An Overv rview of f Power System Transformation – Th The Im Impacts of f New Technologies and In Innovations Owen R. Zinaman, Clean Energy Transition Partners Sao Paulo State Department of Infrastructure and Environment Wednesday, July 24 2019
Power r System Transformatio ion • There is an established and quickly growing body of knowledge on the successful management of modern power systems in transition • The ‘ Status of of Power r System Tran ansformatio ion ’ series codifies global policy, market and technological developments and trends in the power sector 2
Overvie iew of f Se Selec lect t Trends 1. Technology Cost/Performance Improvements 2. Power System Flexibility: A Global Priority 3. Decentralization of Supply 4. Electrification and Sector Coupling 5. Shifting Planning Paradigms and Practices 3
Not t Co Covered Today (S (Sorry! rry!) • Utility business model and regulatory innovations* • Wholesale energy market price formulation re-design • Transportation electrification* • Trends in digitalization, advanced metering infrastructure (AMI),and cyber security • Resiliency efforts and microgrids • Community solar initiatives • “Transactive” peer -to-peer energy trading futures 4
Overvie iew of f Se Selec lect t Trends 1. 1. Technology Cost/Performance Im Improvements 2. Power System Flexibility: A Global Priority 3. Decentralization of Supply 4. Electrification and Sector Coupling 5. Shifting Planning Paradigms and Practices 5
Varia iable le renewable le energy costs ts conti tinue to declin line Image Source: IRENA Renewable Power Generation Costs in 2018 6
How is is th this is happenin ing? Competitive tenders/auctions are th the key driving force for cost reductions Source: GTM 7
Th The Br Broader St Storage Ecosystem Image Source: Zinaman et al. (forthcoming) 8
Lithiu Lit ium-io ion Ba Batterie ies: : Why all ll th the hype? Lithium-ion battery price survey, 2010-18 ($/kWh) Projected Cumulative Global Storage Deployment 2016- Source: Bloomberg New Energy Finance (March 2019) 30 (GW) Source: Bloomberg New Energy Finance (November 2017) 85% cost reduction since 2010 due to To-date, storage deployment following technology improvements, economies similar trajectory to PV deployment in of scale, manufacturing competition early 2000s 9
Record-breakin ing utili tility-scale le so sola lar + storage pric rices The New Record? Developer : 8Minute Energy Offtaker : LADWP PPA Term : 25 years 400 MW Solar @ USD SD $1 $19. 9.97/MWh (≈75 BRL/MWh) 200 MW / 800 MWh Storage@ USD $1 $13. 3.00/MWh (≈49 BRL/MWh) Designed to maximize transmission capacity utilization Hours of Operation: ~7am – 11pm Source: Utility Dive (2019) 10
Most t Co Common Ba Battery ry Use se Ca Case: Frequency Regula latio ion • Significant deployment for frequency regulation (regulating reserves/ secondary frequency response) • Often most cost effective early application – Short duration requirements – High utilization of storage assets Source: US Energy Information Administration (2017) 11
Emergin ing Trend: Ba Battery ry Hybrid idiz izatio ion with ith Co Conventio ional l Power r Pla lants Quick-start capability of hybrid facility Southern California Edison hybrid battery storage, gas turbine peaker system Pairing battery electricity storage systems with peaking plants can allow for the provision of spinning reserves without the power plant actually running. 12
A Vir irtuous Cycl cle? Higher penetrations of wind and solar may increase the market potential for batteries 70.000 Demand 60.000 Shorter duration peak 50.000 Megawatts Residual Lower storage 40.000 Demand capacity needed 30.000 Lower storage 20.000 cost Solar Wind Generation Generation 10.000 More storage deployment 0 12 AM 3 AM 6 AM 9 AM 12 PM 3 PM 6 PM 9 PM 12 AM Hour Some power systems are nearing a tipping point for 4-hour storage providing capacity services instead of conventional generators Source: Denholm, Paul. Utility-Scale Battery Storage: When, Where, Why and How Much?. Greening the Grid. 2019.
