Energy Storage Application Definitions and EDI Policy and Regulation by Paul Vermeulen, Chairman SAESA Policy and Regulation Committee
Energy Storage has arrived • Electricity is unlike any other product in the world – it is consumed at the instant it is created. In order to maintain stability, its supply must have a reserve margin and be perfectly matched to the demand at all times. 100 MW Tesla • This statement has been valid for over 100 years and Battery in South remained unchallenged because of the ‘common Australia – knowledge’ that electricity simply cannot be stored in Completed in time, the volumes that are required to service the grid. on cost and already • Until now, that is… a favourite with system operators Supply Demand
Arbitrage Break-even Cost Point Analysis of break-even point of energy storage cost vs. maximum arbitrage potential of the Local Government Megaflex Tariff 1kWh Storage used for 6 days of the week, one shot per day, to shift 1kWh from peak to off-peak, all year round Plant Parameters Megaflex Tariff Application 11kV Intake point Technology Aspects Units Value Operational Aspects Energy Units Value Total Installed Cost of Storage System $/kWh 400 HV Distribution System Losses % 4,00% Storage System Specified Cycle Life Number 7000 MV / LV Distribution % 3,00% Efficiency of Charge and Discharge cycle % 85% Value of Winter Evening Energy Arbitrage c/kWh 246,84 Value of summer Evening Energy Arbitrage c/kWh 54,29 Capital Aspects Units Value Loss-less average value of daily arbitrage c/kWh 102,43 Rand to Dollar Exchange Rate Ratio 14,4 Average daily rate to re-charge system c/KWh 43,72 Local cost of Storage R/kWh 5760 Cycle cost to overcome system recharging losses c/kWh 8,14 Capital loan interest rate %pa 5,5% Cycle savings due shift of losses out of peak c/kWh 3,07 Capital Loan Term Years 10 Net average value of daily energy arbitrage c/kWh 97,36 Cost of Finance R/kWh -1741 Total financed plant cost R/kWh 7501 Operational Aspects Network and Demand costs Units Value Theoretical Plant Life, 6 days p/week, 1 cycle/day Years 22,4 Peak Period Duration hours 2 Storage Plant Expected Life Years 15 Demand reduction potential per kWh of storage kVA 0,5 Charge / Discharge Cycles required Number 4693 Monthly network charge per kW r/kVA 7,63 Monthly demand charge per kW r/kVA 28,99 Daily network and demand charge savings potential c/kWh 60,23 Total Savings from 1 kWh daily arbitrage over the * This savings is subject to the system being in Rand 7395,34 life of the equipment operation during the annual half hour peak. Total potential daily arbitrage value of 1kWh LCOE over expected plant life, 1 shot per day c/kWh 159,85 c/kWh 157,59 storage
Value of Storage connected at Tx level • For example, a 100 MWh storage system placed at a point on Eskom’s high voltage transmission network can provide: – A means to store surplus renewable energy at a national level, – Avoid transmission network bottlenecks and – Provide frequency support (reserve margin) for the national generation industry
Stacked value when connected at Dx level • If the same storage capacity of 100 MWh was deployed by strategically placing twenty- five smaller 4 MWh systems further downstream on the medium voltage distribution networks, the systems could add further value through: – Energy purchasing arbitrage (Routinely, over the life of the plant) – The alleviation of distribution network bottlenecks and overloads – The avoidance of Eskom Notified Maximum Demand Charge penalties, – The deferment of network refurbishment or network upgrade capital expenditure – Improvement of the power factor over the entire transmission and distribution networks – Realizing a significant improvement in the security of supply for customers. – Providing a measure of standby power to end customers (alternative to diesel power)
Energy Storage and the IRP Modelling • IRP is the most important policy instrument for determining the optimal mix of energy and technologies to deliver the lowest cost energy solution • Transmission connected battery storage was included, however a static, non declining cost was used. • Only the associated reserve margin value was recognized • There are 30 or so parameters defined as inputs to the IRP modelling • The following subset are influenced by distributed energy storage - all positively: – Distribution Infrastructure; Expansion and Refurbishment – Price Cone – Cost of Unserved Energy – Demand and Consumption Forecast – Demand Side Management – Generation Location – Own Generation – Renewables – Reserve Margin
