Integra7ng Distributed Solar and Storage

Transcription

1 Integra7ng Distributed Solar and Storage A Compelling Value Proposi>on to Realizing a Smarter Grid Janice Lin Managing Partner of StrateGen Consul7ng, Director CA Energy Storage Alliance September 29, 2009 San Diego Solar Energy Conference

2 Agenda 1. StrateGen Consul>ng and CESA Overview 2. Energy Storage and California s Smart Grid 3. Ra>onale for Early Focus on Distributed Applica>ons 4. The Value Proposi>on for Integra>ng Distributed PV and Storage 5. Energy Storage Market Barriers and Policy Recommenda>ons 6. Summary 1

3 StrateGen Overview StrateGen helps businesses create sustainable value through clean energy solu7ons Structured Finance HMH Energy Resources Regulatory Barkovich & Yap, Inc Douglass & Liddell Roger Levy Energy Efficiency ConSol Smart Grids Enernex StrateGen Core Team» Deep industry knowledge in clean energy» Core focus on solar, storage, wind, smart grid» Analy7cal and financial capabili7es» Strategic management exper7se» Product development experience» Project leadership and management Corporate Sustainability Tyler Elm Energy Controls Ron Hofmann Solar Advisory Andy Skumanich Lori Mitchell Market Research American LIVES, Inc. New Heights Research 2

4 StrateGen Overview: Our Clients Our clients represent a wide range of organiza7ons, including those central to the clean energy market, and those trying to enter U.S. Department of Energy 3

5 The California Energy Storage Alliance (CESA) Our Goal: Expand the role of storage technology to promote the growth of renewable energy and create a more stable, secure electric system» CA focused advocacy group represen>ng energy storage stakeholders» Focus on storage coupled with renewable energy integrated into the smart grid» Current priori>es/ac>vi>es include: CPUC SGIP AES implementa>on DG (DER) cost benefit methodology Smart Grid OIR Storage legisla>on: SB 412, SB 14, AB 44 CEC Integrated Energy Policy Report planning CAISO Implementa>on of FERC order 719 and 890 Vision for Storage in CA! 4

6 Energy Storage is a key enabling technology Smart Grid Renewables Integra7on Our expecta7on is that this [smart grid] network will be 100 or 1,000 7mes larger than the Internet Cisco, May 2009 Peak Load Growth Transmission Constraints 5

7 Storage is a necessary component of the smart grid Transmission Operator Distribution Operator Load Serving Entity Industrial Customer Distributed Resources Commercial Customer Energy Storage Substation Other Substations Microgrid / sustainable communities Residential Customer Multi- Dwelling Unit Diagram courtesy of PG&E 6

8 Storage is a necessary component of the smart grid Commercial & Industrial Transmission Operator Distribution Operator Load Serving Entity Industrial Customer Distributed Resources Commercial Customer Energy Storage Substation Substation Transmission Scale Other Substations Microgrid / sustainable communities Residential Customer Multi- Dwelling Unit Diagram courtesy of PG&E 7 Microgrid Residential

9 Energy Storage Reduces GHG Emissions Percent CO 2 / MWh Reduc7on Shiaing from Peak to Off Peak: SCE: 33% reduc7on PG&E: 26% reduc7on SDG&E: 32% reduc7on Peak vs. Off-peak CO 2 Emission Rate* (Tons/MWh) Afternoon - Heavy A/C Use Peaker Plants Also ~56% lower NOx emissions Other times - Very Little A/C Use Better Use of Utility Assets E3 Calculator Tons CO2 / MWh Utility Summer On-Peak Summer Mid-Peak Summer Off-Peak PG&E SCE SDG&E *Southern California Edison Data 8

10 Energy Storage Framework for California Phase I Start with smaller customer sited storage, linked with AMI U>lity owned storage demonstra>ons capital deferral 20 MW ancillary services storage demonstra>ons with CA ISO Phase II Couple with distributed wholesale (higher value FiT or PPA) Demonstrate storage as key enabler of sustainable microgrids Phase III Demonstrate large scale transmission level storage (50 100MW+/ site) Accelerate distributed storage deployment for mul>ple applica>ons Goal: MW deployed MW deployed 1,500 MW+ deployed 9

11 Ra7onale for Early Focus on Distributed Applica7ons Distributed applica7ons offer the poten7al to capture and bundle the greatest number of value streams Customer + Utility + System Operator + Society Reduced energy and demand costs Emerg. back up Demand response Improved reliability Integ of renewables Load leveling T&D relief / deferral Improved power quality Reduced peak & spinning reserve requirements Ancillary services Grid integra>on Improved grid reliability & security More renewables Fewer emissions Lower power costs More jobs 10

