Analyze. Simplify. Implement. Affecting Economics Of Electricity … · 2009-07-08 · Analyze....

Analyze.Simplify.Implement.p

Factors Affecting Economics Of Electricity Storage Projects

In Competitive Electricity MarketsIn Competitive Electricity MarketsPresented by

Rahul Walawalkar Ph.D., CEM, CDSM

C t i d E S l ti Ltd

Rahul Walawalkar Ph.D., CEM, CDSMSr. Energy Consultant

Customized Energy Solutions Ltd.1528 Walnut Street, 22nd FloorPhiladelphia, PA 19103 USA

Phone: 215‐875‐9440Fax: 215‐875‐9490

Presented at thePresented at theIAEE International Conference IAEE International Conference 20092009,,

Fax: 215 875 9490info@ces‐ltd.comSan FranciscoSan Francisco

Analyze.Simplify.Implement.

Agenda:Agenda:

• Energy Storage Technologies & Electricity Markets

• Factors affecting Economics of EES– EES Design, performance & capabilities

M k t D i R l & B i– Market Design, Rules & Barriers

– Project Financing– Other Factors (Fuel price, environmental regulations & competition)Other Factors (Fuel price, environmental regulations & competition)

• Questions ???

2


Overview of Electricity MarketsOverview of Electricity Markets

3Source: FERC: http://www.ferc.gov/industries/electric/indus‐act/rto/rto‐map.asp


EES for Electric Utility Applications

ts Available for commercial order

o Preconstruction and licensing period

EES for Electric Utility Applications

• Pumped Hydro Energy Storage

o Preconstruction and licensing period

C Finalized cost estimateDesign/construction period

l First commercial service

at

I 2nd plant in service

• Compressed Air Energy Storage

• Sodium Sulfur (NAS)

pa 3rd plant

C <--estimate actual--> 4th plant 5th plant

t Development period

I cost estimate Mature plant cost---------->

n Simplif ied cost estimate w ith incomplete data

• Flow Batteries– Vanadium Redox (VRB)Zinc Bromine (ZBB)

NASp p

U– Zinc‐Bromine (ZBB)

• Long‐duration (15 Minute) Flywheels

ZBB

VRBFlywheel

4

VRBFlywheel


Opportunities for Energy StorageOpportunities for Energy Storage

Energy Arbitrage Ancillary Services

Regulation O ti ROperating ReservesVoltage Support

Installed CapacityInstalled Capacity Deferral of investment in

Peaking Generation Transmission & Distribution

Supporting integration of renewables

5


Factors Affecting EES EconomicsFactors Affecting EES Economics

EES Design, Performance & CapabilitiesEES Design, Performance & CapabilitiesTechnology selection

Power & Energy ratingPower & Energy rating

Life expectancy

R d T i Effi iRound Trip Efficiency

Response rate & any other operating considerations

Footprint & any special permitting requirements

Capability to meet requirements for different markets

6


EES Selection: Discharge Time & System Power RatingEES Selection: Discharge Time & System Power Rating

Source: Electricity Storage Association 7


Round Trip Efficiency & EES UtilizationRound Trip Efficiency & EES Utilization

8


Net Revenues with different CAES Configurations Net Revenues with different CAES Configurations

CAES Configuration~51% increase over daily operation

MW

S o gu a oHeat RateEnergy Ratio

enue

$ / M Power Ratio

Ramp rate Response time

Ann

ual R

ev Response time Storage Duration

0.50 0.75 1.00 (Daily) 1.00 (Monthly)

A

Power Ratio

9



Market DesignMarket DesignAccess to various markets for energy, ancillary services and capacitycapacity

Generation Supply mix & Demand Curve

Locational factorsLocational factors

Electric transmission network & interconnection

10


Comparison of ISOs/ RTOsComparison of ISOs/ RTOs

11


Recent changes in Market DesignRecent changes in Market Design

• FERC Orders – 890: open regulation markets to non‐gen resources890: open regulation markets to non gen resources – 719: demand response and long term power contracts

• PJM & NYISO opened up ancillary service markets for d d d ddemand side resources during 2007‐08

• ISO‐NE initiated pilot program for alternative technologies participation in regulation markettechnologies participation in regulation market

• Creation of a new category for ancillary services to remove barriers for energy limited resourcesgy– NYISO: Limited Energy Storage Resources (LESR)– MISO: Stored Energy Resource (SER)

• CAISO has proposed a EES Pilot for ancillary servicesCAISO has proposed a EES Pilot for ancillary services

