ESCRI-SA Energy Storage for Commercial Renewable Integration South Australia

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Rodger Parrish
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1 Energy Storage for Commercial Renewable Integration South Australia Project Update - Phase 1 by Bruce Bennett, AGL Hugo Klingenberg, ElectraNet Paul Ebert, WorleyParsons

2 Background to Project A study was undertaken in 2011 examining the role of energy storage for renewable energy integration in South Australia, which found; A reasonable business case for the use of large scale storage (100s of MWs) such as pumped hydro, potentially compressed air and other concepts including gas line-capacity A potential business case around smaller (<30 MW peak) storage where both a renewable energy generation time shift ( arbitrage ) value could be combined with a network service value

3 What is? Energy Storage for Commercial Renewable Integration South Australia () Started as a conversation around the smaller energy storage concept (<30MW peak) between WorleyParsons and AGL Grew to include ElectraNet and the potential to assist renewable energy integration in South Australia Evolved as a project to demonstrate the business case around such storage, including; - The value proposition to renewable generation - The commerciality of the concept if combined with transmission network value - The ability of storage technology to meet utility and market standards - The commercial framework under which such an asset could be owned and operated - How such an asset would fit into the Regulatory framework

4 What is? Phase 1 Business Case Regulatory environment Initial siting Functional specification Capital estimating Technology selection Commercial framework Market impact & value Phase 2 Project Delivery Statutory approvals Formal procurement Finance raising Detailed design Construction Commercial contracts Operation of asset?

5 Phase 1 Basics Targeting revenue from three services; The trading of energy into the NEM, and specifically the time shifting and trading of wind energy within the South Australian NEM Region The provision of ancillary services into the NEM The provision of network services at Transmission level Is technology neutral, but; Looking for commercial solutions that can meet utility standards and expectations, under a LSTK EPC supply Not pursuing pumped hydro or large scale CAES

6 ESCRI Phase 1 Fundamental Questions? What technology and what would it do? Can the device meet typical utility standards? What price? How procured? What contract form? The commercial framework for the device and what would it be selling? Are there particular Safety and operational issues? Where would it be sited what value could it bring? How does this leverage renewable energy? Is it possible to operate an energy storage asset within the Regulations that realises the Market, Network and Ancillary Service value?

7 Building the bona-fides of the technology Kahuku Wind Farm, Hawaii, energy storage system fire, 2012 Photo source; YouTube

8 Energy Storage in Context World installed generation capacity is 5,500 GW 1 World installed energy storage capacity is 150 GW Storage type Technology Installed Capacity (aprox.) Mechanical Chemical and electrochemical Pumped hydro Compressed air (CAES) Flywheel Batteries Flow batteries Hydrogen 142,000 MW 435 MW 972 MW 477 MW 19 MW 3 MW Electrical Super-capacitors 12 MW Thermal Molten Salt Other (chilled water etc) 1237 MW 130 MW 1 All data grid connected, from the US Dept. of Energy Global Energy Storage Database, at: as at 5 February This Exchange is hosted by the Sandia National Laboratories.

9 History of development Global installed energy storage (excl pumped hydro) last 40 years Source: DOE Global Energy Storage Database, Sandia National Laboratories. Images courtesy of Sandia National Laboratories and Strategen Consulting, LLC. Images have bee rearranged to fit medium.

10 Storage is not all equal Choice depends on; Peak output capacity Energy stored Depth of discharge Response time Cycle efficiency Discharge efficiency Number of cycles/lifetime Self discharge Power/energy density Contracting terms Price and return

What some of these look like Technology: Isothermal Compressed Air Energy Storage (ICAES) Pilot Project Nameplate power

5 MWh Technology Supplier: SustainX Asset Owner: SustainX Location: USA Uses: Renewable output time shifting and

Energy capacity: 5 MWh Technology Supplier: Beacon Power Asset Owner: Spindle Grid Regulation, LLC Location: USA Uses:

11 What some of these look like Technology: Isothermal Compressed Air Energy Storage (ICAES) Pilot Project Nameplate power output: 1.5 MW Energy capacity: 1.5 MWh Technology Supplier: SustainX Asset Owner: SustainX Location: USA Uses: Renewable output time shifting and integration, transmission line congestion relief Technology: Flywheel energy storage (FES) Nameplate power output: 20 MW Energy capacity: 5 MWh Technology Supplier: Beacon Power Asset Owner: Spindle Grid Regulation, LLC Location: USA Uses: Grid frequency regulation Source: DOE Global Energy Storage Database, Sandia National Laboratories and formal web sites for either the project or the technology supplier. Note that data accuracy could not be verified.

What some of these look like Technology: Lead Acid Battery Nameplate power output: 4.5 MW Energy capacity: 10.5 MWh Technology Supplier: Shin-Kobe Electric Machinery Co.

sites for either the project or the technology supplier. WorleyParsons could not verify data accuracy.