12 Conceptual Overview of Storage + PV (1+1=3) Distributed Solar + Storage Poten7al Value Streams Base load Load & Solar Genera>on Net Load is S>ll Coincident with Peak Demand Charges Storage to Shij Net Peak Load to Off Peak Periods» Charge during off peak and discharge during peak to reduce demand charges» Firm up addi>onal demand savings from renewables» Can share inverter / power condi>oning equipment with solar or other renewables» Poten>al to act as dispatchable power for u>lity demand response» Can shij peak demand» Poten>al to leverage SGIP and FITC for both technologies» Poten>al to provide emergency back up capabili>es 11

13 Distributed Applica7ons Are U7lity Scale Small distributed systems can have a grid scale impact Substation Sited Storage 44 Typical Summer Daily Demand for CA-ISO Region Demand Curve after Implementation of 3,000 MW solar Customer Sited CA Generation (GW) Peak - Shaving Impact of 13 GWh storage Equivalent to 5 kwh Storage for each kw Installed Solar Hour of Day Source: EPRI 12

14 Value Proposi7on: Our Approach We have extensively analyzed the drivers of value for storage coupled with PV. We ll present results of the base case and sensi7vi7es.» Select a specific applica>on/customer site» Model the value proposi>on of standalone PV system for the site» Design a hypothe>cal energy storage system to be paired with the specific site and PV system» Model the value proposi>on of integrated PV and storage» Run key sensi>vi>es to incen>ves and other project specifica>ons The base case for PV Only and PV + Storage are presented on the following pages 13

15 Value Proposi7on: PV Only Base Case PV Only Base Case: A 350 kw PV system has a 5.9% IRR from avoided energy costs Key Assump7ons» Use: customer sited 350kW roojop PV system» All equity turnkey purchase» CAPEX: $5,000/kW DC» O&M: $15/kW/yr» Incen>ves: 30% FITC $0.22 CSI PBI 5 Year MACRS Deprecia>on Results» Ajer Tax IRR: 5.9%» Simple Payback: 12 years Load Shape Impacts Load & PV Output» High school load profile in California» PVWaos 20deg fixed >lt in So. Cal. (1) 1) 0.5% annual degrada>on factor & 0.77 derate factor 14

16 Value Proposi7on: PV + Storage Base Case PV + Storage Base Case: A 100kW, 4h baper kw PV system has a 7.6% IRR from peak load shiaing and PV avoided energy costs Key Assump7ons (1)» Use: customer sited storage system coupled with a 350kW PV system» All equity turnkey purchase» Baoery Size: 100kW, 4h dura>on» Baoery Round Trip AC Efficiency: 65%» CAPEX: $475kWh ($2,850/kW)» Variable O&M: $0.075/kWh discharged (2)» Fixed O&M: $6/kW/yr» Incen7ves: None Results Load Shape Impacts Storage Op7mal Sizing» Ajer Tax IRR: 7.6%» Simple Payback: 11 years (1) SCE TOU8 tariff, CA high school load profile (2) This cost accounts for replacement costs of battery cells, parasitic loads, and consumables 15» Analyze net peak load with PV system» SCE TOU8 Peak Period 12PM 6PM» Use storage to shave ajernoon peak» 100kW, 4h baoery

17 CA s Energy Storage Regulatory Market California s regulatory framework is rapidly evolving to accelerate deployment of storage, especially storage coupled with solar» Cri>cal Peak Pricing (CPP)» Self Genera>on Incen>ve Program (SGIP)» Permanent Load Shijing (PLS)» Federal Investment Tax Credit (FITC)» CEC Integrated Energy Policy Report 2009 update will include storage» Poten>al medium term opportuni>es Emergence of Feed in Tariff with differen>al rates for renewables coupled with storage Standard offer for PLS The sensi>vity to the first four factors is explored on the following pages 16

18 CPP: Cri7cal Peak Pricing Sensi7vity The SCE TOU8 tariff is scheduled to convert to default cri7cal peak pricing (CPP) in October 2009 Non CPP vs. CPP Impacts to IRR 1 Modeled Scenario: Es>mated October 2009 SCE TOU 8 CPP Tariff CPP Overview» CPP will be the default tariff for SCE customers with peak demand >500kW in October 2009» SCE will role out CPP to smaller customer classes within 1 to 2 years» Average of 9 events/yr (12/yr max) during the summer months (with 24h advanced no>fica>on)» CPP Structure: On peak energy charge : $1.37/kWh Peak demand charge reduced to $7.26 ($19.73 w/o CPP)» Assume storage device can react to and prepare for 24h no>fica>on of CPP event 1. See Appendix for detailed modeling assump>ons 17

