Bottling Electricity Final-Energy-storage 12-16-08

8/9/2019 Bottling Electricity Final-Energy-storage 12-16-08

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ELECTRICITY ADVISORY COMMITTEE

ELECTRICITY ADVISORY COMMITTEE MISSIONThe mission of the Electricity Advisory Committee is to provide advice to the U.S. Department ofEnergy in implementing the Energy Policy Act of 2005, executing the Energy Independence andSecurity Act of 2007, and modernizing the nation's electricity delivery infrastructure.

ELECTRICITY ADVISORY COMMITTEE GOALSThe goals of the Electricity Advisory Committee are to provide advice on:

Electricity policy issues pertaining to the U.S. Department of Energy Recommendations concerning U.S. Department of Energy electricity programs and initiatives Issues related to current and future capacity of the electricity delivery system (generation,

transmission, and distribution, regionally and nationally) Coordination between the U.S. Department of Energy, state, and regional officials and the

private sector on matters affecting electricity supply, demand, and reliability

Coordination between federal, state, and utility industry authorities that are required to cope withsupply disruptions or other emergencies related to electricity generation, transmission, anddistribution

ENERGY INDEPENDENCE AND SECURITY ACT OF 2007The Energy Storage Technologies Subcommittee of the Electricity Advisory Committee was establishedin March 2008 in response to Title VI, Section 641(e) of the Energy Independence and Security Act of2007 (EISA).

This report fulfills requirements of EISA Title VI, Section 641(e)(4) and (e)(5).

Section 641(e)(4) stipulates that No later than one year after the date of enactment of the EISA andevery five years thereafter, the Council [i.e., the Energy Storage Technologies Subcommittee, throughthe Electricity Advisory Committee], in conjunction with the Secretary, shall develop a five-year plan forintegrating basic and applied research so that the United States retains a globally competitive domesticenergy storage industry for electric drive vehicles, stationary applications, and electricity transmissionand distribution.

EISA Section 641(e)(5) states that the Council shall (A) assess, every two years, the performance ofthe Department in meeting the goals of the plans developed under paragraph (4); and (B) make specificrecommendations to the Secretary on programs or activities that should be established or terminated tomeet those goals.

Electronic copies of this report are available at: http://www.oe.energy.gov/eac.htm

Printed on 50% wastepaper including 20% post-consumer waste


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Bottling Electricity:Storage as a Strategic Toolfor Managing Variability andCapacity Concerns in the Modern Grid

December 2008

More Information about the EAC in Available at:http://www.oe.energy.gov/eac.htm


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Letter from the Chair

December 2008

On behalf of the members of the Electricity Advisory Committee (EAC), I am pleased toprovide Congress and the U.S. Department of Energy (DOE) with this report,BottlingElectricity: Storage as a Strategic Tool for Managing Variability and Capacity Concerns in

the Modern Grid. This report recommends policies that the U.S. Department of Energy (DOE)should consider as it develops and implements an energy storage technologies program, asauthorized by the Energy Independence and Security Act of 2007.

The recommendations here were developed through a process undertaken in 2008 by theElectricity Advisory Committee. The members of the Electricity Advisory Committee representa broad cross-section of experts in the electric power delivery arena, including representativesfrom industry, academia, and state government. I want to thankBrad Roberts, Chair, ElectricityStorage Association and Power Quality Systems Director, S & C Electric Companyfor hisleadership as Chair of the EAC Energy Storage Technologies Subcommittee and to the EAC

members who served on the Subcommittee. Thanks also go toKevin Kolevar, AssistantSecretary for Electricity Delivery and Energy Reliability, U.S. Department of Energy and toDavid Meyer, Senior Policy Advisor, DOE Office of Electricity Delivery and Energy Reliabilityand Designated Federal Officer of the Electricity Advisory Committee.

The members of the Electricity Advisory Committee recognize the vital role that the U.S.Department of Energy can play in modernizing the nations electric grid. Theserecommendations provide options for the U.S. Department of Energy to consider as it developsand deploys energy storage technologies, policies, and programs to help ensure a 21st centuryelectric power system. This report and its recommendations also fulfill the requirements inSection 641(e)(5)(B) of the Energy Independence and Security Act of 2007.

