Energy Storage Technologies in Utility Markets Worldwide

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2 : Energy Storage Technologies in Utility Markets Worldwide Energy storage systems provide the ability to balance power demand and supply, reduce electric surges and sags, maintain power frequency, and ensure power remains available for critical loads when power outages occur. They can also provide enough power to maintain operations until systems can be shut down in an orderly fashion or provide enough power until other on-site generation sources come on-line. Energy storage solutions additionally afford several strategic benefits such as improved flexibility for grid operators, increased national energy security, and reduced environmental impact. The financial benefits of energy storage within the generation, transmission, and distribution system are numerous. With the incorporation of energy storage into the grid, the utility sector and customers can expect reduced financial losses due to outages and poor power quality. Energy storage solutions can improve the efficiency of, and thus reduce the costs associated with, load following, frequency regulation and provision of reserves. They can also improve the return on renewable energy generation investments, enable profitable power market arbitrage, enable the deferral of electric infrastructure investments, and reduce end-user electricity costs. Current and future demand for high quality, reliable electricity exceeds the supply capabilities of current infrastructure. Energy storage solutions can help to maximize the capacity of current infrastructure while improving power quality and reliability. Demand for energy storage solutions is expected to further benefit from the growing trends in the adoption of renewable energy generation and microgrid solutions. The significant public and private investments currently being made are also expected to bolster the growth of energy storage solutions in the utility sector. However, a number of challenges remain, including the need to further improve the cost/performance of current technologies, the relative lack of technical and commercial maturity of many energy storage solutions, and regulatory and monetization issues. 1

3 With electric grids around the world struggling to meet the rising demand for more and higher quality power in a cost effective and environmentally conscious manner, utilities and other service providers responsible for reliable electricity service are continuing to identify and evaluate a range of technically and economically viable solutions. Energy storage technologies including CAES, pumped hydro, batteries and capacitors which offer solutions to many of the common problems and emerging needs of the industry have been successfully tested and deployed. Energy storage technologies can offer benefits such as prompt start-up, modularity, easy siting, limited environmental impact, and flexibility to be used for multiple applications. Applications and benefits of energy storage solutions in utility scale power generation, transmission, and distribution are the focus of this report. The Grid and Energy Storage Utility-scale grid energy storage (ES) technologies provide solutions to load-following generation and transmission congestion. Intermediate and peak loads can be met by ES facilities that are able to quickly respond to demand fluctuations. ES facilities allow loadleveling on a grid-wide level by consuming readily available baseload power during periods of low demand, in order to provide additional peak generation during subsequent periods of high electrical demand. Production costs for electricity at ES facilities can be significantly lower than single cycle/low efficiency natural gas peaking power plants, due to reduced fuel consumption displaced by low-cost baseload power. Indirect consumer costs and grid failure associated with transmission congestion can also be avoided through the construction of ES facilities that provide power to consumers in nearby power markets through short-distance transmission or local distribution systems. Reliance on long-distance imports or energy transactions can be reduced through the distribution of ES facilities at select grid points in order to reduce transmission system stress and congestion. Additionally, ES solutions are used in the utility distribution system to supply peaking power to a feeder when the local load is beyond its operational limits, and can effectively defer the need for a costly distribution upgrade. ES devices can be placed in series with sensitive enduser loads, continuously filtering and then providing energy during momentary or extended outages to mitigate power quality or reliability problems which affect sensitive equipment. 2

4 ES offers local energy markets a technological generation platform that requires only offpeak electricity and readily-available fuels such as natural gas or oils. ES systems can improve integration of renewable energy technologies within grid generator portfolios. ES can also firm up intermittent grid connected renewable capacity such as wind and solar and substantially enhance the market value of such generation. ES applications for renewable sources are expected to grow rapidly in response to several emerging and projected trends: increasing fossil fuel costs, increasing regulations and penalties for greenhouse gas and other emissions from fossil fuel consumption, and renewable portfolio standards mandating greater generating capacities for renewable power. Utility-scale grid energy storage technologies also play a role in the development of a smart grid. Without widespread agreement regarding the precise definition of a smart grid, there is a consensus that its central requirement is real-time communications between utilities (power providers), system operators, consumers (ratepayers), and grid components. 1 With cooperation from all participants in an electrical power grid, including consumers, a smart grid would allow operators and power providers to react nearly instantaneously to unforeseen changes in load (measured at the level of distribution among consumers) by activating or ceasing generation from dispatchable power plants, including utility-scale grid energy storage facilities such as PHS and CAES. The current worldwide use of various grid energy storage technologies such as batteries, flywheels, CAES, and PHS demonstrates that the development of smart grids is not necessary to the effective use or management of grid energy storage by grid operators and power providers. However, smart grid technologies, particularly real-time monitoring of grid loads at the points of consumption (electric meters), could improve response times from ES systems and further minimize the possibility of grid faults or failures. Despite its ability to ameliorate multiple challenges facing modern electric grids, currently only about 2% of global electric supply leverages energy storage solutions. However, as technologies mature and more experience is gained, storage solutions are expected to find increasing applications and adoption in global utility power systems. The balance of this chapter identifies opportunities for energy storage solutions and details applications and potential benefits to electricity generators, transmission and distribution operators, ancillary service providers, wholesale traders and end-consumers. 1 Smart Grid Technologies, Markets, Components and Trends Worldwide, SBI Reports, June

