MN Energy Storage Use Case Analysis: Peaker Substitution July 11, - PowerPoint PPT Presentation

MN Energy Storage Use Case Analysis: Peaker Substitution July 11, 2017

Presentation Overview 1. Background & Methodology 2. Results & Conclusions 3. Inputs & Assumptions

Background and Methodology

Potential Peaker Plant Additions in Minnesota Future CT Capacity Additions in Minnesota (MISO MTEP17 “Existing Fleet” Scenario) 2000 1800 1600 1400 1200 MW 1000 800 600 400 200 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Reference: MISO MTEP17 Futures Siting, Planning Advisory Committee Meeting, 10-19-2016 •

Potential Supply-Side Capacity Resource Options (partial list) Natural Gas Combustion Turbine Credit: Duke Energy Energy Storage System* Credit: Doosan GridTech Solar + Storage System* Credit: Solar City *Can be large-scale or distributed

Recent Storage Project Costs “…the all-in cost for the solar-plus-storage project is ‘significantly less than $0.045/kWh over 20 years,’ said Carmine Tilghman, senior director for energy supply at TEP. And, at under 3¢/kWh, he says he believes the solar portion of the PPA is ‘the lowest price recorded in the U.S.’”

Peaker Substitution Use Case Analysis ▪ Context: ▪ MN’s power system has a projected capacity need. ▪ A natural gas combustion turbine (CT) is the marginal resource type for meeting capacity needs. ▪ Energy storage is becoming increasingly cost competitive. ▪ Objective: ▪ Evaluate the economic and environmental impact of using: A) a large-scale energy storage system (ESS) or B) a solar plus energy storage system (S+ESS) in lieu of a new CT to meet future capacity needs.

Steps in the Analysis 1. Calculate the net cost of: ▪ 100 MW, 4-hr energy storage system, with a 20-year project life. ▪ 100 MW, 3-hr energy storage plus 50 MW solar PV system, with a 20-year project life. 2. Calculate net cost of an equivalent MW natural gas Combustion Turbine (CT). 3. Compare the net cost of the two alternatives. ▪ The difference is considered to be the potential benefit to Minnesota electric customers. ▪ Similar to a Total Resource/Societal Cost Test with CT as the avoided cost. 4. Quantify difference in overall impact on CO 2 emissions from both resources.

Cost & Benefit Categories Cost Cost cat categories: Pri Primary Benefit C Categor ories: Capital Costs Capacity (presumed equivalent for both resource • • O&M Costs types) 1 • Fuel or charging costs (incl. losses) Ancillary services revenue • • Tax and Insurance Energy sales revenue • • Avoided environmental costs (solar only) • Potential Benefits (or Costs) of ESS ▪ Other benefit categories not quantified (not in scope): ▪ Avoided startup and no-load costs ▪ T&D deferral [1]: For S+ESS, equivalent CT capacity estimated to ▪ Voltage Support be 90% of nameplate.

Use Case Evaluation Methodology ▪ Analysis performed using a Storage Resource Cost custom Storage Resource Cost Calculator Calculator developed by Strategen. Detailed Proforma ▪ Inputs and assumptions (Cost of Generation, Projected Market Benefits) customized for Minnesota. ESS + PV Dispatch Module ▪ 4 Preliminary Scenarios Examined (Estimates Grid Charge Needs) (plus additional sensitivities) 1. Storage Only – 2018 (online date) Marginal Resource Forecast 2. Storage Only – 2023 (Emissions Impact) + High peaker cost sensitivity 3. Solar + Storage – 2018 4. Solar + Storage – 2023

Results & Conclusions

Cost Comparison: Storage Only $600 Net C Cost o of St Storage v ge vs. P Peaker er lions illio Mil $500 $400 ts Costs Energy V Cos $300 Storage NPV Peaker $200 $100 $0 Storage Only (2023) Storage Only (2018) Storage Only (2023) - high peaker cost Peaker $199,421,299 $209,625,391 $290,535,140 Energy Storage $259,765,849 $187,939,386 $188,060,560 B/C Ratio 0.77 1.12 1.54

Cost Comparison: Solar + Storage $600 Net C Cost o of St Storage v ge vs. P Peaker er lions illio Mil $500 $400 ts Costs V Cos $300 NPV Peaker Energy Storage $200 $100 $0 Solar + Storage (2018) Solar + Storage (2023) Peaker $184,992,561 $194,176,243 Energy Storage $177,384,119 $154,230,487 B/C Ratio 1.04 1.26

Lifetime CO 2 Emissions Comparison 1,400 housands Thousa 1,200 1,000 CO2 800 of CO ons of Tons 600 400 200 0 Storage Only Storage Only Storage Only Solar + Storage Solar + Storage (2018) (2023) (2023) - high (2018) (2023) peaker Peaker Energy Storage