Sincerely,

Linda Stuntz, ChairElectricity Advisory Committee


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ELECTRICITY ADVISORY COMMITTEEMEMBERS

*INDICATES MEMBERS OF THE ENERGY STORAGE TECHNOLOGIES SUBCOMMITTEE

Robert Gramlich*Linda Stuntz*Policy DirectorChairAmerican Wind Energy AssociationFounding Partner

Stuntz, Davis & Staffier, P.C.Dian GrueneichCommissionerYakout Mansour*California Public Utilities CommissionVice-Chair

President and Chief Executive Officer

California Independent System Operator Michael Heyeck*Senior Vice President, TransmissionAmerican Electric PowerPaul Allen*

Senior Vice President, Corporate Affairs andChief Environmental Officer Hunter Hunt*

Senior Vice PresidentConstellation EnergyHunt Oil Company

Guido BartelsChairman, GridWise Alliance Susan Kelly

Vice President, Policy Analysis and GeneralCounsel

General Manager, Global Energy and UtilitiesIBM

American Public Power Association

Gerry Cauley*President and Chief Executive Officer Irwin Kowenski

PresidentSERC Reliability CorporationOccidental Energy Ventures Corp.

Ralph Cavanagh*Co-Director, Energy Program Barry Lawson*

Manager, Power DeliveryNatural Defense Resources CouncilNational Rural Electric Cooperative Association

Jose DelgadoPresident and Chief Executive Officer Ralph Masiello*

Senior Vice PresidentAmerican Transmission CompanyKEMA

Jeanne FoxPresident John McDonaldGeneral Manager, Marketing, Transmission &Distribution

New Jersey Board of Public Utilities

GE EnergyJoseph GarciaPresidentNational Congress of American Indians


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David MeyerSenior Policy AdvisorOffice of Electricity Delivery and EnergyReliabilityU.S. Department of EnergyDesignated Federal Officer, Electricity Advisory

Committee

Steve NadelExecutive DirectorAmerican Council for an Energy EfficientEconomy

David NeviusSenior Vice PresidentNorth American Electric Reliability Corporation

Brad Roberts*

ChairElectricity Storage AssociationPower Quality Systems DirectorS & C Electric Company

Enrique SantacanaPresident and Chief Executive Officerand Region ManagerABB North America

Tom SloanRepresentative

Kansas House of Representatives

Barry Smitherman*ChairmanPublic Utility Commission of Texas

Tom Standish*Membership Chair, GridWise Alliance

Senior Vice President and Group President,Regulated OperationsCenterPoint Energy

Robert Thomas*Professor, Electrical and Computer EngineeringCornell University

Vickie Van ZandtSenior Vice President,Transmission Business LineBonneville Power Administration

Bruce WalkerVice President,Asset Strategy and PolicyNational Grid

Jonathan Weisgall*Vice President, Legislativeand Regulatory AffairsMidAmerican Energy Holdings Company

Malcolm Woolf

DirectorMaryland Energy Administration

Special thanks to Peggy Welsh, Senior Consultant, Energetics Incorporated, and to Amanda Warner,Energy Policy Analyst, Energetics Incorporated, for their tireless support of the Electricity AdvisoryCommittee.


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Table of ContentsChapter 1 Overview........................................................................................................ 1

1.1 ..................................................................................................................................1Background

1.2 ..................................................................2Benefits of Deploying Energy Storage Technologies

1.3 .................................................................................3Distributed vs. Bulk Power Energy Storage

1.4 .......................................................................4How Much Energy Storage Would Be Beneficial?

1.5 ..............................................................................................................5Objectives of this Report

Chapter 2 Energy Storage Technology Applications ..................................................... 6

2.1 ..................................................................6Benefits of Deploying Energy Storage Technologies

2.2 ...............................................................................................................7Generation Applications

2.3 .................................................................................7Transmission and Distribution Applications

2.4 ...............................................................................................................12End-User Applications

Chapter 3 Regulatory Issues and Potential Barriers to Deploying Energy StorageTechnologies ................................................................................................................. 15

3.1 ..............................................................................................................15Regulatory Uncertainty

3.2 .......................................................................................................................15Utility Reluctance3.3 ................................................................16Electricity Pricing and Energy Storage Technologies

Chapter 4 Potential for Energy Storage in Plug-in Hybrid Electric Vehicles ................ 18

4.1 ............................................................................................................................19Current Status

4.2 ...................................................................19A Three-Phase Approach for Future Development

4.3 .................................................................................21Regulatory and Institutional Policy Issues

Chapter 5 Meeting the Mandates of the Energy Independence and Security Act of2007 .............................................................................................................................. 23

