reasons including

Eskom Dx capacity constraints

in some cases, City Power

pays significant penalties for

NMD exceedances

Network

Charges

with

penalties

Should be

Network

Charges

6 245 749 1 800 586

6 108 803 1 608 709

5 255 195 1 743 184

4 335 791 1 655 549

3 709 095 1 347 196

3 139 144 1 541 488

3 244 361 1 551 517

4 906 378 1 709 936

4 179 354 1 640 638

4 994 535 1 718 339

6 067 983 1 820 657

6 599 059 1 888 796

58 785 446 20 026 596

Allandale

Unlocking stalled urban development

Eskom MTS

substation -

Taunus

New 132 kV City

Power Lufhereng

Substation

2x45MVA

Existing Eskom

132 kV substation

Phase -

10 year

plan

Number

of

Houses Current Status

Capacity

Available

MVA

Storage

Capacity

MWh

Capacity

Required

MVA

0 1978 Occupied 10 4,95

1 1818 Final construction 10 9,49

2 169 In construction 10 9,91

3 706 Unlocked? 10 3,4 11,68

4 1051 Unlocked? 10 8,6 14,31

… …..

Final 22 000 45 20,0 55,00

Only long term upgrade planned

Common line also requires

upgrade – only 10 MVA

available

Arbitrage only value – 275kV intake point

Technology Aspects Units Value Operational Aspects Energy Units Value

Cost of Storage $/kWh 470 HV Distribution System Losses % 4,00%

Storage System Expected Cycle Life Number 7000 MV / LV Distribution % 3,00%

Efficiency of Charge and Discharge cycle % 75% Value of Winter Evening Energy Arbitrage c/kWh 209,94

Value of summer Evening Energy Arbitrage c/kWh 46,17

Capital Aspects Units Value Loss-less average value of daily arbitrage c/kWh 87,11

Rand to Dollar Exchange Rate Ratio 13,25 Average daily rate to re-charge system c/KWh 37,18

Local cost of Storage R/kWh 6227,5 Cycle cost to overcome system recharging losses c/kWh 9,29

Capital loan interest rate %pa 5,5% Cycle savings due shift of losses out of peak c/kWh 3,48

Capital Loan Term Years 10 Net average value of daily energy arbitrage c/kWh 81,30

Cost of Finance R/kWh -1883

Total financed plant cost R/kWh 8110 Operational Aspects Network and Demand costs Units Value

Expected Plant Life, 6 days p/week, 1 cycle/day Years 22,4 Peak Period Duration hours 2

Demand reduction potential per kWh of storage kVA 0,5

Monthly network charge per kW r/kVA 21,24

Monthly demand charge per kW r/kVA 0

Daily network and demand charge savings potential c/kWh 34,93

* This savings is subject to the system being in

operational during the annual half hour peak.

LCOE over expected plant life 1 shot per day c/kWh 115,86 Total potential arbitrage value of 1kWh storage c/kWh 116,24

Analysis of break-even point of energy storage cost vs. maximum arbitrage potential of the Local Government Megaflex Tariff

1kWh Storage used for 6 days of the week, one shot per day, to 1kWh from peak to off-peak, all year round

Plant Parameters Megaflex Tariff Application

275kV Intake point, e.g. Johannesburg

8

This analysis excludes the additional potential value of distribution upgrade

deferral (unlock land development and investment), overload outage avoidance

(security of supply), power quality and power factor correction and back to back

demand response (frequency support).

