NY & Energy Storage October 11, 2017 713.305.2055 jeff.bishop@keycaptureenergy.com Jeff Bishop www.strategy.com 1
Key Capture Energy s Role From site selection to construction, KCE drives projects forward All projects begin with a comprehensive analysis of the electrical grid, modeling of possible revenue sources, and an understanding of key trends in political and regulatory landscape Timeline Key Items 0-6 months 6 month - 3 years 1-5 years Interconnect File Queue Request System Impact Study Sign Interconnect Agreement Land Obtain key tracts Sign land options Convert options to leases Permits Fatal Flaws Begin Permitting Process Finalize Permitting Greensmith: Hectate Energy in Ontario Commercial Initial Talks Identify Offtaker Sell dev project Final Product: operating battery storage project 2
New York Market Challenges The market is evolving, and energy storage needs to figure out how we fit in NYSERDA S View of the Market Entry points for Energy Storage 50% Clean Energy Standard Nuclear Replacement Value of Distributed Energy Resources Reforming the Energy Vision Distribution Service Implementation Plans Non-Wires Alternatives NYSERDA: Clean Energy Standard Presentation Doreen Harris: June 7, 2017 3
Primary Storage Markets in NY Frequency regulation, distribution, and capacity opportunities Frequency Regulation Project Size: ~20 MWs Market Size: 150 MWs Revenue: Merchant Uncertain what happens to the Frequency Regulation market after LESRs > requirement T&D Distribution Deferrals Project Size: ~2 MWs Market Size: 200 MWs Revenue: Fixed Opportunities developing throughout the state Capacity Replacement Project Size: ~200MWs Market Size: 2000 MWs Revenue: Mixed Difficult to compete against fully depreciated fossil fuel peakers 4
Secondary Storage Markets in NY Legislative & Regulatory intent will determine marketplace Renewables + Storage Project Size: ~10 MWs Market Size: 500 MWs Revenue: Fixed C&I Customers Project Size: ~2 MWs Market Size: 200 MWs Revenue: Mixed Contracting opportunities continue to evolve Current pricing makes this market attractive in certain parts of the state 5
New York s peakers are problematic 12,500 MWs of fossil-based plants with capacity factors <10% New York has 9.3 GW of gas/oil plants, 1.7 GW of oil, and 1.5 GW of gas peakers with capacity factors of under 10%. The majority of these are in urban areas and are nearing retirement age. Battery Storage projects can help reduce the need for many of these fossil fuel peakers, leading to better environmental and economic metrics for the state. Smaller Energy Limited Resources (ELRs) need to come online to prove value in 4+ hour systems. KCE Analysis using 2014 EPA Emissions & Generation Resource Integrated Database 6
Environmental benefits GHG emission reductions are not priced into market On a GHG emission/mwh basis, low capacity factor fossil peakers have significantly higher GHG emissions compared to higher capacity factor plants. Grey points in the upper plots indicate U.S. gas/oil plants (the plots are vertically scaled to capture 95% of these). Red circles highlight New York plants, and are sized in proportion to nameplate capacity. Dotted vertical lines indicate the capacity factor cut-off of 10% This is because: Efficiency at which a generator converts fuel into electricity decreases with decreasing load Pollution control systems don t run during start-up (as they need temperatures higher than 575 degrees to function) Environmental Benefits of energy storage need to be realized. KCE Analysis using 2014 EPA Emissions & Generation Resource Integrated Database 7
Working within the NY framework Energy Storage Providers need to participate in the conversation Wholesale Markets Participation from industry is required in the NYISO Market Issues Working Group Energy Storage Resource Definition and Parameters State of Charge Management for all battery durations Intra-hour trading for ancillary and energy services, allowing for negative generation Alternative revenue sources for Limited Energy Storage Resources (opportunity costs) Contracted Markets Short-term opportunities need to be expanded to consider energy storage Future NYSERDA Tier 1 Solicitations Value of Distributed Energy Resources (VDER) fast track storage VDER Eligibility for Market Transformation Credit NYSERDA Grants for 2018 utility-scale projects Energy Storage Targets Environmental Markets Needs to be quantified and analyzed to allow for quicker access to market May emerge from New York energy storage study Methodology needs to be developed for different energy storage use cases and appropriate valuation needs to be given Needs to ensure that receiving environmental credit does not preclude wholesale market participation 8