5.1 ..............................................................................................23Research & Development Efforts5.2 ........................................................................24Applied Research and Demonstration Activities

5.3 .......................................................................24Recommended Plan for DOE Program Success

Chapter 6 Recommendations....................................................................................... 26

Chapter 7 References .................................................................................................. 28

Acronyms ...................................................................................................................... 29


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Chapter 1Overview

The ability to store energy in cell phones, personaldigital assistants such as Blackberrys, and other

handheld devices has become an essential componentof business and daily life for consumers in the UnitedStates. The rapid advancement of communicationsand information processing technologies illustrateshow small-scale energy storage technologies (e.g.,batteries in handheld devices) can become a criticalplatform for the reliable performance of tools used foreveryday life. The same information andcommunications technologies will be the primarydrivers in transforming the U.S. electric power gridinto a more reliable, secure, and efficient networkcapable of dealing with massive changes over the

next two decades. It is necessary to evaluate whattype and amount of energy storage technology will beneeded to facilitate the electric power delivery systemtransformation that will support this growth and todeploy a Smart Grid. (A detailed discussion of thebenefits of a Smart Grid is available in the ElectricityAdvisory Committee [EAC] report, Smart Grid:Enabler of the New Energy Economy, December2008.)

1.1 BACKGROUND

The first application of large-scale energy storage(31 megawatts [MW]) in the United States occurredin 1929, when the first pumped hydroelectric powerplant was placed into service. Pumping water from alower elevation to a higher elevation was the mostpractical way to store large amounts of energy thatcould then be released during periods of high, orpeak, demand. These power plants are still used tohelp manage grid frequency and provide clean reservegeneration, known as ancillary services. During a

30-year period from the late 1950s to the late 1980s,approximately 19,500 MW of pumped hydroelectric

storage facilities were brought into service in theUnited States.1 By 2000, about 3% of the total powerdelivered by the nations grid (18,000 MW) wassupplied through these energy storage facilities.2Because of the need for significant elevation changesin pumped hydroelectric plan designs, the number ofenvironmentally acceptable sites for future pumpedhydroelectric facilities is very limited. The siting ofnew plants will face the same objections that thesiting of new transmission lines faces today.Nevertheless, planning is underway to add newpumped hydroelectric power plants to the U.S. grid.

Currently, the energy storage technology receivingthe most attention for use in large-scale energystorage is compressed air energy storage (CAES). A115 MW CAES demonstration power plant wasplaced in service in the early 1990s and has proven tobe effective, although long-term costs withoutresearch and development (R&D) and demonstrationsupport remain to be evaluated. Undergroundformations, such as salt domes and depleted gasfields, can be adapted for use with CAES technology.These systems appear to be practical in a power range

from above 100 MW up to several thousand MW. Amajor energy research institute has proposed two pilotplants to member utilities. One municipal utility

1 Energy Information Administration,Inventory of Electric UtilityPower Plants in the United States 2000,http://www.eia.doe.gov/cneaf/electricity/ipp/ipp_sum.html(accessed December 4, 2008).2 Ibid.


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power plant is under development in Iowa, along withother proposals from commercial developers.3

The most common form of energy storage in usetoday is based on lead-acid batteries. The rapidgrowth of the information age has spawned theconstruction of data centers to support the Internet

and communications centers. These facilities aresensitive to power supply disruptions, so largebattery-powered protection systems have been andwill continue to be deployed to achieve a high level ofprotection. Powering these types of loads currentlyaccounts for over 1.5% of the total utility powerconsumption in the United States.4

Total consumption of lead-acid batteries forcommercial, industrial, and automotive use in theUnited States is currently $2.9 billion per year and isgrowing at an annual rate of 8%.5 In the past, use of

lead-acid batteries for utility applications such as peakshaving was tested, but the economics and life cyclecharacteristics were not ideal for the daily cyclingcapabilities desired in utility applications.

Lithium-ion battery use is growing rapidly. Potentialuse of lithium-ion batteries for high-powertransportation applications has helped drive sales inthe United States to $1billion in 2007, with futuregrowth rates projected at 5060% per year.6 Theability of lithium-ion batteries to economically serveelectric utility applications has not yet been

demonstrated, except for some ancillary servicesprovisions to independent system operators (ISOs).

