Navigant Research Blog

New Utility Program Hopes to Stimulate Sustainable Energy Storage Growth

— February 17, 2017

There is considerable debate throughout the energy storage industry about what the optimal location is for energy storage systems (ESSs) to provide the most value. Systems can be installed either behind the meter (BTM) for individual customers, or located strategically on the utility side of the grid. While these two types of systems are typically designed for different purposes, the advances being made in storage software platforms are blurring the lines between these markets and the specific services they are able to provide. A recently proposed energy storage program from utility Consolidated Edison (Con Ed) is hoping to capture the most advantageous aspects of both approaches.

Although BTM energy storage has been a rapidly growing market over the past 2 years, a number of challenges remain that limit growth prospects. One of the major issues is that the value of an ESS varies considerably from one customer to another and across different regions. To realize a solid return on investment from energy storage, customers must have specific load profiles with enough variability to result in high demand charges and the willingness to invest in a relatively new technology. While opportunities to participate in competitive wholesale markets are often touted by vendors, actual revenue streams from these opportunities remain uncertain or entirely unavailable in many areas. As a result, excess storage capacity that could be used for participation in these markets is not built into projects, leaving economies of scale unrealized.

A New Approach

With its newly proposed energy storage program, Con Ed hopes to overcome many of the barriers facing BTM storage while also taking advantage of customer facilities to host new systems. Through this proposal, Con Ed will partner with developer GI Energy to deploy in front of the meter battery ESSs that will be located at customer sites. In exchange for hosting these systems, customers will be paid a set rate for leasing their space. This should make hosting storage a lucrative opportunity for a much greater number of customers, regardless of their energy usage patterns.

The utility believes this program will be able to realize much more value from a battery system compared to customers installing these systems on their own. By leveraging the utility’s support and third-party financing, Con Ed will be able to deploy much larger storage systems resulting in greater economies of scale. Additionally, these systems can be installed in select locations of the grid experiencing capacity constraints or other challenges to allow for the deferral of new infrastructure investments. These systems will also compete to provide services in wholesale markets when available, such as energy arbitrage, capacity, and frequency regulation. While a much greater array of values can be realized from these systems, the host customers still get what they are looking for—reduced energy costs.

Initially this program will seek to deploy four relatively large (1 MW) storage systems in select locations throughout Con Ed’s territory. However, if successful, this program could be expanded to all customers and potentially provide a framework for similar programs in other regions. There remains a number of details to be worked out through this program, including how exactly the systems and the services they provide will be paid for, how various services will be prioritized, and specifically how the utility will select which developers to work with. Despite the uncertainly around a few pieces of the program, Con Ed’s proposal is an innovative approach to stimulating sustainable energy storage market growth for the benefit of all stakeholders.

 

New Energy Solutions Shaped by Local Challenges

— January 3, 2017

HydrogenThe transition to a renewables-based energy system is taking different forms in regions around the world. This stands in contrast to the traditional approach to energy infrastructure and development, which has been very much one-size-fits all, utilizing large centralized generation and standardized transmission and distribution systems. Moving forward, the optimal grid architecture and mix of energy generation and storage technologies will vary based on the particular needs and resources of a given area. A prime example of this dynamic are Scotland’s remote Orkney Islands, which are ahead of most of the world in the transition to renewables-based energy. While much of the world is looking to batteries to solve challenges associated with the intermittency of renewable energy, local conditions in Orkney are driving the islands to take a different approach.

Innovation on the Islands

The islands are home to the European Marine Energy Centre (EMEC), where innovative wave and tidal energy systems are being tested. The EMEC recently launched its Surf ‘n’ Turf project to capitalize on the excess energy produced at the facility using a 500 kW electrolyzer from ITM Power for hydrogen storage. Elsewhere on the islands, another hydrogen storage project is helping maximize the use of renewable generation while improving grid stability and reducing the need to import fuels for transportation. The BIG HIT project launched early in 2016 aims to limit the amount of curtailed wind energy, which has reached nearly 30% annually over the past 3 years. This project will use excess wind energy to power a 1 MW electrolyzer to generate hydrogen that can be used for power generation in fuel cells, as fuel for a new fleet of 10 fuel cell powered vehicles, or to supply two recently installed hydrogen powered boilers for district heating.

