Energy Storage: Yes, A Game Changer

Transcription

1 Energy Storage: Yes, A Game Changer Jason Burwen NCSL Capitol Forum December 6, 2016

2 Energy storage is the technology of the future Currently deployed and providing services

3 Storage is in all parts of the grid And in microgrids

4 Projects operating across the U.S. Several MW-scale projects have 8+ years of operations Source: DOE Database

5 Storage costs decreasing rapidly Source* Li-ion Cost Reduction Li-ion Cost Trajectory IHS 52% ( ) 50% ( ) UBS 50% ( ) 55-65% ( ) BNEF 60% ( ) 35-50% ( ) *IHS estimates system cost; UBS & BNEF estimates cell costs 5

6 Installed Cost ($/kw) Installed Cost of Capacity 100 MW / 4-hour Lithium-Ion Battery Storage Sources: ESA Calculation from IHS, GTM, BNEF, Navigant $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- Typical Gas CT Lower estimate from EPRI 2016 Energy Storage Cost Summary for Utility Planning: Executive Summary. EPRI, Palo Alto, CA: Post-2020, there may never be another peaker built in the United States -- very likely you'll be just building energy storage instead. -- Jim Robo, CEO, NextEra

7 Energy storage: not if, but when IN THE U.S. annual installation in 2021 expected to be over 2,100 MW-- 9x installation in and distributed storage is expected to rise from 15% to over 50% of annual installations by Source: ESA/GTM

8 Source: ESA/GTM

9 Duration 1 Sec 1 Min 1 Hr 4 Hrs 12+ Hrs Main types of energy storage Grid Stabilization Network Capacity Bulk Supply Pumped Hydro Flow Batteries (V, Zn, Na+) Compressed Air Molten Salt Customer Thermal Batteries (Li+, Pb, NaS, Ni) Flywheels 1 kw 10 kw 100 kw 1 MW 10 MW 100 MW 1 GW Power

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11 Storage offers many applications Bulk Services Bulk Energy Services Electric Time Shift Electric Supply Capacity Curtailment avoidance Ancillary Services Frequency Response Ramping / Load Following Regulation Operating Reserves Voltage Support Black Start Network Services Transmission Services Upgrade Deferral Congestion Relief Distribution Services Upgrade Deferral Voltage Support End User Services Energy Management Services Power Quality Power Reliability / Outage Mitigation Retail Energy Time Shift Demand Charge Management and can provide these services interchangeably over time, depending on location Source: EPRI/Sandia National Laboratory

12 Why is storage important? Storage optimizes use of the grid & enables system transformation Saves households & businesses money reduce spending on excess capacity to meet peak system & local demands, optimize use of grid assets lower rates Makes the grid more reliable & resilient balancing supply & demand fluctuations; mitigating supply disruptions and outages; managing planning uncertainty Integrates more clean & distributed energy compensating natural variability of renewables and making them dispatchable; increasing DER hosting capacity Creates businesses & jobs new, growing industry offer investment and employment opportunities across the map

13 Peak capacity is expensive Top 1% of MA hours = 8% of MA cost ($680MM/yr) Top 10% of MA hours = 40% of cost ($3B/yr) SOURCE: MA DOER State of Charge

14 Peak capacity is expensive Top 1% of MA hours = 8% of MA cost ($680MM/yr) Top 10% of MA hours = 40% of cost ($3B/yr) SOURCE: MA DOER State of Charge

15 Taming peaks is key From Massachusetts 2016 State of Charge study on benefits of 1,700 MW of storage Reduced peak capacity Energy price reduction Generator cost reduction T&D deferral DER integration Ancillary service cost reduction $- $500 $1,000 $1,500 $2,000 50% of benefit is reducing system peak 25% of benefit is reducing local peak (T&D deferral + DER integration) SOURCE: MA DOER State of Charge

16 System Load Example: peak capacity replacement Peaking Generation Avg ~4% utilization (Source: GE) Load Following Generation Baseload 0% 100% Percent of Annual Hours

17 System Load Example: peak capacity replacement Storage Discharge Storage Charge Load-Following Generation Baseload Hour

18 System Load Example: peak capacity replacement Storage Discharge Storage Charge Load-Following Generation Baseload Hour

19 Storage as system capacity SCE (California): 250 MW storage economically selected for local capacity requirements following unit retirement Preceded CA target APS (Arizona): 10% of peak capacity additions to come from storage through 2022 KIUC (Hawaii): 13 MW / 4-hour storage for delivering solar on peak 19

20 Load Example: Distribution upgrade deferral Hour Substation Storage AND/OR Behind-the-meter Storage Energy storage enables deferring or avoiding substation and circuit upgrades by reducing local peak demands & increasing power quality/reliability

