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2 Energy Storage: Exploring the Business Link Opportunity May 6, 2014 Presented By: Michael Stosser, Sutherland Asbill & Brennan LLP Richard Baxter, Mustang Prairie Aaron Bullwinkel, Beacon Power Association of Corporate Counsel 2

3 Energy Storage: Exploring the Business Link Opportunity Michael Stosser, Sutherland Asbill & Brennan LLP Association of Corporate Counsel 3

4 Basics The Electric Industry Power is generated, transmitted and distributed Source: DOE Report. 4

5 Basics Generation Types of generation Fossil fuels: coal, natural gas, oil Nuclear Hydroelectric Cogeneration Renewables: wind, solar, tidal/wave Other Generation can be central (e.g., large solar farm) or distributed (solar panels on a rooftop of the end user) Real vs. reactive power Voltage stability 1 MW = 1,000 homes 5

6 Basics Transmission Purpose Power lines that connect generators to distribution systems The Physics: AC/DC, loop flows, line losses Reliability Adequacy: the bulk power system (an interconnected electrical system made up of generation, transmission and controls) needs to supply the aggregate electrical demand and energy requirements of the customers at all times, taking into account scheduled and reasonably expected unscheduled outages of system elements. Security: the bulk power system must withstand sudden disturbances such as electric short circuits or unanticipated loss of system elements from credible contingencies. Cyber-security: the bulk power system must be protected from cyber attacks. 6

7 Basics Distribution The wires and other facilities used to serve end-use customers: industrial, commercial, and residential Generally low voltage Tariff issues Wholesale distribution service vs. local distribution Rate schedules 7

8 ISOs/RTOs and NERC Independent Systems Operators (ISOs) and Regional Transmission Organizations (RTOs) act as a market place for wholesale power and move electricity over large interstate areas. ISOs and RTOs enable market participants to obtain non-discriminatory access to the electricity grid Set up at the direction of FERC, ISOs/RTOs were formed voluntarily to administer the transmission grid throughout North America, including Canada A larger organization, the North American Electric Reliability Corporation (NERC), ensures reliability of the grid in the U.S., Canada and Mexico 8

9 Federal Regulation (FERC) Jurisdiction over wholesale sales of electricity in interstate commerce States cannot regulate interstate transactions ( Attleboro gap ) Rates are either set by FERC or are market-based, approved by FERC Market participants can apply to FERC for market-based rate authority 9

10 State Regulation States have jurisdiction over retail sales of electricity Retail rates and services are regulated by state commissions Retail service areas are franchises Utility has sole right and obligation to serve Municipal utilities and most electric cooperatives are exempt from state rate regulation 10

11 Some Context on Power Generation Historically, electricity had to be generated and used immediately when it was needed Traditional energy generation does just that Renewable energy sources are variable, which makes them unreliable Wind turbines only produce power when it is windy Solar only generates power when it is sunny Demand for power also fluctuates So, costly investment in generation must be made to meet peak demand 11

12 Some More Context But, there is a solution to limitations on electricity usage when it is generated and how to meet its demand: technologies have emerged that enable electricity to be temporarily stored Some storage technologies, like pumped hydro storage, have been around for years Others are still in their infancy All are quickly becoming more cost-effective and better suited for commercialization Energy storage will improve utilization of power facilities, reduce transmission congestion, facilitate the integration of variable energy resources, and prevent losses from unreliable power 12

13 Energy Storage: Technologies and Applications Richard Baxter, Mustang Prairie Association of Corporate Counsel 13

14 Energy Storage Is it Ready? Maturity Value Access Capability Durability Scalability Criteria Evidence Technical Standards Warranty/Guarantee Criteria Revenue Capital/Operating Costs Financeability Evidence Wider Deployment Repeat Orders Criteria Legislative - Fed, State Regulatory - Fed, State Customer Acceptance Evidence ISO / PUC Rules Commercial Contracts 14

15 Energy Storage Technologies Chemical Thermal Cell Li, Pb, Na, Metal-Air Flow V, ZnBr, ZnCl, FeCr Ice Water, Glycol Salt Molten Salt Rotation Flywheel Mechanical Gravity Pumped Hydro Pressure CAES, Hydraulic Electrical Electrostatic Cap, UCap, Pseude-Cap EM Field SMES 15

16 Energy Storage Systems Energy Storage Module Storage Medium Battery Management Systems (BMS) Safety Controls & Communication Monitoring & Recording Analytics & Controls Communication Power Conversion System Bi-Directional Inverter Reactive Power Control Transformer Balance of Plant Thermal Management Fire Suppression Enclosure Deployment & Operation Shipping & Installation Commissioning Operation & Maintenance 16