A hydrogen-based energy storage system is an ideal solution for the Orkney Islands for a number of reasons. With only two 33 kilovolt cable connections to the Scottish mainland, the islands do not have the luxury of exporting excess renewable generation to neighboring systems and are forced to curtail energy during peak production. While batteries are able to store a few hours’ worth of excess generation, the islands often require an entire night’s worth of generation to be stored for relatively long periods of time. Storing excess electricity in the form of hydrogen is much more well-suited to this need and provides numerous other benefits, as well.

Like most islands, residents in Orkney pay high prices for transportation fuel given the lack of local resources and the need to transport everything via ships. The Orkney Islands Council is hoping to improve this situation through the use of battery and fuel cell electric vehicles powered by energy generated locally on the islands. The Council also believes hydrogen will play an important role in the islands’ future as fuel cell technology becomes increasingly common for powering ships. By establishing and refining hydrogen storage and fuel cell technology for the maritime industry, the islands hope to emerge as a hub of innovation and develop technologies to export worldwide.

Local Resources, Local Solutions

Given the specific local conditions and challenges, a hydrogen-based energy system is well-suited for the islands. However, this will not be the case in all locations. As the industry continues to evolve in the coming decades, energy systems will be based more on local conditions and resources than ever before. This will result in a much more diverse and complex industry as the resources available in each region are tapped into. Orkney is providing an early example of how local conditions will shape the development of the next generation of energy systems.

 

MESA Standards Aim to Organize a Diverse Market

— December 15, 2016

IT InfrastructureLast month, the MESA Standards Alliance officially released the first draft of a protocol for communications standards between utility control centers and energy storage systems (ESSs). This marks an important development for the ESS industry given the relative lack of existing standards and the increasingly diverse range of products in the market. Founded in 2014, the MESA Alliance is an organization of industry groups including both product vendors and utilities working to accelerate the growth of the ESS industry. MESA is developing open, non-proprietary specifications and standards for multiple types of ESSs.

Compared with the broader energy industry, standards for ESS components and software have barely begun to develop. Yet there is a clear need for standardization. Many vendors and other stakeholders in the industry cite the diverse operational characteristics of ESS components and the differing utility interconnection protocols as barriers to growth and cost reductions. There are basic standards currently in place covering ESS design and the integration of systems into the grid, and efforts are underway to update these protocols or supplement them with more in-depth standards. To date, the main standards for ESS come from the International Electrotechnical Commission (IEC), most notably the group’s TC 120 standards. However, these standards are more high-level and cover aspects such as defining unit parameters, testing methods, environmental issues, and system safety.

MESA Standards

MESA’s protocols are among the most comprehensive standards in the industry, aiming to accelerate the market through greater system interoperability, scalability, safety, quality, and affordability. A key focus for the grid is on standardizing communications between components within an ESS and between a system and the grid. This type of standardization can give customers more choice in the market and reduce project-specific engineering costs. These standards will also hopefully reduce training costs and improve safety for field staff through uniform procedures for safety and efficiency. The two primary segments of MESA standards are:

  • MESA-Device: Addresses system design for the components of an ESS, including the storage medium (batteries), inverters/power electronics, and meters
  • MESA-ESS: Specifies how an ESS communicates with the utility’s grid control and power scheduling systems (and is built on the DNP3 protocol)

The recently published draft protocol is for MESA-ESS and primarily addresses ESS configuration management, ESS operational states, and the applicable ESS functions. MESA hopes that these standards will enable electric utilities and grid operates to more effectively deploy and manage ESSs—including fleets of multi-vendor systems—to meet various needs with minimal custom design or engineering.