21 Storage as network capacity AEP (Texas): 1.5 MW / 2-hour storage is 15-25% cost of circuit upgrade for reliability enhancement RMP (Utah): 5 MWh storage is 33-66% cost of circuit upgrade for voltage support Boothbay (Maine): 3 MWh storage is 33% cost of transmission line HECO (Hawaii): 1 MW aggregated storage to avoid distribution system upgrades from high PV ConEd BQDM (New York): storage as part f DER procurement for peak load reduction at 50% of substation upgrade 21

22 Example: Multiple use storage Flexibility to provide multiple services makes projects more economic SOURCE: RMI

23 Multiple use storage On a budget of $7 million per year, we are saving about $1 million per month, which allows us to avoid raising rates on our customers, who are also the citizens of our village. --Donald Harrod, Minster OH Administrator Primary service: frequency regulation Secondary service: avoided circuit upgrades Tertiary service: peak load charge avoidance Integrated with municipal solar 23

24 Example: Infrastructure resilience Rapid energy storage deployment underway to mitigate Aliso Canyon gas shortage 65 MW to be built and placed in service <6 months from contract approval Projects will be able to offer other grid services into future

25 Key Findings from State of Charge (1) The biggest challenge to achieving more storage deployment in Massachusetts is the lack of clear market mechanisms to transfer some portion of the system benefits (e.g. cost savings to ratepayers) to the storage project developer. 25

26 State Policy on Storage Shared conversations 26

27 Policy has not caught up with tech Grid was not designed with storage as option Lack of market structure to value and compensate storage for its performance Hard to monetize benefits (T&D deferral) Unmonetized system benefits (fleet efficiency) Limits to multiple values (wholesale & retail/end-user, transmission & generation) Structural disincentives Utilities know how to build power plants and wires, why fix what ain t broke? Regulators have not yet given clarity and certainty to utilities that cost-effective storage will be approved 27

28 4 Pillars for State Storage Policy System Benefits of Storage 28

29 Recent State Regulatory & Legislative Energy Storage Activities (As of Q3 2016) Regulatory Activity Legislative Activity Leg + Reg Activity

30 Shared State Policy Efforts At utility commissions Long-Term Resource Planning Demos, Pilots, or Incentive Programs All-Source RFPs & Procurement Targets Interconnection, Grid Modernization, & Distribution System Planning Rate Design & DER Compensation In legislatures Ownership Rules Procurement Targets Tax Credits & Rebates Interconnection & Siting Process Enhancements Demonstration & Pilot Funding

31 Procurement Bills Examples MA H (passed) Directed Dept of Energy Resources to determine if a procurement target is appropriate, and if so, set one for 2020 Redefined storage to allow distribution utility procurement Recommended examining use of efficiency funds MD H.B. 787 Directed PSC to determine if a procurement target is appropriate, and if so, set one for 2020 & 2025 CA A.B (passed) Directed PUC to establish procurement target for 2020 Qualifies storage for resource adequacy OR H.B (passed) Established procurement target of minimum 5 MWh and max 1% peak capacity by 2020 for each utility Directed PUC to establish a valuation method for storage Directed utilities to propose procurement plans by 2018 CT S.B (passed) Authorized energy storage as asset class eligible for clean energy resource procurement 31

32 Incentive Bills Examples MD H.B % tax credit to 2021 Limit $5K residential / $150K commercial HI S.B % tax credit to 2020, phase down to 15% Limit $10K residential / $500K commercial Separate credit for solar + storage MN S.F % tax credit to 2022 Limit $5K residential / $25K commercial $5MM limit per year MN S.F % rebate for systems made in state Minimum 40 kw / 1-hour systems Only for utility-controlled, customerowned systems NY A.B Exempted onsite energy storage from personal property tax assessment to

33 Other Bills Examples CA A.B (passed) Directs CA utilities to investigate up to 500 MW of additional distributed storage, focused on low-income residential and C&I customers Authorizes utilities to own behind-the-meter storage, not impede competitive provision CA A.B. 33 (passed) Removed minimum size limits for pumped hydro eligibility for storage target Ordered a study of bulk storage CA A.B (passed) Established a PUC technical panel to arbitrate interconnection disputes CT S.B (passed) Directs distribution utilities to propose storage demonstration projects, subject to approval CT S.B. 272 (passed) Makes storage eligible asset for microgrid grants & loans for resiliency WA H.B (passed) Authorized $13MM for demonstration projects including storage 33

34 Other Bill Concept Examples Signals of Value Establishment of timevarying rates Clean Peak Standard All-source procurement Pilot all-source RFPs for distribution capacity/peak load reduction Include in all planning Direct utilities to include in resource planning Enable grid access Facilitate interconnection Clarify ownership ability 34

35 Thank you Jason Burwen

36 Parking Lot

37 EPRI: Installed Costs 2017 Energy Storage Cost Summary for Utility Planning: Executive Summary. EPRI, Palo Alto, CA:

38 Energy storage: not if, but when (2) Profitability for non-residential customers in cities already 58% of profitable buildings provide 71% of demand Average optimal battery size of 31 MWh per profitable building Source: McKinsey

39 Energy storage: not if, but when (3) Medium C&I Energy Storage Returns from Demand Charge Management Alone IRR 5%-10% IRR 10%+ IRR 5%-10% IRR 10%+ Source: GTM Research The Economics of Commercial Energy Storage in the U.S.: The Outlook for Demand Charge Management

40 Source: SEPA Storage unlike other DERs

41 Key is unlocking value BTM storage capable of multiple services with value exceeding today s unit costs SOURCE: RMI

42 Storage opens path to more DERs Increases DER hosting capacity And increases value of paired DR, DG More efficient grid utilization Defer substation and feeder upgrades Increase circuit reliability & power quality Meet system capacity needs 42

43 Highlights of Recent State Activities CA MA: Bill authorizing energy storage Re-orientation of Self-Generation procurement target Incentive Program (SGIP) to storage WA: Opened docket on storage in Bills: doubling SGIP funds; expanding IRPs utility procurement; streamlining interconnection OR: Draft guidelines for storage procurement proposals Aliso Canyon procurements on 6 month timeline CT: Utility planning standards for storage in distribution grid NY: BQDM procurements of storage for TX: First storage application for cost peak load reduction recovery as distribution First municipal storage target: NYC HI: Pilot residential TOU with $ MWh by 2020 $0.36 midday to on-peak spread AZ MD: Distribution transformation First utility storage procurements proceeding, with valuation of storage Opened docket discussing storage NY/MA/HI: Solar + storage role in RPS compensation 43

44 PJM leading market (270 MW) Innovative market for fast-responding Frequency Regulation CAISO, NYISO, & ISO- NE developing markets with some storage ERCOT, MISO, & SPP all considering new rules to enable storage Wholesale Markets

45 Relevant FERC Orders to Date Order 890 participation of non-generator resources in energy & ancillary services markets Order 719 comparable treatment of demand response in all market products Order 745 compensation of demand response in wholesale markets Order 755 pay for performance (speed, precision) in frequency regulation Order 784 allows 3 rd party provision of ancillary services Order 819 frequency response bilateral markets Order minute settlements & shortage pricing Underway now: AD16-20 on market participation of storage RM16-12 on storage interconnection RM16-6 on compensating primary frequency response AD16-25 on multiple-use storage

46 PJM Regulation Performance Two control signals: RegA and RegD

47 PJM Regulation Performance RegD performance allows 30% lower regulating reserve requirement for same grid stability RegD is thus paid more for speed/precision ( pay-for-performance ) RegA asset clears market RegD resources paid as multiplier of RegA assets, using a ratio based on effective MW value (as much as 2.9x RegA)

48 PJM

49 ERCOT Fast Frequency Response

50 CAISO Avoided Starts From NREL (2015) Operational Benefits of Meeting California s Energy Storage Targets

51 ISO-NE Capacity In 2015, more than 50% of peaker starts were for 3 hours or less, relative to nameplate Analysis of Velocity Suite/EPA Carbon Emissions Monitoring System data on all coal- and gas-fired generation units in ISO-NE with annual net capacity factor less than or equal to 10% over the period January 1, 2015 December 31, 2015.

52 ISO-NE Capacity (2)

53 Different asset capabilities Presumptions of conventional assets Slow ramp rates long intervals & no market for fast service Start-up/shut-down costs uplift payments Fuel costs marginal unit cost dispatch Inertia governor control Single function modeled only as supply or load & only generation or transmission service Battery storage has different capabilities Fast/instantaneous ramp shorter market intervals & markets for fast services No start/stop cost prices for flexibility No fuel costs system value dispatch Inverter-based no governor requirement Interchangeably supply or demand model as negative generation, not load & interchangeable generation and transmission service

54 Keys for storage market design (1) Participation clarifying tariffs & qualification so storage can engage in Energy, Ancillary Services, and Capacity Pay-for-performance compensating the speed and precision of storage to allow more efficient grid operations Capacity enabling energy-limited assets to effectively provide capacity value Price formation create products to value and compensate unpriced grid services Ramping, frequency response, avoided start/stop, positive DR, VLR, etc Wholesale treatment ensuring wholesale rates for wholesale services

55 Keys for storage market design (2) Multiple use enabling storage to provide both transmission/reliability service and generator services Distributed resources enabling behind-themeter storage to participate in wholesale markets Interconnection study of storage as highly controllable resource unlike generation/load Transmission planning storage considered as part of infrastructure options