Energy Storage & the Grid

1. Energy Storage & the Grid Jason Makansi Executive Director, Energy Storage Council President, Pearl Street Inc JMakansi@pearlstreetinc.com 314-621-0403 314-621-2916 fax

2. The Issues: Tectonic Shifts in our Industry--and a Solution • Consumers and elected officials are demanding renewables, but costs of highly variable resources not being properly accounted for • National Security is jeopardized because electricity is fundamental to all other infrastructure • Generation, transmission, and distribution are being disaggregated • More than 30% of generating assets are “non-utility,” merchant, or IPP • Transmission is being reorganized into regional grids and markets with private development emerging • Distributed generation is rising as distribution utilities seek new opportunities and customers with critical needs protect themselves against what they see as deteriorating grid service. ENERGY STORAGE CAN BRIDGE GAPS BEING CREATED!

3. Five Dimensions of the “Old” Electricity Value Chain Fuel/energy source Electricity Generation Transmission Distribution Delivery Traditional way: Regulated utility bundled functions: One price does all.

4. Six Dimensions of the “New” Electricity Value Chain Large-scale Energy Storage Fuels/ Energy Sources Generation Transmission Distribution Customer Energy Services • Unbundled services • Unbundled prices • New service strategies Distributed Power/Energy Storage devices

5. A New World Order for Electricity Wholesale market Retail market • Fully deregulated • Significant hedging/trading • Energy storage for arbitrage • Flexible/truly dispatchable power stations • (coal, gas) • New private DC lines • Conversion to some private AC Transmission • FLEXIBILITY, COMMODITY MARKET • MENTALITY. ARBITRAGE-DRIVEN • Mostly deregulated • Distributed power, micro-, mini-grids • Distributed energy storage devices • Natural-gas driven • CUSTOMER-DRIVEN SERVICES • Demand-side conservation • Little trading and hedging (except big- • load customers • Power quality management The Electricity Infrastructure BACKBONE • Fee-for-service • RELIABILITY AND SECURITY DRIVEN • Incremental rates of return over costs • Mostly regulated or large government role • Energy storage for ancillary services/security/assurance • Low cost but inflexible baseload stations (coal, nuclear)

6. Energy Storage Value Buckets • Arbitrage-storing and moving low-cost power into higher price markets, reducing peak power prices. • Security andassurance-voltage regulation, black start, frequency control, emergency power. • Assetoptimization–reducing the cycling and dispatch of large fossil units meant for baseload. • Enhancing renewables –transforming “take it when you can get it” into scheduled power. A fuel-free electricity source in the peak markets! (Also, daily wind resource curves are often opposite the daily load demand curves) • Transmission asset deferrals –postpone the need for new transmission assets depending on where storage assets are placed. • Support distributed generation –Micro- mini-grids and on-site power systems must become at least as reliable as traditional grid-supplied electricity. Today’s digital society/economy demands power quality several orders of magnitude higher. Storage assets placed at distribution-voltage substations and integrated into advanced DG devices and uninterruptible power systems

7. The Potential Value(Back-of-the-envelope, first-order analysis) • Wind energy enhancement: $15-million • Arbitrage: $15-million • Avoided costs of cycling large coal plants: $11-million • Ancillary services: $4.5-million • Avoiding/deferring transmission: $20-million • Enhancing security/assurance: $23-million • Environmental: $1-million

8. Coal Generation Benefits from Storage Facilities

9. The Potential Value • TOTAL VALUE: $90-million annually • CAES Cost of Electricity (COE)-$34-60-million annually • CONCLUSION: At a 25% capacity factor, CAES in central Illinois could pay back within three years.

10. Wind Volume vs. Transmission Constraint Slide courtesy of Ridge Energy Services, Houston, Texas

11. CAES/Wind Value Proposition • Store excess wind power in a CAES plant and redeliver a shaped energy product • Manage available transmission capacity and optimize value • Improve system stability by using CAES to provide voltage and VAR support and ancillary services • Benefits • Maximized wind energy sales, PTC’s and REC’s • Ability to earn a capacity fee for firm delivery • Ability to deliver wind power on peak when power is more valuable • Reduced need for system cycling in order to accept intermittent wind Slide courtesy of Ridge Energy Services

