An Economic Assessment of the Benefits of Storage in South Africa. by Jeremy Hargreaves, Energy & Environmental Economics

Transcription

1 An Economic Assessment of the Benefits of Storage in South Africa by Jeremy Hargreaves, Energy & Environmental Economics

2 USTDA/IDC Storage Assessment IDC commissioned the South Africa Energy Storage Technology and Market Assessment through USTDA, including: Market research Technical, economic and financing assessments Development, environmental and legal/regulatory assessments Roadmap of recommended next steps Conducted by team led by Parsons Today s focus: economic assessment

3 Storage: The Swiss army knife Storage is the most flexible energy resource we have It can offer a very broad set of grid and customer services but not all at the same time How do we use this valuable resource to best effect? When do we need it? How much do we need? Where to site storage? How do we align compensation for storage with highest value uses?

4 When and how much should we build? Integrated resource planning approach When is storage needed? How many MWs? Wide uncertainty in future cost reductions Cost effective when storage can offer grid services more cheaply than any alternative resource or set of resources Dependent on other resource options and costs Base Assumption Wide range in optimal storage build 4

5 Where to site storage?

6 USTDA/IDC Energy Storage Assessment: Our approach Bulk Transmission Energy Capacity Ancillary services Distribution T&D Deferral Local Capacity Power quality Reliability BTM Backup Use an integrated resource planning model to find bulk system storage benefits How much additional benefit needs to come from other revenue streams? Funding gap analysis Qualitative discussion of how to cover the funding gap What are the most promising sites for storage value? How to find them? Future steps to realize greatest value from storage

7 BULK SYSTEM BENEFITS

8 Grid Solutions Various solutions have different performance characteristics and costs Energy storage (batteries, compressed air, etc) Flexible loads or advanced DR Conventional resources, Flexible resources (new flexible CCGTs, Aero CTs, Reciprocating Engines or retrofits to existing plants) Tariff design, regulatory and market changes Storage value depends on alternatives that can offer the same service Wartsila.com Cooling-2.jpg Teslamotors.com

9 Flexibility Planning Challenges 1. Downward ramping capability Thermal resources operating to serve loads at night must be ramped downward and potentially shut down to make room for a significant influx of solar energy after the sun rises. 2. Minimum generation flexibility Overgeneration may occur during hours with high renewable production even if thermal resources and imports are reduced to their minimum levels. A system with more flexibility to reduce thermal generation will incur less overgeneration. 3. Upward ramping capability Thermal resources must ramp up quickly and new units may be required to start up to meet a high net peak demand that occurs shortly after sundown. 4. Peaking capability The system will need enough resources to meet the highest peak loads with sufficient reliability. 5. Sub-hourly flexibility (not shown in chart) Flexible capacity needed to meet sub-hourly ramping needs. What is the least cost set of resources for reliable system operation? Meets operational challenges Meets system reserve requirements

10 Optimizing Investments What is the least cost set of investments? Factors in technology performance and changing loads and prices over time Complex optimization: Multidimensional optimization Interactive effects Requires sophisticated model that treats both operations and investment costs Optimal capacity expansion modeling with detailed system operations Optimal investment point: Marginal avoided cost of alternatives = Marginal cost of storage 10

11 Hawaii Example Hawaii IRP: Oahu s Transition to 100% RPS Significant investments in storage needed to complete transition to 100% RPS Portfolio increasingly relies on solar PV to meet clean energy needs: above RPS because renewables are cheaper Wind resource limited by technical potential Fossil plants kept in service until retirement or conversion to biofuels is necessary Biodiesel provides peaking capability at 100%

12 California Example IRP E3 planning tools being used for IRP How do we get there? Mechanisms for implementation Example: 30 MMT CO 2 Statewide Target Long duration storage added to balance daily renewable production Example scenario: least cost planning showing tradeoffs Remaining high quality wind built in first period to capture PTC Near term solar build takes advantage of ITC Short duration storage becomes cost effective 12

13 Cost effective storage in South Africa Regime 1 Regime 2 Use case is primarily displacement of instantaneous reserves and capacity Energy arbitrage becomes cost effective

14 Regime 1 - Instantaneous Reserves Instantaneous reserves are highest value use of the battery Improves coal fleet efficiency Short duration suited to battery technologies Limited market, 500 MW on peak, 800 MW offpeak Competes against capacity on peak, downward reserves, and arbitrage in dispatch

15 Regime 2 - Arbitrage Installed storage starts to significantly exceed size of instantaneous reserve market Instantaneous reserves become marginalized use as the larger battery investment offers peak capacity and regular arbitrage

16 Local Storage Benefits CLOSING THE FUNDING GAP

17 How to Close the Funding Gap? Distribution T&D Deferral Local Capacity Power quality Reliability BTM Backup Our quantitative analysis only looked only at bulk system benefits for storage Additional use cases available to storage located on the distribution system and at the customer site Where to site storage to get the greatest additional benefits?

18 Local and Customer Benefits Backup services Potential demand charge reduction and rate arbitrage Tap changer Fuse Open switch High Voltage Transmission Transformer Medium Voltage Sub-Transmission Circuit breaker and relay Neighboring Circuit Potential distribution deferral Potential deferral of transmission investments Solar home Low Voltage Distribution Additional benefits beyond the bulk system that can close the funding gap Deferred investments in T&D infrastructure Demand charge reduction, back up, rate arbitrage Reliability and power quality 18

19 Distribution Avoided Cost ($/kw-yr) T&D Deferral Value How to calculate T&D deferral value? Present worth method the value of deferring for a specific amount of time Value of two year deferral: PV of investment (installed in year 1) - PV of investment (installed in year 3) Adjustments made for inflation and technological progress PGE SCE SDGE

20 Load is growing, what are our options? A. Select from one or more capital investments in T/D infrastructure B. Install utility side DER, such as fixed or mobile storage C. Customer side participation in peak load reductions through DER incentive programs D. Any combination of the above

21 Total Resource Cost Test Distribution Deferral California Example Net TRC Cost PV System Cost Solar + Storage System Cost

22 Ratepayer Impact Measure Test Distribution Deferral California Example Net Ratepayer Cost Bill Savings SGIP Rebate

23 Conclusions Funding gap exists when using storage for bulk system benefits only Caveats: Subject to IRP assumptions and scenario dependent The IRP cases have ~15-25% renewables installed by Greater renewables would drive higher storage value. The results assume South Africa is an island. Strengthened interties in SAPP could reduce the need for storage by pooling energy, capacity and ancillary grid services Demand side flexibility could reduce bulk system benefits Value of instantaneous reserves drives initial storage adoption. Pumped hydro will reduce the size of this market. Storage is likely cost effective now in high value locations on the distribution system, factoring in local use cases Need detailed study at the distribution level by Eskom/Munics to find best storage opportunities Reform of storage compensation/control or tariff design needed to take full advantage of storage benefits How large is this market? Storage only gets full bulk system benefits when included in IRP process