Quite   Stationary Grid-level Energy Storage in the U.S.

Major Issues and Policy Options
Quti  

Faaez Ul Haq Professor Harold Feiveson WWS 402: Renewable Energy and the Electric Grid in the U.S.
 

Executive Summary To adequately meet the reliability needs introduced by integration of renewable resources and smart grid technologies into the U.S. grid, a careful planning of bulk and distributed energy storage systems into the electric grid is necessary. These storage systems will provide better, more economically efficient ancillary services that ensure quality of electricity supply, mitigate the stress on the national grid by time and load shifting energy capacity and allow greater penetration of renewable energy resources into the national grid. Energy storage systems can be broadly categorized into bulk and distributed systems. While large-scale bulk storage systems like pumped hydro and Compressed Air Energy Storage (CAES) are better suited to providing long-term load shifting services, which do not require a fast response time, distributed sources with a short response time, such as batteries and flywheels are best suited for short-term services such as Frequency regulation. Each of these resource categories has several issues of interest, discussed in detail in this paper, that finally inform the following set of policy recommendations: 1) FERC should identify and eliminate systemic opportunities for discrimination against storage systems by transmission providers: FERC should ensure that there is no opportunity for undue discrimination against storage systems by transmission providers, by reviewing tariff structures and mechanisms used by transmission providers and BAs to compensate independent providers of electricity. FERC has already proposed rules that allow storage devices to compete fairly with generating sources in frequency and voltage regulation markets and standardized the way Available Transfer Capability (ATC) metric, which directly affects prices, is calculated1 , but the same rules should be extended to nonregulation, wholesale electricity markets as well. 2) FERC should mandate that quality of electricity supply be factored into pricing: Quality of electric supply should be incorporated into compensation for regulation service, instead of compensating the operator purely on the basis of energy output and the opportunity cost of foregone sales from the generation capacity reserved for regulation.                                                                                                                
1  Docket  Nos.  RM05-­‐17-­‐000  and  RM05-­‐25-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐

meet/2007/021507/E-­‐1.pdf,  accessed  on  Apr  28th  2011  

 

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Currently, only the NYISO adjusts its compensation according to the accuracy of a system’s response by maintaining an index that tracks the accuracy of a regulating resource in following AGC dispatch signals.2 3) FERC should mandate that the cost of additional regulation service be borne by the party introducing supply variability: The cost of additional regulation services required due to the variability in a system’s output should be shifted to the system operator, to accurately reflect the real cost of the energy produced. Operators of wind farms, e.g., could be required to install regulation capacity to offset the variability of their system’s output, or the compensation provided to the operator be adjusted according to the variability of their output. 4) Tax and/or Energy Credits should be provided for Storage Systems: The importance of storage technologies to the successful integration of ERG and smart grid technologies into the grid should be recognized and tax and/or energy credits, similar to the ones extended to renewable resources should be introduced. This will encourage investment in the high-risk area of cutting edge grid-level storage technologies, especially considering the inherently risk-averse nature of these technologies’ primary customer, i.e., the utilities. 5) DOE’s Loan Guarantee Program should be continued: Department of Energy’s Loan Guarantee Program for renewable resources has been instrumental in starting up several high-risk, high-return projects. NYISO’s 20 MW flywheel plant is one example of the same. As of November 2010, the Obama administration was considering abandoning the DOE loan guarantee program and shifting the remaining funds to a pool for Section 1603 investment credits3 . While this may benefit some players in the renewable resource market, such as wind generator operators, it may prejudice the position of others, who depend on loan guarantees to undertake high-risk projects that are crucial to the evolution of the grid in the U.S.

                                                                                                               
2  FERC,  “Frequency  Regulation  in  the  Organized  Wholesale  Power  Markets”,  Docket  Nos.  

RM11-­‐7-­‐000,  AD10-­‐11-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐ meet/2011/021711/E-­‐4.pdf,  accessed  on  Mar  20th  2011,  pp.7   3  Lane,  Jim,  Obama  May  Kill  Key  DOE  Loan  Guarantee  Program,     “http://www.renewableenergyworld.com/rea/news/article/2010/11/obama-­‐may-­‐kill-­‐ key-­‐doe-­‐loan-­‐guarantee-­‐program,  accessed  on  Mar  26th  2011    

 

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Introduction It is hard to imagine the future of the electrical industry in the U.S. without viable grid-level4 energy storage options. While the sophistication of these storage systems can vary from a simple (yet expensive) pumped hydro system, to high-capacity batteries based on breakthroughs in advanced materials science, the degree to which these will be critical to the future of the electrical grid is undisputed. Some of the most critical issues that face the electrical industry today are inextricably tied to the ability (or inability) to store electricity at the grid level. In this paper, the need for grid-level energy storage is established, followed by an assessment of the different kinds of energy storage available, an analysis of how the storage could be used, and finally a presentation of the main findings and policy options. Why Storage? The following graph shows that electricity demand in the country is projected to increase at 1% every year through 20355 , when the country is expected to consume over 5 trillion kWh of electricity per year6 .

