5/27/2015. Overview of Energy Storage Value Propositions and Business Cases. Utility Cost-Function: Foundation of Energy Storage Economics.

Transcription

1 Overview of Energy Storage Value Propositions and Business Cases Ben Kaun Senior Project Manager ESA Energy Storage 101 Workshop Agenda Utility Cost-Function: Foundation of Energy Storage Economics Utility Perspective for Energy Storage Services energy storage can provide to the grid Utility perspective value propositions Customer Perspective for Energy Storage How customers pay - Review of customer electricity tariffs Business cases for customer-side of the meter Remaining Issues for Full Realization of Energy Storage Value 2 Utility Cost-Function: Foundation of Energy Storage Economics Safe, reliable, affordable, compliant 3 1

2 What Drives Electric Power Decision-making? 1 st Priority Safety 2 nd Priority Reliability 3 rd Priority Affordability The electric utility is operated to ensure compliance with safety, reliability, and regulatory/policy directives at the least cost 4 Top Objective: Safety Of utility personnel Of customers Of the community Protection of property Compliance with all applicable codes and standards 5 Second Objective: Reliability Components of Reliability on the Electric Power System 6 2

3 Second Objective: Reliability Reliability of Generation Resource Adequacy Ensure system has sufficient generation and reserves. Emerging: ensure sufficient flexibility for peak ramp events. 7 Second Objective: Reliability Reliability of Transmission Contingency Ride-Through Transmission reliability contingency analysis. Ensure transmission is able to cope loss of key lines or generators. 8 Second Objective: Reliability Reliability of Distribution Outage Mitigation Plan for load growth eliminate sources of customer outage 9 3

4 Second Objective: Reliability Reliability of Distribution Outage Mitigation And power quality ensure power delivered is within spec, e.g., frequency (60Hz), voltage (220V), low harmonics, etc. 10 Third Objective: Affordability What is the least-cost, lowest ratepayer impact approach to ensuring safety and reliability? Costs of delivered electricity are both fixed and variable costs long-term planning processes long lead times for building large infrastructure costs day-ahead / real time operations fuel and O&M costs 11 Utility Perspective for Energy Storage How energy storage fits into utility economics and reduces cost of delivered electricity 12 4

5 Grid Services Mapping and Costs to Terminology Grid Domain Type of Avoided Cost Grid Services Possible w/storage Generation Transmission Distribution Resource Adequacy (Capacity) Resource Adequacy (Flexibility) Energy (Time-shifting / Arbitrage) Frequency Regulation Ancillary Spinning Reserve services Non-spinning Reserve Upgrade Deferral / Avoidance (Capacity) Energy Loss Reduction Voltage Support Upgrade Deferral / Avoidance (Capacity) Energy Loss Reduction Voltage Control / Power Quality 13 Grid Services and Benefit Stacking by Energy Storage Conventional Solution Energy Storage Solution As a flexible technology class one energy storage installation could serve multiple grid services 14 Cost Components to Consider in a Storage Project For Illustration Only Disposal Operations and Maintenance Balance of Plant Power Electronics Battery Cost Costs Revenue 15 5

6 Understanding Storage Competitiveness Goes Beyond Cost Standard cost metrics for generation are not suitable for storage Storage doesn t produce energy, so Levelized Cost of Energy (LCOE) is not an appropriate unit of measurement LCOE Lifetime project net present value (NPV) is more appropriate 16 Examples of Utility-Scale Energy Storage Project Benefit-Cost Comparisons Example 1 Transmission-Connected Storage: Gas Peaker Substitution Example 2 Distribution-Connected Storage: Substation Upgrade Investment Alternative 17 Transmission-Connected Storage: Gas Peaker Substitution Relevant grid services to consider Grid Domain Type of Avoided Cost Grid Services Possible with Storage Generation Transmission Distribution Resource Adequacy (Capacity) Resource Adequacy (Flexibility) Energy (Time-shifting / Arbitrage) Frequency Regulation* Spinning Reserve* Non-spinning Reserve* Upgrade Deferral / Avoidance (Capacity) Energy Loss Reduction Voltage Support Upgrade Deferral / Avoidance (Capacity) Energy Loss Reduction Voltage Control / Power Quality 18 6

