Critical Factors for Developing Economically Viable Electricity Storage Projects.

1. 7/17/2009
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Critical Factors for
Developing Economically Viable
Developing Economically Viable
Electricity Storage Projects
Presented by
Rahul Walawalkar Ph.D., CEM, CDSM
Sr. Energy Consultant
Presented at the Customized Energy Solutions Ltd.
1528 Walnut Street, 22nd Floor
Philadelphia, PA 19103 USA
Storage Week Phone: 215‐875‐9440
Fax: 215‐875‐9490
San Diego, Ca info@ces‐ltd.com
July 14th, 2009
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Agenda:
Energy Storage Technologies & Electricity Markets
Factors affecting Economic viability of EES
EES Design, performance & capabilities
Market Design, Rules & Barriers
Project Financing
Other Factors (Fuel price, environmental regulations & competition)
Questions ???
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2. 7/17/2009
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Overview of Electricity Markets
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Source: FERC: http://www.ferc.gov/industries/electric/indus‐act/rto/rto‐map.asp
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EES for Electric Utility Applications
• Pumped Hydro Energy Storage
C o s t
Available for commercial order
Preconstruction and licensing period
• Compressed Air Energy Storage
p gy g Finalized cost estimate
Design/construction period
First commercial service
a l
• Sodium Sulfur (NAS)
t
2nd plant in service
C a p I
• Flow Batteries (VRB/ZBB)
3rd plant
<--estimate actual--> 4th plant
5th plant
Development period
t
• Flywheels (Beacon) cost estimate Mature plant cost---------->
NAS
U n I
Simplified cost estimate w ith incomplete data
• Li‐Ion Batteries (Altairnano/ A123)
ZBB
Flywheel
VRB/Prudent Energy 4
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Opportunities for Energy Storage
Energy Arbitrage
Ancillary Services
Regulation
Operating Reserves
Voltage Support
Installed Capacity
Deferral of investment in
Peaking Generation
P ki G ti
Transmission & Distribution
Supporting integration of renewables
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Factors Affecting EES Economics
EES Design, Performance & Capabilities
Technology selection
Power & Energy rating
Life expectancy
Round Trip Efficiency
Response rate & any other operating considerations
Footprint & any special permitting requirements
Capability to meet requirements for different markets
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4. 7/17/2009
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EES Selection: Discharge Time & System Power Rating
Source: Electricity Storage Association 7
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Round Trip Efficiency & EES Utilization
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5. 7/17/2009
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Net Revenues with different CAES Configurations
CAES Configuration
~51% increase over daily operation
Heat Rate
Heat Rate
Energy Ratio
ual Revenue $ / MW
Power Ratio
Ramp rate
Response time
Storage
Annu
Duration
0.50 0.75 1.00 (Daily) 1.00 (Monthly)
Power Ratio
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Factors Affecting EES Economics
Market Design
Access to various markets for
energy,
ancillary services
capacity
Generation Supply mix & Demand Curve
Market size
Locational factors
Electric transmission network & interconnection
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6. 7/17/2009
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Comparison of ISOs/ RTOs
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Recent changes in Market Design
FERC Orders
890: open regulation markets to non‐gen resources
719: demand response and long term power contracts
719: demand response and long term power contracts
PJM & NYISO opened up ancillary service markets for
demand side resources during 2007‐08
ISO‐NE initiated pilot program for alternative
technologies participation in regulation market
g y y
Creation of a new category for ancillary services to
remove barriers for energy limited resources
NYISO: Limited Energy Storage Resources (LESR)
MISO: Stored Energy Resource (SER)
CAISO has proposed a EES Pilot for ancillary services
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7. 7/17/2009
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Factors Affecting EES Economics
EES Revenues & Cost
On Peak Energy Revenues
Off Peak Charging Costs
Ancillary Service Revenues
Capacity revenues
Interconnection costs
Natural Gas price
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NYISO Net Load - 2006
NYISO - Net Load - Yr 2006
35000
30000
25000
20000
MW
15000
10000
5000
0
1-Jan
n
13-Jan
25-Jan
6-Feb
18-Feb
1-Mar
13-Mar
25-Mar
6-Apr
18-Apr
30-Apr
12-May
24-May
5-Jun
17-Jun
29-Jun
11-Jul
23-Jul
4-Aug
16-Aug
28-Aug
9-Sep
21-Sep
Days in Year S21
3-Oct
S17
15-Oct
S13
27-Oct
S9
8-Nov
S5 Hrs in
20-Nov
S1
2-Dec
14-Dec
Day
26-Dec
1
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Short Run Marginal Cost Curve
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Location, Location, Location
• NYISO • PJM
East
NY
NY West
East Central
West
South
NYC
• NYC: NYC, Long Island • PJM East: AECO, DPL, JCPL, METED,