There are several other electrochemical technologiesin use for electric backup power applications. Thesebattery technologies are also being investigated ordeployed for utility-scale applications. Batterytechnologies include sodium sulfur, zinc-bromine,vanadium redox, and polysulfide-bromide redox flowbatteries, among others. The sodium sulfur battery isa technology widely used in Japanese utilities and isbeing deployed in the United States today. The zinc-

3 Holst, Ken, Iowa Stored Energy Park (presentation, U.S.Department of Energy Storage Program Peer Review, September2008).4 Koomey, Jonathan G.,Estimating the total power consumptionby servers in the U.S. and the world, (Lawrence BerkeleyNational Laboratory, February 2007).5 Buchmann, Isidor, Battery Statistics, Freedonia BatteryUniversity, http://www.batteryuniversity.com.6 Lux Research,Energy Storage for Electric Vehicles (New York:Lux Research, October 2008), http://www.luxresearchinc.com.

bromine battery is currently in use in the UnitedStates.

Nickel-cadmium (Ni-Cad) andNickel metal hydride(Ni-MH) batteries, common to power tools, have alsofound applications in backup electric powerapplications but are being surpassed by other

technologies for cost and energy-density reasons inutility applications.

Additionally, there are other energy storagetechnologies with potential performance and costadvantages, including direct air compression via windturbines and underground pumped hydroelectricfacilities.

The pressing need for better energy storagetechnologies for electric-drive vehicle applicationsand the potential advantages of energy storage for

utility applications have provided incentives for R&Dand venture capital funding in new energy storagetechnologies. However, the potential for even higher-performance (energy density) or lower-cost electro-technologies, based simply on analysis of the periodictable of elements, is very large. If battery technologyis to be dramatically improved, there is still a need forfederal R&D in basic electrochemistry to identify thecombinations of chemical compounds that have thehighest potential for use in energy storage devices.

1.2 BENEFITS OF DEPLOYING

ENERGY STORAGETECHNOLOGIES

The nation must continue to pursue all alternatives forthe continued availability of highly reliable andinexpensive electric power supply. These alternativesinclude the deployment of renewable energyresources, nuclear power, clean coal generation, andother generation resources; the transmission upgradesnecessary to interconnect these resources with load;and various conservation and demand response / loadmanagement programs. The United States should also

consider energy storage technologies as a strategicchoice that allows for optimum use of existing andnew resources of all kinds. Energy storagetechnologies are not an alternative to any particularresource decision; rather, they are a valuable adjunctto all resources, and they will allow increasedcapacity to be derived from any given quantity ofphysical resources.


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There are many benefits to deploying energy storagetechnologies into the nations grid. Energy storagecan provide:

1. A means to improve grid optimization for bulkpower production

2. A way to facilitate power system balancing in

systems that have variable or diurnal renewableenergy sources

3. Facilitation of integration of plug-in hybridelectric vehicle (PHEV) power demands with thegrid

4. A way to defer investments in transmission anddistribution (T&D) infrastructure to meet peakloads (especially during outage conditions) for atime

5. A resource providing ancillary services directly to

grid/market operators

Depending upon the principal application of theenergy storage technology and the contributinginstitution, energy storage can be seen as ageneration, transmission, distribution, or end-userresource. When the energy storage technology isconnected to the grid either at a substation or inconjunction with a generation resource, the labelingand identification of it as one asset class or anotherinevitably gets entangled with cost allocation (andrevenue accrual) issues. Depending upon thetechnology and its performance characteristics, it maybe most effective if seen as a system resource, onethat can be used optimally to improve reliability andeconomics without regard to being classified as oneresource type or another.

1.3 DISTRIBUTED VS.BULKPOWER ENERGY STORAGE

Pumped hydroelectric and CAES technologies areconsidered bulk power energy storage systems. Incontrast, new classes of batteries have been developed

that are considered suitable for smaller applicationsand are referred to as distributed utility storagesystems. (In this context, the term distributed isused as a differentiation from large centralizedenergy storage technologies, analogous to largecentralized power plants.) The term distributed energystorage means deployment of these devices close toload centers, transmission system points ofreinforcement, or renewable generation sources,typically in or near utility substations. In other

contexts, the term distributed denotes location ondistribution feeder circuits or at consumer premisesbehind the meter.

The two main classes of batteries in this distributedenergy storage category are flow batteries and high-temperature batteries such as sodium sulfur (NaS) and

sodium nickel chloride (NaNiCl) batteries. Industryexperts have found that, unlike lead-acid batteries,these devices can cycle on a daily basis and haveuseful operating lives in the range of 10 to 20 years.These systems can be designed for charge/dischargedurations up to eight hours per day. All of thesedevices are scaled chemistries with no emissions andquiet operation.