Conclusions ▪ Standalone energy storage may not be cost effective versus a new CT in the near term (2018) for MN. ▪ Standalone energy storage may become cost effective within the next 5 years provided that storage technology costs decline as anticipated. This could occur sooner if: ▪ Additional locational benefits (e.g. T&D deferral, etc.) can be captured ▪ CT costs increase due to a need for more flexible unit types ▪ A coupled energy storage + solar resource may be beneficial both in the near term (2018) and long-term (2023) provided that: ▪ The federal investment tax credit (ITC) is fully leveraged ▪ Environmental benefits are fully recognized

Conclusions (cont.) ▪ Both standalone storage and solar + storage have the potential to reduce GHG emissions relative to a CT: ▪ Solar + storage is significantly more effective at reducing emissions ▪ Standalone storage built in near term may increase emissions due to high frequency of coal on the margin in MISO ▪ The relative emissions impact of standalone storage can improve over time if the frequency of wind on the margin increases

Inputs & Assumptions

Energy Storage System Operations ▪ Operation Assumptions: ▪ Full storage capability (i.e. 100 MW x 4 hrs) is discharged during peak hours, and charged during off-peak hours. ▪ Note: MISO historical peak hours typically correspond with HE 15 through HE 18 (EST) during summer months. ▪ All other hours are available to provide ancillary services (~18 hours/day). Ancillary service dispatch profile was estimated using ESVT software tool. 150 100 Output (MW) 50 0 -50 -100 -150 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Hour References: MISO Historic Peak Load: https://www.misoenergy.org/_layouts/MISO/ECM/Redirect.aspx?ID=229498 •

Energy Storage System Operations (cont.) ▪ Energy Market Revenues: ▪ Storage and CT receive LMP price for all MWh generated ▪ Storage pays LMP price for all MWh charged ▪ Operating Reserve (Ancillary Services) Market Revenues: ▪ Storage resource can receive a market award for one power or energy unit in any given time interval. ▪ The highest value ancillary services product for storage is Frequency Regulation (FR) and it is most advantageous to bid full battery capacity for FR (vs. spin, non-spin, etc.). ▪ CT not presumed to provide FR. ▪ For storage-only resource, IOU ownership assumed.

Storage + Solar PV Operations Typical Peak Hours Slide Credit: Connexus

Storage + Solar PV Operations (cont.) ▪ Coupled Energy Storage + Solar PV system is sized and operated to ensure the following: ▪ Output targeted to summer peak hours (hours ending 15 through 18, June through Sept) ▪ >75% of charging energy is derived from coupled solar PV, not the grid (this is necessary for federal ITC eligibility) ▪ Any excess energy produced by PV (i.e. when storage is fully charged) is exported to the grid ▪ Assumes financing through power purchase agreement (PPA) ▪ Environmental benefits due to PV energy are included ▪ Based on most recent value of solar update (Sept 30, 2016 compliance filing in Docket No. E002/M-13-867)

Summary of Key Technology Cost Assumptions Scenar nario: o: Stor orag age Only (201 018) Stor orag age Only So Solar + + St Storage (20 2018) Solar ar + Stor orag age (2023) 23) (2023) 23) ESS As ES Assum sumptions: s: Size/Du Duratio tion 100 MW/ 4 hrs 100 MW/ 4 hrs 100 MW/ 3 hrs 100 MW/ 3hrs Insta stalled Cost st $1600/kW $1200/kW $1335/kW $1020/kW Fixed ed O&M $16/kW-yr $14/kW-yr $16/kW-yr $14/kW-yr Varia riable le O&M $4/MWh $4/MWh $4/MWh $4/MWh Round und Trip ip Effic icie iency 85% 90% 85% 90% (incl. l. auxilia iliarie ries) CT As CT Assum sumptions: s: Base Case: $829/kW Insta stalled Cost st $829/kW $829/kW $829/kW Sensitivity: $1200/kW Fixed ed O&M $8.50/kW-yr $8.50/kW-yr $8.50/kW-yr $8.50/kW-yr Varia riable le O&M $2.30/MWh $2.30/MWh $2.30/MWh $2.30/MWh Capacity ity Factor 10% 10% 10% 10% Base Case: 9,750 BTU/kWh Heat at Rat ate 9,750 BTU/kWh 9,750 BTU/kWh 9,750 BTU/kWh Sensitivity: 9,300 BTU/kWh PV As PV Assum sumption ons: s: Si Size ze -- -- 50 MW 50 MW Insta stalled Cost st -- -- $1,608/kW $1,213/kW Capacity ity Factor -- -- 18.7% 18.7% Fed eder eral ITC -- -- 30% 22%