In Innovativ ive technolo logy can brin ring inn innovativ ive busin iness models ls Example le: GI GI Energy + + Con onEd • Four 1 MW / 1MWh batteries located in front-of-the-meter at customer sites throughout NYC area • Located in constrained network areas • Customer receives lease payment • Reg egulated ed: ConEd granted priority dispatch during peak local demand • Co Competit itive: GI Energy can otherwise sell flexibility services on NYISO • In Innovation: Value stackin ing across regulated and competitive market segments Image Source: T&D World 14
Overvie iew of f Se Selec lect t Trends 1. Technology Cost/Performance Improvements 2. Power System Fle 2. lexibil ility: A Glo lobal Prio iority 3. Decentralization of Supply 4. Electrification and Sector Coupling 5. Shifting Planning Paradigms and Practices 15
Power r system fle flexib ibil ilit ity has as become a a glob lobal l prio riorit ity Figure source: NREL Report No. FS-6A20-63039 16
Dif ifferent le levels ls of f VRE penetratio ion requir ire an evolv lvin ing approach to provi vidin ing power system fle flexib ibil ilit ity 60% % VRE of annual electricity generation 50% 40% 30% 20% 10% 0% Phase 1 - No relevant impact on system Phase 2 - Minor to moderate impact on system operation Phase 3 - VRE determines the operation pattern of the system Phase 4 - VRE makes up almost all generation in some periods Source: 21 st Century Power Partnership and International Energy Agency. (2019). Status of Power System Transformation 2019. 17
Growing Recognition of Importance of “Institutional” Flexibility • Fas aster power system / / market dis ispatch* – Reduces flexibility requirements • Better win ind an and so solar production forecastin ing – Reduces flexibility requirements • Im Improved bala alancin ing ar area coordination – Increases access to flexibility resources • Sm Smart plan lannin ing an and procurement str trategies – Integrated generation-transmission planning finds system-optimal VRE resources to reduce aggregate flexibility requirements • Fle Flexible le contract str tructures for power plan lants – Avoiding “lock - in” of long -term take-or-pay contracts enables flexible operation and leaves headroom for lower cost resources at a later time 18
Overvie iew of f Se Selec lect t Trends 1. Technology Cost/Performance Improvements 2. Power System Flexibility: A Global Priority 3. 3. Decentralization of Supply 4. Electrification and Sector Coupling 5. Shifting Planning Paradigms and Practices 19
Key Trend: Decentrali lizatio ion of f Su Supply ly • Increasing permeation of distributed energy resources (DER) in power markets • Geographically diverse spread of power generation resources – Predominantly variable renewable energy resources, but also batteries and natural gas to some extent 20
Key Trend: Decentrali lizatio ion of f Su Supply ly • In Increasin ing permeation of dis istributed energy resources (DER) in in power markets • Geographically diverse spread of power generation resources – Predominantly variable renewable energy resources, but also batteries and natural gas to some extent 21
Th The Utili tility Persp spectiv ive: Dis istrib ibuted So Sola lar Chall llenges Our Tradit itio ional l Busin iness Model • Selli lling power creates revenue to pay y for in infrastructure • DPV deployment reduces revenues and may y reduce regula lated capit ital exp xpenditures • DPV most appealin ing and accessible to customer groups that typ ypic ically subsidize the system 22
How big ig are these exp xpected utilit ility tarif iff im impacts? Usually smaller than predicted… 23
Ca Categorie ies of f potentia ial l utili tility responses to DER Constrain Impede program development, impose fixed charges, restrictive permitting and interconnection, etc. Establish passive regulatory frameworks for Enable compensation and interconnection, allowing market to function without intervention Create proactive regulatory frameworks for Accelerate interconnection and compensation, providing market with framework to monetize value create by innovation Restructuring of traditional utility business model, Transform establishing new revenue streams, performance regulation and incentives, etc. Amended from: IEA-RETD 2014: http://iea-retd.org/wp-content/uploads/2014/09/RE-PROSUMERS_IEA-RETD_2014.pdf
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