The Role of Energy Storage
in PV Projects
Energy Storage Due Diligence
P R O D U C E D B Y E U C I ● J a n u a r y 3 1 , 2 0 11
W E D N E S DAY, J a n u a r y 2 6 , 2 0 11
Overview
• Why is electric energy
storage (EES)
needed?
• What are the uses to
which EES can be
put?
• What’s the regulatory
environment for EES?
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• How has EES been
deployed so far?
• What issues do
parties need to
consider in EES
transactions?
2
Why is Electric Energy Storage
(EES) needed?
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Generally, electricity must be used as soon as it is produced and must
therefore be produced as and when it is needed.
Wind and solar generation present forecasting and variability
challenges that impose a cost on the grid.
Grid operators want to shift this cost onto wind and solar developers in
the form of “integration charges.” See, e.g., BPA Rate Case.
Integration charges apply mainly to wind at this point but BPA, Xcel,
have expressed a desire to extend charges to solar.
“Curtailments” of generation may signal the grid’s inability to absorb
intermittent resources and can make PPAs hard to negotiate and
projects hard to finance.
Utilities or system operators may seek caps for intermittent renewable
energy.
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Electric Energy Storage (EES)
and Solar PV Energy
• Solar PV has an advantage over wind in that its
generation profile is closer to peak loads.
• Solar PV can be combined with electric energy
storage (EES) in “island grid” or “micro-grid”
systems (e.g., Hawaii, Alaska, isolated grids).
• Energy generated from solar PV could be stored for
use after sundown (peak shifting).
• EES could be used to smooth intra-hour variations
in solar generation occurring on partly-cloudy days.
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PV Array on a Partly Cloudy
Day
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Megawatts
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200
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Photovoltaic Array – Partly-Cloudy-Day Generation
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Alternatives to EES: Non-Storage
Mitigation Measures
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Non-storage tools defer the date when addition of more intermittent
generation becomes impractical.
Geographical diversity—increase size of plant, distribute fleet
Improved intermittent generation forecasting
Construction of more electric transmission to take advantage of fleet
Use of within-hour scheduling changes
Generator self-supply of regulation services (the BPA/Iberdrola pilot)
Market acquisition of regulation down services (the BPA/Calpine pilot)
Dynamic power transfers
Combination of balancing authorities
However, these non-storage measures can only accomplish so much:
Energy storage solutions will increasingly become necessary for
continued integration of intermittent generation resources.
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Electric Energy Storage (EES) and
Solar PV Energy
• EES can help integrate intermittent solar PV energy, as well
as wind—the key question is whether it is cost effective.
• Who should deploy EES? Developers, load-serving
utilities, grid operators, or some combination?
• Is EES transmission, generation, distribution, load or
something else?
• Despite uncertainty,solar and wind developers and utilities
are beginning to enter into transactions with EES providers.
• The move to EES is likely to be evolutionary rather than
revolutionary.
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How EES Can Be Used: “Peak
Shifting”
• Store electricity generated during periods of low
demand (e.g., from wind plants at night) and use the
stored electricity to meet load during peak periods.
• Examples of “Peak Shifting” Technologies
– End-use thermal storage
• Water heaters (e.g, Steffes Corporation)
• Air conditioners (e.g., ICE Energy, CALMAC)
– Plug-in electric vehicle batteries (V2G)
– Grid Scale Pumped Hydro or Compressed Air Energy
Storage (CAES)
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How EES Can Be Used:
Regulation and Load Following
• Regulation
– Balance electricity supply and demand fluctuations
over seconds or minutes
– Stabilize voltage or frequency
• Load following—tens of minutes/hours
• Technologies: Batteries; flywheels; advanced capacitors;
regenerative hydrogen fuel cells; superconducting magnetic energy
storage (SMES); pumped storage hydro; CAES
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How EES Can Be Used:
Transmission
• EES can maintain service to transmission
customers by providing reactive power or by
providing virtual transmission service in the
event of a line trip.
• EES may also be attractive in situations where it
enables a utility to avoid the cost and delay of
building new transmission or peaking
generation.
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EES Cost Elements
• Costs/benefits vary depending on technology and
electricity market in which it is deployed
• Cost factors
– Rated power (maximum rate of discharge)
– Efficiency
– Energy (duration of discharge)
– Frequency and depth of charge
• Lifecycle costs ($/kW-year): data is available on
capital costs, less data is available on O&M
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Comparison Sampling of EES Costs
Source: Energy Storage and the Smart Grid (TiE Oregon Clean Energy Special Interest
Group100421 ), presented in Bokka, et al., Feeder Advanced Storage Transaction: Battery
Storage for a Smarter Grid, Portland State University Presentation to Portland General Electric
on FAST Project (June 15, 2010)
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FERC’s Approach to EES Rate
Setting and Cost Recovery
• In June 2010, the Federal Energy Regulatory Commission
(FERC) issued a Request for Comments Regarding Rates,
Accounting and Financial Reporting for New Electric Storage
Technologies, FERC Docket No. AD10-13-000 (June 11, 2010)
(comment period closed).
