Energy storage can address power plant retirements

by Eric Hsieh, A123 Systems

With the twin economic forces of low natural gas prices and environmental regulations, older coal power plants are entering their golden years — according to a study by the Brattle Group, as much as 77,000 MW of coal plant capacity in the U.S. could be retired over the next several years.

Some corners have warned that the decommissioning of this much capacity could hurt grid reliability, but some of these warnings erroneously equate a capacity shortage with an energy shortage. Existing and planned generation, including wind and solar, provide sufficient energy to meet demand.

During some hours, the generation fleet provides more than enough energy; more than base load capacity, which produces a steady quantity of energy, the grid needs flexible capacity in order to move energy to when and where it is needed most.

The challenge of a changing fleet mix creates an opportunity for grid energy storage in three key areas: energy storage can be used for highly flexible peak shifting, providing utilities with a shock absorber in highly variable conditions; energy storage can provide capacity with minimal water consumption; energy storage can be sited close to generation, standalone or near load, which reduces potential transmission costs.

Under traditional power system planning models, the output of a generating fleet typically tracks the weather and human activity. Output is at a minimum during the early morning, increases to a peak during the afternoon, and returns to minimum late at night. An increase in the share of variable energy resources reduces the correlation between load and generation.

When a subset of generators provides power, the net load shape can change dramatically. Instead of a single peak in the afternoon or early evening, the net load can appear to have dual peaks, morning and night. For example, the California Independent System Operator (CAISO) forecasts that the state could see this “seahorse” shape by the end of the decade.

The seahorse peak conditions presents challenges the economics of traditional thermal generators. With fewer net load megawatt hours to sell energy, a marginal gas turbine will have fewer opportunities to amortize its fixed investment. On the other hand, the same conditions are ideal for storage, the economics of which compare favorably when the objective is to match a highly variable signal.

In addition, both coal and natural gas generators require water as part of their production process. As population increases, water becomes scarce. Several proposed power plants have already encountered difficulty in obtaining water permits.

In California, the capacity reductions due to the Once-Through-Cooling rule could require 12,000 MW in new flexible generation. When considering water consumption, the combination of renewables and storage provides the ideal footprint: zero. The lack of point source emissions enables both clean capacity on the bulk power grid and the ability to be sited where needed, which leads to the third opportunity: transmission.

Finally, retiring coal plants create a challenge in transmission. Large base-load plants were typically sited near sources of cooling water and transport links for fuel delivery. While renewables are also located near their respective fuel sources, the windiest and sunniest sites are rarely near existing coal plants. New transmission is needed to connect these new generators.

As a result, investment in transmission is expected to increase considerably in the coming years — Edison Electric Institute analysis shows that planned transmission investment by shareholder-owned utilities is more than $40 billion over the next three years.

Grid energy storage can be used to defer the cost of transmissions upgrades as old plants are retired and renewable generation is added. In many instances, this new transmission is being implemented to support wind and solar projects that are not scheduled to come online for several years, which means the full transmission capacity is not needed right away.

So instead of purchasing and deploying the entire transmission asset up front, utilities can add scalable, flexible grid energy storage to the grid incrementally, ensuring that the transmission infrastructure keeps pace with the adding of renewable generation capacity.

Over time, of course, a full transmission upgrade may be required. At that point, the grid energy storage solution can be economically detached and redeployed at another point in the distribution system for transmission deferral, flexible capacity, or renewable integration. And, in the case of lithium ion battery systems, the long life of the grid energy storage system enables this process to be repeated several times as necessary.

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