The Optimal Approach to Firming Windpower

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1 5735 Hollister Avenue, Suite B Goleta, California T F The Optimal Approach to Firming Windpower Summary As many regions of the world are staging massive ramp ups of new renewable generation capacity to meet capacity requirements given the cancellation of existing or new baseload nuclear and coal-fired generation, and to displace energy produced with fossil fuels, ensuring a stable grid with these variable and intermittent sources of power is problematic. This paper focuses on wind and the coming need for technologies that must be added to firm the wind to ensure stable grids around the globe. Firming wind at utility scale can be provided with the addition of simple cycle gas combustion turbines or with an energy storage-based approach that achieves similar siting flexibility, installed cost, operating cost and time to construct. Wind Power At the end of 2010, worldwide nameplate capacity of wind-powered generators was 197 gigawatts (GW). Energy production was 430 TWh, which is about 2.5% of worldwide electricity usage and has doubled in the past three years. Several countries have achieved relatively high levels of wind power penetration, such as 21% of stationary electricity production in Denmark, 18% in Portugal, 16% in Spain, 14% in Ireland and 9% in Germany in As of 2011, 83 countries around the world were using wind power on a commercial basis As counties like Germany, Italy, the U.K., China, South Africa and the U.S. begin to add substantial quantities of wind power capacity, significant quantities of gas plants and/or bulk energy storage become mandatory to satisfy utility system capacity needs. Variability and Intermittency The intermittency of wind seldom creates problems when it provides a small portion of total demand, but as its contribution rises, increased accommodation costs, a need to upgrade the transmission system, and a lowered ability to supplant base load generation may occur. Power management techniques, such as exporting and importing power to neighboring areas or reducing demand when wind production is low, can mitigate these problems today, but as future grids rely on wind as a growing portion of the energy supply, firming capacity will have to be added. Electricity generated from wind power can be highly variable at several different timescales: minutes, hourly, daily, and seasonally. Related to variability is the short-term (minutes, hourly or daily) predictability of wind plant output. Like other electricity sources, wind energy with some accommodating technology must be "scheduled". Wind power forecasting methods are used, but predictability of wind plant output remains low for short-term operation. In February of 2008, Texas experienced a grid emergency given a confluence of several factors. Three major contributions to this event included a large ramp-down of wind generation which started at 15:00, the unexpected loss of conventional generation, and a quicker than expected evening load ramp-up. Collectively these factors led to ERCOT calling on reserve capacity, including Loads acting as a Resource (LaaR) large industrial and commercial electricity users who have agreed to allow

2 ERCOT to curtail their electricity supply in exchange for economic compensation to both increase generation and reduce total demand. While no customers lost power involuntarily, the event exposes the issues with the large use of wind as system capacity. This year, the Bonneville Power Authority (BPA) has decided to not pay wind developers under contracts in place due to the extremely high level of hydropower production given the snow cap melt. BPA is forecast to more than double wind capacity over the next 5 6 years. If there were a way to store the wind power generated, the wind plants would be paid, RPS targets better met and power could be dispatched when most needed. A report on Denmark's wind power noted that their wind power network provided less than 1% of average demand 54 days during the year Wind power advocates argue that these periods of low wind can be dealt with by simply restarting existing power stations that have been held in readiness or interlinking with HVDC. Electrical grids with slow-responding thermal power plants and without ties to networks with hydroelectric generation may have to limit the use of wind power, which means it cannot be relied upon as capacity. A New Scenario with Wind but it Needs a Partner For wind to be considered as a large capacity addition to an area grid, including access to the associated financial benefits of capacity payments, it must be viewed by the grid operator as dispatchable and baseload in nature. If one adds 1 GW of wind that is expected to be counted on as system capacity, it must add 1GW of firming capacity. In some countries like Japan and in the U.S. in California as it pertains to importing future wind from other states, wind power must be firmed to guarantee stability and delivery. Counting Germany, South Africa and China alone, over the next decade, over 100 GW of energy storage is projected to be required given the reliance to a large part on wind as new capacity. No battery production capacity exists to serve this, even if the installed cost and expectations for the technologies were competitive with gas turbines. Pumped-storage hydroelectricity or other forms of grid energy storage can store energy developed by high-wind periods and release it when needed. Energy storage increases the economic value of wind energy since it can be shifted to deliver generation during peak demand periods. For example, in the UK, the 2 GW Dinorwig pumped storage plant delivers power during the electrical demand peaks, and allows base-load suppliers to run their plants more efficiently. Although pumped storage power systems are only about 75% efficient, and have high installation costs, their low running costs and ability to optimize electrical base-load operation can save both fuel and total electrical generation costs while reducing carbon emissions. Limitations in siting, difficulties in permitting, time to secure land, secure transmission access and upfront cost of construction eliminate traditional pumped storage hydropower (PSH) and compressed air energy storage, (CAES) as global solutions. They are proven and will participate as some new projects will get built, but the scenario calls for more than doubling in ten years all the pumped hydro and CAES ever built. A technology that duplicates the benefits of pumped hydro yet eliminates the aforementioned challenges would be a world beater. Peak wind power production often does not coincide with peak demand for electrical power. In the US states of California and Texas, for example, hot days in summer may have low wind speed and high electrical demand due to air conditioning. Another option is to interconnect widely dispersed geographic areas with an HVDC "Super grid". In the US it is estimated that to upgrade the transmission system to accommodate planned or potential renewables would cost at least $60 billion, but the authors of this paper 2

