Distributed Energy Storage (I): What Benefits Constitute the “Benefits Stack”?

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Dom Geraghty

 

Distributed Energy Storage (DES) (I): Aren’t We Missing Some of the Benefits in the “Benefits Stack”?

Energy storage, while providing unique and valuable benefits, is relatively expensive.  Based on studies and demonstrations to date of the usual set of bulk and distributed applications, it appears that there is an approximately $250/kW to $500/kW “gap” by which the costs exceed the benefits (see below). But have all the benefits been counted?

Simulation models used for these evaluations to date have not been capable of faithfully simulating the operation of storage facilities within the power system as a whole, calculating all of the potential benefits, and certainly not of co-optimizing these benefits.  It’s a complicated problem.

That leads us to ask: Would a more holistic simulation and a more complete benefits’ “stack” help us close the cost/benefit “gap”?

And, with the communications, controls, data, and intelligence capability available in the Smart Grid 2.0, can’t we do a better job of extracting all of the benefits?

Before We Look at the Benefits, Let’s Look at the Costs of Storage

For a distributed energy storage (DES) application to be viable, its benefits will need to exceed its costs.

Quoted specific costs of energy storage range from:

$810/kW to $7,200/kW (SCE, 2011),

$960/kW to $11,000/kW (EPRI, 2010), and

$550/kW to $2950/kW (Walawalkar, 2009).

Several analyses present a cost “cap”, i.e., the most that storage can cost in order for it to be economic in different applications, as follows:

$500/kW to $2500/kW (NREL, 2010), and

$1,132/kW to $1,145/kW (OGE, 2011, private communication).

11. DSC_0184-150x150The costs depend on the type of application -- whether high power density (high loading) or high energy density (long duration) is required from the storage device. To account for this, some studies characterize the costs (and the benefits) in terms of $/kWh – for example, an EPRI/SMUD report  suggests a $500/kWh target cost, while OGE estimates ~$475/kWh for high value applications.

So, we have to be careful that we compare “apples” to “apples”.  Here, we will mostly focus on high power density applications, using the $/kW metric for both benefits and costs.

What Do Recent Analyses Tell Us About the Benefits of Energy Storage?

Some very fine analyses have been completed by highly competent groups and individuals. Here are our “top” references:

Sandia

The Eyers et al. Sandia Laboratory report lists 19 power system storage benefits ranging from $31/kW to $3,000/kW. The highest benefit related to an 8-hour storage application, i.e., high-energy-density. The second highest benefit provided area regulation, the benefit of which tends to be one of the highest across many different analyses that we’ve reviewed.

The 19 benefits fell into the following broad categories: shifting the peak, integrating renewables, deferral of capital investment and more efficient operations for T&D, reliability improvements, and increased reserves.

SCE

SCE’s analysis of energy storage applications covered 22 sources of benefits. The calculated benefit to cost ratio ranged from 0.01 to 0.5, meaning that no benefit exceeded the cost for any application. SCE provided some interesting ideas on pathways to cost-effectiveness for each of the storage applications.

Unfortunately, the definitions of the Eyers et al. benefits are different to the definitions provided by SCE, and we are faced with an “apples and oranges” situation when we try to compare the results.

NREL

The NREL study focuses on the market value of energy storage facilities. It calculates the benefits of energy arbitrage, regulation, and contingency reserves to be in the range of $29/kW to $429/kW. It also provides the intriguing idea of a “flexibility supply curve” for a power system, where storage is used when other system flexibility options are saturated, due to storage’s higher cost. We will discuss the "flexibility supply curve" in a future dialog posting.

EPRI and EPRI/SMUD

EPRI’s study provides comprehensive detail on energy storage benefits (and costs) on a $/kW and $/kWh basis. Its 22 benefit types range in value from $311/kW to $1,152/kW, with definitions being somewhat different to the other studies above.

The EPRI/SMUD (private communication) analysis lists the benefits of energy storage, capable of up to 4 hours discharge (high-energy density application), in the range of $100/kWh to $525/kWh, and cites a target economic cost for energy storage as needing to be below $500/kWh. SMUD also presented an industry-based forecast of the expected decline of Li-Ion battery costs from $600/kWh in 2001 to $350/kWh in 2015 (link).