Arbitrage only value – 11kV intake point

Technology Aspects Units Value Operational Aspects Energy Units Value

Cost of Storage $/kWh 575 HV Distribution System Losses % 4,00%

Storage System Expected Cycle Life Number 7000 MV / LV Distribution % 3,00%

Efficiency of Charge and Discharge cycle % 75% Value of Winter Evening Energy Arbitrage c/kWh 230,01

Value of summer Evening Energy Arbitrage c/kWh 50,59

Capital Aspects Units Value Loss-less average value of daily arbitrage c/kWh 95,45

Rand to Dollar Exchange Rate Ratio 13,25 Average daily rate to re-charge system c/KWh 40,74

Local cost of Storage R/kWh 7618,75 Cycle cost to overcome system recharging losses c/kWh 12,65

Capital loan interest rate %pa 5,5% Cycle savings due shift of losses out of peak c/kWh 2,86

Capital Loan Term Years 10 Net average value of daily energy arbitrage c/kWh 85,66

Cost of Finance R/kWh -2303

Total financed plant cost R/kWh 9922 Operational Aspects Network and Demand costs Units Value

Expected Plant Life, 6 days p/week, 1 cycle/day Years 22,4 Peak Period Duration hours 2

Demand reduction potential per kWh of storage kVA 0,5

Monthly network charge per kW r/kVA 7,11

Monthly demand charge per kW r/kVA 27,01

Daily network and demand charge savings potential c/kWh 56,12

* This savings is subject to the system being in

operation during the annual half hour peak.

LCOE over expected plant life 1 shot per day c/kWh 141,74 Total potential arbitrage value of 1kWh storage c/kWh 141,78

Analysis of break-even point of energy storage cost vs. maximum arbitrage potential of the Local Government Megaflex Tariff

1kWh Storage used for 6 days of the week, one shot per day, to 1kWh from peak to off-peak, all year round

Plant Parameters Megaflex Tariff Application

11kV Intake point, e.g. Randburg

9

Global disruptive factors in Power and Utilities

Energy Storage has a part to play

10

Generation mix is shifting to

cleaner sources that include

gas and renewables with

storage. Sources are

becoming more decentralized.

Customers are being offered choices

to manage their energy use and costs,

through energy efficiency measures,

distributed generation and energy

management solutions.

Smart meters, “big data” and

analytics can be used to optimize

energy delivery, improve energy

efficiency and enhance customer

experiences.

Significant investment is being

made to refurbish and expand

grid assets

Industry re-structure is

overdue. Stalled REDS

transformation, rejection

of ISMO bill

Regulatory compact is under

pressure to accommodate

changing customer demands

e.g. trading and wheeling

Aging workforce and

challenges of the new digital

economy require effective

knowledge transfer and fresh

thinking.

New viable energy mixes, mini

and micro grid options to meet

the energy needs of

communities, both rural and

urban

Changing

energy mix

and DG

Empowered

customers

Digitization

Market

and policy

reforms

Regulatory

frameworks

New

Options

Skills and

diversity

Infrastructure

investment

Sector in

transformation

The City of Johannesburg:

Shareholder’s Mandate

Drive

• Increasing and securing the supply of energy

• Expanding services to all citizens of the City

• Acquiring electricity and energy from renewable and alternative sources

• Reducing greenhouse gas emissions

• Strategic use of a mix of technologies and energy sources to achieve goals

While

• Reducing the burden of cost on the consumer

• Balancing the financial sustainability of the business, delivery of services and Shareholder goals

• Moving to the “Smart City” concept via a Smart Grid and integration with other City initiatives such as transport and waste to energy programs

11

Storage as distributed grid management tools

Longer termImmediate Short term

Rooftop PV

feed-in tariffs

Embedded GX

policy

Demand

Response

Kelvin Power

IPP PV

applications

Gas - thermal

alternative

Solar Water

Heaters

Demand Side

Management

Renewable

Energy tariff

Rural Gas/PV

systems

Diesel

Generation

Utility Scale

Storage

City – Waste to

Energy

City – Landfill

Gas

Gravitational

feed GX

Electric

Vehicles

charging

Smart meter /

Load Limiting

Gas Turbines

(OCGT)

Own Rooftop

PVRipple Control

Independent Power Producers /

Embrace Renewable Energies

20

80

20

0

11

2

60

24

06

20

30

Structural

Changes

Open

Grid/Trading3

Time of Use /

Tailored Tariffs

An increase in Demand Side and Supply

Side grid management tools are needed

to contain costs, secure supply and

accommodate alternative energy sources

Energy

Efficiency

?