• FERC may issue a Notice of Proposed Rulemaking (NOPR) on
this subject in the near future.
• FERC’s Request for Comments itself provides a helpful overview
of the EES services over which FERC will probably have ratesetting jurisdiction, as well as the EES services that will be
subject to retail rate recovery under state public utility
commission jurisdiction.
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Maintaining Service to Transmission
Customers
• EES Services for Transmission Customers
– EES can provide reactive power.
– EES can serve as a “virtual” replacement
transmission circuit if a transmission line trip occurs
(e.g., a battery that releases energy to replace
energy cut off by a tripped transmission line).
– FERC would likely allow cost recovery under
jurisdictional transmission rate under certain
circumstances.
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Maintaining Service to
Transmission Customers
• Cases Considering Whether EES is a
Transmission Asset
– Western Grid Development, LLC, 130 FERC ¶ 61,056 (2010)
(NaS battery eligible for jurisdictional transmission rates).
– Nevada Hydro Co., 122 FERC 61,272 (2008)(deferred ruling
whether pumped storage hydro would be treated as
transmission until after CAISO proceeding).
– Application of Electric Transmission Texas, LLC for
Regulatory Approvals Related to Installation of a Sodium
Sulfur Battery at Presidio, Texas, PUC Docket No. 35994
(Texas PUC 2009) (4.8 MW NaS Battery).
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Enhancing the Value of
Generation
• EES facility could “peak shift” in order to take
advantage of differences between off peak
and peak pricing.
• FERC would probably treat this as being a
service offered under the developer’s
wholesale rates, presumably pursuant to a
market-based rate tariff.
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Providing Ancillary Services
• Ancillary services maintain reliability and deliverability of
power to customers in the face of changing load
conditions
• Examples include frequency regulation, voltage control
and contingency reserve.
• EES provider could sell ancillary services where there is
a competitive market for such services (e.g., in an ISO).
• Will the ancillary services market support the financing of
EES projects, or will bilateral commitments be required
to insure the project’s ability to serve debt?
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EES Services Subject to State
Rate-Setting Jurisdiction
• An EES system installed on the distribution grid to
provide voltage support or to serve as a virtual
replacement distribution circuit in the case of a line
trip.
• A peak-shifting EES system used to provide power to
a load-serving utility’s retail customers
• An EES system with a demand-response component
(e.g., end-use thermal storage) may receive rate
recovery as a demand response program
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The Challenge of Multi-Use
EES Facilities
• An EES facility could be used to provide
transmission services, peak shifting services
for retail customers, and ancillary services.
• Will the facility as a whole be subject to one
rate treatment, or will different aspects of the
same facility be subject to different rate
treatment?
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“Gas Storage” or “Tolling
Agreement” Model
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To keep transmission and generation services separate, EES facility
developer would provide an “open-access” storage service but would
not buy or sell energy from the facility.
“Tolling” customer would pay injection, capacity and/or withdrawal
charges to EES owner under long-term contract.
Market risks and benefits from purchase, sale or use of energy would
be for the account of the customer rather than the EES owner.
The customer could, for example, re-sell stored energy subject to FERC
wholesale rate jurisdiction (e.g., to arbitrage non-peak energy
generation against peal load).
If the customer used the EES facility for transmission reliability
purposes, the cost of the EES service could be recoverable in
transmission rates.
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California’s AB 2514
• Load-Serving Entities (LSEs)
– By March 1, 2012, CPUC is to open a proceeding to
determine appropriate targets, if any, for each LSE to
procure viable and cost-effective energy storage systems
– If the CPUC determines a procurement target is
appropriate, then it is to adopt by October 1, 2013:
• A 1st energy storage system procurement target to be achieved by
each LSE by December 31, 2015; and
• A 2nd procurement target to be achieved by December 31, 2020.
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California’s AB 2514
• Publicly owned utilities
– By March 1, 2012, the governing board of the local
publicly owned electric utility is to open a proceeding to
determine appropriate targets, if any, for the utility to
procure viable and cost-effective energy storage systems
– If the governing board determines that a procurement
target is appropriate, it is to adopt by October 1, 2014:
• A 1st target to be achieved by the utility by December 31,
2016; and
• A 2nd target to be achieved by December 31, 2021.