                                                                                                                4  Grid-­‐level,  in  this  context  means  1  MW  and  above  
5  U.S.  Department  of  Energy,  Energy  Information  Administration,  Annual  Energy  Outlook   2010  with  Projections  to  2035  (May  2010),   http://www.eia.doe.gov/oiaf/aeo/electricity.html,  accessed  on  Mar  1st  2011    

 

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Fig. 1) U.S. Net Electricity Consumption7 To meet this need, an additional 250 gigawatts of generating capacity will have to be put in place.8 At the same time, the expansion of and shifts in national cultural imperatives, especially as they relate to distributed grid capacity and electrical vehicles, growth of embedded renewable energy sources in the grid and the evolution of the smart grid, which will further stress the electrical grid’s generation, distribution and transmission capacity. Reliable and cost-effective grid-level energy storage can help address these concerns in the following four broad categories: 1) Ancillary Services at Scale: To maintain reliability and quality of service in electricity transmission, several Regional Transmission Organizations (RTOs)/Independent System Operators (ISOs) maintain wholesale electricity markets where about 130 Balancing Authorities (BAs) provide ancillary services such as Frequency and Voltage regulation, Load Following or Ramping and redundant capacity for reliability control (See Appendix A for a list of ancillary services provided by energy storage systems).                                                                                                                
7  U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage   Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  15th  2011     8  Ibid.,  the  generation  capacity  was  813  gigawatts  (GW)  as  of  2001  

 

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The most important of these services is Frequency regulation, whereby real power is injected or withdrawn from a system depending on its frequency deviations or power interchange imbalance over a scale of 10 seconds to several minutes. This is done with a view to providing steady power without significant frequency deviations. Both of these factors are measured by a single metric, the Area Connection Error (ACE), which is a measure of i) the offset between a BA’s scheduled and actual interchange9 and ii) the BA’s share in correcting the frequency of the interconnection. ACE is then used as the basis of Automatic Generation Control (AGC) signals that are sent to service providers (SPs) who can then bid on portions of the advertised load requirement10 . Upon a successful bid, the SPs must inject or withdraw energy from the grid at the specified time. It must be noted that Frequency regulation is different from Frequency response, which is the automatic and autonomous action of both generating sources and technically capable demand response consumers to respond to frequency shifts in the transmission. Frequency response does not require the BA to send out AGC signals, as is the case in Frequency regulation. While historically, generators have been used to provide most ancillary services, gridlevel energy storage systems are increasingly being deployed in RTOs and ISOs across the country to do the same. Not only are many of these systems more responsive to AGC signals from BAs than conventional generators, but under the right regulatory framework, they are more economically efficient too. In situations where generators are used to provide these ancillary services, they must be able to “ramp up” and “ramp down” by changing the output

                                                                                                               
9  Energy  transfers  that  cross  Interchange  boundaries   10  At  least  in  the  case  of  ISOs  and  RTOs  that  maintain  a  wholesale  market  for  electricity  

 

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of real power from a generating unit per time (usually measured as megawatt/minute)11 . Energy storage systems do the same by discharging and recharging, to ramp up and down, respectively. Flywheels and large-scale batteries, in particular, provide ACE correction rapidly12 . Fig.1 shows the dramatic difference in the responsiveness of conventional generators as compared to advanced energy storage systems. The green line is the required level of output, while the red line shows the resource’s actual response. It is important to note that further value is lost due to a mismatch between the AGC signal dispatched by the BA and the subsequent response by the operator, because the BA may have to solicit additional resources to balance the offset introduced by slow/inaccurate ramping energy resources.

Fig. 2) A comparison of a slow-ramping generator’s response with that of advanced energy storage

                                                                                                               
11  FERC,  “Frequency  Regulation  in  the  Organized  Wholesale  Power  Markets”,  Docket  Nos.   RM11-­‐7-­‐000,  AD10-­‐11-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐ meet/2011/021711/E-­‐4.pdf,  accessed  on  Mar  20th  2011,  pp.2   12  Ibid.  