19 SGIP: Evolu7on of the SGIP D SGIP established to implement AB 970. Creates financial incen>ves for distributed genera>on technologies that provide energy conserva>on demand side management and other ini>a>ves in order to reduce demand for electricity and reduce load during peak demand periods. AB 2778 Only wind and fuel cell DG technologies qualify for SGIP Nov 2008 CPUC concludes that AES systems cannot be added to the SGIP as stand alone technology, but do qualify when coupled with eligible wind or fuel cells D CPUC Opinion reveals that Legislature expressed no guidance on the extent or scope of incen>ves for distributed genera>on. AB 2778 Removes all PV incen>ves from SGIP SB 412 Restores CPUC authority to add new technologies to SGIP (awai>ng Gov. signature) Q1 Q2 An>cipated implementa>on of storage incen>ves for solar applica>ons SGIP admin implement 2008 decision: storage applica>ons accepeted May 8, 2009 NOTE: Details about current SGIP structure in appendix 18

20 SGIP Energy Storage Incen7ve Structure System Size Incen7ve Structure Renewable Fuel Cell Non renewable Fuel Cell Wind Energy Storage 0 1 MW 100% $4.50 $2.50 $1.50 $ MW 50% $2.25 $1.25 $0.75 $ MW 25% $1.125 $0.625 $0.375 $0.50 Minimum technical opera7ng parameters:» Ability to be used daily in concert with an on site genera>on resource, and s>ll meet its 20 year life>me requirement.» Ability to handle hundreds of par>al discharge cycles each day.» Ability to be discharged for at least four hours of its rated capacity to fully capture peak load reduc>ons in most u>lity service territories.» Ability to meet Ins>tute of Electrical and Electronics Engineers, Inc. interconnec>on standards.» Must comply with all local environmental and air quality requirements. 19

21 SGIP: SGIP Incen7ve Sensi7vity SGIP incen7ves for solar + storage projects will be very aprac7ve, even more aprac7ve than standalone storage SGIP Impacts to IRR 1 SGIP Current Status» SB 412 (Kehoe, Blakeslee, Skinner) restores CPUC authority to add technologies into the SGIP» Storage will be explicitly added, for standalone applica>ons as well as coupled with PV Modeled Scenario: $2,000/kW for Storage» SB 412 awaits the Governor s signature, will be effec>ve January 2010, subject to CPUC and SGIP working group implementa>on >ming 1. See Appendix for detailed modeling assump>ons 20

22 PLS: Program Overview» Permanent Load Shijing (PLS) is shijing energy from one >me period to another on a permanent basis. It provides several system benefits: Reduce need for capacity investments Reduce likelihood of shortages (was done in response to 2006 heat wave) Lowered system costs (fewer peaking plants)» Main applica>on has been to offset peak demand from A/C» The CPUC created a program to encourage PLS because there was no incen>ve to do this (other than TOU rates) and PLS was caught in between DR and EE programs, thus gewng few incen>ves» In 2007 PG&E and SCE implemented Shij and Save programs to implement this, with budgets of $10M each These programs only allow for Thermal Energy Storage systems PG&E uses ICE Energy exclusively 21

23 PLS: PLS Incen7ve Sensi7vity PLS doubles storage s IRR, but the California programs are closed to future RFPs and only thermal storage is currently eligible PLS Impacts to IRR 1 PLS Current Status Modeled Scenario: SCE s Nightshij $1,110/kW 2 1. See Appendix for detailed modeling assump>ons % nominal ra>ng used for the purposes of this analysis» The CPUC issued a Final Decision for the Demand Response Program that ended further RFPs for PLS» The Decision did, however, order the u>li>es and Energy Division Staff to provide construc>ve input to future PLS programs, including a possible standard offer (e.g.. Fixed $/kw shijed)» Benefit for PV this incen>ve could be combined with the CSI and possibly SGIP incen>ves as well» SCE s Nightshij Program is currently only available for thermal storage and is closed to new technologies: $1,110/kW Based on a nominal ra>ng, not peak ra>ng similar to a PTC ra>ng for PV 2 22