3 feel the costs will be much more significant in the EU, China and elsewhere given the wind resources proximity to the load. In addition to the significant capital required to implement such a system, the right of way necessary would add several years of permit applications to the project schedule and would likely face significant public challenges. Simple Cycle Combustion Turbines (SCGTs) SCGTs are deployed in several global markets to provide power during peak load demand. They are about 30% to 35% efficient versus 75% - 80% for PSH and take about 15 minutes to start up. PSH may ramp to full power in less than a minute if designed to operate in this manner. SCGTs are a proven technology, but with natural gas or oil consumption, a carbon footprint, noise, a visual stack and significant land use. The market for SCGTs as capacity additions is growing as wind is deployed as discussed above. The Gravity Power Module The Gravity Power Module, or GPM, is an innovative, in-ground modular pumped storage hydropower technology that offers the proven benefits of conventional pumped storage hydropower without the conventional challenges of siting, permitting and cost and time to market. Figure 1: The Gravity Power Module Each GPM employs two deep, water-filled shafts, one of which stores energy in heavy pistons that move vertically within this shaft. The smaller shaft of the two is a return pipe which connects each piston shaft to a ground level, Francis pump turbine. The system is filled once with clean water and sealed. As a piston falls, it forces water through the pump-turbine to generate electricity. In storage mode, grid electricity drives the pump-turbine, forcing the weight up the shaft. Clusters of GPMs, with hundreds of MWh of storage per GPM, can replace gas turbine peaking plants at lower levelized costs of electricity. GPMs will also firm gigawatts of variable renewable generation, a necessity for stable global grid systems. Figure 1 shows the GPM concept. GPM system advantages include: modularity; use of existing technology; no new factories required, low land requirements and no emissions; flexible siting; fast permitting; rapid construction; local material and labour, low cost per megawatt-hour; low maintenance cost; long lifetime; high efficiency (up to 80%); and a short time from project start to revenue. Economic Comparison of SCGTs and GPMs To date the majority of wind produced energy has come from systems that use SCGT s for back up and to provide dispatchable power to satisfy the system peak demand. In this section we assume that the utility is adding wind to its grid and needs new capacity to satisfy its growing load. That being the case, the 3

4 question is, given that we are adding wind capacity, are we better off adding SCGTs or GPMs to fully utilize the wind energy and satisfy our need to meet our growing demand? This paper employs an LCOE model to calculate the sales price that must be achieved by various generation sources to achieve a particular Rate of Return. Gravity Power s team inserted its costs, efficiency and similar metrics into this model to compare GPM energy storage-based peaking power plants to gas peaking plants to firm windpower. The following analysis assumes a capital cost of $1000/kW for 4 hours of generation for both a simple cycle gas combustion turbine and a mature Gravity Power Module installation. It compares six GE 7FA turbines at 200MW each and an octet of GPMs of 150MW each. The total capacity of each plant is 1200 MW and both provide 4 hours of power sales on peak. It is assumed the gas plant is generating given a shortfall of wind during peak hours and that GPMs purchased off-peak wind to provide on-peak power. Using PG&E s currently approved rate of return of 8.8% and a natural gas price of $5/MMBtu in the U.S. and $12.50/MMBtu for Europe, in addition to several other financial assumptions, the Credit Suisse model for SCGTs calculates a sales price for peak power to be $99.64/MWh at U.S. gas prices and $164.74/MWh at European gas prices. Inserting the GPM with the same facility life and a 20% ITC into the Credit Suisse model and assuming buying off-peak electricity at $40/MWh in the U.S. and at $80/MWh in Europe, we see the GPM can sell on-peak power at $74.92/MWh and $105.43/MWh respectively and net the same 8.8% return. This is shown below in Figure Peak Power Sales Prices to Achieve an 8.8% Annual Rate of Return $5MMBtu $12MMBtu SCGT Peak Sales Price ($/MWh) GPM Peak Sales Price ($/MWh) Figure 2: Peak Power Sales Price for SCGTs and GPMs to Achieve an Annual Rate of Return of 8.8% Annually, each installation will sell 1200MW x 4 hours per day x 5 days a week x 52 weeks per year for a total of about 1,248,000 MWh annually. Figure 1.1 summarizes the results below: 4