Flow battery technology utilizes an active element ina liquid electrolyte that is pumped through amembrane similar to a fuel cell to produce an

electrical current. The systems power rating isdetermined by the size and number of membranes,and the runtime (hours) is based on the gallons ofelectrolyte pumped through the membranes. Pumpingin one direction produces power from the battery, andreversing the flow charges the system.

High-temperature batteries operate above 250C andutilize molten materials to serve as the positive andnegative elements of the battery. These chemistriesproduce battery systems with very high powerdensities that serve well for storing large amounts of

energy. The NaS battery is currently being deployedin the United States by several large utilities indemonstration projects. The NaNiCl battery systemsare utilized in Europe primarily for electric busapplications.

Other energy storage devices such as flywheels andsupercapacitors are being applied for power qualityapplications and frequency regulation for utilities andother load-balancing uses to reduce emissions fromdiesel generator-powered devices such as port cranes.For these systems, energy storage is measured in

minutes.

The one energy storage technology poised for bothutility and automotive use in PHEVs is lithium-basedbattery technologies. Lithium-ion batteries dominatethe portable electronics market, and variations in theirchemistries are yielding higher-power designs withimproved cycling capability. Current projectionsindicate that PHEVs with these new batteries will beon the road by 2010 or 2011. The acceptance of these


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vehicles and the ensuing rate of adoption by thepublic will determine the timing of their impact on theoverall power demand of the utility grid. Assumingthat most charging of PHEVs occurs at night, therelative impact on the grid over time should bepositive in conjunction with the anticipatedsignificant growth of wind energy. Uncontrolled

daytime or early evening charging by PHEVs, bycontrast, could pose challenges to system economicsand capacity, as the extra demand could increasecongestion or peak use.

Full integration of new sources of energy demandcoupled with the overall increase in electricity use is amajor challenge facing the designers of the U.S. gridof the future. Energy storage technologies need to beexamined closely to understand where storage canadd value to the overall electricity infrastructure.Examples of the value of energy storage technologies

could include capital deferral, energy maintenanceduring islanding (continuing to power a portion of agrid independently from the utility source), and betterutilization of generation in coordination with thevariable output nature of renewable energygeneration.

The ratio of storage energy capacity tocharge/discharge power rating, or the duration of theenergy storage that is required, varies depending uponthe application and favors different technologiesaccordingly. Energy density, cost, efficiencies, and

environmental concerns are additional factors thataffect the applicability of different technologies todifferent purposes. The electric vehicle applicationdrives most R&D for advanced materials today, but itshould be noted that it is also the most demandingapplication and thus the one that justifies higher costs.In the long term, the best energy storage technologiesfor utility-scale applications may be different fromthose used for electric-drive vehicles.

1.4 HOW MUCH ENERGYSTORAGE WOULD BE

BENEFICIAL?Determining the amount and overall value of energystorage that should be added to the grid begins withan examination of the marginal cost of generatingelectricity. The U.S. electric power industry runs atvery low capacity factorsperhaps as low as 40%.(This means that the average level of production isonly 40% of the peak capacity that is installed and

theoretically available.)7 This capacity has beenacceptable to the industry because generationresources have traditionally been more cost-effectivesources of capacity than energy storage resources.The growth of renewable energy will likely lead toeven lower capacity factors for traditional generationsources.

Many of the drivers for a Smart Grid are based on adesire to improve capacity factors by shifting thedemand curve through either incentives or controls.Beyond some point that remains to be determined,there is likely to be some public resistance to thedegree of load shifting (and high real-time prices)entailed in the deployment of demand response / loadmanagement programs. Energy storage technologyoffers another path to help balance the system as ameans to adapt production to demand whileimproving capacity factors. As such, the deployment

of energy storage technologies may be moreacceptable politically than other types ofinfrastructure upgrades and potentially less disruptiveto the U.S. economy and society. This outcome willprovide powerful motivation to invest in energystorage technologies R&D.