24 FITC: FITC Incen7ve Sensi7vity Storage may be eligible for the FITC when coupled with PV. If so, it will raise the IRR s approximately 50% higher than they are today FITC Impacts to IRR 1 Modeled Scenario: Unrestricted Grid 30% FITC» FITC is 30% FITC Current Status» Chadbourne & Parke has indicated that storage is currently eligible for the FITC when paired with renewables, but only if charged by renewables and not grid power» This par>cular applica>on works well in conjunc>on with CPP tariffs because the baoery can be charged on the weekend off peak with PV to prepare for CPP events (out of scope for this project)» In the future, the FITC may be applicable to storage without these current restric>ons» StrateGen s model assumes storage can charge unrestricted from grid and not from PV 1. See Appendix for detailed modeling assump>ons 23

25 Incen7ves: Combining CPP, SGIP, & FITC Combining all incen7ve value streams has favorable financial outcomes, making Storage + PV a very aprac7ve value proposi7on Combined Impacts to IRR 1 1. See Appendix for detailed modeling assump>ons 24 Note: The ability to combine and capture all of these value streams is s>ll specula>ve pending clarifica>on of programs rules

26 Market Barriers to Full Deployment of Energy Storage» Cost / Economics Many storage technologies have not demonstrated scale economies Analyzing impact of storage, especially coupled with renewables, is very challenging» Technology Many solu>ons, all with tradeoffs First demonstra>ons of new applica>ons are difficult to implement» Regulatory / Policy Difficult to aggregate complete value streams provided by storage Percep>on that u>lity scale storage = large equipment only Tariff design does not reflect true cost of producing and delivering power on peak Incomplete CA ISO implementa>on of FERC Order 890/719 energy storage tariff for regula>on Unclear net metering rules for storage + renewables projects Storage is new enough that it is not yet considered in all relevant aspects of regula>on and policy making 25

27 Energy storage is deserving of its own asset class category and immediate energy policy focus Energy Storage Supply Goal: System Optimization Demand Transmission/ Distribution 26

28 Summary Storage is a key enabler of the smart grid Integra>ng storage with PV can boost the value proposi>on of PV significantly Many new storage technologies are commercially available today Significant incen>ve programs for storage + PV will be in place soon With these incen>ves, the value proposi>on will be very aorac>ve Now is the >me to start developing projects CESA needs the PV community s help to design effec>ve policy for integrated PV + storage projects Storage is cri>cal to many key energy policy goals it is deserving of its own asset class in CA 27

29 For Further Informa7on, Contact: 28

30 CESA Policy Recommenda7ons (1 of 2) Incen7ves Fully implement SGIP for storage (need incen>ves for standalone and solar applica>ons) Establish increased rate of return for u>lity owned storage, similar to renewables treatment Long term discounted financing for storage Tax incen>ves comparable to solar and wind (ITC and MACRS) RD&D Funding Accelerate deployment of integrated demonstra>on projects under various business models Leverage PIER matching funds for federal ARRA storage related proposals in California Create California based Energy Storage Center of Excellence to provide technical and policy leadership 29

31 CESA Policy Recommenda7ons (2 of 2) Goal: Leverage storage under mul7ple ownership models to help enable the Smart Grid, GHG reduc7on, EE, DR and the RPS Include storage in DG, DR, EE cost benefit methodologies Increase Feed in Tariff cap and price for renewables firmed with storage Require storage (customer, 3 rd party and/or u>lity owned) as part of long term procurement process, including pursuing Standard Offers for Distributed Energy Storage and pursuing storage eligibility for next Permanent Load Shijing RFP Explore retail tariff design that encourages load shijing Implement energy storage tariff for regula>on (FERC Orders 890 and 719) Consider a peak reduc>on standard for state agency power purchases Clarify net metering rules for renewable energy projects with storage 30

32 Benefits of Storage Renewable Integra7on Enabling technologies such as fuel switching in smart appliances, dispatch able load from plug in hybrid or other electric vehicles, or sta7onary energy storage would be required to enable very high levels of PV contribu7on (>20%) to the electric power system. NREL Denholm & Margolis, April 2006 When PV penetra7on reaches sufficiently high levels (e.g., 5 to 20% of total genera7on), the intermipent nature of PV can begin to have no7ceable, nega7ve effects on the en7re grid [requiring storage] US DOE, SEGIS ES, July 2008 Storage will need to be part of our porwolio if going to 15 to 20 percent wind at a na7onal level, otherwise it won t be efficient at a lower level and it won t get us where we want to go environmentally Electric Power Research InsNtute, March

33 CA s RPS implementa7on will increase the need for regula7on and ramping Increased wind penetration creates need for greater regulation capacity and faster regulation ramping capability Nov 07 CAISO report identifies significant additional regulation requirements with 20% renewables (about 10% wind penetration) Ancillary services can be provided today at 20 MW scale, and from systems as small as 1 MW on the customer side of the meter 32