17 Contract & Design Issues Friction Points in Contracts Storage is a Multi- Variant Question Risk => Cost 17

18 Standards Development International Electrotechnical Commission (IEC) Technical Committee (TC) 120: EES (Electrical Energy Storage) Systems Overseeing the development of International Standards that address all different EES technologies in a systems approach IEEE P Draft Guide for the Interoperability of Energy Storage Systems Integrated with the Electric Power Infrastructure NECA-NEIS Energy Storage Installation Standard (In Development) NEC (NFPA 70) 2017 NEC update Energy storage system integration EPRI Energy Storage Integration Council WG1 - Applications: Functional and technical requirements in distribution-connected use cases WG2 - Performance: Common metrics of performance, test protocols, and reference duty cycles WG3 - System Development: Common approaches to component and system standardization, technical specification, safety, and communications and control WG4 - Grid Deployment: Installation and commissioning, controls, dispatch, and protection 18

19 Why Use Storage? 19

20 Where Does Storage Fit? Bulk Storage Renewable Integra-on Ancillary Services Distributed Storage Distributed Storage Commercial Storage Residen-al Storage V2G Source: EPRI 20

21 Energy Storage Applications Wholesale Renewable T&D Consumer Arbitrage Ramping Support Transmission Support Energy Management Capacity Capacity Firming Conges-on Relief Power Management Freq. Regula-on Time ShiG Upgrade Deferral PQ/Reserve Power Load Following Permanent Load ShiG Regenera-ve Energy Spinning Reserves Distribu-on Losses Voltage Support Service Reliability Black Start Substa-on Power 21

22 Valuing Storage: Increasing Clarity Revenue Clearer Revenue per Applications Application Stacking Reduced Costs Costs Capital Costs Operating Costs Metrics ($/kw, $/kwh, $/kwh-yr) 22 Source: EPRI, Electricity Energy Storage Options, , Dec. 2010

23 Market Activity Wholesale Renewable T&D Consumer Ancillary Services Renewable Integration Reliability & Security Energy Management Frequency Regulation, Spinning Reserves Frequency Regulation, Ramping Capacity, Upgrade Deferral, Perm. Load Shift, Service Reliability Power Management, Energy Management PJM, NY-ISO, ISO-NE, CAISO, ERCOT, etc. HI, AK, PR, Corsica, etc. SCE, PG&E, SDG&E, LIPA Ontario, etc. CA, NY, NJ, CO, etc. 23

24 Thank You Richard Baxter President, Mustang Prairie Board of Directors, Energy Storage Association (M)

25 Energy Storage: Exploring the Business Link Opportunity Michael Stosser, Sutherland Asbill & Brennan LLP Association of Corporate Counsel 25

26 Energy Storage Policy Landscape Investment tax credit for energy storage (S.1030) is pending in Congress Would introduce a 20%-30% tax credit (depending on where storage is interconnected) The Bill was introduced in May 2013 and still remains with the Senate Finance Committee The Administration and federal and state regulators are working on policies, rules and regulations to encourage the development of energy storage Federal and state energy storage policies should spur development of new energy storage projects ISOs / RTOs are looking at policies to encourage energy storage as Ancillary Services 26

27 Are PEVs the Future of Storage? The Obama Administration has established a goal of one million Plug-in Electric Vehicles (PEVs) on the road by 2015 With more PEVs on the road, and an increase in demand, the utility industry has begun to respond Utilities are looking at PEVs as a source of energy storage, particularly school buses Many utilities have PEV rates that promote off-peak charging through price incentives 27

28 Energy Storage Issues for Federal Regulators Classification Is it generation or transmission? Cost Recovery Who pays? Transmission costs are generally allocated to beneficiaries or socialized, but storage can provide benefits across all value chains of generation, transmission and distribution Barriers of Entry How to remove them? FERC Commissioner John Norris: Storing electricity is at the heart of the changes being seen among new technologies, because it enables a customer to use intermittent renewable resources combined with storage to be completely separated from the utility grid or self-sufficient to a large extent. I don t expect the utilities to be driving the change, but they re going to have to respond to it or they ll be left behind 28

29 Energy Storage Issues for Federal Regulators Top Initiatives on FERC s website are indicative of FERC s hot topics. Some of these are: Natural Gas Electric Coordination Smart Grid Demand Response Integration of Renewables Order No Transmission Planning and Cost Allocation Electric Reliability All of these initiatives can be enhanced by energy storage 29

30 FERC Order Nos. 784 and 784-A Goal: Enhance competition and transparency of energy storage devices in public utility operations Allows third-party sales of reactive supply and voltage control service and regulation and frequency response service to transmission providers, either at rates capped at the provider s OATT rate for the same service or, if provider uses a competitive solicitation for ancillary services, at market-based rates New accounting/reporting requirements New electric plant O&M expense accounts must report on use of energy storage devices As of January 1, 2013, must file FERC Forms Nos. 1, 1-F, and 3-Q, Annual and Quarterly Reports 30