Another positive aspect of the implementation ofenergy storage technologies is the potential to captureand store electricity from wind energy when there is alack of transmission infrastructure. For example, windcurtailment has already become common in Texas

because of a lack of transmission capacity to movethat power from western Texas to load centers inother parts of the state. In many regions, includingTexas, transmission projects are moving forward tobetter connect wind power plants with load centers,although energy storage technologies may havepotential value in the interim.8 In addition, as windpower deployment increases, wind output may beginto exceed electricity demand during certain times ofthe year, which would necessitate curtailment. WhileTexas is moving forward with a $5 billion investmentin new transmission capacity to ameliorate this

problem, it could take up to 5 years to bring this new

7 U.S. Department of Energy, Energy Information Agency,Energy Basics 101 Electricity Basic Statistics,http://www.eia.doe.gov/basics/quickelectric.html (accessedDecember 12, 2008).8 Dan Woodfin, CREZ Transmission Optimization StudySummary (Electric Reliability Council of Texas Board ofDirectors Meeting, April 15, 2008), PowerPoint slides.http://www.ercot.com/meetings/board/keydocs/2008/B0415/Item_6_-_CREZ_Transmission_Report_to_PUC_-_Woodfin_Bojorquez.pdf.


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transmission infrastructure online. This problem mayalso be aggravated by inflexible nuclear and coalpower plants that have limited ability to decrease theiroutput, given the difficulty of powering up orpowering down these large baseload facilities.

The July 2008 U.S. Department of Energy (DOE)

report 20% Wind Energy by 2030: Increasing WindEnergys Contribution to U.S. Electricity Supplydiscusses the scenario in which integration of300 gigawatts (GW) of wind energy into the U.S. gridis achieved.9 To deal with the variability of the windenergy output, approximately 50 GW of new peakingplant gas turbines would be used to supplement orcompensate for the variability of the wind powersoutput. Energy storage could serve a portion of thisneeded capacity.

In analyzing energy storage alternatives, Figure 1-1

shows the current cost estimates for various types ofenergy storage technologies available today. With theexception of CAES, all other forms of energy storagehave no emissions associated with the energydischarge cycle. CAES systems burn a mixture ofcompressed air and natural gas to generate power.CAES technology requires further evaluation and ishighly dependent upon the cost of preparingunderground caverns or other geophysical domainsfor compressed air storage. CAES technology alsorequires fuel costs for discharging, which are notcaptured in Figure 1-1. If the system operated on

compressed air alone, the costs per kilowatt (kW)would be approximately three times greater.

Source: Figure created forBottling Electricity: Storage as aStrategic Tool for Managing Variability and Capacity Concerns

in the Modern Gridby EAC Energy Storage TechnologiesSubcommittee 2008

9 U.S. Department of Energy, 20% Wind Energy by 2030(Washington, DC: U.S. Department of Energy, 2008),http://www.20percentwind.org/20percent_wind_energy_report_revOct08.pdf.

Energy storage technology types can be divided intotwo categories based on their economically practicalduration: those with hours of runtime, and those withminutes of runtime. Currently, flywheels and lithium-ion batteries rated for smaller amounts of energy areappearing in the grid today for ancillary service usesuch as frequency regulation. All other energy storage

technologies can provide hours of energy runtime inaddition to use in ancillary services such as frequencyregulation. One issue that needs attention is thedevelopment of lower-cost energy storage systems inthe 14 hour runtime range through productimprovements in existing technologies or newtechnologies.

1.5 OBJECTIVES OF THIS REPORT

The objectives of this report are to provide theSecretary of Energy with the Electricity Advisory

Committees proposed five-year plan andrecommendations for integrating basic and appliedresearch on energy storage technology applicationsfor electric-drive vehicles, stationary applications, andelectricity transmission and distribution, as mandatedby Subtitle D, Section 641(c)(4) of the EnergyIndependence and Security Act of 2007, and toprovide an analysis of the potential for energy storagetechnology deployment in the coming years.

The report is divided into three major sections:

1. Regulatory issues and potential barriers to adding

energy storage

2. Energy storage growth in PHEVs

3. Meeting the mandates of the EnergyIndependence and Security Act of 2007

Each of the issues is presented in terms of the specificareas of concern and the recommended actions thatneed to occur. Each topic is presented with a set ofgoals and metrics to measure progress. Wherepossible, goals and associated timelines are providedbased on near-term goals (35 years), mid-term goals(512 years), and long-term goals (2020 and beyond).