5 Sale Price of Peak Power 1200 MW SCGT Plant ($/MWh) Sale Price of Peak Power 1200MW GPM Plant ($/MWh) $40/MWh U.S.,$80/MWh EU Difference in Sales Price to Achieve the same Rate of Return ($/MWh) Annual Energy Sold (MWh) Incremental Annual Profit Increase for GPMs Selling at the Same Peak Market Price (USD millions) $5 MMBtu Natural Gas U.S. $12.50 MMBtu Gas Europe ,248,000 1,248,000 $30,850,000 $74,020,000 Table1: Peak Power Sales Price of SCGTs and GPMs for a Common 8.8% Rate of Return Alternatively, one may conduct an analysis comparing the rate of returns should both the SCGTs and GPMs sell Peak Power at the sale price of the SCGT calculated above. This is shown in Table 2. SCGT GPM $5MMBtu Natural Gas $12.50MMBtu Natural Gas 8.8% 15.2% 8.8% 23.0% Table 2: Annual Rate of Return for GPMs if Selling at the Same On-Peak Prices as SCGTs Knowing that a SCGT peaking gas plant is paid for by the utility rate base with an 8.8% annual rate of return, GPMs present a more attractive return for the utilities and the Commissions that approve funding such plants. Enabling the integration of wind as capacity and, helping achieve the Renewable Portfolio Standards as well as reducing fossil emissions makes GPM energy storage that much more attractive. Several additional benefits for grid systems are discussed below. This analysis provides no financial credit to GPMs for a carbon-free system. T&D deferral for new wind sites which otherwise is not a practical benefit when employing SCGT plants at the wind site, is made possible by GPMs. This is not considered in the financial analyses above. Additional GPM Benefits Versus SCGTs GPMs are an energy storage technology that has superior economic returns versus SCGTs for the same CAPEX and capacity, but they also provide several benefits that are only now being explored by FERC, the ISOs and PUCs as services that will be monetized. If the GPM or SCGT installations compared above are not called upon to provide peaking power generation, the facility is available to perform other valued services. A general comparison of these services and benefits is mentioned below. 5

6 1. Renewable Generation Asset Integration a. Ramp Control The almost instant variability of wind generation causes significant power ramping issues for grids. Gas turbines take 15 minutes to start. GPMs can respond as a load in several seconds. b. Curtailment Mitigation GPMs can store wind instead a curtailment event. c. Firming and Shaping Fast-responding GPMs provide a better wave shape for the grid d. Interconnection Compliance 2. Transmission and Distribution Providers a. GPMs enable T&D deferral by storing energy at the wind site when generated capacity exceeds the transmission system capacity b. GPMs enable voltage support, enhance power quality and enhance grid reliability 3. Ancillary Services a. GPMs can supply Frequency Regulation and Voltage Regulation much faster and more efficiently than can SGCTs b. GPMs can supply black start response c. GPMs optimize responsive reserves when compared to SCGTs 4. Utility Generation a. GPMs can provide equal performance to SCGTs for delivering peak power b. Per installed MW, GPMs can supply or purchase power for load leveling moreso than can SCGTs c. GPMs can be sited more flexibly, whether at the wind site or next to the load, do not need a gas line, emit little noise compared to SCGTs, have no stack or visibly disruptive attributes, have no emissions, and use less land per MW. Summary PSH is the dominant and only proven utility-scale energy storage on the planet, and the services it provides are superior to any existing or competing technologies. GPMs will duplicate those services, but will be more flexibly sited, environmentally benign, will not take decades to commission and present a paradigm shift in the way energy is stored and dispatched. As wind power penetrates grid systems as significant capacity, it must be backed by similar capacity to ensure that the system demand can be met. The American Wind Energy Association, several national governments and state utilities and even American wind developers have recently recognized the need to install utility-scale energy storage with new large wind installations. GPMs are a fossil-free, economically superior alternative to SCGTs to firm this wind power and provide a host of additional superior benefits for grid operators worldwide. Wind developers with existing power sale agreements should be able to pay for a GPM system to store energy and deliver it when needed as long as the utility needs and is willing to pay for capacity. However, at present in the U.S., there is no capacity growth. As wind starts to supplant conventional generation as capacity in the U.S. and globally, GPMs will present the optimal solution for storing wind energy and delivering it when called upon by the system operator. 6