31 Energy Storage in ISO/RTO Markets NYISO FERC approved new market rules for Limited Energy Storage Resources to provide regulation in May 2009 ISO-NE Operating a five-year Alternative Technology Regulation Pilot Program PJM MISO CAISO ERCOT Implemented a frequency-based signal for energy storage resources in March 2009, allow resources to self-manage energy and capacity Recognizes energy storage as different from generation and demand response, but still considering products that would support storage applications FERC approved new market rules for non-generator resources to provide ancillary services in 2010, and further expanded those rules with regulation energy management in 2011 Exploring feasibility of Energy Storage Pilot Project and an ancillary services market redesign to better accommodate storage 31

32 Energy Storage in California First energy storage bill in the U.S. (AB 2514) Passed in 2010 California PUC established first storage targets for utilities under the Renewables Portfolio Standard (RPS) Investor-owned utilities (IOUs) to collectively procure 200 MW of storage capacity by 2014; 1,325 MW by 2020 Applies to PG&E, SoCal Edison, and SDG&E Flexibility to choose storage technologies Other energy storage initiatives Demand-side response Long-term procurement planning Resource adequacy programs 32

33 Energy Storage in California The Implementation Process at the California PUC First phase (August, 2012) identified 20 end uses for storage under four broad categories Renewables firming Demand-side management Distributed energy support Transmission (Ancillary Services) Second phase (September, 2013) mandates energy storage usage under RPS or other programs Deferral available for up to 80% of biannual procurement targets if cost-effective projects unavailable 33

34 Energy Storage in New York New York Green Bank (NYSERDA) LIPA RFP NY-BEST Commercialization Laboratory Governor Cuomo s April 24, 2014, energy modernization initiative: calls for a fundamental shift in utility regulation and encourages use of new technologies to curb energy usage 34

35 Questions? Michael Stosser Of Counsel Sutherland, Asbill & Brennan LLP

36 Flywheel Energy Storage Systems: Beacon Power, LLC Aaron Bullwinkel, Beacon Power, LLC Association of Corporate Counsel 36

37 Beacon Power: Who We Are Global leader in flywheel energy storage systems Develop, design, build, and operate flywheel energy storage systems Offer the largest commercially available composite flywheel Designed, built, and operate the largest flywheel energy storage plants in the world 37

38 Beacon Power Flywheel Beacon has the highest energy flywheel in commercial operation. ~7 tall, 3 in diameter 2,500 pound rotor mass Spins up to 16,000 rpm Max power rating 190 kw, 30 kwh/charge Lifetime throughput is over 4,375 MWh Capable of charging or discharging at full rated power without restriction Beacon flywheel technology is protected by over 60 patents Vacuum Chamber Composite Rim Motor/Generator Radial Bearings 38

39 Representative Flywheel Energy Storage Module 480V Switchgear & Cluster Controller 480V Step-Up Transformer Cooling System Flywheel Foundation (Flywheel Inside) Power Control Module System operation at any size from 100 kw to multi-mw power blocks 39

40 Market-Leading Performance Over 5.5 Million Flywheel Operating Hours Tyngsboro, MA 0.5MW Operating since 2008 Stephentown, NY 20MW Facility Operating since Q Hazle, PA 20MW Facility Initial COD Sep 2013 Full COD Jun % of regulation capacity provides over 30% Area Control Error correction 40

41 FERC Order No. 755 Frequency Regulation Tariffs Prior to Order No. 755 Frequency Regulation ( FR ) was paid on capacity + lost opportunity cost ( LOC ) irrespective of performance FERC: current compensation fails to acknowledge inherently greater amount of frequency regulation service being provided by faster ramping resources Performance measured as mileage ; i.e. sum of up and down movement Order No. 755: RTOs/ISOs implement two-part payment to compensate resources on the actual service provided Capacity payment (including LOC) Performance payment (adjusted for accuracy) ISOs implementing with slight variations 41

42 Frequency Regulation Mechanics Flywheel Energy Storage Facility bids a regulation price in wholesale market (NYISO has real time and dayahead regulation market; PJM has real time market) ISO clears the market based on competitive bids ISO sends Automatic Generation Control ( AGC ) signal to resources dispatched in frequency regulation market (injecting or absorbing energy) Flywheel Energy Storage System responds to AGC signal and is scored on accuracy by ISO Accuracy score impacts performance payment 42

43 Flywheel Regulation Signals - ISOs Substantial differences in how ISOs dispatch fast resources currently. Markets are still developing on how to best fully utilize these plants. 43

44 Flywheel Energy Storage System Performance Stephentown, NY Facility 12 month period ending November 30, 2013 Overall plant availability has been 99.1% 0.1% forced outage rate caused by Beacon equipment 98% accuracy 44

45 Thank You Aaron Bullwinkel General Counsel Beacon Power, LLC

46 Questions? 46

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