5 Applications of Energy Storage Solutions The basic functions of an electric grid are 1) to generate and supply sufficient energy when and where it is required and 2) to maintain adequate power quality and reliability to minimize disruptions to end-users. Thus, the industry often classifies energy storage applications as either energy solutions that improve the generation/supply function, or power solutions that improve the quality and reliability of the distribution and transmission function. The table below summarizes the specific applications of energy storage solutions based on grid function and application type. Table 1 Functional Categorization of Utility Energy Storage Applications Function Application Application Type Generation/Supply Black Start Energy Generation/Supply Contingency Reserve Replacement Energy Generation/Supply Contingency Reserve Spinning Energy Generation/Supply Contingency Reserve Supplemental Energy Generation/Supply Load Following Energy Generation/Supply Load Shifting Geographic Energy Generation/Supply Load Shifting - Long Duration Energy Generation/Supply Load Shifting - Short Duration Energy Generation/Supply Regulation Control Energy Generation/Supply Renewable Energy Integration Energy Transmission/Distribution Grid Stabilization - Angular Stability Power Transmission/Distribution Grid Stabilization - Frequency Regulation Power Transmission/Distribution Grid Stabilization - Voltage Stability Power Transmission/Distribution Power Quality - Long Duration Power Transmission/Distribution Power Quality - Short Duration Power Source: Various, compiled and classified by SBI Energy. 4

6 Energy Storage Technologies The energy storage technologies being developed are as varied as its potential applications. While batteries have long been the electricity storage solution available for short duration power applications, ongoing advancements in various battery chemistries has enabled them to become increasingly viable in some energy applications as well. Similarly, while pumped hydro projects have been the energy storage systems of choice for large-scale energy applications like load shifting, developments in CAES technologies, and in particular smaller scale above-grade CAES implementations, have enabled them to become increasingly viable in load shifting, load following, regulation control, and contingency reserve applications. Further, advancements in efficient flywheel systems and electrochemical capacitors are enabling these technologies to become increasingly viable across a host of power quality applications. Pumped Hydro Storage The most widely implemented power-sector energy storage technology worldwide is pumped hydro storage. Pumped hydro storage (PHS) involves pumping water into a storage reservoir using excess electricity during periods of low electric load and then directing it through hydroelectric turbines to generate power during periods of high electric demand. This enables load leveling and/or power arbitrage. Conceptually based upon conventional hydroelectric generation, pumped hydro storage is a mature technology suitable for applications which require both high power levels and long discharge times. The most widespread form of energy storage used on electric power networks worldwide, its primary applications are energy management, frequency control and provision of reserve. Compressed Air Energy Storage Compressed air energy storage (CAES) involves forcing air into underground reservoirs using high efficiency compressors. Air is compressed during times when electricity demand and costs are low or when excess energy from baseload plants is available and compressed and stored in underground formations. During times when demand for power is high, the compressed stored air is heated and expanded to atmospheric pressure and is directed through turbines to power electric generators. CAES is a technologically mature energy storage 5

7 technology capable of generating electricity for several hours at utility-scale capacities above 100 MW. A CAES system, exclusive of power plant infrastructure, is largely reducible to a variety of industrial and power machinery components. Rather than relying on highly specialized or alternative technologies, CAES systems have been developed from products frequently applied in the oil and gas production, refining, heavy industrial manufacturing, and power generation industries. Electrochemical Capacitors Electrochemical capacitors for use as energy storage devices in the power sector are an evolving technology. Several solutions leveraging electrochemical capacitors have been designed and tested for application in electric power transmission and distribution applications. Ongoing improvements addressing performance and cost characteristics of the technology may enable significant adoption these applications. Electrochemical capacitors, also called supercapacitors and/or ultracapacitors, are a class of electrolytic capacitors which use specific combinations of electrode and electrolytic materials that enable them to leverage both electrostatic and chemical processes for energy storage. As a result, the capacitance and energy density of electrochemical capacitors are many orders of magnitude greater than those of simple electrolytic capacitors. Electrochemical capacitors provide high power density and benefit from a temperatureindependent response. Further, they can be charged and discharged thousands of times, have long projected lifetimes of up to 20 years and are low maintenance. In general, electrochemical capacitors are suitable for fast-response, short-duration applications, such as backup power during brief interruptions. They are also well-suited for voltage and frequency stabilization applications. ECs can also be networked for use in longer time-scale applications, but they are relatively expensive. Improvements in high-speed manufacturing and cell fabrication as well as the development of less expensive electrode and electrolytic materials could make ECs more attractive in the future. 6

