Critical Factors for Developing Economically Viable Electricity Storage Projects


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Critical Factors for Developing Economically Viable
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Critical Factors for Developing Economically Viable Electricity Storage Projects

  1. 1. 7/17/2009 Analyze. Simplify. Implement. 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‐ July 14th, 2009 Analyze. Simplify. Implement. 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 ??? 2 1
  2. 2. 7/17/2009 Analyze. Simplify. Implement. Overview of Electricity Markets 3 Source: FERC:‐act/rto/rto‐map.asp Analyze. Simplify. Implement. 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 2
  3. 3. 7/17/2009 Analyze. Simplify. Implement. 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 5 Analyze. Simplify. Implement. 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 6 3
  4. 4. 7/17/2009 Analyze. Simplify. Implement. EES Selection: Discharge Time & System Power Rating Source: Electricity Storage Association 7 Analyze. Simplify. Implement. Round Trip Efficiency & EES Utilization 8 4
  5. 5. 7/17/2009 Analyze. Simplify. Implement. 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 9 Analyze. Simplify. Implement. 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 10 5
  6. 6. 7/17/2009 Analyze. Simplify. Implement. Comparison of ISOs/ RTOs 11 Analyze. Simplify. Implement. 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 12 6
  7. 7. 7/17/2009 Analyze. Simplify. Implement. 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 13 Analyze. Simplify. Implement. 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 4 7
  8. 8. 7/17/2009 Analyze. Simplify. Implement. Short Run Marginal Cost Curve 15 Analyze. Simplify. Implement. 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 16 8
  9. 9. 7/17/2009 Analyze. Simplify. Implement. Congestion Example Analyze. Simplify. Implement. NYISO & PJM LMP Profiles (2001-09*) 18 * Partial year data as of June 2009 9
  10. 10. 7/17/2009 Analyze. Simplify. Implement. Effect of Location & Efficiency on Net Revenue 19 Analyze. Simplify. Implement. Effect of Natural Gas Price in NYISO 20 10
  11. 11. 7/17/2009 Analyze. Simplify. Implement. Average Daily LMP Curves for each month in NYC 21 Analyze. Simplify. Implement. Ancillary Service Revenue 22 11
  12. 12. 7/17/2009 Analyze. Simplify. Implement. Regulation Price Profiles NYISO (2001-09) 2 3 Analyze. Simplify. Implement. Probability Curve for Expected Regulation Revenues 24 12
  13. 13. 7/17/2009 Analyze. Simplify. Implement. 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 25 Analyze. Simplify. Implement. Other Factors Affecting EES Economics Financing Factors Capital Costs Real estate and taxes Cost of borrowing Construction, permitting & interconnection period 26 13
  14. 14. 7/17/2009 Analyze. Simplify. Implement. Impact of capital cost on economics of CAES in NY 27 Analyze. Simplify. Implement. 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 28 14
  15. 15. 7/17/2009 Analyze. Simplify. Implement. Transmission Infrastructure National Interest Electric Transmission Corridor 29 Analyze. Simplify. Implement. PJM: Proposed new transmission projects Source: PJM 30 15
  16. 16. 7/17/2009 Analyze. Simplify. Implement. 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 31 Analyze. Simplify. Implement. Occurrence of Negative LMPs in NYISO Zones 32 16
  17. 17. 7/17/2009 Analyze. Simplify. Implement. Distribution of –ve LMPs 33 Analyze. Simplify. Implement. 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. 34 17
  18. 18. 7/17/2009 Analyze. Simplify. Implement. 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) 35 Analyze. Simplify. Implement. QUESTIONS ??? Dr. Rahul Walawalkar 215‐875‐9440 215‐875‐ rahul@ces‐ rahul@ces‐ www.ces‐  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‐ 18