STAFF REPORT: VERNON GAS & ELECTRIC DEPARTMENT   September 2, 2014

[some of the 25-page report is shown below as I attempted to get up to speed on energy storage. Since California is the first state to mandate this, and energy storage is MANDATORY for being able to integrate solar and wind into the electric grid, it will be interesting to see how this unfolds in the future.  Alice Friedemann]

A 10 MW, 40 MWh Lithium Ion battery storage system participating in CAISO wholesale market from 2017 to 2031 has a Net Negative Present Value of $57 million. Results indicate that the installation of a Lithium Ion battery storage system for arbitrage is not cost-effective. The 15 year annual revenues and costs for the Lithium Ion battery storage system are graphed in Figure 1. The large capital expenditure is derived from the construction and installation of the storage device. Annual loan payments are then made to pay down the remaining principal on the loan at the fixed charge rate of 11% over the 15 year life. Operating and maintenance (O&M) costs and imbalance energy costs represent the other costs incurred by the storage device. Every 15 years, the entire battery stack is replaced because of the annual reduction in energy capacity due to cycle life degradation.

Chart of 15 Year Revenues for Lithium Ion Battery

Figure 2: Chart of 15 Year Revenues for Flow Battery

The purpose of energy storage systems is to absorb energy, store it for a period of time with minimal loss, and then release it when appropriate. When deployed in the electric power system, energy storage provides flexibility that facilitates the real-time balance between electric supply and demand. Maintaining this balance becomes more challenging as the contribution of electricity supplied by intermittent renewable resources expands. Typically the balance between supply and demand is achieved by keeping some generating capacity in reserve to ensure sufficient supply at all times and by adjusting the output of fast-responding resources such as hydropower. Energy storage systems, however, have the potential to perform this role more efficiently. Rechargeable batteries are the most familiar form of energy storage technology.

Large battery energy storage systems can be connected to the transmission grid to absorb excess wind or solar power when demand for electricity is low and, in turn, release the power when demand is high.

Pumped hydroelectric energy storage is a mature, commercial utility-scale technology that is currently in operation at many locations throughout the country. Pumped hydro draws off-peak electricity to pump water from a lower reservoir to a reservoir located at a higher elevation.

When demand for electricity is high, water is released from the upper reservoir, run through a hydroelectric turbine and deposited once again in the lower reservoir in order to generate electricity. This application has the highest capacity of the energy storage technologies that were studied. The output is only limited by the volume of the upper reservoir. Projects can be sized up to 4000 MW and operate at approximately 76%–85% efficiency. Pumped hydro plants can have a service life of 50 years, yielding rapid response times that warrant participation in voltage and frequency regulation, spinning and non-spinning reserve markets, arbitrage and system capacity support. While the siting, permitting, and associated environmental impact processes can take many years, there is growing interest in re-examining opportunities in pumped hydro. CAES uses off-peak electricity to compress air and store it in an underground reservoir or in above ground pipes. When demand for electricity is high, the compressed air is heated, expanded, and directed through a conventional turbine-generator to produce electricity. Underground CAES storage systems are most cost-effective with storage capacities up to 400 MW and discharge times of between 8 and 26 hours. Siting CAES plants requires locating and verifying the air storage integrity of an appropriate geologic formation within a service territory of a given utility. CAES plants employing above ground air storage would typically be smaller capacity plants on the order of 3 to 15 MW with discharge times of between 2 and 4 hours. Aboveground CAES plants are easier to site but more expensive to build.

Lead-acid is the most commercially mature rechargeable battery technology in the world. Valve regulated lead-acid (VRLA) batteries are used in a variety of applications, including automotive, marine, telecommunications, and UPS systems. Transmission and distribution applications are rare for these batteries due to their relatively heavy weight, large bulk, cycle-life limitations and maintenance requirements. Serviceable life can vary greatly depending on the application, discharge rate, and the number of deep discharge cycles. Battery price can be influenced by the cost of lead, which is a commodity. Finally, very limited data is available regarding the operation and maintenance costs of lead-acid based storage systems for grid support.

Flow Battery. Vanadium redox batteries are the most mature type of flow battery systems available. In flow batteries, energy is stored as charged ions in two separate tanks of electrolytes, one of which stores electrolyte for positive electrode reaction while the other stores electrolyte for negative electrode reaction. Vanadium redox systems are unique in that they can be repeatedly discharged and recharged. Like other flow batteries, many variations of power capacity and energy storage are possible depending on the size of the electrolyte tanks. Vanadium redox systems can be designed to provide energy for 2 to 8 hours depending on the application. The lifespan of flow-type batteries is not significantly impacted by cycling. Suppliers of vanadium redox systems estimate the lifespan of cell stacks to be 15 or more years.

Lithium-Ion (Li-ion). Rechargeable Li-ion batteries are commonly found in consumer electronic products, which make up most of the worldwide production volume of 10 to 12 GWh per year. A mature technology for consumer electronic applications, Li-ion is positioned as the leading platform for plug-in hybrid electric vehicle (PHEV) and electric vehicles (EV). Given their attractive cycle life and compact nature, in addition to high efficiency ranging from 85%-90%, Li-ion batteries are being considered for utility grid-support applications such as distributed energy storage, transportable systems for grid-support, commercial end-user energy management, home back-up energy management systems, frequency regulation, and wind and photovoltaic smoothing.

Flywheels are shorter energy duration systems that are not generally attractive for large-scale grid support applications that require many kilowatt-hours or megawatt-hours of energy storage. They operate by storing kinetic energy in a spinning rotor made of advanced highstrength materials, charged and discharged through a generator. Flywheels charge by drawing off-peak electricity from the grid to increase rotational speed, and discharge when demand is high by generating electricity as the wheel rotation slows. Flywheels enjoy a very fast response time of 4 milliseconds or less, can be sized between 100 kW and 1650 kW and may be used for short durations of up to 1 hour. Flywheels possess very high efficiencies of about 93% with a lifetime estimated at 20 years. Because flywheel systems are quick to respond and very efficient, they are being positioned to provide frequency regulation services.