8 Flywheels Flywheel-based energy storage solutions rely on electric motors to convert electricity into rotational motion. This rotational motion of the motor is used to spin a massive disk. The momentum of the spinning disk effectively stores this inertial, or kinetic, energy for later reconversion into electricity through the use of electric alternators or generators. The amount of energy stored is determined by the mass of the disk, the distribution of the disk s mass, and the speed of rotation. As the speed of rotation and disk mass increase, the amount of energy stored increases. Additionally, the distribution of more of the disk s mass closer to its rim also increases the amount of energy stored. During the past two decades, rising energy costs, utility deregulation and increasing concern over environmental issues has contributed to the continued development and commercialization of flywheels as independent energy storage devices. There are various companies active in the development of flywheels for frequency regulation, load shifting, load smoothing and backup and uninterruptible power supply. Batteries Storage, or rechargeable batteries, are a collection of one or more electrochemical cells which use a reversible chemical reaction to store and discharge energy. Electrical energy is converted into chemical potential energy during the charge cycle and this process is reversed for discharge. Electrochemical reactions occur between three active components within the cell: the positive electrode, the negative electrode and the electrolyte. Storage batteries are available in varied form factors and their specific chemistry varies based on the materials used for these active components. Batteries are generally classified based on their chemistry, which imparts distinct characteristics to various battery designs. Rechargeable chemistries that find use in utility storage applications include lead-acid, lithium-ion, sodium-sulfur, and vanadium redox and zinc bromide flow batteries. Lead-Acid Batteries One of the oldest and best understood battery technologies, development of lead-acid batteries began in the mid-1800s. They are the most widespread battery storage system in use globally and are employed to provide starting, continuous, emergency and auxiliary power in nearly every sector. Lead-acid batteries can be classified into two main categories: flooded 7

9 batteries and valve regulated lead acid (VRLA) batteries. While the design and construction of flooded and sealed batteries differs, the basic chemical reaction which occurs within them is the same. Lead-acid batteries are relatively low-cost, rechargeable and readily available, factors which drive their selection for many large-scale power storage applications, including power quality, uninterrupted power supply and spinning reserve applications. While they have been used in some commercial and large-scale energy management applications, the short life cycles at deep discharge levels presented by lead-acid batteries has limited their use in energy management applications to date. A number of battery manufacturers are working to develop alternative battery technologies and advanced lead acid batteries to address this limitation. While these technologies are more expensive to implement than conventional lead acid solutions, they can offer substantial cycle life advantages. Lithium-Ion Batteries Lithium-ion batteries feature high energy density, one of the best energy-to-weight ratios among battery technologies, deep discharge capabilities and are able maintain charge for long durations when not in use. Several types of lithium-ion batteries exist based on the specific materials used for the positive electrode, negative electrode and electrolyte continue to evolve. As a result of the specific combinations of these materials, battery chemistry, performance, cost and safety attributes vary among the lithium-ion battery types. Significantly more expensive than competitive technologies, their initial use was limited to high value, low energy applications such as consumer electronics. As the cost and performance characteristics of the batteries improved with wide-scale manufacturing and commercialization, lithium-ion batteries garnered the lion s share of the market for portable rechargeable batteries and now account for over three-quarters of the portable rechargeable market. Continued R&D investments have resulted in even further improvements in energy density, durability, cost and safety and lithium ion batteries are being adopted in motive applications in the transportation, aerospace and military sectors for electric vehicles. At 2X to 3X the cost of lead acid batteries, lithium ion batteries remain extremely expensive for utility applications. However, significant investment in technology development and manufacturing cost reductions continue and are expected to deliver ongoing improvements in costperformance resulting in a clear path to their use in utility applications. 8