As the ESS industry has matured, software and controls platforms that communicate with grid systems are emerging as key to the technology’s value. However, there are a growing number of software platforms available, each with differing characteristics. Navigant Research’s new Energy Storage Software: Aggregation, Asset Management, and Grid Services report explores these platforms in detail. More open and official standards in the industry could result in greater interoperability between the various platforms, thus enabling greater customer choice. These developments can allow technology suppliers to focus on their core competencies and will hopefully lead to more rapid cost reductions and innovations.

 

The FERC Looks to Bring Down Barriers to Storage and DER

— December 7, 2016

AnalyticsLauren Callaway coauthored this post.

This November, the US Federal Energy Regulatory Commission (FERC) released a notice of proposed rulemaking (NOPR) that could elicit a fundamental step forward for storage and distributed energy resources (DER). The NOPR includes two proposals—one establishing a participation model and market rules for storage resources in wholesale markets, and the other defining DER aggregators as participants in wholesale markets.

Developing a Pathway for Storage

For the first proposal, regional transmission operators (RTOs) would be required to develop participation models for grid-tied storage, which take into account storage’s unique physical and operational qualities. The NOPR requires that participation models include the following five criteria:

  • Storage resources are eligible to provide all capacity, energy, and ancillary services that they are technically able to perform
  • Bidding parameters that account for the above services are established
  • Storage resources are allowed to act as both buyers and sellers, included in establishing the clearing price for electricity
  • RTOs must establish a minimum size requirement for storage that cannot exceed 100 kW
  • Services sold from storage resources to the wholesale market be sold at the wholesale locational marginal price

These criteria are driven by a need to properly recognize the unique operational characteristics of storage systems, enabling storage to act as either load or generation depending on system needs. Essentially, the NOPR proposes to develop a more level playing field within the wholesale markets that will better reflect the cost-effectiveness of storage. Additionally, grid operators will be able to capitalize on storage’s unique abilities to provide black-start service, spinning reserves, renewable ramp control, and output smoothing.

The FERC has previously made efforts to allow for the integration of storage by recognizing its unique value, but those have had limited impact so far. Under FERC Order 755 (2011), RTOs are required to create a fast-regulation service in wholesale power markets, compensating resources for speed and accuracy using a mileage payment—storage is uniquely capable of providing these services. Yet to date, only the PJM region has a well-developed market with fast-regulation prices high enough to make a solid business case for storage. Despite the fact that over 250 MW of storage has been deployed and PJM has decreased the total need for regulation due to the greater accuracy and responsiveness of storage systems, other RTOs have remained slow to adopt the rule. The current NOPR takes into account lessons learned by PJM’s enablement of storage participation.

DER Aggregator Participation

The FERC also proposed to require each RTO/independent system operator (ISO) to revise its tariffs to allow DER aggregators to participate directly in markets by permitting such aggregators to register under the participation model in the RTO/ISO tariff that best accommodates the physical and operational characteristics of their resources. While the specific details and timeline for implementing these proposals are still unclear, this could have a major impact on the national DER market.

To date, only California has allowed aggregated DER (aside from traditional demand response and load control) to bid into an organized statewide capacity market. Furthermore, outside of pilot programs, there have been no aggregated DER allowed to provide ancillary services such as frequency regulation. DER can be a much more effective source of frequency and voltage regulation compared to centralized assets, as the systems are dispersed throughout distribution networks where issues may originate, particularly areas with high penetrations of solar PV generation.

DER providers have been pushing RTOs and the FERC to implement these rules, which can provide new sources of revenue for aggregated storage systems, thereby greatly reducing costs to customers and increasing the value of these systems to grid operators. Additionally, allowing DER to provide these types of services can be part of a post-net metering solution that fairly compensates DER owners based on specific grid needs in a given location at any time. The upholding of FERC Order 745 earlier this year has also set a powerful precedent in terms of allowing participation of behind-the-meter resources into wholesale markets.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Finance & Investing, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies

By Author


{"userID":"","pageName":"Alex Eller","path":"\/author\/aeller","date":"2\/20\/2017"}