Energy Storage Use Case: Distribution System Optimization via Substation Storage

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1 Technology Advisory Energy Storage Use Case: Distribution System Optimization via Substation Storage This Technology Advisory is one of a series by NRECA s Renewable and Distributed Generation work group, providing Use Case studies of various aspects of Energy Storage. The series may be found on NRECA s: Energy Storage topic page on cooperative.com, and Renewable and Distributed Generation page on nreca.coop. Note: As a Use Case, this document provides description and recommendation of applying Energy Storage to the given market scenario; this is not a Case Study of a particular deployment of the technology. Defining the Use Case Distribution System Optimization via Substation Storage The concept of Distribution System Optimization (DSO) - and DSO functionality relates to the effective use of cooperative assets to ensure the availability and reliability of power delivery. Energy storage, by its very nature, has the potential to provide a number of useful contributions to system optimization, particularly if strategically located in dynamic operating environments. Such environments include locations where transmission and distribution equipment is stressed by load demands from rapid growth in electricity use, increasing penetration of distributed generation resources, and the growing equirements for enhanced physical security and cyber security. The advantages of a substation energy storage system (ESS) for accommodating the variety of changes experienced in modern distribution systems are multiple. At the outset, substation storage may provide for the deferral of equipment upgrades and life extension of existing equipment. Over time, the flexibility The Golden Valley Electric Association Wilson Substation Battery Energy Storage System (BESS), completed in 2003, was one of the first large scale energy storage system deployed in the US. The initial consideration for the installation of the system was emergency power to substitute for on-line spinning reserve. GVEA relies on power supply from a major transmission line. Upon loss of that supply, the BESS was available to immediately provide up to 27 MW of real power for 15 minutes using Ni-Cad batteries. That supply contribution was adequate to provide time to start-up an additional local generation source, offsetting the loss of transmitted power. As time went on, GVEA began to investigate wind power additions, and determined that the BESS was a vital component for system stability from anticipated fault conditions as resources were added to the system, including the potential for modifications to the BESS control settings.

2 afforded through controls modifications of the ESS may provide adaptability to meet evolving operational requirements. The most logical first step in considering the substation storage opportunity is to evaluate the deferral of transmission and distribution (T&D) equipment, primarily involving short- to medium-term deferral of T&D upgrades. Sandia Laboratory in studied modular energy storage options for short-term (annual) deferrals. That study evaluated modular systems that could be deployed at various times at various locations of a distribution system. The Sandia research, as well as more modern studies, suggested that certain system criteria would indicate an ESS as useful for T&D deferral: 1) High T&D cost; 2) High peak-to-average demand ratio; 3) Modest projected overload; 4) Slow peak demand growth (rate); 5) Uncertainty about the timing or likelihood of block load additions; 6) T&D construction delays or construction resource requirements; and 7) Competition for capital between T&D upgrade and other important projects. The fundamental benefit of T&D deferral provides the foundation for substation storage by commercial entities that operate under the mission to develop, own, and operate cost-effective energy storage assets.creating new value for utilities, end users, and project investors, with a technology-neutral approach to select technologies/vendors to meet application and financing requirements of specific projects. 2 The premise of the developers is that, over time, the infrastructure needs of the electric utility system may be effectively met by energy storage, and thereby improve upon the capability of the existing grid capacity through targeted ESS deployments. Those deployments would be at locations to address operating constraints and expected changes in loads and resources. An initial application of an ESS for T&D deferral would be fully supportable operationally and economically, if the area served by the substation is also anticipating, or experiencing, increased penetration of distributed generation. For example, the substation storage device when properly specified will provide identifiable system benefits for: 1) Renewables integration; 1 Electric Utility Transmission and Distribution Upgrade Deferral Benefits from Modular Electricity Storage A Study for the DOE Energy Storage Systems Program, June Convergent Energy + Power, Materials for Distribution (at NRECA Nov. 2013) and Energy Storage Industry Overview From an Asset Developer s Perspective, UBS Webinar Presentation June, 2015.