• NY East: Capital, Hudson Valley, Millwood, PECO, PPL, PSEG, RECO
Dunwoodie • PJM Central: PENELEC, APS
• NY West: West, Genesee, Central, Mohawk • PJM South: DOM, BGE, PEPCO
Valley, North • PJM West: COMED, AEP, DAY, DUQ
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9. 7/17/2009
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Congestion Example
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NYISO & PJM LMP Profiles (2001-09*)
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* Partial year data as of June 2009
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10. 7/17/2009
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Effect of Location & Efficiency on Net Revenue
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Effect of Natural Gas Price in NYISO
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11. 7/17/2009
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Average Daily LMP Curves for each month in NYC
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Ancillary Service Revenue
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12. 7/17/2009
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Regulation Price Profiles NYISO (2001-09)
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3
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Probability Curve for Expected Regulation Revenues
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13. 7/17/2009
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Capacity Credit
NYISO has a locational ICAP requirement
80% for NYC
97.5% for Long Island
PJM uses Reliability Pricing Mechanism (RPM) to set
up locational capacity prices
Future capacity prices will be influenced by
demand growth
Energy and ancillary service revenues
Generation addition / retirements as well as DR
Cost of new generation technologies
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Other Factors Affecting EES Economics
Financing Factors
Capital Costs
Real estate and taxes
Cost of borrowing
Construction, permitting & interconnection period
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14. 7/17/2009
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Impact of capital cost on economics of CAES in NY
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Other Factors Affecting EES Economics
Transmission / Distribution Upgrades
Impact of wind & renewable integration
Impact of environmental regulations
Renewable Portfolio Standard mandates
NYS 15x15 Program Initiative
Carbon Tax
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15. 7/17/2009
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Transmission Infrastructure
National Interest Electric Transmission Corridor 29
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PJM: Proposed new transmission projects
Source: PJM
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16. 7/17/2009
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Impact of Renewables
PJM has 40GW + wind projects in interconnection queue
Current wind penetration is 1.3 GW
NYISO is anticipating more than 3 GW of wind being
added on the grid in next 3-4 years
Current wind penetration is 1 GW
Represents around 10% of peak load for NYISO
20-30% of off peak load
May result in increased regulation and ancillary service
requirements
Can improve the case for energy arbitrage by lowering
off peak prices
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Occurrence of Negative LMPs in NYISO Zones
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17. 7/17/2009
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Distribution of –ve LMPs
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Conclusions
• Electricity markets across US allow or are working on allowing
EES to participate in energy, ancillary services & capacity
markets.
• The economic feasibility of EES will depend on factors including
– Design parameters
– Market Structure and location
– Ability to capture multiple revenue streams
– Financing
– Environmental regulations
– For large scale integration of EES it is important that technology
developers and market participants, as well as potential
investors understand these factor while determining value
proposition of EES for different applications.
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18. 7/17/2009
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Acknowledgements
Co‐authors & Colleagues
Netra Thakur, Rick Mancini and Jim Harvilla
I would also like to thank
Dr. Jay Apt & Dr. Lester Lave (CMU)
Dr. Peter Balash (NETL)
Joseph Sayer & Mark Torpey (NYSERDA)
Haresh Kamath & Robert Schainker (EPRI)
This analysis was supported in part by
This analysis was supported in part by
Carnegie Mellon Electricity Industry Center (CEIC)
New York State Energy Research Administration (NYSERDA)
National Energy Technology Labs (NETL)
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QUESTIONS ???
Dr. Rahul Walawalkar
215‐875‐9440
215‐875‐
rahul@ces‐ltd.com
rahul@ces‐
www.ces‐ltd.com
www.ces‐
Customized Energy Solutions Ltd.
1528 Walnut Street, 22nd Floor
Philadelphia, PA 19103 USA
Phone: 215‐875‐9440
Fax: 215‐875‐9490
info@ces‐ltd.com
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