Commercial and Industrial Sector

• Sector characteristics:

– Continuous supply essential

– Highly cost conscious

– Invest in efficiency improvements

– Predominantly daytime loads

– Require a ‘means to green’

Embedded GX

policy / co-gen

Demand

Response

Own rooftop

PV

Battery Storage

Smart meter /

Load Limiting

Open

Grid/Trading

Electric

Vehicles

charging

Independent Power Producers /

Embrace Renewable Energies

‘Smart’ functionality requirements

Time of Use /

Tailored Tariffs

Energy

Efficiency

Implemented In progress / planned

Mid to Upper Income Residential Sector

• Sector characteristics:

– Primarily responsible for the large evening peak

– Invests in efficiency improvements

– Ideal PV IPP partner

– But also most likely to defect from the grid

Battery Storage

Smart meter /

Load Limiting

Electric

Vehicles

charging

Aggregated Residential

Independent Power Producers

‘Smart’ functionality requirements

Rooftop PV

feed-in tariffs

Ripple ControlSolar Water

Heaters

Gas - thermal

alternative

Energy

Efficiency

Time of Use /

Tailored Tariffs

Open

Grid/Trading

Low Income Residential Sector

• Sector characteristics:

– Shorter, significant contribution to the evening peak

– Absolute need for affordable energy services

– Prone to overload outages

– Rapid densification, ‘backyard shack’ phenomenon

Tailored Tariffs

‘Smart’ functionality requirements

Solar Water

Heaters

Gas - thermal

alternative

Energy

Efficiency

Smart meter /

Load Limiting

Battery Storage

for peak load

reduction

Load Profile of a typical low income area

High cost to supply electricity

zones – replace with

alternatives and reduce with

energy storage

Medium cost zones -

replace with PV feed-

in power and replace

cross-subsidy

Low cost zones –

recharge energy

storage systems

Grid Failure zone –

maintain lighting with

energy storage

Sustainable provision of alternative energy:

New Energy Mix

• Grid electricity supply is not sufficient to cover peak demand, due to limited capacity on the municipal bulk distribution network

• Grid supply therefore needs to be augmented with technologies such as ‘Solar PV plus Storage’ (electrical) and LPG for cooking and water heating purposes (thermal)

• The electricity connection will be restricted (load limiting) or partitioned into essential and switchable non-essential circuits to prevent overloading.

• This can be done with a 20 Amp ‘ready board’ that will also be equipped with an LED light rather than an incandescent or compact fluorescent light.

• Households will need to be educated and informed accordingly. (Load Management)

Energy

Efficiency

Tailored Tariffs

Battery Storage

Demand Side

Management

Smart meter /

Load Limiting

Gas - thermal

alternative

Utility Rooftop

PV

Proposed New Energy Mix Overview

Bulk Supply –

limited capacity

Gas Supply –

for thermal

requirements

The Grid and the New Energy Mix

Low Income Suburb / Informal Settlement

Limited Grid Supply

M&C

M&CM&C

M&C

Utility Scale

Storage

Local Storage

Renewable

Energy - hedge

Gas provided

for cooking

energy needs

Load Management

to control non-

essential electric

loads

Emerging Transport Sector

• Sector characteristics:

– Most will daily charge at home with cheap off-peak energy

– A proportion will require fast charging stations for extraordinary trips

– Potential to be a highly flexible, controllable load

– Opportunity to link private PV generation through energy offsetting / wheeling / trading to meet needs for daytime fast charging

Commercial

rooftop PV

Independent Power Producers

(e.g. Warehouse roof)

Time of Use /

Tailored Tariffs

Residential

rooftop PV

Open

Grid/Trading

Electric Vehicle

charging - Fast

Grid Surplus

Signal

Smart meter

Electric Vehicle

charging – slow

Thank you

21

Are there any questions?