 

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Electrical plants use spinning reserves13 to provide redundant capacity, in case another generator fails, to prevent unscheduled fluctuations in output. However, this requires the backup generators to be running at all times, without contributing to production. Using energy storage systems instead of conventional generators to provide ancillary grid services can potentially free up 1-3% generation capacity14 , which would be significant given the linear increase in electricity consumption in the U.S. through 2035. Some Balancing Authorities (BAs) in RTO and ISO markets provide unit-specific opportunity cost payments to independent sellers of electricity, who maintain generation capacity to specifically keep the ACE under acceptable limits15 . Compensation structures for ancillary services at the ISO/RTO level are biased against storage systems providing the same services (as compared to conventional generation sources). While new Federal Energy Regulatory Commission (FERC) initiatives, such as FERC Order 890, have opened regulation markets to non-generation energy technologies by categorizing them as (Limited) Energy Storage Resource (LESR or ESR), tariff structures in most ISO/RTOs disadvantage fast-ramping energy storage devices against conventional spinning reserves by including the opportunity cost of foregone sales from generation capacity set aside for frequency regulation in the compensation paid to the operators, while ignoring the speed of ramp up/down. This is problematic because a slow ramping, high-capacity regulating resource may put in a high amount of energy into the system, but still not provide useful regulation because of slow                                                                                                                
13  Unloaded  generation  that  is  synchronized  and  ready  to  serve  additional  demand.     14Beacon  Power,  Application  of  Fast-­‐Response  Energy  Storage  in  NYISO  for  Frequency  

Regulation  Services.  Retrieved  March  25th,  2011,  from   http://www.beaconpower.com/files/UWIG-­‐presentation-­‐April2010.pdf     15  FERC,  “Frequency  Regulation  in  the  Organized  Wholesale  Power  Markets”,  Docket  Nos.   RM11-­‐7-­‐000,  AD10-­‐11-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐ meet/2011/021711/E-­‐4.pdf,  accessed  on  Mar  20th  2011,  pp.2  

 

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ramp up, thereby needlessly increasing the cost of frequency and voltage regulation. Because advanced storage systems are more accurate in their response, service providers could have incentive to install them even with their higher installation cost per megawatt (MW) output capacity, if compensation structures at the ISO/RTO level are changed to accurately reflect the useful frequency regulation provided by the operator. In fact, tariff and compensation structures revisions proposed by FERC in 2009 and 2010 incorporated the accuracy of performance16 for balancing services into the compensation structure, instead of purely relying on the net energy input into the system, and NYISO has already adopted these revisions. 2) Embedded Renewable Generation (ERG) and Climate Change Initiatives (CCI): Recent climate change regulations and commitments, such as the Clean Air Act, Energy Independence and Security Act of 2007 and the Copenhagen Accords, which require or recommend carbon emission reductions, imply that there will be a significant shift in the resource mix of U.S. electricity generation.17 As the proportion of fossil fuels in the resource mix makeup decreases, renewable sources of energy will account for an increasing amount of the U.S. electricity generation capacity. Although under current policies, renewable sources are anticipated to contribute only about 14% of U.S.’s total electricity output in 2035, up from 10% in 200918 , this still implies that the electricity generated from renewable sources

                                                                                                               
16  Accuracy  in  this  context  means  the  speed  of  ramp  up/down.  Cf.  Fig  2   17  NERC,  Reliability  Impacts  of  Climate  Change  Initiatives:  Technology  Assessment  and  

Scenario  Development.  Retrieved  March  20th,  2011,  from   http://www.nerc.com/files/RICCI_2010.pdf.     18  U.S.  Department  of  Energy,  Energy  Information  Administration,  Annual  Energy  Outlook   2010  with  Projections  to  2035  (May  2010),   http://www.eia.doe.gov/oiaf/aeo/electricity.html,  accessed  on  Mar  1st  2011  

 

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will increase by 73% over the next 25 years.19 Nearly 50% of this added renewable capacity would be met by variable energy sources like wind and photovoltaic solar. (See Appendix D for the complete makeup of U.S. renewable energy portfolio in 2035). Because these energy sources rely on weather-based fuel (wind and sunlight, respectively), there is great fluctuation in their electricity output across time, and they are categorized into a separate class of resource called “Variable Generation” (VG). VG resources further accentuate the endemic frequency and load fluctuations in transmission systems and require buffer storage capacity to be feasible.20 In fact, in a seminal study sanctioned by the National Renewable Energy Laboratory (NREL) on the embedding of wind and solar resources into the electric grid found that with better utilization of existing pumped hydro storage systems, wind could provide 35% and solar 5% of the energy in the WestConnect group of utilities in the U.S.21 Weather-based fluctuation in output over time is especially problematic for wind generation: firstly because peak production for wind turbines usually occurs during off-peak hours of the day and secondly because large-scale integration of geographically diverse resources does not guarantee a sufficient decrease in output variability over time: while aggregate frequency variation over such resources may go down, operating experience in areas with large amount of wind resources such as the Columbia basin and western part of the ERCOT system has shown that variability and fluctuation of individual plants can correlate with that of others over distances of a few hundred miles for large weather                                                                                                                 19  Ibid.  
20  North  American  Electric  Reliability  Corporation  (NERC),  Potential  Reliability  Impacts  of  

Emerging  Flexible  Resources,  November  2010,   http://www.nerc.com/docs/pc/ivgtf/IVGTF_Task_1_5_Final.pdf,  accessed  on  March  16th   2011,  pp.1   21  NREL,  “Western  Wind  and  Solar  Integration  Study”,  May  2010,   http://www.nrel.gov/wind/systemsintegration/pdfs/2010/wwsis_final_report.pdf,   accessed  on  March  25th  2011,  pp.  277-­‐280  