7 Possible Economics for 50MW+ / 4 Hour Storage System* NPV of Costs and Benefits Over Project Lifetime For Illustration Only Disposal Operations and Maintenance Balance of Plant Power Electronics Battery Cost Frequency Regulation Spinning/Non-spinning Reserve Energy Time- Shifting/Arbitrage Resource Adequacy (Capacity and Flexibility) Costs Revenue * Iterations of this Use Case Performed in Cost-Effectiveness of Energy Storage in California. EPRI Real-World Example: Southern California Edison Local Capacity Requirement (LCR) Procurement AES project 100MW / 4 hr. lithium-ion battery installation co-located with AES Alamitos Power Center in Long Beach To meet a requirement for 2,200 MW of new generation, SCE procured a range of different resources 20 Distribution-Connected Storage: Substation Upgrade Investment Alternative Relevant grid services to consider Grid Domain Type of Avoided Cost Grid Services Possible with Storage Generation Transmission Distribution Resource Adequacy (Capacity) Resource Adequacy (Flexibility) Energy (Time-shifting / Arbitrage) Frequency Regulation* Spinning Reserve* Non-spinning Reserve* Upgrade Deferral / Avoidance (Capacity) Energy Loss Reduction Voltage Support Upgrade Deferral / Avoidance (Capacity) Energy Loss Reduction Voltage Control / Power Quality 21 7

8 Distribution Energy Storage Use Case Distribution Substation Load Hour Substation Storage Energy storage can help in distribution planning, when the alternative is an expensive investment to service a short peak The storage installed at the constraint point, or closer to the load can be relatively small since it is used just to shave the peak load Installing storage also reduces the risk of stranded assets (in the event that the load growth is not permanent) 22 Possible Economics for 1MW+ / 4 Hour Storage System* NPV of Costs and Benefits Over Project Lifetime For Illustration Only Disposal Operations and Maintenance Balance of Plant Power Electronics Battery Cost Frequency Regulation Spinning/Non-spinning Reserve Energy Time- Shifting/Arbitrage Resource Adequacy (Capacity and Flexibility) Distribution Upgrade Deferral (Capacity) Costs Revenue * Iterations of this Use Case Performed in Cost-Effectiveness of Energy Storage in California. EPRI Customer Perspective for Energy Storage How customers pay Review of customer electricity tariffs Business cases for customer-side of the meter 24 8

9 Important: Notice the Change in Perspective Utility Perspective Customer Perspective How costs accrue for electricity How costs are collected for electricity This will impact the valuation of storage and who is controlling it 25 Example: My Electric Bill Tiered Time-of-Use Residential The Overall Picture Your Electric Charges Breakdown Conservation Incentive -$26.28 Generation Transmission Distribution Public Purpose Programs 8.05 Nuclear Decommissioning 0.30 DWR Bond Charge 3.11 Competition Transition Charges (CTC) 1.07 Energy Cost Recovery Amount Taxes and Other 4.29 Total Electric Charges $86.51 Cost of Delivering Power 26 Example: My Electric Bill Tiered Time-of-Use Residential The Overall Picture Your Electric Charges Breakdown Conservation Incentive -$26.28 Generation Transmission Distribution Public Purpose Programs 8.05 Nuclear Decommissioning 0.30 DWR Bond Charge 3.11 Competition Transition Charges (CTC) 1.07 Energy Cost Recovery Amount Taxes and Other 4.29 Total Electric Charges $86.51 Other charges and fees Storage can t help these much 27 9