10 Molten Salt Batteries Molten salt batteries are a class of high temperature electric batteries. The most common molten salt battery chemistry in use within the utility sector is sodium-sulfur. Ongoing development activity on another type of molten salt battery, ZEBRA-type batteries, shows potential for utility scale applications. Originally developed in the 1960s for automotive applications, sodium sulfur batteries are now leveraged in load leveling and renewables stabilization applications, among others. The basic technology is well understood and these products have been commercially deployed in utility applications for more than a decade. The early growth of sodium sulfur batteries has been lead largely by its increasing use in utility applications in Japan. Sodium sulfur batteries currently account for the bulk of the market for molten salt battery systems. Increasingly, utilities in countries outside Japan have recently begun adopting the technology with current and planned installations in the United States, France, and Abu Dahbi. Flow Batteries In flow batteries, the electrolyte is stored outside the cell within two tanks and is pumped into the cell during charge/discharge operations. Typically, flow batteries consist of three subsystems: cell stacks, electrolyte containment system, and the electrolyte circulation system. The large capacities achievable with flow batteries make them well suited for use in large power storage for load leveling, peak shaving and renewables integration and for use in remote area power supply applications. Further, the rapid response times achievable by the technology makes it well suited to UPS and backup power applications as a substitute for lead acid or diesel generators. Vanadium redox batteries have been utilized in peak shaving applications since the mid- 1990s, primarily in Japan. In the early 2000s, the technology began commercial use in renewables integration, Other Technologies and Solutions A selection of other technologies and solutions for potential use in energy storage within the utility sector are emerging. These technologies and solutions are receiving attention and while some levels of development, demonstration and/or commercial activity is taking place, various challenges inhibit each of their widespread adoption before A few of these 9

11 emerging areas include: superconducting magnetic energy storage, thermal storage and vehicle to grid. Superconducting Magnetic Energy Storage (SMES) systems store energy in the magnetic field created by the flow of direct current in a coil of superconducting material that has been cryogenically cooled. SMES provide both real and reactive power and have been used to improve industrial power quality and to provide premium power for utility customers vulnerable to voltage fluctuations. Advantages of SMES include high energy storage efficiency, rapid recharge, and long cycle life. Challenges to their widespread adoption include high system costs largely relating to the use and temperature requirements of superconducting materials. Thermal energy storage technologies store energy in a thermal reservoir for later reuse. There are two types of thermal energy storage, one applicable for centralized energy storage and the other for distributed, point of use applications. Thermal energy storage for solar thermal power plants stores solar energy collected by the plant in the form of heat. End-use thermal energy storage technologies store energy in a thermal reservoir, which is maintained at a temperature above or below the ambient temperature, depending on the application. The stored energy is later used to reduce the electricity consumption of building HVAC systems during times of peak demand. Vehicle to grid is a battery to grid energy storage concept which involves using the energy stored within the batteries of plug-in hybrid electric vehicles (PHEV) to power the electrical grid. As adoption of electric vehicles increases, utilities are faced with addressing the challenge of fulfilling the associated increase in electric demand on the grid. V2G could alleviate increased investment in generation and infrastructure and improve asset utilization by using off-peak baseload generation to charge batteries. Similarly, vehicle owners could sell power back to the grid during peak times; offsetting some of the higher cost of electric vehicles. In recent years, V2G has gained momentum as advances in battery technology; interest in PHEVs and the market for grid-scale energy storage have evolved; however many issues must be addressed before widespread implementation can be achieved. 10

12 Drivers of Demand for Energy Storage Systems Current and future demand for high quality, reliable electricity exceeds the supply capabilities of current infrastructure. While investments in capacity additions and upgrades are necessary, they are also expensive. Energy storage solutions offer an alternative that can maximize the capacity of current infrastructure while improving power quality and reliability. Further, the demand for energy storage solutions is expected to benefit from the growing trends in the adoption of renewable energy generation and microgrid solutions. The significant public and private investments currently being made are also expected to bolster the growth of energy storage solutions in the utility sector. Limiting Factors Energy storage has the potential to increase the efficiency of electric generation, reliability of transmission and distribution systems, enable the integration of renewable energy sources, and improve power quality, reliability and cost for end users. However, a number of challenges remain, including the need to further improve the cost/performance of current technologies, the relative lack of technical and commercial maturity of many energy storage solutions, and regulatory and monetization issues. This section discusses some of the factors which have limited the widespread adoption of energy storage solutions within the utility sector to date. Current and Projected Market Size Driven by market factors such as the gap between electricity demand and supply, the desire to defer or avoid significant infrastructure investments, and the growth of renewable generation, the energy storage market has grown substantially over the past five years. The global market for energy storage systems for utility applications has grown from $3.2 billion in 2006 to over $4.8 billion in 2010, representing an annual average growth rate of 10.9%. The US market for energy storage in the utility sector has grown 14.4% per year during the period and is currently valued at $0.6 billion. 11

13 Figure 1 Global and US Value of Energy Storage Market for Utility Applications, ($ billion) $ $ $ $ Global US Source: Calculated and estimated by SBI Energy. Ongoing growth in renewable generation, the emergence of microgrids, substantial public and private investments, and continued R&D that improves the cost/performance of energy storage technologies are expected to drive even stronger growth over the next several years. The global market for energy storage solutions in the utility sector is expected to grow by 15.8% per year to over $10 billion in Meanwhile, the value of energy storage solutions in the United States is forecast to increase 26.6% per year to nearly $2 billion in

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