 

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systems.22 Given that wind energy constitutes the fastest growing energy source in the U.S., with capacity growing 30% per year over the last five years alone23 and another 200 GW projected in the next ten years24 , large scale, inexpensive storage systems, such as pumped hydro or CAES will be necessary to accommodate the high volume of VG capacity embedded in the grid. 3) Smart Grid and Demand-Response (DR): Commenting on the importance of energy storage to smart grid technologies, a particularly imaginative blogger likened the smart grid to a computer: neither is particularly useful without storage.25 In any market with variability in supply and demand, an economically efficient outcome requires some level of elasticity in the supply and demand curves: in the face of higher prices, consumers scale back their consumption and suppliers ramp up their supply, and vice versa, until an economically efficient outcome is reached. In the wholesale electricity market, however, elasticity of electricity supply is severely limited by the fact that electricity produced needs to be consumed almost immediately and output of energy sources is relatively fixed either because they rely on time-dependent fuels, such as in the case of VGs, or because it is not economically feasible to completely shut down operating resources at times of low demand. An essential component of the smart grid and proposed DR programs is a variable pricing feature that would make the demand curve more elastic by letting consumers vary their                                                                                                                
22  North  American  Electric  Reliability  Corporation  (NERC),  Potential  Reliability  Impacts  of  

Emerging  Flexible  Resources,  November  2010,   http://www.nerc.com/docs/pc/ivgtf/IVGTF_Task_1_5_Final.pdf,  accessed  on  March  16th   2011,  pp.2   23  Ibid.  pp.  34   24  Estimates  of  proposed  and  conceptual  sources,  according  to  a  NERC  report.  Much  of  this   capacity  is  likely  not  to  actually  materialize,  but  the  figure  gives  an  idea  of  the  scale  of   interest  in  VG  resources   25  Katie  Fehrenbacher,  “Energy  Storage  for  the  Smart  Grid”,   http://gigaom.com/cleantech/faq-­‐energy-­‐storage-­‐for-­‐the-­‐smart-­‐grid/,  accessed  on  Mar  21st   2011  

 

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electricity consumption according to the price. However, for the smart grid and proposed DR programs to be truly successful, the supply curve needs to be made more elastic as well. This can be achieved through existing tools that BAs use for load management, specifically called Load Following and Electric Energy Time Shift.26 Load Following is the practice of changing power output in response to the changing balance between electricity supply and demand in the system. As in the case of Frequency regulation, spinning reserve generators are typically used to provide these services, but advanced storage systems, especially short-term distributed storage with a faster responsetime such as large-scale batteries and flywheels are better suited to provide Load Following services. Electric Energy Time Shift is the practice of storing energy when the demand, and therefore price is low, and selling the stored electricity back to the grid when consumption peaks in the day and prices are higher. For this purpose, long-term, more centralized storage, such as pumped hydro and compressed air energy systems (CAES) are more useful, because response time is not an issue and input/output can be scheduled along observed patterns over time. 4) Alleviating Pressure on the Current Grid: As electricity demand and sophistication of regulatory mechanisms increases, additional transmission and distribution infrastructure is required to deliver electricity to consumers and make wholesale electricity markets work. However, building transmission lines is a costly and time-consuming undertaking and even existing transmission lines experience very low capacity utilization

                                                                                                               
26  U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage  

Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  15th  2011,  pp.  18-­‐20    

 

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because they are built for high reliability during peak conditions.27 Building a mile of high voltage transmission lines can now cost several million dollars and obtaining rights-of-way and the necessary permits can take 5-7 years.28 In this context, a more time- and costefficient solution would be to use grid-level storage to mitigate the effect of higher consumption on the grid. Relatively small amounts of grid-level energy storage can help alleviate pressure on the current grid by storing power during times of low demand and dispensing it during peak conditions. E.g., according to an Electric Power Research Institute (EPRI) report, a 15minute energy storage device can provide continuous Frequency regulation, given that it can dynamically charge up and down in response to AGC signals.29 By building storage systems closer to the point of use, grid congestion is reduced during peak periods as well. Therefore, instead of building long transmission lines across interchanges to fulfill Load Shifting and Frequency regulation needs, distributed storage can be used to provide the same services and thereby defer or substitute the upgrade of transmission and distribution systems. Principal Findings: Various Storage Systems and Related Issues of Interest All electricity storage systems are not equal: to meet the spectrum of energy storage needs in the grid, storage systems vary by power ratings (from kW to MW) and energy discharge ratings (millisecond to hour scale) and each of them is better suited to a particular grid storage application than another. These storage systems can be broadly categorized into                                                                                                                
27  U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage  

Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  15th  2011,  p.  18   28  Schainker,  Robert  B.,  “Energy  Storage  Options  For  A  Sustainable  Energy  Future”,  IEEE,  p.5   29  Application  of  Fast-­‐Response  Energy  Storage  in  NYISO  for  Frequency  Regulation  Services.   Retrieved  March  25th,  2011,  from  http://www.beaconpower.com/files/UWIG-­‐ presentation-­‐April2010.pdf,  p.8    

 

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Bulk and Distributed systems, and in this section, two of the more important ones in each category are assessed for their suitability to different applications.30 (See Appendix B for an overview of more storage technologies and Appendix C for the criteria used). Bulk storage systems are better suited to “energy” applications, which include long-term services like Load Shifting because they have higher capacity but slower response time, whereas distributed systems are better suited for “power” applications, which include short-term services that require fast-responding storage systems, such as Frequency regulation.
Storage   Systems  

Mobile  Storage  

Stationary   Storage  

Electric/Hybrid   Vehicles  

Bulk  Storage  

Distributed   Storage  

CAES  

Flywheels  

Pumped  Hydro  

Batteries  

Fig. 4) Categorization of different storage systems

Compressed Air Energy Storage (CAES): With the lowest capital cost of storage, on a per kW-basis, and an AC-AC roundtrip efficiency of 85%, CAES is well-suited for largescale storage needs for providing services in the energy applications category. CAES plants                                                                                                                
30  U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage  

Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  15th  2011    

 

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use off-peak electricity to pump air into underground reservoirs or surface vessel/piping systems and then use the compressed air to drive expansion turbines after heating the air with conventional fossil fuels. This process is three times more efficient than a plant that would use the fossil fuel directly in combustion turbines.31 To date, only one large-scale CAES plant has been built in the U.S., which is operated by Alabama Electric Cooperative. However, recent EPRI studies have shown that three-fourths of the U.S. has geology suitable for reliable underground storage of compressed air32 and therefore more companies are venturing into this space. One such company is SustainX, a GE-investee, which focuses exclusively on CAES systems. SustainX’s technology is novel in that unlike conventional CAES systems, it does not use fuel to heat the air up before compression, relying instead on its “isothermal” compression technology, which is more energy-efficient and uses thermodynamic and hydraulic control mechanisms to achieve the same results.33 In an interview, Adam Rauwerdink, a Business Development Executive at SustainX commented that despite limited rollout of CAES systems in the U.S., significant growth in the sector is expected because of improvements in technology and regulatory frameworks under which CAES falls. Specifically, he believed that In addition to the existing CAES system in Alabama, another one is being installed at the Iowa Compressed Air Storage Park and more are in the planning phase, to be implemented in NY and CA. Pumped Hydro: Pumped hydro is the oldest form of energy storage system considered in this paper: its usage dates back almost a hundred years and the technology                                                                                                                 31  Interview  with  Adam  Rauwerdink,  Business  Development  Executive,  SustainX  
32  Schainker,  Robert  B.,  “Energy  Storage  Options  For  A  Sustainable  Energy  Future”,  IEEE,  p.2   33  Interview  with  Adam  Rauwerdink,  Business  Development  Executive,  SustainX  

 

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relies on the simple idea that water can be pumped to a higher reservoir and the stored potential energy used to generate electricity at a later time by driving turbines. With about 38 plants in operation in the U.S., it is also the most widespread form of large-scale energy storage in the country.34 Despite its widespread use, however, pumped hydro has recently fallen into relative disfavor due to various reasons. Thanks to high total costs of building (even though it is relatively cheap on a per kW basis), long project completion times (10 years on average, with 5 years waiting-time for permits35 ) and unavailability of suitable sites, environmental concerns and the fact that the Department of Energy discontinued its own Hydropower program in 2006 (although it was re-started three years later with a focus on storage)36 , private companies are turning to other forms of large-scale storage instead. Nevertheless, pumped hydro remains the second-cheapest form of energy-storage after CAES, on a cost per kW-basis and is ideally suited to provide grid-level Electric Energy Time Shift services, where the scale, and not the responsiveness of the system is the more important factor. Further innovations in siting capabilities, such as using “closed-loop” pumped hydro, where two off-stream reservoirs are used so that natural ecosystem of rivers and natural water bodies is not disturbed, and underground pumped hydro, where the lower reservoir is excavated from subterranean rock have also made it possible to consider situating pumped hydro at sites which would have been deemed unsuitable in the past. While the

                                                                                                               
34  Ibid.   35DOE  Promotes  Pumped  Hydro  as  Option  for  Renewable  Power  Storage  -­‐  NYTimes.com..  

Retrieved  March  26th,  2011,  from   http://www.nytimes.com/gwire/2010/10/15/15greenwire-­‐doe-­‐promotes-­‐pumped-­‐hydro-­‐ as-­‐option-­‐for-­‐renewa-­‐51805.html.   36  Ibid.  