12. Denmark 20% of Installed Base is Now Wind Generation •Operating conditions for system operator are deteriorating •New wind capacity in West Denmark, during late 2002, rose to 2,350 MWe from 2,315 MWe and caused 4 events where wind output exceeded local demand, compared with 2 in whole of 2002 •A whole week passed in February with almost no wind output. •There have been many events when wind surges or drops were rapid. On one occasion, 6 April, wind output dropped 487 MWe in a single hour •Load factor during the first 4 months, 23.4% Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

13. West Denmark: Wind output stopped one week while load demand was volatile Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

14. West Denmark: Wind output vs load demand for two days last winter Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

15. West Denmark:Hourly load changes can be significant Data courtesy of Hugh Sharman, IncoTeco Aps, Hals, Denmark

16. Wind Generation is on an Accelerated Growth Curve World-wide, Especially Europe Chart courtesy of Burkhard Roemhild, Alstom Power

17. Midwest CAES Precedent • Iowa Stored Energy Project • Backed by 74 municipal utilities in the state • 200-MW aquifer-based CAES, 85-MW wind generation • Vision: Intermediate-load generation facility using wind energy • $45-50/kWh all-in electricity costs at a 50% capacity factor • Additional value from ancillary services, scheduling flexiblity, and so-called “green tags”

18. Barriers to Implementation (based on stakeholder discussions) • Budget constraints on transmission • CAES “not viable” within the least-cost capacity planning exercise and excess capacity available for at least five years in the state • Merchant generation group: CAES not “in the money” • Constraints in Chicago are “market” not technical limitations • No market participants are “complaining” about congestion on the grid • Wind energy development is passive currently • Lack of renewable “credits” available for renewable energy that comes from storage facilities • Value of storage cuts across several organizations, none of which are responsible for the “overall scenario.” • Government response for security (terrorism), assurance (blackout) DISAGGREGATION OF GENERATION, TRANSMISSION, AND RTO EMERGENCE ARE NOT CONDUCIVE TO STORAGE INVESTMENTS

19. Small-scale Storage with Wind • VRB Power Systems Inc, PacifiCorp, and SAIC to conduct analytical studies on transmission benefits of deploying hybrid wind and advanced Vanadium Redox battery storage systems. • VRB Power Systems and Sea Breeze Power Corp create alliance to integrate Vanadium Redox energy storage in selected wind farms and renewable projects in Canada and Alaska to effectively supply firm capacity.

20. Flywheels for gridfrequency regulation • Regulation, or fine-tuning of grid frequency, does not require generation • Required time to full capacity- <5 minutes • Flywheel “Smart Energy Matrix” • Ten 25-kWh flywheels • 1-2.5 MW for five to 15 minutes • Quick connection, highly mobile • Delivers both real and reactive power • Excellent deep discharge and cycling • Sub-second response time

21. Storage Technologies UPS Market 100-MW and above 10-MW 1-MW Pumped storage Compressed Air Energy Storage (CAES) Large-scale batteries Lead-acid NAS Va Redox Flywheels Batteries Capacitors Ultra-capacitors (combined with DG devices) Reverse-flow fuel cells Regenesys Sub-surface CAES (underground pipe)

22. Next Steps • Expand the business models used to evaluate storage-include all value buckets, quantify the value of “flexibility.” • Quantify the “value” of national security, regional assurance. Should there be a minimum level of storage to serve the grid? • Develop second-order more dynamic economic model to evaluate storage facilities • Engage other stakeholders in the region (state agencies, RTO, non-investor-owned utilities, etc) • Work towards extending green tags or credits to “stored” renewables

23. CAES Attributes* • Significant storage capacity at relatively low cost ($400-600/kW) • Proven technology, supplied competitively, easily optimized for site-specific conditions • Black start, fast startup (seconds from hot spinning reserve condition, 5-12 minutes from cold metal), ramp rates of 30% MCR per minute • Nominal heat rate 2.5 times better than combustion turbine, much better part load efficiency • Ability to operate as synchronous condenser • Project lead times less than three years *Source: EPRI T&D Handbook, Chapter on CAES

24. Storage Attributes • FLEXIBILITY • TRUE INTERMEDIATE-LOAD DEEP CYCLING MACHINE AND SYSTEM • LOW ENVIRO PROFILE • BRIDGES GAPS BETWEEN GENERATION, TRANSMISSION, DISTRIBUTION

25. Conclusion Energy Storage has the potential to become the sixth dimension of the electricity value chain with special near-term benefits for renewables and grid management.