JP Spring UlHaq Final

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 non-
regulation, 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
1
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
2
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

3
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
4
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, grid-
level 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
5
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


12 Ibid.
6
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

7
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),

8
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
9
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


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
10
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 response-
time 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

10_FINAL_lowres.pdf, accessed on Mar 15th 2011, pp. 18-‐20
11
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 cost-
efficient 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 15-
minute 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

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
12
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
Stationary
Mobile Storage
Storage
Electric/Hybrid Distributed
Bulk Storage
Vehicles 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 large-
scale storage needs for providing services in the energy applications category. CAES plants

13
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
14
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.
15
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.

2011, pp.13
16
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
17
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 1MW-
5MW) and high efficiency (around 90% AC-AC translation)43 flywheels are usually only
used to provide short-term power applications.

18
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 short-
term 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-

2011, pp.14
44 Beacon Power, Application of Fast-‐Response Energy Storage in NYISO for Frequency

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
19
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


20
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
21
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),
• U.S. Department of Energy, Electric Power Industry Needs for Grid-‐Scale Storage
• Beacon Power, Application of Fast-‐Response Energy Storage in NYISO for Frequency
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
• 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
22
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
10_FINAL_lowres.pdf, accessed on Mar 25thth 2011
23
Appendix B: Overview of Various Storage Technologies
Source: U.S. Department of Energy, Electric Power Industry Needs for Grid-‐Scale Storage
10_FINAL_lowres.pdf, accessed on Mar 25thth 2011
24
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_12-
30-10_FINAL_lowres.pdf, accessed on Mar 24th 2011
25
Appendix D: Composition of non-hydropower renewable generation per year
Source: U.S. Department of Energy, Energy Information Administration, Annual Energy

26

JP Spring UlHaq Final

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

JP Spring UlHaq Final

Uploaded by

Copyright:

Available Formats

To adequately meet the reliability needs introduced by integration of renewable

finally inform the following set of policy recommendations:

1) FERC should identify and eliminate systemic opportunities for discrimination

2) FERC should mandate that quality of electricity supply be factored into

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

5) DOE’s Loan Guarantee Program should be continued: Department of Energy’s

RM11-­‐7-­‐000, AD10-­‐11-­‐000, http://www.ferc.gov/whats-­‐new/comm-­‐

the grid level.

trillion kWh of electricity per year6 .

2010 with Projections to 2035 (May 2010),

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

list of ancillary services provided by energy storage systems).

injected or withdrawn from a system depending on its frequency deviations or power

generating sources and technically capable demand response consumers to respond to

AGC signals, as is the case in Frequency regulation.

respectively. Flywheels and large-scale batteries, in particular, provide ACE correction

rapidly12 . Fig.1 shows the dramatic difference in the responsiveness of conventional

additional resources to balance the offset introduced by slow/inaccurate ramping energy

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

RM11-­‐7-­‐000, AD10-­‐11-­‐000, http://www.ferc.gov/whats-­‐new/comm-­‐

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

opportunity cost payments to independent sellers of electricity, who maintain generation

regulation markets to non-generation energy technologies by categorizing them as (Limited)

Regulation Services. Retrieved March 25th, 2011, from

RM11-­‐7-­‐000, AD10-­‐11-­‐000, http://www.ferc.gov/whats-­‐new/comm-­‐

2) Embedded Renewable Generation (ERG) and Climate Change Initiatives

Scenario Development. Retrieved March 20th, 2011, from

2010 with Projections to 2035 (May 2010),

capacity to be feasible.20 In fact, in a seminal study sanctioned by the National Renewable

Weather-based fluctuation in output over time is especially problematic for wind

Emerging Flexible Resources, November 2010,

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

efficient outcome is reached. In the wholesale electricity market, however, elasticity of

Emerging Flexible Resources, November 2010,

http://gigaom.com/cleantech/faq-­‐energy-­‐storage-­‐for-­‐the-­‐smart-­‐grid/, accessed on Mar 21st

called Load Following and Electric Energy Time Shift.26

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

consumption on the grid.

thereby defer or substitute the upgrade of transmission and distribution systems.

Principal Findings: Various Storage Systems and Related Issues of Interest

Retrieved March 25th, 2011, from http://www.beaconpower.com/files/UWIG-­‐

services that require fast-responding storage systems, such as Frequency regulation.

Pumped Hydro Batteries

Fig. 4) Categorization of different storage systems

would use the fossil fuel directly in combustion turbines.31

SustainX, a GE-investee, which focuses exclusively on CAES systems.

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

phase, to be implemented in NY and CA.

storage in the country.34

private companies are turning to other forms of large-scale storage instead.

Nevertheless, pumped hydro remains the second-cheapest form of energy-storage

important factor. Further innovations in siting capabilities, such as using “closed-loop”

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

RM11-‐7-‐000, AD10-‐11-‐000, http://www.ferc.gov/whats-‐new/comm-‐

RM11-‐7-‐000, AD10-‐11-‐000, http://www.ferc.gov/whats-‐new/comm-‐

RM11-‐7-‐000, AD10-‐11-‐000, http://www.ferc.gov/whats-‐new/comm-‐

http://gigaom.com/cleantech/faq-‐energy-‐storage-‐for-‐the-‐smart-‐grid/, accessed on Mar 21st

Retrieved March 25th, 2011, from http://www.beaconpower.com/files/UWIG-‐

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

RM11-‐7-‐000, AD10-‐11-‐000, http://www.ferc.gov/whats-‐new/comm-‐