by Paul Maxwell, Colette Lamontagne and Jay Paidipati, Navigant
During the past five years, energy storage technologies have experienced unprecedented funding by public and private sources for research, development and demonstration.
For example, the Department of Energy provided some $185 million in funding for 16 energy storage demonstrations through the American Recovery and Reinvestment Act (ARRA) Smart Grid Demonstration program.
These demonstrations are nearing completion, and the results are validating the technology performance, which is necessary for the technologies to be commercialized.
This growth is supported further by the recent California Public Utilities Commission decision that requires California investor-owned utilities to procure more than 1.3 GW of energy storage projects by 2020.
As a result, energy storage is enjoying a renaissance among utility planners, regulators and system operators as a tool for load leveling, grid operational support and grid stabilization (see Figure 1).
Harnessing energy storage in these applications can offer economic, reliability or environmental benefits such as ancillary services revenue and deferred transmission and distribution investments, as well as reduced electricity losses, power interruptions and emissions.
The value of each benefit varies significantly, depending on the energy storage technology, location on the grid, market structure and type of owner.
For utilities to develop successful procurement plans, they must be able to assess the benefit and overall value of energy storage.
Initially, utilities should conduct a high-level screening of possible locations, technologies, capacities and the resulting costs and benefits.
Next, utilities should conduct more detailed and sophisticated analyses of the most attractive opportunities to quantify the costs and benefits more accurately.
Although numerous energy storage models and tools support system planning control system operation and measure cost-effectiveness, the wide range of technologies, deployment locations, ownership structures and benefits provided by energy storage poses challenges for traditional utility proposal evaluations and procurement processes.
A recent Navigant study for the Energy Storage Association identified and characterized existing energy storage models and tools and how each addresses the needs of energy storage industry stakeholders.
The study concluded that although numerous software models are available to utilities for system planning, these models historically have considered only large pumped-hydroelectric storage facilities.
As a result, current system planning models generally do not account for the complex, variable operations of energy storage systems and are just beginning to address the unique modeling requirements needed to represent the true value of energy storage systems.
Although no one model or software package can calculate the value of energy storage at all locations on the grid (i.e., generation, transmission, distribution, behind the meter), it is possible to use well-known, commercially available products together with new models and tools to determine overall cost-effectiveness.
For example, at the generation level, commercially available production cost models can be used in conjunction with proprietary tools to dispatch resources on a subhourly level and co-optimize between energy and ancillary services. At the transmission and distribution levels, impacts identified through load flow analysis can be used to calculate the value.
After modeling is complete and the most attractive opportunities are identified, a procurement plan should be tailored to request funding, proposals to secure the preferred storage resources or both.
Several key issues must be considered when developing a procurement plan (see Figure 2). The grid location of the new energy storage system will affect interconnection costs, reliability requirements and net metering growth across the system.
Co-location of energy storage with existing third-party-owned generation raises questions about how to handle the incremental energy under the existing power purchase agreement.
A requirement to provide firm or flex capacity can result in relatively large storage systems to meet the discharge duration and frequency standards as defined in the local market.
Last, procurement of thermal storage may require special performance standards and procedures to verify electricity savings.
Evaluation and resolution of these issues should include input from key stakeholders, including energy storage technology providers, national laboratories, consultants and the utility’s staff who have been involved with demonstration projects.
The resulting procurement plan must be robust enough for utility management and regulatory agency approval, yet flexible enough to mitigate the technology, cost and counterparty risks with new and evolving technologies such as energy storage.
The procurement plan and targets must be re-evaluated regularly in response to lessons learned from each solicitation.
In some cases, certain emerging technologies or applications must be procured on a demonstration project basis rather than a more traditional energy purchase, capacity purchase or both to mitigate risk and maximize operating experience in support of future traditional procurement.
Vendor proposals received must be evaluated on the aforementioned quantitative cost and benefit metrics and on key qualitative risk factors related to emerging technologies, including:
“- Performance. Will the technology work as expected?
“- Availability. Will the technology and operator meet requirements?
“- Degradation. Will the technology’s performance degrade as expected? What are the implications on revenue?
“- Project execution. Can the technology vendor, system integrator and EPC meet contractual schedule and performance requirements?
“- O&M costs. Will the project owner’s O&M budget be enough to meet availability requirements and handle unforeseen issues?
“- Permitting. What are the necessary permits, and can the project developer get them?
“- Safety. Does the technology present any safety risks?
Markets with high energy prices, high resource intermittency, high load growth and poor transmission and distribution (T&D) reliability likely will see the most early-stage deployment.
Subsequent penetration into less challenged markets likely will hinge on the associated penetration of intermittent renewables across both T&D domains. Will energy storage become the third pillar of the electric power industry alongside generation and transmission? Or will it remain a niche technology that proves cost-effective only for limited applications?
Proper valuation and procurement by utilities and delivery of commercially viable and lower-cost storage systems by manufacturers will be necessary for energy storage to become a valued contributor to electric grid performance and reliability.
Paul Maxwell assists several clients with feasibility studies, market assessments and regulatory support for new storage projects in California.
Colette Lamontagne works with utility, independent power producers, project developers, technology providers and government clients to identify and demonstrate the value of energy storage deployments and the development of strategic plans.
Jay Paidipati has been working in the energy industry for 10 years and has been working on technology and business strategy in energy storage with utilities, governments and equipment vendors during the past four years.