 

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latter siting approach would provide more flexibility in siting, currently the cost is too prohibitive and the approach remains a project of EPRI and DOE R&D.37 Battery Storage: While the specific characteristics of a battery depend on its electrochemical makeup, which can vary significantly among different battery technologies, all batteries have the advantage of being modular, quiet, non-polluting and quick to respond to changes in demand. For this reason, they make excellent storage systems for services in the power application category. However, unlike flywheel storage, CAES and pumped hydro, batteries span the energy and power application category: while they have traditionally provided services in the power application category, breakthroughs in battery design have meant that they can be feasibly used for energy applications as well. Batteries can be broadly categorized into Solid and Liquid Electrode batteries. While the former are appropriate for power applications, where fast charge-up/discharge is required but discharge duration is not an issue, the latter use liquid electrolytes as the active materials in place of solid electrodes and are better suited to long-term services in the energy applications category.38 Another battery that does not fit into either of these categories is the metal-air battery. Instead of using two solid electrodes, the battery uses only one solid electrode and oxygen in the air as the other active material in its electrochemical reactions. These have traditionally not been serious contenders for grid-level deployment since they are not rechargeable and are prohibitively expensive, a PA firm, Grid Storage Technologies (GST), is                                                                                                                
37  Ibid.   38  North  American  Electric  Reliability  Corporation  (NERC),  Potential  Reliability  Impacts  of   Emerging  Flexible  Resources,  November  2010,   http://www.nerc.com/docs/pc/ivgtf/IVGTF_Task_1_5_Final.pdf,  accessed  on  March  16th   2011,  pp.13  

 

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currently working on a rechargeable utility-scale metal-air battery that is scheduled for production next year39 . In an interview, the CEO, Michael Oster explained that having one electrode significantly reduced the physical footprint of the battery and enabled distributed storage to be deployed close, in proximity to the major points of consumption, thereby reducing congestion on the transmission lines at peak capacity. GST’s technology would also have 1/5 the cost/MW of traditional battery storage and be safer due to being water-based and therefore, not prone to chemical runaways.40 The stimulus bill of 2009 set aside $2 billion in grants for manufacturing advanced batteries41 . Understandably, this has led to much R&D being carried out at universities, national labs, such as DOE’s Sandia Laboratories and well-capitalized private labs42 . However, there are several issues that still need to be addressed by government regulatory agencies, especially FERC, for battery storage to become a viable large-scale storage option. According to Mr. Oster, storage systems need to be treated on an equal footing to energy production resources, because they essentially perform the same basic function: provide electricity at a price that a consumer is willing to pay. Despite having the technical capacity to do so, battery storage is prevented from providing much of the same services that energy resources provide because of prohibitive policy that favors energy production sources over storage systems. Mr. Oster expressed concern that while ERG sources imposed additional cost on the grid by introducing variability in supply, they did not have to bear the                                                                                                                
39  Interview  with  Grid  Storage  Technologies  CEO,  Michael  Oster,  March  28th  2011  

40  In  Chemistry,  refers  to  a  situation  where  an  increase  in  temperature  changes  the  

conditions  in  a  way  that  causes  a  further  increase  in  temperature,  often  leading  to  a   destructive  result.  It  is  a  kind  of  uncontrolled  positive  feedback.   41  Bullis,  Kevin,  Stimulus  Big  Winner:  Battery  Manufacturing,  Technology  Review,   http://www.technologyreview.com/energy/22188/?a=f,  accessed  on  March  27th  2011   42  Interview  with  Michael  Oster,  CEO,  Grid  Storage  Technologies,  March  28th  2011  

 

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cost of ancillary services that corrected for this variability. This unduly disadvantages storage systems like batteries, which provide high-quality regulated supply to the grid and do not impose additional cost on the grid by requiring corrective ancillary services but nevertheless had to compete with ERG sources on a similar pricing structure. His contention was that quality of electricity supply be factored into the compensation structure, so that batteries can compete more effectively against other grid technologies. Similarly, ERG resources get tax and energy credits, which offsets the high installation costs of the systems, whereas battery storage does not- even though it arguably adds societal environmental value to the system by reducing the load on generating resources that utilize fossil fuels and emit greenhouse gases. Lastly, he believes that the biggest challenge facing emerging battery technologies was the risk-aversion of utility companies. Since cutting edge technology has usually not had sufficient testing deployed at the grid-level, utility companies are wary of installing it in their systems. Flywheels Flywheel storage relies on the angular momentum of a rotating mass in vacuum. To “charge up”, the flywheel is spun up to the right speed by a generator run by electricity and the same generator is then used in a discharging cycle to translate the momentum of the flywheel into electricity. Due to the short discharge capacity (most are between 1MW5MW) and high efficiency (around 90% AC-AC translation)43 flywheels are usually only used to provide short-term power applications.

