June 13, 2011 — Energy storage, in theory at least, is a technology with enormous potential to change the way energy is transported, dispatched and consumed. As technologies improve and capacities grow larger, utilities are taking a closer look at how the various energy storage technologies available today can be applied to the problems facing energy companies.
In a recent survey of energy sector leadership, Black & Veatch found that 20 percent of utility leaders are considering some type of energy storage project, perhaps indicating that this technology is moving into the mainstream. In the same survey, participants said they believe energy storage will have an important role in the electric utility industry in the near-term future.
Because the energy sector is always changing and technologies evolve every bit as fast, I took a moment to speak about energy storage with Edwin F. Feo, the managing partner of USRG Renewable Finance, an affiliate of the US Renewables Group and one of the country’s largest private equity firms for renewable energy, biofuels and cleantech infrastructure.
USRG RF provides fixed rate construction and long-term debt financing under federal loan guarantee programs for renewable energy projects with commercial technology and long-term power and/or REC contracts. USRG RF financings range from $20 to $500 million, with a tenor of up to thirty years.
Prior to joining USRG, Feo led the Global Project Finance practice at the international law firm of Milbank, Tweed, Hadley & McCloy, LLP where he spearheaded the development of one of the first law firm practice groups devoted to renewable energy.
Jeff Postelwait: Please begin by telling me a bit about how important energy storage technology could be to the world of renewable energy. I have heard people refer to energy storage as “the big wild card” or a “game changer” when it comes to integrating an even greater amount of renewable energy onto the grid.
Edwin Feo: Storage can assist with renewables by smoothing the effect of variable energy output (typical for wind and solar), providing capacity firming such that a renewable resource can be seen as an almost constant source of energy, and with frequency regulation support for the transmission grid. Without storage, the grid needs to be able to deal with the effects of intermittent energy, and that can be done with other generation sources providing firming services. The issue historically with storage has been the cost.
JP: What about more traditional generation technologies, such as coal and nuclear and hydro, as well as natural gas-fired peaker plants? How could energy storage change things for these more tried and true types of generators?
EF: Traditional generation technologies usually have a level of dispatchability—so they can be ordered to respond to load demand within certain time periods. Hydro can do that unless the water level is too high or too low in which event either it must run or can’t run. Traditional generation can benefit from storage to the extent that storage technologies can provide cheaper and/or faster reacting support services. Flywheels and lithium-ion batteries, for example, can respond quickly and are typically used for frequency regulation.
JP: Tell me about some of the different technologies that exist for energy storage on a utility (or multi-megawatt) scale. What are some of the others, and what are the pros and cons of each?
EF: The main technologies are pumped hydro storage, compressed air storage (below or above ground), batteries (sodium sulfur, vanadium redox, lead acid, nickel cadmium and lithium ion), molten salt, thermal peak shaving (aka ice storage) and flywheels. Of global installed storage capacity of about 125,000 mw, over 123,000 is pumped hydro. Other technologies lag by comparison—molten salt—142 MW; compressed air—440 MW; batteries—451 MW; and flywheels—95 MW.
The different technologies have different applications. Pumped hydro has been used for centralized utility scale projects—being able to handle load with quick response.
Compressed air projects are also being aimed at large utility applications—but there are also small above ground compressed air assets, which can be teamed with a specific generation asset. Certain batteries (NaS, Vanadium) have long duration and are better oriented to back up applications.
Other batteries (e.g., Li-ion) have faster response and are best used for renewable integration and frequency regulation—typically at the generation project level. Flywheels are used for frequency regulation and are being developed as stand-alone projects.
JP: I have heard people say that energy storage can and should be considered to be a vital part of a smarter transmission grid, smart cities, and microgrids. How could a smart grid use energy storage best?
EF: The more that the electric service model migrates from the central station generation/dumb meter consumer model (where it is today) to more of a distributed generation/smart meter consumer model, the greater the role for storage to play in smoothing of energy delivery, integration, and regulation. How would it be best used? Probably with the application of different technologies as appropriate at the utility, generation and distribution levels.
JP: What are the primary limitations of energy storage as a technology? What barriers need to be removed before the technology can be made even more beneficial to power utilities?