10 Example: My Electric Bill Tiered Time-of-Use Residential Tiers Pay more as more energy is used (encourages efficiency) 28 Example: My Electric Bill Tiered Time-of-Use Residential Time of Use Pay more during the peak load hours (encourages improved load factor) 29 Example: My Electric Bill Tiered Time-of-Use Residential Energy Storage Savings Potential Moving on-peak energy to off-peak times 30 10

11 Common Types of Electric Customer Tariffs Residential Tariffs Flat Rate Time of Use Emerging: Residential Demand Charge (see recent Salt River Project tariff in Phoenix, AZ) Commercial and Industrial (C&I) Tariffs Flat Rate with Demand Charge Time of Use with Demand Charge Demand charges are assessed at the peak power used per month. Typically averaged in 15 minute blocks. 31 Other Considerations Besides Tariff for Customer Energy Storage Value Propositions Enhanced Reliability Silent Backup Generator Seamless Bridging Power (for seconds after a disturbance until a backup generator starts) Access to additional grid service value ( e.g. market participation or demand response programs) Policy incentives e.g., ConEd rebates and California Self-Generation Incentive Program (SGIP) Also, with Solar PV, possible to extend Solar Investment Tax Credit (ITC) to energy storage system if it charges primarily from solar 32 One Customer Perspective: Behind-the-Meter Storage with Solar in California For Illustration Only Disposal Operations and Maintenance Balance of Plant Grid Service Revenue Demand Charge Reduction PV Energy Shift Reliability Value to Owner Power Electronics Battery Cost Policy Incentives Costs Revenue 33 11

12 One Customer Perspective: Behind-the-Meter Storage with Solar in California For Illustration Only Disposal Operations and Maintenance Balance of Plant Grid Service Revenue Demand Charge Reduction PV Energy Shift Reliability Value to Owner Power Electronics Battery Cost Policy Incentives Costs Revenue What happens if the policy incentives goes away? 34 One Customer Perspective: Behind-the-Meter Storage with Solar in California For Illustration Only Disposal Operations and Maintenance Balance of Plant Power Electronics Battery Cost Grid Service Revenue Demand Charge Reduction PV Energy Shift Reliability Value to Owner Costs Revenue Costs must fall for storage to make sense without incentives 35 One Customer Perspective: Behind-the-Meter Storage with Solar in California For Illustration Only Disposal Operations and Maintenance Balance of Plant Power Electronics Battery Cost Grid Service Revenue Grid Service Revenue Demand Charge Reduction PV Energy Shift Reliability Value to Owner Costs Revenue Or the grid service opportunities and values would have to increase 36 12

13 Remaining Issues for Full Realization of Energy Storage Value 37 Finding Business Opportunities for Energy Storage Location Size Services Key Questions: Where is a need? Does the utility need to invest? Is storage an option? How much storage is required to solve the need and how? Can the storage provide value in other ways? 38 Remaining Issues to Understand and Achieve Storage Value Propositions New Tools Needed Need validated tools for regulators and utilities to understand storage value under and integrated approach New Methods for Planning and Operations Current methods are primarily steady-state and difficult to accommodate limited energy resources System Operators in PJM, ERCOT, and elsewhere are considering market design options to better accommodate storage Communications and Control Advancements Advanced forecasting, communications, and control systems are required to enable storage to address multiple service 39 13

14 Review of Presentation Utility Cost-Function Priorities: Safety, Reliability, Affordability (in that order) Ensure reliability across multiple domains: Generation, Transmission, Distribution Utility Perspective for Energy Storage Storage may address and offset fixed and variable costs of planning and operating the power system Multiple services are possible; more services are available to distributed storage systems Customer Perspective for Energy Storage Depends strongly on the structure of the tariff Policy incentives are a big part of the current case Remaining Issues for Full Realization of Energy Storage Value New tools and methods for planning, operations, and value benchmarking for utilities, regulators, and operators 40 Together Shaping the Future of Electricity 41 14