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Possibility of Federal Legislation
• Last Congress: Storage Technology for Renewable
and Green Energy Act of 2010, S. 3617 (Senators
Bingamen, Wyden, & Shaheen)
– Investment tax credit of 20% for grid-connected “qualified energy
storage property” with greater than 1 MW per hour power rating
– Clean Renewable Energy Bonds (CREBS) would be available
for grid-connected EES
– Tax credit for specified onsite EES
– Tax credit for specified residential EES
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EES Projects: Thermal Storage
• Southern California Public Power Authority
(SCPPA) recently announced a purchase of ICE
Energy’s “Ice Bear” Thermal Energy Storage
Units, which use off-peak energy to produce ice
that is used to cool refrigerant for air conditioning
during peak hours
• BPA’s thermal storage program with Mason
County PUD No. 3
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EES Projects: MinWind
• Xcel’s MinWind W2B battery project
– Wind-to-Battery (W2B) demonstration project
– 1 MW, 7.2 MWh NaS (sodium sulfur) battery
purchased from NGK Insulators Ltd. (NGK)
– Installed near the 11.5 MW MinWind Energy LLC
(MWD) wind facility in Luverne, MN
– Report at
http://www.xcelenergy.com/Minnesota/Company/Environment/Renewabl
e%20Development%20Fund/RDFProjects/Pages/SodiumSulfurBatteryE
nergyStorage.aspx (click “Milestone 5”)
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EES Projects: MinWind
– Preliminary results (July 2010) indicate that the
battery has the ability to:
• Effectively shift wind energy from off-peak to on-peak
availability
• Reduce the need to compensate for the variability and limited
predictability of wind generation resources
• Support the transmission grid system by providing voltage
support, which contributes to system reliability
• Support regional electricity market by responding to real-time
imbalances between generation and load
– Duke and SCE are also conducting battery/wind
integration tests.
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EES Projects: First Wind Kaheawa
Project (Hawaii)
• First Wind’s 30 MW Kaheawa Wind Project
(Maui)
– 20 GE wind turbine generators
– Supported by a 1.5 MW Xtreme PowerTM energy
storage and power management system
– Xtreme Power reports that this system, after 6
months of use, allows:
• Delivery of energy within strict ramping criteria
• Storage of energy generated during curtailment periods
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EES Projects: First Wind’s Kahuka
Wind Project (Hawaii)
• Kahuka Wind Project (in permitting)
• The project would incorporate a 15 MVA, 10
MW/hour energy storage system from Xtreme
Power.
• First Wind received $117 million in DOE loan
guarantees for the Kahuka Wind Project.
• EES component of First Wind’s Hawaii projects
is “behind the busbar”—HECo buys under PPA
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EES Projects: LADWP’s Pine
Tree Wind Farm (California)
• September 13, 2010: Los Angeles Department of
Water & Power (LADWP) entered into an MOU with
BYD Ltd. Corp. (China) to develop the parameters and
scope of a 5-10 MWh power storage unit to be installed
at LADWP’s Pine Tree Wind Farm.
• The MOU is an agreement to study EES rather than a
commitment to procure storage.
– Either party can terminate the MOU upon thirty (30) days notice.
– The MOU makes it clear that any equipment procurement must
take place through LADWP’s normal procurement process.
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EES Projects: LADWP’s Pine
Tree Wind Farm (California)
• According to the MOU, the purpose of the
project is to solve one or more utility challenges:
– Improve integration of renewable energy
– Shape or firm energy generated from wind and/or solar
generation for economic dispatch or to optimize transmission
of renewable energy
– Improve electric system reliability
– Provide demand response
– Shift load to off peak
– Promote plug-in electric vehicle technology
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EES Projects: Flywheel (New
York)
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Developer: Beacon Power Corporation
20 MW flywheel plant located in Stephentown, New York ($69 million,
supported by $43 million DoE Loan Guarantee)
8 MW interconnected and on line as of January 24, 2011—world’s first
grid-connected fly wheel
Fast-rotating rims made of a carbon-fiber composite material store
excess & renewably generated energy as kinetic energy. The rims spin
on magnetic bearings in a vacuum to minimize energy loss from friction.
Stored kinetic energy can be released when demand rises or energy
from wind or solar sources is not available.
Very fast ramp rate (10x faster than fossil fuel plant)
Expected to provide 10% of New York’s frequency regulation needs
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EES Projects: Grid-Scale
Battery
• AES Energy Storage LLC
• Phase 1: 8 MW battery-based storage system in
Johnson City, New York (on line)
• On line and providing frequency regulation services in
NYISO
• Phase 2: Additional 12 MW supported by $17.1 million
DoE Loan Guarantee
• Can charge or discharge in one second in response to
automated signal
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EES Projects: Vehicle-to-Grid
(V2G)
• PJM Vehicle-to-Grid (V2G) pilot program in
Delaware.
• The program is testing use of electric vehicle
batteries to provide frequency regulation and
storage of intermittent energy.
• Each vehicle in pilot project is earning $7-$10
per day to provide regulation services.
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EES Projects: Solar PV (CA)
• SunPower Corp.
– Received a grant of $1.8 million from California’s
state solar initiative program (September 2010)
– Partnering with ICE Energy, Prudent Energy
and ZBB Energy Corporation to develop a pilot
energy storage program for a commercial
customer (Target)
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EES Projects: Solar PV (Hawaii)
• Kauai Island Utility Cooperative’s 3 MW
Kauai Solar Plant, built and run by Poipu
Solar
• Poipu Solar sells to Cooperative under “as
delivered” PPA
• 1.5 MW utility-scale storage battery supplied
to the Cooperative by Xtreme Power
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EES Projects: Portland General
Electric (PGE) FAST Project
• Feeder Advanced Storage Transaction
(FAST)
• ARRA Funded ($20 million)
• Goals:
– Test high reliability “island” or “micro-grid”
– Provide energy during peak load periods
– Firm intermittent renewable resources
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EES Projects: Portland General
Electric (PGE) FAST Project
• FAST components
–
–
–
–
113 kW Solar PV (Kettle Chips Plant)
1,300 kWh EnerDel battery
5 MW Eaton power conditioning system
5 MW customer-owned diesel backup generators
(distributed generation)
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EES Projects: Portland General
Electric (PGE) FAST Project
• FAST Long-Term Benefits may include:
– Wind integration (PGE’s 2009 IRP assigns an
integration cost of $13.50/MWh of wind
generation)
– Spinning reserve (worth $5-$5/MWh in PGE’s
service territory during Oregon’s peak demand
seasons, winter and summer)
– Frequency regulation
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Possible Models for Use of EES
Services by Solar PV
• EES storage could be installed “behind the busbar” pursuant to a
solar PV power purchase agreement with a utility offtaker (First
Wind/HECo model).
• EES could be installed to provide load shifting, firming and reliability
services in a microgrid primarily served by solar PV and/or wind.
• EES could be installed as part of an on-site PV installation.
• EES services could be sold on a merchant basis by EES developers
to solar PV plant owners, grid operators or utilities.
• Grid operators could acquire EES services to manage intermittency
and charge an integration or transmission service charge (which,
like wind integration charges, would be allocated between developer
and offtaker in PPA negotiations).
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EES Transaction Issues:
Structure
• EES system manufacturers and buyers should be prepared
to address the transaction issues outlined in the next few
slides, which are likely to arise in any deal involving an EES
system.
• If a developer or utility wishes to buy an EES system,
should it buy a “turnkey” solution or specify the project’s
components?
• In the context of a PPA, is the EES solution something that
the developer installs “behind the busbar” (First
Wind/Xtreme Power/HECo) or is the EES solution
something the utility arranges (Xcel/MinnWind W2B)?
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EES Transaction Issues:
Performance
• Performance elements
– Rated Power (maximum rate of discharge)
– Discharge rate
– Discharge duration (hours, minutes, seconds)
– Efficiency
– Lifetime (cycling)
• Performance warranties will crop up in procurement agreements
and in build-transfer arrangements and will flow through PPAs
• What is the duration of the performance warranty?
• What if the performance warranty is not satisfied? Liquidated
damages? Other remedies?
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EES Transactional Issues:
Intellectual Property
• Intellectual Property (“IP”) is
highly relevant to the EES
Industry
• Entities engaged in this
industry should have an IP
Strategy
• Procurement agreement
should include reps,
warranties and indemnities
around EES producer’s IP
• IP is an important due
diligence issue
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IP Due Diligence
Staged Disclosures
Action
Cautions
Relevant Agreement
Non-Confidential
Demonstration
• Limit discussion to nonconfidential information
• Do not share samples
None
Confidential Discussion
• Limited disclosure of
confidential information
• Do not leave samples
CDA
Proof of concept
• Release samples
• Non-collaborative
Mutual CDA and Material
Transfer Agreement
Joint Development
• Collaborative
• IP ownership issues
• Complex
Joint Development
Agreement
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EES Transaction Issues:
Compliance with Laws
• The buyer will likely want a representation
and warranty that EES supplier is in
compliance with all applicable laws
• The EES buyer may want representations
and warranties addressing the concern that
the production of the EES system might harm
the environment
Energy
Storage
in Due
PV Projects
Energy
Storage
Diligence
W E D N EJanuary
S DAY, J31,
a n u2011
a r y 2 6 , 2 0 11
Monday,
44
EES Transaction Issues:
Indemnification
• Intellectual property indemnifications
• Indemnification against claims and damages
arising from production, transportation and
delivery process
• Financial condition (ability to stand behind
indemnifications)
• Required insurance
Energy
Storage
in Due
PV Projects
Energy
Storage
Diligence
W E D N EJanuary
S DAY, J31,
a n u2011
a r y 2 6 , 2 0 11
Monday,
45