12



EES Revenues & CostEES Revenues & Cost

On Peak Energy Revenues & Off Peak Costs

Ancillary Service Revenues

Capacity revenues

Interconnection costs

Natural Gas priceNatural Gas price

13


Location Location LocationLocation, Location, Location

• NYISO • PJMNYISO

NY WestNY

EastWest

Central

East

NYC

West

South

• PJM East: AECO, DPL, JCPL, METED, PECO, PPL, PSEG, RECO

• PJM Central: PENELEC, APSPJM South: DOM BGE PEPCO

• NYC: NYC, Long Island• NY East: Capital, Hudson Valley, Millwood,

DunwoodieNY West: West Genesee Central Mohawk

14

• PJM South: DOM, BGE, PEPCO • PJM West: COMED, AEP, DAY, DUQ

• NY West: West, Genesee, Central, Mohawk Valley, North


PJM –NYISO LMP Profiles (2001‐09*)PJM NYISO LMP Profiles (2001 09 )

15* Partial year data as of June 2009


Effect of Location & Round Trip Efficiency on Net RevenueEffect of Location & Round Trip Efficiency on Net Revenue

16


Effect of Natural Gas Price in NYISOEffect of Natural Gas Price in NYISO

17


Average Daily LMP Curves for each month in NYC (2001‐09)Average Daily LMP Curves for each month in NYC (2001 09)

18


Ancillary Service RevenueAncillary Service Revenue

19


Regulation Price Profiles NYISO (2001‐09)g ( )

20


Probability Curve for Expected Regulation RevenuesProbability Curve for Expected Regulation Revenues

21


Capacity CreditCapacity Credit

NYISO has a locational ICAP requirement80% for NYC97.5% for Long Island

PJM R li bilit P i i M h i (RPM) t tPJM uses Reliability Pricing Mechanism (RPM) to set up locational capacity pricesFuture capacity prices will be influenced byFuture capacity prices will be influenced by

demand growth generation addition / retirementsgeneration addition / retirementscost of new generation technologies

22


Other Factors Affecting EES EconomicsOther Factors Affecting EES Economics

Financing FactorsCapital CostsReal estate and taxes Cost of borrowingCost of borrowingConstruction & permitting period

2323


Impact of capital cost on economics of CAES in NYImpact of capital cost on economics of CAES in NY

24


Other Factors Affecting EES EconomicsOther Factors Affecting EES Economics

Transmission / Distribution UpgradesImpact of wind & renewable integrationImpact of environmental regulations

Renewable Portfolio Standard mandatesNYS 15x15 Program InitiativeC b TCarbon Tax

2525


Transmission InfrastructureTransmission Infrastructure

26National Interest Electric Transmission Corridor


PJM: Proposed new transmission projectsPJM: Proposed new transmission projects

27

Source: PJM


Impact of RenewablesImpact of Renewables

• NYISO is anticipating more than 3000 MW of wind being added on the grid in next 3 4 yearsadded on the grid in next 3-4 years

• Represents around 10% of peak load for NYISO– 20-30% of off peak loadp

• May result in increased regulation and ancillary service requirementsC i th f bit b l i ff• Can improve the case for energy arbitrage by lowering off peak prices

28


Occurrence of Negative LMPs in NYISO ZonesOccurrence of Negative LMPs in NYISO Zones

29


ConclusionsConclusions

• Electricity markets across US allow or are working on allowing EES i i i ill i & i kto participate in energy, ancillary services & capacity markets.

• The economic feasibility of EES will depend on factors including– Design parametersDesign parameters

– Market Structure and location

– Ability to capture multiple revenue streams

Fi i– Financing

– Environmental regulations

– For large scale integration of EES it is important that technology g g p gydevelopers and market participants, as well as potential investors understand these factor while determining value proposition of EES for different applicationsEES for different applications.

30


AcknowledgementsAcknowledgements

• Co‐authors & Colleagues Netra Thakur Rick Mancini and Jim Harvilla– Netra Thakur, Rick Mancini and Jim Harvilla

• I would also like to thank– Dr. Jay Apt & Dr. Lester Lave (CMU)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

Carnegie Mellon Electricity Industry Center (CEIC)– Carnegie Mellon Electricity Industry Center (CEIC)– New York State Energy Research Administration (NYSERDA)– National Energy Technology Labs (NETL)

31

Analyze.Simplify.Implement.p

QUESTIONS ???QUESTIONS ???QUESTIONS ???QUESTIONS ???Dr. Rahul WalawalkarDr. Rahul Walawalkar

215215‐‐875875‐‐94409440rahul@cesrahul@ces‐‐ltd.comltd.com

l dl d

C t i d E S l ti Ltd

www.ceswww.ces‐‐ltd.com ltd.com

Customized Energy Solutions Ltd.1528 Walnut Street, 22nd FloorPhiladelphia, PA 19103 USA

Phone: 215‐875‐9440Fax: 215‐875‐9490Fax: 215 875 9490info@ces‐ltd.com

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