Benefits are realized by analyzing energy storage in the three fundamental categories of load leveling, grid operational support and grid stabilization. Within these categories, each application of energy storage can lead to different economic, reliability, and environmental benefits.

Cost and performance data including installed cost, operation and maintenance costs, round trip efficiency and cycle life

The tool itself has gone through extensive review and usage. Sandia National Labs and the US Department of Energy (DOE) have both conducted formal peer reviews of the framework. The DOE has adopted this framework for use by the 16 recipients of the Smart Grid Demonstration program to quantify the costs and benefits of energy storage demonstration projects.

Load Leveling in general terms refers to the practice of generating power off peak when prices and demand are low and using or dispatching this power on peak when prices and demand are high.

Four basic areas of Load Leveling are as follows: 1) Renewable Energy Shifting – The process of capturing electricity generated from renewable sources during periods of over-generation or low demand then, in turn, dispatching the stored electricity to the grid in times of high demand.

2) Wholesale Arbitrage – This method takes advantage of a price difference between markets by capitalizing and profiting from the imbalance between them. 3) Retail Market Sales – The practice of capturing electricity off peak in order to sell to the retail market at on peak pricing for profit. 4) Asset Management – Energy Storage technologies can be used to store and dispatch certain amounts of electricity so that generating units may be run at the most efficient output level. This practice can save wear and tear on the generating units by allowing them to run in an optimal state.

Grid Operational Support can be defined as ancillary services utilized to effectively match supply to demand. These services are typically performed by an Independent System Operator to maintain the reliability of the electric grid. Five different areas were examined with respect to grid operation support applications: 1) Load Following – an ancillary service concerned with maintaining grid balance by adjusting power as demand for electricity fluctuates throughout the day. 2) Operating Reserves – an ancillary service charged with maintaining extra capacity that can be called upon when some portion of the normal electric supply resources suddenly become unavailable. 3) Frequency Regulation – an ancillary service tasked with managing energy flows to reconcile momentary differences between supply and demand. 4) Renewable Energy Capacity Firming – an application using energy storage to produce more consistent power output when renewable resources temporarily drop. 5) Black Start – an ancillary service responsible for providing power to a conventional generator in order to restart after a partial or full shutdown.

Grid Stabilization involves improving reliability. Grid Stabilization can be divided into four components as follows: 1) Renewable Energy Ramping – Using energy storage to mitigate volatility from low wind conditions and high wind cutout. Cut out speed, typically between 45 and 80MPH, causes a turbine to shut down, ceasing power generation. 2) Renewable Energy

Smoothing – Solar and wind resources are intermittent on a second to second basis. Energy storage can assist in smoothing the output volatility of these resources, thus, improving power quality. 3) Backup Power – Energy Storage may be used to ensure highly reliable electric service. In the event of a system disruption, energy storage can be used to ride through the outage. 4) Power Quality – Energy Storage technologies have the potential to function as capacitors and transformer tap changers by providing voltage support for localized reactive power issues.

Calling upon an energy storage device to keep services up during a distribution outage carries with it a host of issues. The energy storage device could not be brought online seamlessly to mitigate customers being impacted by the outage due to safety and technical reasons. The energy storage device, if brought online in this scenario could contribute to a fault causing more profound damage. VG&E customers that might benefit from this type of system are either on an interruptible contract or have redundant power feeds to their facilities.

Deferral of Distribution System Upgrades. Seeing that VG&E does not own or operate significant generation or transmission resources, the focus of this feasibility study centered on the VG&E distribution system. Energy Storage systems can defer the need for distribution system upgrades. Typically, as systems evolve and grow, upgrades are made to serve loading requirements and meet the needs of customers. Installing Energy Storage systems on impacted feeders that are near full-load capacity can defer or eliminate the need for large capital investments to upgrade the system in that specific region. Assuming that the storage system reduces loading on existing equipment, the energy storage system could improve or increase the life of the existing distribution equipment, including transformers and cables.

In their most recent study, R.W. Beck recommended that system upgrades be implemented when the City peak load reached 400 MW. As the national economy has struggled since the mid 2000’s, the VG&E load has remained flat and peak load is currently 193 MW. The VG&E resource planning group, in performing a ten year forecast does not see any appreciable load growth, and therefore, deferral of distribution system upgrades was not an application staff considered

Since 2007, VG&E experiences on average, 32 electrical system outages per year. Outages in the City of Vernon are typically caused by events that are beyond control such as metallic balloons, vehicles striking utility poles, birds and weather related circumstances.

Electricity storage can reduce electricity peak demand and thereby reduce feeder losses. This process translates into a reduction in emissions if peak generation is produced by fossil-based electricity generators. However, since electricity storage has an inherent inefficiency associated with it, electricity storage could increase overall emissions if fossil fuel generators are used for charging.

Inherent Risk. There are some true challenges when assessing the feasibility of energy storage systems that cannot necessarily be accounted for in using the Energy Storage Assessment tool.

First and foremost, energy storage technologies at the grid level are not mature and do not

have a long track history that can be analyzed. Attempting to calculate the cost of emerging technologies is problematic in that many of the technologies still find themselves in the research, testing and development stage rather than in an actual production or in-service environment.

Limited safety data is available when considering emerging technologies that are still in the development stage. Last, with newer technologies and relatively short life expectancy, accurate replacement costs are simply not available.

When attempting to perform a rigorous cost-benefit analysis, valuating the replacement cost of various energy storage technologies is speculative at best.