                                                                                                               
43  North  American  Electric  Reliability  Corporation  (NERC),  Potential  Reliability  Impacts  of  

Emerging  Flexible  Resources,  November  2010,  

 

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The 2009 FERC approval of market rules that allowed energy storage systems to provide regulation services sparked an interest in flywheels as fast, efficient sources of shortterm regulation capacity. The first 20 MW flywheel regulation plant was installed in Stephentown, NY to provide regulation services in the NYISO.44 The facility, operated by Beacon Power, stores excess electricity at times of low electricity demand, and sells it back at times of high demand. Policy Recommendations Increase in energy consumption, integration of ERG and smart grid technologies into the grid and the subsequent impact that each will have on the reliability of the grid, will require more bulk and distributed storage capacity. To this end, the following policy options are proposed: 1) FERC should identify and eliminate systemic opportunities for discrimination against storage systems by transmission providers: FERC should ensure that there is no opportunity for undue discrimination against storage systems by transmission providers, by reviewing tariff structures and mechanisms used by transmission providers and BAs to compensate independent providers of electricity. FERC has already proposed rules that allow storage devices to compete fairly with generating sources in frequency and voltage regulation markets and standardized the way Available Transfer Capability (ATC) metric, which directly affects prices, is calculated45 , but the same rules should be extended to non                                                                                                                                                                                                                                                                                                                                          
http://www.nerc.com/docs/pc/ivgtf/IVGTF_Task_1_5_Final.pdf,  accessed  on  March  16th   2011,  pp.14   44  Beacon  Power,  Application  of  Fast-­‐Response  Energy  Storage  in  NYISO  for  Frequency   Regulation  Services.  Retrieved  March  25th,  2011,  from   http://www.beaconpower.com/files/UWIG-­‐presentation-­‐April2010.pdf  ,  pp.  11   45  Docket  Nos.  RM05-­‐17-­‐000  and  RM05-­‐25-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐ meet/2007/021507/E-­‐1.pdf,  accessed  on  Apr  28th  2011  

 

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regulation, wholesale electricity markets as well. When interviewed, representatives from both SustainX and Grid Energy Storage expressed similar concerns, claiming that the disparity between regulation of storage and production systems puts the former at a disadvantage and inhibits investment and R&D in the area. 2) FERC should mandate that quality of electricity supply be factored into pricing: Quality of electric supply should be incorporated into compensation for regulation service, instead of compensating the operator purely on the basis of energy output and the opportunity cost of foregone sales from the generation capacity reserved for regulation. Currently, only the NYISO adjusts its compensation according to the accuracy of a system’s response by maintaining an index that tracks the accuracy of a regulating resource in following AGC dispatch signals.46 3) FERC should mandate that the cost of additional regulation service be borne by the party introducing supply variability: The cost of additional regulation services required due to the variability in a system’s output should be shifted to the system operator, to accurately reflect the real cost of the energy produced. Operators of wind farms, e.g., could be required to install regulation capacity to offset the variability of their system’s output, or the compensation provided to the operator be adjusted according to the variability of their output. 4) Tax and/or Energy Credits should be provided for Storage Systems: The importance of storage technologies to the successful integration of ERG and smart grid technologies into the grid should be recognized and tax and/or energy credits, similar to the                                                                                                                
46  FERC,  “Frequency  Regulation  in  the  Organized  Wholesale  Power  Markets”,  Docket  Nos.  

RM11-­‐7-­‐000,  AD10-­‐11-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐ meet/2011/021711/E-­‐4.pdf,  accessed  on  Mar  20th  2011,  pp.7  

 

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ones extended to renewable resources should be introduced. This will encourage investment in the high-risk area of cutting edge grid-level storage technologies, especially considering the inherently risk-averse nature of these technologies’ primary customer, i.e., the utilities. 5) DOE’s Loan Guarantee Program should be continued: Department of Energy’s Loan Guarantee Program for renewable resources has been instrumental in starting up several high-risk, high-return projects. NYISO’s 20 MW flywheel plant is one example of the same. As of November 2010, the Obama administration was considering abandoning the DOE loan guarantee program and shifting the remaining funds to a pool for Section 1603 investment credits47 . While this may benefit some players in the renewable resource market, such as wind generator operators, it may prejudice the position of others, who depend on loan guarantees to undertake high-risk projects that are crucial to the evolution of the grid in the U.S.

