Energy Storage & the Grid

Jason MakansiExecutive Director, Energy Storage Council

President, Pearl Street IncJMakansi@pearlstreetinc.com

314-621-0403314-621-2916 fax

The Issues: Tectonic Shifts in our Industry--and a Solution

• Consumers and elected officials are demanding renewables, but costs of highly variable resources not being properly accounted for

• National Security is jeopardized because electricity is fundamental to all other infrastructure

• Generation, transmission, and distribution are being disaggregated– More than 30% of generating assets are “non-utility,” merchant,

or IPP– Transmission is being reorganized into regional grids and

markets with private development emerging– Distributed generation is rising as distribution utilities seek new

opportunities and customers with critical needs protect themselves against what they see as deteriorating grid service.

ENERGY STORAGE CAN BRIDGE GAPS BEING CREATED!

Five Dimensions of the “Old” Electricity Value Chain

Fuel/energysource

ElectricityGeneration

Transmission Distribution Delivery

Traditional way: Regulated utility bundled functions:

One price does all.

Six Dimensions of the “New” Electricity Value Chain

Fuels/EnergySources

Generation Transmission DistributionCustomer

EnergyServices

Distributed Power/EnergyStorage devices

Large-scale Energy Storage

•Unbundled services•Unbundled prices•New service strategies

A New World Order for Electricity

Wholesale market Retail market

The Electricity Infrastructure BACKBONE

•Fully deregulated•Significant hedging/trading•Energy storage for arbitrage•Flexible/truly dispatchable power stations(coal, gas)•New private DC lines•Conversion to some private AC Transmission•FLEXIBILITY, COMMODITY MARKETMENTALITY. ARBITRAGE-DRIVEN

•Mostly deregulated•Distributed power, micro-, mini-grids•Distributed energy storage devices•Natural-gas driven•CUSTOMER-DRIVEN SERVICES•Demand-side conservation•Little trading and hedging (except big- load customers•Power quality management

•Mostly regulated or large government role•Energy storage for ancillary services/security/assurance•Low cost but inflexible baseload stations (coal, nuclear)

•Fee-for-service•RELIABILITY AND SECURITY DRIVEN•Incremental rates of return over costs

Energy Storage Value Buckets• Arbitrage-storing and moving low-cost power into higher price

markets, reducing peak power prices.• Security and assurance-voltage regulation, black start, frequency

control, emergency power. • Asset optimization–reducing the cycling and dispatch of large fossil

units meant for baseload.• Enhancing renewables –transforming “take it when you can get it”

into scheduled power. A fuel-free electricity source in the peak markets! (Also, daily wind resource curves are often opposite the daily load demand curves)

• Transmission asset deferrals –postpone the need for new transmission assets depending on where storage assets are placed.

• Support distributed generation –Micro- mini-grids and on-site power systems must become at least as reliable as traditional grid-supplied electricity. Today’s digital society/economy demands power quality several orders of magnitude higher. Storage assets placed at distribution-voltage substations and integrated into advanced DG devices and uninterruptible power systems

The Potential Value(Back-of-the-envelope, first-order analysis)

• Wind energy enhancement: $15-million• Arbitrage: $15-million• Avoided costs of cycling large coal plants: $11-

million• Ancillary services: $4.5-million• Avoiding/deferring transmission: $20-million• Enhancing security/assurance: $23-million• Environmental: $1-million

Coal Generation Benefits from Storage Facilities

0%

20%

40%

60%

80%

100%

12:00 AM 4:00 AM 8:00 AM 12:00 PM 4:00 PM 8:00 PM 12:00 AM

With Storage Without Storage

Utilization Rate

Without Storage 61% With Storage 68%

The Potential Value

• TOTAL VALUE: $90-million annually

• CAES Cost of Electricity (COE)-$34-60-million annually

• CONCLUSION: At a 25% capacity factor, CAES in central Illinois could pay back within three years.

Wind Volume vs. Transmission ConstraintTypical Randomness of Wind Power

-

200

400

600

800

1,000

1,200

1,400

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Off-Peak On-Peak Off

MW

Wind Volume Transmission constraint

Slide courtesy of Ridge Energy Services, Houston, Texas

CAES/Wind Value Proposition

Store excess wind power in a CAES plant and redeliver a shaped energy product

Manage available transmission capacity and optimize value

Improve system stability by using CAES to provide voltage and VAR support and ancillary services

Benefits

• Maximized wind energy sales, PTC’s and REC’s

• Ability to earn a capacity fee for firm delivery

• Ability to deliver wind power on peak when power is more valuable

• Reduced need for system cycling in order to accept intermittent wind

Slide courtesy of Ridge Energy Services

Denmark 20% of Installed Base is Now Wind Generation

•Operating conditions for system operator are deteriorating •New wind capacity in West Denmark, during late 2002,

rose to 2,350 MWe from 2,315 MWe and caused 4 events where wind output exceeded local demand, compared with 2 in whole of 2002

•A whole week passed in February with almost no wind output.