EF: The primary issue is cost. Pumped hydro projects have tended to be large (1,000 MW) and significant civil works projects. The newer technologies are more geared to smaller applications so the capital cost per unit is less, but the issue is the cost on a kWh basis. These costs are headed down as technology improves.
A somewhat related issue is reliability—given the relatively modest and recent deployment of some of the storage technologies, there is an issue as to evidence of long-term reliability. The more that units are deployed of course, the more there should be evidence of reliability, and the lower the cost as well.
JP: Please tell me a few examples from the real world where energy storage is being used as part of a larger T&D and/or generation project.
EF: First Wind is using Xtreme Power batteries in wind farms in Hawaii. Energy storage makes a lot of sense in an island application where the load may not be large and the day/night demand may differ widely. In the case of the wind projects in Hawaii, First Wind would be facing the potential of curtailment at night (when the wind still blows) given the reduced demand for energy. So a battery can be charged with off hours electricity, and discharged during peak demand during the day.
AES Energy Storage is developing storage systems using A123 Systems Lithium ion batteries to provide ancillary services.
Primus Power is proposing to build a 25 MW battery storage project for the Modesto Irrigation District—this is known as the “Wind Firming EnergyFarm” and is intended to replace a fossil fuel plant as the means of firming energy provided to the MID from wind power sources.
Southern California Edison is building an 8 MW Lithium ion battery storage project to improve grid performance and to aid in integration of wind energy resources located in the Tehachapi area.
JP: Which countries or areas in the world are using energy storage? Do some countries have greater potential for using the technology, or is it applicable anywhere people need power?
EF: Japan, Western Europe and the U.S. Pumped storage is biggest in Japan, surprisingly enough. The newer technologies, which are more relevant to renewables integration and energy smoothing, are more deployed in (obviously enough) those countries with the most renewables—Western Europe and the U.S.).
JP: How has the U.S. federal government worked to promote energy storage by backing power projects and/or funding research and development?
EF: The Department of Energy launched a program to support energy storage technology in 2009. DOE is providing about $185 million to support over $775 million of energy storage projects (these aggregate about 537 mw of new storage). These projects are all across the energy storage space—by technology, size and geography.
JP: When it comes to regulatory agencies such as FERC and NERC, are there any changes in old policy or adoptions of new policy that need to be made to clear the way for wider adoption of energy storage?
EF: Storage presents an interesting regulatory challenge. Depending on its use (and the point of view of a regulatory agency) it may be considered transmission or generation, and as either a wholesale or a retail service. Those characterizations affect by which agency it is regulated (federal or state) and how an investment in storage can be recovered.
Choice of a regulatory regime affects planning (who approves?), ownership (who can own, and by whom are they regulated?) among other issues. Certain storage projects can be delivering both transmission and generation support services—and therefore technically regulated by both regulatory regimes.
The regulatory complexities of storage are addressed but not completely resolved by FERC in a Request for Comments Regarding Rates, Accounting and Financial Reporting for New Electric Storage Technologies (Docket No AD 11-7-000) and a Notice of Proposed Rulemaking—Frequency Regulation Compensation in the Organized Wholesale Power Markets (Docket No. RM 11-7-000).
JP: What do you think of the tendency of some to think of plug-in electric vehicles as “mobile energy sinks”? How can energy storage and PHEVs work in tandem?
EF: As a broad concept, electric vehicles can be used as energy sinks in the sense that they can charge at night while other electric demand is low. Of course, that doesn’t mean the vehicles are available as storage to be applied during the peak of the next day. I think electric vehicles ultimately will be another variable in the electric supply/demand mix that can’t be controlled (other than in the broadest terms) and so may present as many problems as they do solutions for grid operations.
JP: How would you describe power utilities’ level of interest in energy storage at the moment? Are they interested in looking into the technology? If not, why?
EF: A number of utilities are pursuing demonstration projects (see above for a couple). The most interest seems to be in areas where there is significant penetration by renewables.
Ultimately, the deployment of more storage technologies at the distribution level means that demand management can be more flexible—because storage can be used to meet peak demands, as opposed to relying on reduction of demand to trim peaks.
JP: What other consumer benefits could energy storage offer?
EF: The principal benefits will be reliability of the grid, backup power when applied locally and lower costs (because high on peak prices can be mitigated with stored energy).