                                                                                                               
47  Lane,  Jim,  Obama  May  Kill  Key  DOE  Loan  Guarantee  Program,    

“http://www.renewableenergyworld.com/rea/news/article/2010/11/obama-­‐may-­‐kill-­‐ key-­‐doe-­‐loan-­‐guarantee-­‐program,  accessed  on  Mar  26th  2011    

 

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Bibliography
• FERC,  “Frequency  Regulation  in  the  Organized  Wholesale  Power  Markets”,  Docket   Nos.  RM11-­‐7-­‐000,  AD10-­‐11-­‐000,  http://www.ferc.gov/whats-­‐new/comm-­‐ meet/2011/021711/E-­‐4.pdf,  accessed  on  Mar  20th  2011   U.S.  Department  of  Energy,  Energy  Information  Administration,  Annual  Energy   Outlook  2010  with  Projections  to  2035  (May  2010),   http://www.eia.doe.gov/oiaf/aeo/electricity.html,  accessed  on  Mar  1st  2011    U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage   Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  15th  2011     Beacon  Power,  Application  of  Fast-­‐Response  Energy  Storage  in  NYISO  for  Frequency   Regulation  Services.  Retrieved  March  25th,  2011,  from   http://www.beaconpower.com/files/UWIG-­‐presentation-­‐April2010.pdf      NERC,  Reliability  Impacts  of  Climate  Change  Initiatives:  Technology  Assessment   and  Scenario  Development.  Retrieved  March  20th,  2011,  from   http://www.nerc.com/files/RICCI_2010.pdf.     U.S.  Department  of  Energy,  Energy  Information  Administration,  Annual  Energy   Outlook  2010  with  Projections  to  2035  (May  2010),   http://www.eia.doe.gov/oiaf/aeo/electricity.html,  accessed  on  Mar  1st  2011   DOE,  “The  Smart  Grid:  An  Introduction”,  retrieved  from   http://www.oe.energy.gov/DocumentsandMedia/DOE_SG_Book_Single_Pages(1).pd f    on  Mar  20th  2011,  pp.25   North  American  Electric  Reliability  Corporation  (NERC),  Potential  Reliability   Impacts  of  Emerging  Flexible  Resources,  November  2010,   http://www.nerc.com/docs/pc/ivgtf/IVGTF_Task_1_5_Final.pdf,  accessed  on  March   16th  2011   NREL,  “Western  Wind  and  Solar  Integration  Study”,  May  2010,   http://www.nrel.gov/wind/systemsintegration/pdfs/2010/wwsis_final_report.pdf,   accessed  on  March  25th  2011,  pp.  277-­‐280   Katie  Fehrenbacher,  “Energy  Storage  for  the  Smart  Grid”,   http://gigaom.com/cleantech/faq-­‐energy-­‐storage-­‐for-­‐the-­‐smart-­‐grid/,  accessed  on   Mar  21st  2011   Schainker,  Robert  B.,  “Energy  Storage  Options  For  A  Sustainable  Energy  Future”,   IEEE,  p.5   Application  of  Fast-­‐Response  Energy  Storage  in  NYISO  for  Frequency  Regulation   Services.  Retrieved  March  25th,  2011,  from   http://www.beaconpower.com/files/UWIG-­‐presentation-­‐April2010.pdf,  p.8     Interview  with  Adam  Rauwerdink,  Business  Development  Executive,  SustainX   DOE  Promotes  Pumped  Hydro  as  Option  for  Renewable  Power  Storage  -­‐   NYTimes.com..  Retrieved  March  26th,  2011,  from   http://www.nytimes.com/gwire/2010/10/15/15greenwire-­‐doe-­‐promotes-­‐ pumped-­‐hydro-­‐as-­‐option-­‐for-­‐renewa-­‐51805.html.   Interview  with  Grid  Storage  Technologies  CEO,  Michael  Oster,  March  28th  2011   Bullis,  Kevin,  Stimulus  Big  Winner:  Battery  Manufacturing,  Technology  Review,   http://www.technologyreview.com/energy/22188/?a=f,  accessed  on  March  27th   2011   Lane,  Jim,  Obama  May  Kill  Key  DOE  Loan  Guarantee  Program,   “http://www.renewableenergyworld.com/rea/news/article/2010/11/obama-­‐may-­‐ kill-­‐key-­‐doe-­‐loan-­‐guarantee-­‐program,  accessed  on  Mar  26th  2011    

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Appendix A: List of Ancillary Services provided by Energy Storage Systems

Source: U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage  
Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  25thth  2011  

 

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Appendix B: Overview of Various Storage Technologies

Source: U.S.  Department  of  Energy,  Electric  Power  Industry  Needs  for  Grid-­‐Scale  Storage  
Applications,  http://www.oe.energy.gov/DocumentsandMedia/Utility_12-­‐30-­‐ 10_FINAL_lowres.pdf,  accessed  on  Mar  25thth  2011    

 

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Appendix C: Targets for Energy Storage Technologies used for Grid Applications

Source: U.S. DOE, Advanced Materials and Devices for Stationary Electrical Energy, December 2010, http://www.oe.energy.gov/DocumentsandMedia/AdvancedMaterials_1230-10_FINAL_lowres.pdf, accessed on Mar 24th 2011

 

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Appendix D: Composition of non-hydropower renewable generation per year

Source: U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook 2010 with Projections to 2035 (May 2010), http://www.eia.doe.gov/oiaf/aeo/electricity.html, accessed on Mar 1st 2011

 

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