IRP modelling Boundary Eskom Meters R0,94 c/kWh 40% of all Customers Municipal Distribution Municipal Meters Area R1, 65 c/kWh 60% of all Customers IRP Modelling Boundary Eskom Generation and Transmission The modelling boundaries need to be extended up to all end customer meters, The IRP to factor in the modelling cost benefits of solves for the new technologies Eskom Distribution ‘least cost’ to and options South Africa at available to the Eskom distributors meter
NERSA Licensing Classification • How should energy storage be classified - DSM or Generation? • It is better than a geyser control system as DSM – it does not need to restore load within a time constraint • It is better than gas plant as a provider of peaking generation it has a full positive and negative range • For now, let’s assume it is generation Gas Generation range limits
Storage - a Generation ‘Shape Shifter’ • How should the stored energy be valued in the IRP? • Is it equivalent to gas-peaking plant cost? • Perhaps it is equivalent to the least cost ‘whatever is available’ plus round trip losses and own capital cost? • In that case, off peak coal energy will be the preferred choice for recharging energy the foreseeable future – a short term boost for coal? • Later, when renewable penetration progresses , the systems can be changed to recharge from the ‘zero cost’ surplus renewable energy Megaflex tariff - Local authority Active energy charge [c/kWh] High demand season [Jun - Aug] Low demand season [Sep - May] Voltage Peak Standard Off Peak Peak Standard Off Peak VAT incl VAT incl VAT incl VAT incl VAT incl VAT incl < 500V 300,18 345,21 91,34 105,04 49,84 57,32 98,28 113,02 67,83 78,00 43,23 49,71 ≥ 500V & < 66kV 295,45 339,77 89,52 102,95 48,61 55,90 96,38 110,84 66,33 76,28 42,09 48,40 ≥ 66kV & ≤ 286,13 329,05 86,67 99,67 47,07 54,13 93,34 107,34 64,25 73,89 40,75 46,86 132kV > 132kV* 269,66 310,11 81,69 93,94 44,36 51,01 87,96 101,15 60,54 69,62 38,41 44,17
NERSA Licensing Requirements Assume distributed storage is classed as generation: • On municipal grids, most storage will be in the 0 to 1 MW or the 1 to 10 MW range • If in the 0 to 1 MW range, it will be covered by the Schedule 2 amendments and the embedded generation allocation in the IRP. A distributor registration process overseen by NERSA will apply. • If in the 1 to 10 MW range, Ministerial dispensation is no longer required, however the New Gen Regs requires a feasibility study be completed as part of the ‘ lite ’ licensing requirements • These are not showstoppers, but the rules are needed...... Soon please. *2015 – Amended to include Demand Side Measures
Grid Code Compliance and Safety • The Renewable Energy grid code is closest to what is required. Focuses on curtailment, and needs the opposite ’consume’ criteria added • Deliberate Islanding –‘ Microgrids ’ - review of standards and HV regulations to manage grid operations is needed so that- • A potential new service and revenue stream can be realized where, through negotiation with key customers to locate the storage facilities at their premises, the distributor can provide a measure of secure standby power to the customer in the event of network outages. • Compliance to deliver added benefit of power factor correction right down at the load where it is needed
Price Cone • The price cone is defined as the average price of Eskom power to South Africa. It is not a true reflection of the actual end user price as 60% of the end users are on Municipal networks and experience additional distribution costs. • The IRP as a result excludes any energy or financially efficient measures that may be possible to apply to reduce the additional distribution costs • Most of the country’s ‘peaky’ residential load is connected to the Municipal networks. Purchasing on the Megaflex (soon to be Muniflex) tariff, the municipal distributor’s price cone is inflated by this load profile. • The arbitrage value of energy storage is very high to a non-Eskom distributor • Aside from geyser control systems, storage is probably the only practical DSM tool available to them to limit exposure to Eskom peak energy pricing. • On top of this, municipal distributors are paying dearly on excess NMD charges for short duration residential peaks. • Charges can be reduced or avoided altogether by installing storage at any point downstream of the Eskom meter. The MFMA obliges municipalities to reduce the cost of providing services
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