12 What some of these look like Technology: Lead Acid Battery Nameplate power output: 4.5 MW Energy capacity: 10.5 MWh Technology Supplier: Shin-Kobe Electric Machinery Co. Asset Owner: Kuroshio Power Location: Japan Uses: Wind farm capacity firming Source: DOE Global Energy Storage Database, Sandia National Laboratories and formal web sites for either the project or the technology supplier. WorleyParsons could not verify data accuracy. Technology: Vanadium Redox Flow Battery Nameplate power output: 600 kw Energy capacity: 3.6 MWh Technology Supplier: Prudent Energy Corporation Asset Owner: Prudent Energy Services Location: USA Uses: Peak shaving and demand charge avoidance

13 Results to date?

14 ESCRI Phase 1 Regulation Such an asset would be subject to the National Electricity Law and National Electricity Rules Good news is that there appears no impediment to an energy storage device realising multiple revenue streams Bad news is that just how depends very much on what it does, who owns it and how it connects there is some precedent (pumped hydro), but also complexity, including; - The best registration path (market/non-market generator, scheduled/semi-scheduled/unscheduled generator) - Consideration of Transmission Use of System (TUOS) charges, Marginal Loss Factors (MLFs), ability or desire to provide market ancillary services (such as FCAS, SRAS or NSCAS) - In realising a Network benefit value, the Regulatory Investment Test (RIT-T) process likely applies and potentially limits trading value, depending on ownership and function

15 ESCRI Phase 1 Initial Siting Siting aimed to maximise the overall business case for the asset Started with broad selection criterion, and slowly rationalised to most valuable/practical Two layers of screening to select target sites Benefit quantification to try & rationalise selection Benefits ultimately used in screening Category Generated Energy Value Network Support (due to reliability constraints) Network Support (to increase Market Benefit) Benefit class 1. Energy Trading Value 2. Marginal Loss Factor (MLF) Impact 1. Network Augmentation Capital Deferral 2. Localised Frequency Support 3. Expected Unserved Energy (USE) reduction 1. Heywood Interconnector Constraint Reduction 2. Murraylink Interconnector Constraint Reduction 3. Local Generator Constraint Reduction 4. Grid Support Cost Reduction 5. System Frequency Support 6. Avoided Wind Farm Frequency and Control Ancillary Service (FCAS) obligation

three locations were chosen; 1. Port Lincoln terminal Sub. 2.

16 ESCRI Phase 1 Initial Siting Initial siting suggested three locations; Eyre Peninsula Riverland Yorke Peninsula Of which three locations were chosen; 1. Port Lincoln terminal Sub. 2. Dalrymple Substation 3. Monash Substation Ultimately very iterative process

ESCRI Phase 1 Functional Specification A mathematical model of the asset has been built, which allows simulation against financial metrics Allows functional algorithms to be tested and trialled,

17 ESCRI Phase 1 Functional Specification A mathematical model of the asset has been built, which allows simulation against financial metrics Allows functional algorithms to be tested and trialled, across 100s of technology and size options Storage parameters can be optimised within technology constraints Various energy time shift algorithms can be tried Differences between sites can be calculated Used to determine basic functional Specifications

on LSTK EPC terms Essentially a draft Specification was issued, seeking a storage device between 5-10MW pk & 20 200MWh

18 ESCRI Phase 1 Procurement and Price A formal RFI was issued on 11 May to forty two interested parties (in and outside of Australia); Seeking information on pricing, procurement preferences, technology capability, warranties etc. on LSTK EPC terms Essentially a draft Specification was issued, seeking a storage device between 5-10MW pk & MWh at typical utility standards Concept is to short-list for potential Phase 2 tendering and to assist in confirming final business case

ESCRI Phase 1 Commercial Framework There is a tension between network and energy trading value Ownership is critical in determining operation and commercials Could be owned by a TNSP, specialist 3 rd

19 ESCRI Phase 1 Commercial Framework There is a tension between network and energy trading value Ownership is critical in determining operation and commercials Could be owned by a TNSP, specialist 3 rd party or generator/gen-tailer Functional hierarchy may influence the best owner for such a device who has dispatch rights and when? Trading could be sold or leased, but if owned by a regulated business there may be a limitation on revenue

20 ESCRI Phase 1 Knowledge Sharing Knowledge sharing material will likely begin appearing around August, and include; A final business case report including the regulatory, siting, commercial framework and essential business case for the asset and how this could be used to increase renewable energy supply A state-of-the-art report on Energy Storage use globally A functioning version of the mathematical model for people to use for evaluations The Functional Specification document, once feedback from the market has been received Recommendations on road-blocks and how these might be overcome A series of presentations at key forums

21 ESCRI Phase 1 Conclusions so far Basic conclusions to date include; There are few precedents in Australia but even internationally the market is still in its infancy There is potential to leverage diverse value from storage within the NEM, within the current rules The issues can be complex especially defining role(s) and commercial arrangements, and many technology choices with different strengths/weaknesses There is no simple optimum asset an iterative process is required to establish the what, where and who Yet to conclude on storage and renewables, with early work favouring a straight market role for initial storage assets Storage appears a more complex asset, perhaps requiring long term a rethink of certain constraints and market concepts to be most effective for consumers

22 DISCLAIMER This presentation has been prepared by representatives of AGL, ElectraNet and WorleyParsons. The presentation contains the professional and personal opinions of the presenter, which are given in good faith. As such, opinions presented herein may not always necessarily reflect the position of either AGL, ElectraNet or WorleyParsons, their officers or executive. Any forward-looking statements included in this presentation will involve subjective judgment and analysis and are subject to uncertainties, risks and contingencies many of which are outside the control of, and may be unknown to, AGL, ElectraNet or WorleyParsons. AGL, ElectraNet and WorleyParsons and all associated entities and representatives make no representation or warranty as to the accuracy, reliability or completeness of information in this document and do not take responsibility for updating any information or correcting any error or omission that may become apparent after this document has been issued. To the extent permitted by law, AGL, ElectraNet and WorleyParsons and its officers, employees, related bodies and agents disclaim all liability direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of AGL, ElectraNet or WorleyParsons and/or any of their agents) for any loss or damage suffered by a recipient or other persons arising out of, or in connection with, any use or reliance on this presentation or information.

ESCRI-SA Project Journey

ESCRI-SA Project Journey Phase 1 Early Investigations and Business Case A presentation for the ESCRI-SA Knowledge Sharing Reference Group, Meeting 1 February 6, 2018 The issues in the spotlight. Source: