Evaluating Batteries: Deployment, Integration and Market Drivers

Evaluating Batteries: Deployment, Integration and Market Drivers

Evaluating Batteries: Deployment, Integration, and Market Drivers TechAdvantage 2018 Nashville, Tennessee February 27, 2018 Taylor Gunn, Lead Economist Knowledge Exchange Division tgunn@cobank.com

Pumped hydro dominates existing energy storage capacity, but growth is focused on lithium-ion technology Existing storage capacity by technology Growth in energy storage by technology since 2013 Thermal Storage 3% Electrochemical 3% Electromechanical 1% Electrochemical Thermal Storage 126 466 Electromechanical 24 Pumped Hydro Storage 93% Source: Department of Energy Storage Database Pumped Hydro Storage 0 0 100 200 300 400 500 Megawatts (MW) Note: Thermal storage excludes concentrated solar power projects. 3

Li-ion batteries are growing outside California and PJM January 2012 January 2018 Source: Department of Energy Storage Database, Velocity Suite 4

Use-cases for Li-ion batteries are moving beyond frequency control Megawatts (MW) 350 300 250 200 150 Cumulative Operating Capacity of Li-Ion Batteries by Use-Case Electric Energy Time Shift Electric Supply Reserve Capacity - Spinning Black Start Frequency Regulation 100 50 0 2011 2012 2013 2014 2015 2016 2017 Source: Department of Energy Storage Database Electric Supply Capacity Ramping Other 5

Lithium based batteries dominate the U.S energy storage pipeline Megawatts (MW) 400 350 300 250 Future Battery Installations by Technology Zinc Air Vanadium Redox Flow Ice Thermal Electrochemical Capacitors 200 Lithium Ion 150 100 50 0 Contracted Source: Department of Energy Storage Database Accessed February 13, 2018 Under Construction 6

Expanding global cell production capacity will drive down the cost of Li-ion batteries Source: International Renewable Energy Agency 7

Experience curves suggest 12% annual decline for utility-scale Li-ion battery systems Source: The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017) 8

Battery cells, modules, and packs

Typical components included in the capital costs for battery storage systems Sources: Lazard's Levelized Cost of Storage Study 3.0 10

Industry participants expect ~10% annual decline in the cost of utility-scale systems moving forward $818 Lithium-ion battery costs are falling ($/kwh) $202 $263 $667 Li-ion Battery Cell EV Battery System Stationary Li-ion Battery System $365 $283 $255 $202 $229 $178 $155 $157 $136 $136 $120 $106 $124 $94 2015 2016 2017 2018 2019 2020 Note: The stationary battery system represents a six hour 10 MW, 60 MWh Li-ion system. The costs shown for stationary batteries include modules, racking, BMS, balance of systems, power conversion system, engineering, procurement, and construction costs. The units for capital costs for stationary Li-ion systems are total investment divided the rated output of the system, 60,000 kwh in this case. Sources: Nature Energy 2, 17125 (2017), Lazard's Levelized Cost of Storage Studies 1.0-3.0

Examples of electric distribution coops currently deploying battery storage

Load shaping is driving interest in batteries among electric distribution coops 13

How are coops managing the risks associated with investing in batteries? Battery Service Agreements Strong Vendor Partnerships Output Guarantees Contracts Extend Beyond Payback Life-cycle Management Member Engagement 14

electric distribution cooperative northwestern Montana 66,000 meters

What does the future look like for Flathead Electric Cooperative? traditional electric distribution provider vs. energy facilitator

Peak Time Program: water heater DRUs, GE smart appliances, in-home displays Transformative Technology employee/member work group: solar panel & Tesla Powerwall demonstration project Electric Vehicle employee/member work group: public ChargePoint and employee-only Clipper Creek workplace charging stations

Transformative Technology Workgroup: - review impacts of disruptive technologies and netmetering - review impacts on the utilities revenues given current rate design - analyze the impact of solar distributed generation and battery backup on a residential member

Tesla Powerwall 1: - uses only 90% of battery capacity - 3.2 kw input/output (2 hour charge/discharge period) - SolarEdge Inverter software - simple controls: encourages a Set and Forget strategy - data is robust and easy to download - Modes - Charge excess PV power - Charge from PV power - Charge from PV and grid power - Discharge to maximize export - Discharge to minimize export - Maximize self-consumption (default setting)

Lessons Learned: - Member-owned Wi-Fi problematic - Modes allow member to address several different rate structures - TOU rates: energy arbitrage - Demand rates: peak shaving - Real Time rates: maximizing self-consumption - Modes can be set for each hour in each day of a week - currently have five different settings - would not accept 12 different monthly settings

Member Perspective: - Reduced electric bill - Back up power supply for utility outages

Utility Perspective: - Threat, challenge or opportunity - Reduce intra-class subsidization - Make win-win for member and cooperative

Next steps: - Completing an analysis to implement demand charges for residential and small general service members - Establish TOU rates for EV and DER members - Analyze potential incentives for utility control of memberowned batteries