•There have been many events when wind surges or drops were rapid. On one occasion, 6 April, wind output dropped 487 MWe in a single hour

•Load factor during the first 4 months, 23.4%

Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

West Denmark: Wind output stopped one week while load demand was volatile

Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

West Denmark: Wind output vs load demand for two days last winter

Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

West Denmark:Hourly load changes can be significant

Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

Chart courtesy of Burkhard Roemhild, Alstom Power

Wind Generation is on an Accelerated GrowthCurve World-wide, Especially Europe

Midwest CAES Precedent

• Iowa Stored Energy Project– Backed by 74 municipal utilities in the state– 200-MW aquifer-based CAES, 85-MW wind

generation– Vision: Intermediate-load generation facility using

wind energy– $45-50/kWh all-in electricity costs at a 50% capacity

factor– Additional value from ancillary services, scheduling

flexiblity, and so-called “green tags”

Barriers to Implementation (based on stakeholder discussions)

• Budget constraints on transmission• CAES “not viable” within the least-cost capacity planning exercise and

excess capacity available for at least five years in the state• Merchant generation group: CAES not “in the money”• Constraints in Chicago are “market” not technical limitations• No market participants are “complaining” about congestion on the grid• Wind energy development is passive currently• Lack of renewable “credits” available for renewable energy that comes from

storage facilities• Value of storage cuts across several organizations, none of which are

responsible for the “overall scenario.”• Government response for security (terrorism), assurance (blackout)

DISAGGREGATION OF GENERATION, TRANSMISSION, AND RTO EMERGENCE ARE NOT CONDUCIVE TO STORAGE INVESTMENTS

Small-scale Storage with Wind

• VRB Power Systems Inc, PacifiCorp, and SAIC to conduct analytical studies on transmission benefits of deploying hybrid wind and advanced Vanadium Redox battery storage systems.

• VRB Power Systems and Sea Breeze Power Corp create alliance to integrate Vanadium Redox energy storage in selected wind farms and renewable projects in Canada and Alaska to effectively supply firm capacity.

Flywheels for gridfrequency regulation

• Regulation, or fine-tuning of grid frequency, does not require generation

• Required time to full capacity- <5 minutes• Flywheel “Smart Energy Matrix”

– Ten 25-kWh flywheels– 1-2.5 MW for five to 15 minutes– Quick connection, highly mobile– Delivers both real and reactive power– Excellent deep discharge and cycling – Sub-second response time

Storage Technologies

100-MW and above

Pumped storage

Compressed AirEnergy Storage(CAES)

10-MW

Reverse-flow fuel cellsRegenesys

Sub-surface CAES(underground pipe)

1-MW

Large-scale batteriesLead-acidNASVa Redox

FlywheelsBatteriesCapacitorsUltra-capacitors(combined withDG devices)

UPSMarket

Next Steps

• Expand the business models used to evaluate storage-include all value buckets, quantify the value of “flexibility.”

• Quantify the “value” of national security, regional assurance. Should there be a minimum level of storage to serve the grid?

• Develop second-order more dynamic economic model to evaluate storage facilities

• Engage other stakeholders in the region (state agencies, RTO, non-investor-owned utilities, etc)

• Work towards extending green tags or credits to “stored” renewables

CAES Attributes*

• Significant storage capacity at relatively low cost ($400-600/kW)

• Proven technology, supplied competitively, easily optimized for site-specific conditions

• Black start, fast startup (seconds from hot spinning reserve condition, 5-12 minutes from cold metal), ramp rates of 30% MCR per minute

• Nominal heat rate 2.5 times better than combustion turbine, much better part load efficiency

• Ability to operate as synchronous condenser• Project lead times less than three years

*Source: EPRI T&D Handbook, Chapter on CAES

Storage Attributes

• FLEXIBILITY

• TRUE INTERMEDIATE-LOAD DEEP CYCLING MACHINE AND SYSTEM

• LOW ENVIRO PROFILE

• BRIDGES GAPS BETWEEN GENERATION, TRANSMISSION, DISTRIBUTION

Conclusion

Energy Storage has the potential to become the sixth dimension of the electricity value chain with special near-term benefits for renewables

and grid management.