PNNL

In its analysis of arbitrage opportunities for bulk energy storage (minimum of 4 hours duration capability) PNNL found a benefit value of about $55/kW. They used the PROMOD production cost model (zonal, not nodal prices) to support their calculations.

They concluded that arbitrage revenue itself is insufficient to justify energy storage, even in transmission-congested locations, presenting a table in which all of the net "profits" are significantly negative for pumped hydro, Na-S battery, and Li-Ion battery applications.

They suggested that if a nodal representation of the transmission system had been represented, small niche markets of high congestion may have been identified, but that the total market would likely be small.

Benefits not included in this study were sub-minute cycle arbitrage, load following, transmission and distribution upgrade deferral, and reliability and power quality improvements.

Walawalkar

Walawalkar, in his study of the NE-ISO and NYC, calculated energy storage benefits in the range of $11/kW to $248/kW, for capacity and energy credits, sync- and non-sync reserves, regulation, and demand response.

He concluded that the capital costs of batteries need to come down and their efficiency needs to be increased.

Here's a summary table of the above analyses:

 Source

Costs

Costs

Benefits

Benefits

$/kW

$/kWh

$/kW

$/kWh

 SCE

810 – 7,200

Benefit/Cost ratio 0.01 – 0.5

 EPRI

960 – 11,000

500 (target)

311 – 1,152

100 - 525

 Walawalkar

550 – 2,950

11 - 248

 NREL

500 – 2,500 (cap)

29 - 429

 Sandia

31 – 3,000

 PNNL

55

 

OK, That’s A Lot of Information, But Does It Help Close the “Gap”?

Not exactly.

11. DSC_0118-150x150-150x150First, we have a lot of “apples and oranges”: (1) different definitions of the elements in the benefits “stack”, (2) benefits that are dependent on the local or regional situation, and (3) benefits that depend on the storage’s operating cycle. They are practically impossible to compare.

However, I think we can agree that if we list all of the different benefits, we will have a comprehensive set of entries for our ultimate, standardized, defined “stack” of benefits that can be ascribed to energy storage.

Second, we have some indicative ranges of the benefits of high-power-density storage (as well as some for high-energy-density).  We can get a sense of their relative value by comparing across the different analyses, and use that to rank each benefit within the “stack” (while perhaps caveating this ranking by noting influential locational factors).

Third, we have a range of expected costs for energy storage devices. We can apply our own judgment as to if, and how fast, these prices might come down as a result of increased field and manufacturing experience.

Dealing with “Stack” Overlaps and Optimization Opportunities

Not all of the benefits cited above are additive. If the energy storage device is occupied with a particular application, it will not be available.

If it is simply in place for its optional value, there is more flexibility for it to execute secondary activities subject to preserving “on-call” optionality for the primary application.

Many of the benefits are time-differentiated. In this case, the storage device can create benefits sequentially.

Where this leads us is to the question of how to optimize the value of a particular storage device across the benefits “stack” in order to create the maximum value. For DES, there can be device-specific optimization, a centralized optimization managed by the “cloud” for additional benefits, or even a global optimization where the storage is fully integrated with utility and ISO operations, and power markets, through Smart Grid 2.0 applications.

We will leave the subject of optimization for another day’s dialog.

Conclusion

We cannot say definitively today that the cost of energy storage exceed its benefits. We need to do a better job of defining all of the benefits, and we need to apply location- and/or application-specific factors too.

We also need to take into account the enabling infrastructure of Smart Grid 2.0 which will provide opportunities to realize and capitalize upon some of the benefits hitherto inaccessible.

Would you agree?

One thought on “Distributed Energy Storage (I): What Benefits Constitute the “Benefits Stack”?

  1. Greg Cipriano

    I like your site. Good summary of the major cost/benefit analyses done to date. Yes, there are lots of complexities here and no doubt even after we think we have found a good application the truth will ultimately be in the doing.

    Reply

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