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Transmission/Distribution Asset Purchase Deferral
As more renewable energy joins the grid, the need for more
regulation to handle the variable nature of renewable energy
becomes necessary. The cost of building new regulating
generation plants is very high, and may represent the highest
value for batteries today. The largest battery in the
world, a 25MW / 75MWh battery costing $47 million, will be
built in 2010 by Primus Power corporation to replace the planned
construction of a $78 million 50MW fossil fuel generator in
California that was to be used to regulate wind energy.
By shaving peak load requirements, batteries can also prove a
temporary or permanent replacement for new transformers,
additional transmission lines, and other transmission and
distribution assets.
Ancillary Services
Ancillary services are services designed in general to increase
reliability of the energy supply and to match generation
to load instantaneously to keep supply and demand for
electricity in balance. Some of these services are
requirements of the ISO on the generator, others have available
open markets where such services are traded. The rules
defining what ancillary services batteries can supply, the
markets where they can be traded, and the rules governing them,
are changing rapidly. Batteries are perfectly suited
to help balance load and generation on a moment-by-moment basis
due to their nearly instantaneous response, a feature not
available in any other utility asset.
Ancillary services are primarily services which either add or
reduce energy on the grid, where a supplier agrees to provide
the service of being able, on request, to add or reduce a
certain amount of power or energy during a specified time
period. The different types of services are defined by the
required response rates, the amount of power or energy required,
and whether the service is active, as in Frequency Regulation,
or 'stand by', as in a Black Start Service. The ancillary
service market is growing rapidly, in support of the increased
need to mitigate the uncertainty associated with wind and solar
generation.
Frequency Regulation
To meet FERC AC frequency requirements, batteries would provide
regulation up or down (adding or removing power) based on a
signal every 4 seconds normally from an AGC system.
Voltage Regulation
Generation capacity where the power factor and output voltage
level can be scheduled to maintain transmission voltages within
defined limits. In some markets this is an offerable
service, in others like ERCOT, generators are required to meet
this without compensation. In these cases, the generators
may find value in battery energy storage.
Black Start Services
A service where a generator contracts to, without the support of
the transmission grid, supply service for emergency dispatch in
the event of a blackout.
Responsive Reserve Service (Spinning Reserve)
Generation reserves that may be called upon within a few minutes
of an event that causes significant deviation from the standard
frequency on the grid. Basically, being paid to stand by
and provide power whether the power is needed or not.
Energy Arbitrage
Most energy is bought and sold on long term bilateral contracts.
However, to balance the load there exists a marginal market
which represents perhaps 5% of all energy consumed. Energy
generators can schedule to sell energy in 10-15 minute chunks at
a bid price, scheduled 75-90 minutes ahead. Energy
consumers who require power purchase it at the lowest bid price
available. The highest value paid for energy in that
period is called the MCP, or Market Clearing Price, and
published.
There are general daily trends of one or two high pricing
periods during a day and one or two low pricing periods.
In addition, there are relatively random spot changes that can
be enormous, with pricing changing from -$30/MWh to +$500/MWh in
a few hours.
Batteries can take advantage of this market on the long term,
short term, or a combination of both. In many wind farms,
the wind blows primarily at night, during the lowest pricing
period, while the load and price is greatest during the day.
By shifting energy daily to higher value periods, while
maintaining the opportunity to take advantage of pricing spikes,
significant value can be achieved.
Capacity Payments
Capacity payment are the price to supply rated capacity to the
grid. Batteries can increase the capacity factor for
renewable energy. These payments are either made on the
open market, or are reflected in long term PPAs.
Renewable Development in Limited Transmission Areas
Areas with limited transmission assets are often the same areas
where wind and solar energy is most abundant. Due to
transmission constraints, utilities may find renewable energy to
be of little value, as the energy provided will displace only
the lowest cost energy available. They may even curtail
the provider, as happens often with wind energy suppliers in
ERCOT. With batteries, wind and solar plants may make new
developments practical by garnering higher PPA pricing due to
the flexible dispatchability of the energy.
Who Controls the Energy Markets? Who
Makes the Rules?
The bulk of the American energy market is controlled by the Independent
System Operators (ISO's) and the Regional Transmission Organizations (RTO's).
These operators also, with FERC oversight, set the rules for the
ancillary service market. These ISOs and RTOs include:
PJM (13 Eastern States the and
District of Columbia)
NYISO (New York and Surrounding
Areas)
MISO (Upper Midwest States)
NEISO (Northeast US)
ERCOT (Texas)
CALISO (California)
IESO (Ontario, Canada)
AESO (Alberta, Canada)
SPP (Southwest)
A good description of the wholesale energy market can be found here:
http://neuralenergy.blogspot.com/2009/06/electricity-markets.html,
and here
http://www.epsa.org/industry/primer/.
A great visualization of the nations energy grid can be found here:
http://www.npr.org/templates/story/story.php?storyId=110997398 |