3 2) Frequency regulation; 3) Service continuity under separation; 4) Congestion relief; 5) Reduced system losses; and 6) Improved power quality. Specifications of ESS for Distribution System Optimization Power Rating: The appropriate ESS power rating for distribution system optimization involves both forecasting system characteristics and estimating the financial aspects of accommodating expected changes. The first step is estimation of the immediate demand and energy requirements to be met under the near term conditions, followed by estimation of changes or modifications to load patterns over subsequent years. The determination of the power rating of a proposed ESS for T&D equipment upgrade deferral or life extension may be accomplished initially in the manner described by the following example: Excess Demand Yr 3 565kW Yr 2 318kW Yr 1 77kW Excess Energy Yr 3 1,700kWh Yr 2 757kWh Yr 1 112kWh Demand Growth 2%/year Storage for 2 Year Deferral Overload: 318 kw (2.65%), 757 kwh Storage Power: 4% of 12,000 kw = 480 kw Energy: 3.5 hours duration, 1660 kwh Source: E&I Consulting via ESA

4 In this example, from a graphic available from the Energy Storage Association 3, demand at the substation is growing at approximately 2 percent per year, and is expected to exceed the existing equipment s load carrying capacity of 12 MW in the next year. For this example, the estimated load increase is to MW, an excess demand of 77 kw in the first year, increasing to a load of MW, an overall increase in demand of 318 kw. The excess capacity is 0.6 percent of the 12 MW rated capacity of the equipment in the first year, and by year two, the excess capacity reaches 2.7 percent of the rated capacity. This suggests a storage unit power rating of at least 4 percent, or 480 kw for a minimum 2-year deferral, an oversize providing reserve for uncertainty. (A threeyear deferral would require a storage facility of at least 4.7 percent over the existing facility capacity, for example, to meet an increase of 565 kw without reserve). Energy storage devices are tending towards standard sizes, so this need could be met by a 500 kw/1,000 kwh (two hour) system. However, for system optimization, the substation ESS power rating should include the evolving change in demand on the substation equipment over time, which will moderate the expected capacity overload. The power rating for the selected ESS, then, would include a forecast of demand reductions on the equipment as a result of distributed resource development or other demand reduction activities. With uncertainty about the growth rate of demand offsets, and to ensure continuity of service, a reasonable margin in power rating should be included in the sizing the ESS. Energy Capacity: The figure on the previous page provides the estimation of energy capacity required for the substation storage unit for T&D equipment deferral and T&D equipment life extension. In the example shown, 112 kwh of energy will be needed to serve the load over the daytime peak period that the equipment capability is exceeded (the excess energy ) during the daytime peak period. In the subsequent year, the energy requirement reaches about 757 kwh, but over a time period of about 3.5 to 4 hours (interpolating). As with power rating, the anticipated operating time period and expected demand reduction from growth in other distributed resources will necessarily be considered in sizing the ESS. Required Footprint: The existing substation location and availability of a fenced, controlled, area will be the limiting factor in selecting and designing the substation ESS. The space considerations of the equipment currently installed in the substation may limit some of the options. Alternatively, not all ESS components are necessarily contiguously positioned, so options may be available that would not normally be considered at a greenfield site. Some T&D deferral applications may best use mobile facilities, which are likely to have a larger space requirement than permanent installations, but in anticipation of system optimization, space may need to be acquired 3 ESA Website, Technology Applications, T&D Upgrade Deferral

5 and added to the substation. Many energy systems are being packaged in multiple 20- or 40-foot shipping containers, which can often be vertically stacked at least two high for space savings. Round Trip Efficiency: Round-trip efficiency is not a major criterion for T&D asset deferral and life extension, as the emphasis would be on a relatively short period of peaking duration for most ESS applications with seasonal peak loading. A greater round-trip efficiency will, however, reduce operating costs. A high peak to off peak energy rate differential will likely have a greater impact on operating costs of the storage system than round trip efficiency. Cycling: The cycling of the ESS for asset deferral applications will be driven by the characteristics of the peak periods. The length of peak season will have the greatest impact. As time progresses, however, it may become more significant, if system changes result in additional cycling for purposes outside of asset deferral, such as PV smoothing. Consequently, in forecasting the system requirements and assessing the longer term applications, there may be instances of differing technologies providing greater advantage over time. However, smaller storage devices distributed with the demand contributors may be more effective for such purposes. Equipment Life: Equipment life for deferral of T&D assets or life extension would normally be limited to only that period of time until other substation features require upgrades, such as addition of feeders, reconductoring, or other system developments. The saturation rate of distributed resources offsetting station demand will prevail when considering substation optimization with ESS. Many commercial ESS systems are being designed for 10- or 20-year equipment life. Controls: The ESS control requirement for T&D asset deferral is relatively minor. The ESS control must have adequate capability to identify and observe the load through metering to discharge during those periods of time when excess demands occur on the equipment, and recharge only when the equipment is below the rated capability. Unique features of the installation will be the point of demarcation for the constrained equipment. Once installed, however, controls may be required for the centralized functions of the distribution system. Energy Storage Technologies for Distribution System Optimization via Substation Storage: Since the T&D asset deferral and life extension application requires medium duration energy capacities (three to four hours), appropriate technologies include flow batteries, lithium technologies, advanced lead-carbon, aqueous-ion and various sodium technologies. The downstream applications will generally be of medium duration (2- to 4-hour) energy capacity. Fast duration applications, such as PV smoothing or frequency response, can be handled by the longer duration batteries. This is not presently an application suited for short-duration flywheels, which are more suited to rapid response requirements.