Figure 1-1: Current Energy Storage TechnologiesCost Estimates


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Chapter 2Energy Storage Technology

Applications

Electricity has traditionally been used at the time atwhich it is generated. It is not often stored, despite thefact that energy storage would allow for theoptimization of power generation. Currently, theUnited States has adapted generation to match peakload, resulting in very low capacity factors for theelectric power industry, as much of the capacity isused infrequently to meet peak demand. The shift ingeneration resources from fossil fuels to renewableenergy resources as a source of electric power will

aggravate this low capacity factor because windpower, in particular, is often strongest at times whenelectric demand is far from peak. Used to levelize theproduction/demand mismatch over various timedomains, energy storage technologies have a numberof generation applications. In addition, storage alsohas transmission applications that improvetransmission capacity and reliability.

2.1 BENEFITS OF DEPLOYINGENERGY STORAGETECHNOLOGIES

Benefits to Transmission andDistribution

Energy storage applications may offer potentialbenefits to the transmission and distribution (T&D)system because of the ability of modern powerelectronics, and some electrochemistries, to changefrom full discharge to full charge, or vice versa,

extremely rapidly. These characteristics enableenergy storage to be considered as a means ofimproving transmission grid reliability or increasingeffective transmission capacity. At the distributionlevel, energy storage can be used in substationapplications to improve system power factors andeconomics and can also be used as a reliabilityenhancement tool and a way to defer capitalexpansion by accommodating peak load conditions.

Energy storage can also be used to alleviate diurnal orother congestion patterns and, in effect, store energyuntil the transmission system is capable of deliveringthe energy to the location where it is needed.

Benefits to Renewable EnergyResources

One area in which energy storage technologies couldprovide great benefits is in conjunction withrenewable energy resources. By storing energy fromvariable resources such as wind and solar power,energy storage could provide firm generation fromthese units, allow the energy produced to be usedmore efficiently, and provide ancillary transmissionbenefits.

Benefits to End-Use Consumers

At the end-use level, energy storage technologies canbe used to capture distributed renewable generationphotovoltaic solar or wind powerand store it until itis needed, both for off-grid and grid-connected


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applications. As such, end-user energy storagetechnology applications also have the potentialbenefit of improving grid utilization, especially ifend-user energy storage can be coordinated withutility operations. One example of such coordinationis the use of energy storage in large commercialbuildings to allow peak shaving and demand response

/ load management to occur without reducing actualbuilding services and heating, ventilation, and airconditioning (HVAC).

A potential benefit of an end-user energy storagetechnology is vehicle-to-grid (V2G) technology,whereby plug-in hybrid electric vehicles (PHEVs),with the added capability of discharging back to thegrid, are used to improve grid utilization, levelizedemand, and improve reliability. Becauseexpectations for PHEV deployment are so high, thereis great interest in the electric power utility industry

about the potential for V2G to provide many of thebenefits of energy storage at the distribution and end-user level.

Benefits to Niche Applications

There are also high-value benefits to niche energystorage applications associated with specific end-usesectors. An example of such a niche application is theuse of energy storage technology in commuter railstations to provide accelerating power to trains whereit is needed and thus minimize losses associated withtrack catenary distribution. Other specific industrialapplications will be developed as megawatt-scaleenergy storage technology becomes proven andeconomic and that will provide added benefits ofenergy storage technologies.

2.2 GENERATION APPLICATIONS

This section further discusses the potential benefits ofenergy storage across different infrastructure and timedomains and gives some indications of theperformance characteristics required by eachapplication and the estimated economic gains.

Table 2-1 summarizes generation domain applicationsand their benefits. In addition, some generalcomments regarding generation applications areprovided for increased understanding.

Many of the generation services that are potentialenergy storage applications are existing energymarket-defined products (e.g., ancillary services andbalancing energy), and as such, market costs for these

services are readily available. Where markets are notderegulated, the amount of energy storage capacitythat could be used is roughly linked to system orgenerator sizes. In most cases, the overall economicbenefits can be used to finance energy storagetechnology projects via normal market mechanisms.

When benefits are described as alleviatingconventional generation capacity to provide energy, itis because the provision of an ancillary servicerequires that the generator operate at less than fullcapacity. Thus, the owner of that generator incurs anopportunity cost in that the margins on production aredecreased; this cost is a large part of the pricingdemanded for ancillary provision, especially at peakload. In some cases, generating units that are not inthe market and would be uneconomical are used toprovide ancillary services, generally at higher prices.Replacing these units with energy storage

technologies would reduce these costs and theassociated emissions from these units, potentiallyenabling the retirement of older power plants.