34 Value Proposi7on Framework We will now examine the other storage specific drivers to customersited energy storage systems paired with PV 1. StrateGen s Approach to Energy Storage Modeling 2. Primary Drivers of Value 3. Base Case Results 4. Key Sensi>vi>es 5. Value Proposi>on Summary Findings 33

35 Modeling the value proposi7on of storage is challenging. StrateGen s approach: 34

36 Value Proposi7on Key Drivers StrateGen has extensively analyzed the drivers of value for storage. We ll present results of the base case and sensi7vi7es. Customer Specific Baseline Load» Requires peaky loads coincident with u>lity peaks to maximize storage value Tariff» Requires high peak demand charges or >me of use tariffs with large spreads between off peak and on peak prices» Cri>cal Peak Pricing is an improvement for storage Technology Specific CAPEX» Fully loaded cost of storage system including baoeries, controls, inverters, BOS, building, etc. OPEX» Fixed and Variable O&M» Consider running the baoery every weekday on peak» Includes replacement costs and consumables Round Trip Efficiency» AC to AC efficiency losses of charging and discharging 35

37 Value Proposi7on Base Case Base Case: A 100kW, 4h bapery has a 7.6% IRR from peak load shiaing when paired with a 350 kw PV system Key Assump7ons (1)» Use: customer sited storage system coupled with a 350kW PV system» All equity turnkey purchase» Baoery Size: 100kW, 4h dura>on» Baoery Round Trip AC Efficiency: 65%» CAPEX: $475kWh ($2,850/kW)» Variable O&M: $0.075/kWh discharged (2)» Fixed O&M: $6/kW/yr» Incen>ves: None Results Load Shape Impacts Storage Op7mal Sizing» Ajer Tax IRR: 7.6%» Simple Payback: 11 years (1) SCE TOU8 tariff, CA high school load profile (2) This cost accounts for replacement costs of battery cells, parasitic loads, and consumables 36» Analyze net peak load with PV system» SCE TOU8 Peak Period 12PM 6PM» Use storage to shave ajernoon peak» 100kW, 4h baoery

38 Customer Specific Sensi7vi7es Three hypothe7cal load shapes and tariffs were selected to determine sensi7vity of customer specific factors Customer Load August Daily Load Profile Applicable Tariff» SCE TOU8 (Secondary): $15.41/kW Summer Peak Demand Charge $0.1077/kWh Summer Peak Energy Charge 4 Month Summer 12 to 6 PM Summer Peak» SCE TOU8 CPP (Secondary): Same structure as TOU8, but with 12 Cri>cal Peak Days during summer peak hours at $ /kWh Peak Demand Charge credit of $12.47/kW to offset CPP events» PG&E E 19 (Secondary): $13.51/kW Summer Peak Demand Charge $0.1555/kWh Summer Peak Energy Charge 6 Month Summer 12 to 6 PM Summer Peak 37

39 Value Proposi7on Customer Specific Drivers A project s load shape and tariff will have a significant impact on endcustomer returns Customer Load Applicable Tariff 38

40 Value Proposi7on Storage Technology Drivers CAPEX has a significant impact on end customer returns. Round Trip Efficiency is typically less cri7cal CAPEX AC Round Trip Efficiency 39

41 Value Proposi7on Storage Technology Drivers A project s OPEX will have an impact on end customer returns and is the least transparent variable for distributed applica7ons OPEX Methodology» OPEX has two components: Fixed costs that are incurred whether the baoery is cycled or not Variable costs from cycling the baoery» This graph focuses only on the variable costs associated with kwh hours discharged» The variable costs include consumables such as water, cell stack replacement, parasi>c loads, etc. Variable costs do not include energy consumed or lost during charge/discharge (accounted for in avoided energy costs) 40

42 Summary Value Proposi7on Analysis Findings Retail applica7ons can provide aprac7ve value proposi7ons Economic Drivers» Top economic drivers CAPEX Load shape Tariff Incen>ves» Addi7onal economic drivers (not quan7fied) Ability to provide emergency backup/ UPS capability Ability to comply with u>lity demand response ini>a>ves Ability to par>cipate in more tariff opportuni>es Realis7c Scenario» Key Assump7ons 85% RTE $475/kWh CAPEX $2/W SGIP $0.0500/kWh discharged OPEX SCE TOU8 CPP High school load profile Includes PV integra>on» Results of Storage + PV System 11.9% IRR 6 Yr Simple Payback 41