6 What is the Value? The value of substation ESS for distribution system optimization is two-part: an initial value and a longer-term value. The initial benefits arise from the avoided cost of equipment deferred, and the longer-term value arises from either deployment to alternative sites or from provision of additional services at the initial location or subsequent locations. Deferred Equipment: The value of the deferred T&D equipment is estimated from inventory analysis, system planning models, and construction cost estimates normally provided by system planners. In the case of a substation upgrade for additional demand coverage, it would include all T&D equipment necessary, divided by the incremental gain in capacity. For example, assume that an expenditure of $2 million could provide an additional 33 percent to the load capability in the foregoing example of upgrading from 12 to 16 MW, based on the size of equipment available from manufacturers. The actual value for any specific application would have to be determined from the planning studies and equipment specifications. Payback of a Two-year, Single Site T&D Deferral: Assuming $2 million in investment is deferred and a fixed charge rate about 11 percent per year, the annualized savings of a one-year deferral would be $220,000. A 500 kw-ac/1,000 kwh-ac energy storage system would be needed. If this system has to pay for itself over the initial two-year deferral period, it would have to cost $440K or less, including installation, maintenance, and operation for two years. This works out to $440 per kwh-ac ($880K/kW-AC). Payback of a Multi-Site T&D Deferral: Under the previous example, and estimated 2 percent annual demand increases, the load growth by year three would bring the system to a total load of MW, suggesting a much larger ESS a 600 kw/2,000 kwh device to enable deferral for a third year. If the battery could be used for its full ten-year life by moving to different sites every two years, then the total deferred value would be roughly $2.2M. If the original battery cost less than $2,200/kWh-AC, then it would be a good economic investment, even without additional revenue streams. This is well within the cost of commercially available battery systems. Longer-Term Value: If demand at a substation site is growing, the marginal value of the substation storage device declines. This is due to the increasing size of the storage required to accomplish deferral and the relatively constant deferral savings. Reductions in load growth arising from downstream distributed generation sources will offset the declining marginal value over time. An in-place system may then be used for other purposes, providing an optimal result from an asset utilization standpoint and providing a vehicle for additional control opportunities to respond to variations in system conditions. Those longer-term values arise from the system planning expectations and technological changes.

7 Other Factors to Consider in Value Assessment: Once installed and having gained the deferral value, a substation ESS can provide a number of the additional operational benefits at a relatively minor incremental cost. The deferral value arises from a possibly relatively short duration of time, after which the storage can be used for a wide variety of applications. Potential additional revenue streams include peak reduction, VAR support, energy arbitrage, spinning reserve, and transmission congestion reduction. For example, if the ESS could reduce the system peak by 500 kw and peak charges were $25/kW-month in the summer, and $15/kW-month and $10/ kw-month in spring and fall shoulder months, respectively, the peak reduction value could be as much as $90K/year. If this use applied during the time of the asset deferral, for the two-year investment, the ESS could now cost ($440k + $180k) or $720k ($720/kWh-AC). Continued use at the initial site for an additional eight years provides for an investment of $1.16M. The factors to consider when selecting and sizing the unit will include assessments over the expected life of the storage of the additional applications, and: The all-in installation cost; Maintenance costs; Financing costs and margin requirements; Demand costs that may be avoided and the marginal cost of recharge; and Changes in cycle times and charge/discharge rates, as other conditions develop. Summary Substation energy storage can be an effective contributor to distribution system optimization. Effective asset deployment is a fundamental consideration for DSO functionality, and storage may provide a cost-effective means to defer investment in new T&D equipment or extend the life of existing equipment. Deferral values may be derived from system planning studies on upgrade requirements and incremental T&D additions that can be avoided by means of installed storage devices. But, storage devices provide capabilities beyond the deferral application. By judicious assessment of long-term trends in system requirements, the installation of a storage device based on initial deferral values can generate a stream of benefits well beyond that initial term. Applying the evaluation techniques of deferral benefit based on T&D costs, storage can be supported economically and become available to provide a wide range of energy services for optimal utilization of utility assets. Contact for Questions Andrew Cotter, Program and Product Line Manager - Renewable and Distributed Generation Technology, NRECA Business and Technologies Strategies: Andrew.Cotter@nreca.coop.