Some of the applications are already under earlycommercial development; several merchant energystorage developers are piloting fast energy storagetechnologies for use in system regulation. In addition,some wind developers that experience curtailmentdue to insufficient transmission capacities areinvestigating energy storage solutions.

At a much larger scale, the Dutch government isexploring the creation of an energy island, wherebya hollowed-out artificial island in the North Seawould use pumped hydroelectric in reversewindmills would pump water out of the island, andthen hydroelectric turbines could generate electricitywhen it is desired from water flowing back into theislands cavity.10

2.3 TRANSMISSION ANDDISTRIBUTION APPLICATIONS

Transmission and distribution (T&D) applications arenot as advanced in development and deployment asgeneration energy storage applications. In addition,regulated utilities in general must be the first toembrace energy storage as a cost-effective option, andtraditionally the T&D sector relies on proventechnologies with asset lives of 40 years or more,

10 The Energy Island Stores Electricity,European EnergyReview, December 2007.


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which is difficult to demonstrate for many emergingtechnologies.

Transmission capacity to bring remote generation toload centers is currently limited, although newtransmission infrastructure is being planned and builtin many areas. Increasingly, new generation has to be

sited far from population centers, which can placeadditional strain on the grid. Wind power generationin particular is often located in remote or rurallocations, which requires the installation of newtransmission. Because wind resources typically havecapacity factors below 50%, it is often the case thatassociated new transmission rated at the full powercapacity of the renewable resource is not economical.For some wind power projects, it may be cost-effective to either build transmission capacity forslightly less than the full nameplate capacity of theproject and simply curtail output during the small

number of hours per year when output exceeds theavailable transmission capacity or to add energystorage to enable the dispatch of the energy at adifferent time.

One noteworthy leader in applying energy storage toT&D applications is American Electric Power (AEP).AEP is deploying a 5.0 megawatt (MW) sodiumsulfur (NaS) battery to solve a transmission issue insouthern Texas. AEP has stated a commitment to add1,000 MW of energy storage to their grid by 2020.11

Energy storage technologies may provide a way tocapture power production that would otherwise becurtailed and reserve it for a time when thetransmission grid is not loaded to capacity. Energystorage also affords the transmission owner/gridoperator a chance to defer transmission expansion fora period; transmission capacity is generally notincrementally increased. This ability to defertransmission expansion is an example of energystorage providing mutual benefits to generation andtransmission. However, the costs of energy storageoptions need to be compared to other options,

including the construction of new transmissioninfrastructure, that benefit all generators as well asconsumers via enhanced reliability and lower overallcosts.

It is a matter of debate whether the cost of energystorage technologies utilized to shift transmission

11 American Electric Power, AEP to deploy additional large-scale batteries on distribution grid, news release, September 11,2007.

utilization to match capacity should be a generation ora transmission asset because of its multifacetedimplications for business models, sources offinancing, and regulatory cost recovery. Energystorage is described here as a transmission applicationbecause it is directly linked to the transmissionsystem and its operation, without any bias towards its

classification as such for regulatory or business modelquestions. However, it is worth noting that energystorage used for this purpose can also be used forenergy price arbitraging and production levelization,which are normally generation functions and whichdevelopers prefer to perform on a merchant basis sothat they can access market prices.

Transmission congestion is already a peak periodissue in many parts of the country. Congestion upliftcharges are typically considered as part of fuel costadjustments by most regulated load-serving entities

and can be tens to hundreds of millions of dollarseach month. The impact of congestion is to force theuse of expensive generation resources (combustionturbines or older steam units converted to oil and gas)closer to the load center instead of less expensive coaland hydroelectric (or increasingly, wind power)resources, which can be used in remote locations.Therefore, large-scale energy storage is another wayto mitigate transmission congestion, if the economicsare viable.

A special case of congestion relief occurs when the

limiting transfer capacities are not the physicalcapacities of the transmission paths in question, butrather are reliability limits arising from post-contingency loading or stability conditions. In thewestern United States, system dynamic and transientstability limits impose restrictions on the north-southpower flows, below the physical limits of thetransmission lines. In the Northeast, post-contingencyvoltage conditions similarly limit transfers below thephysical capacities.

Very fast energy storage has the potential, as yet

unexplored or validated, to relieve many of thesereliability limitations. In the event of a contingency (asudden unplanned outage of a line or generator), theinverter-based storage could theoretically respond in aperiod of power system cycles (


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increased power transfers for better economics andwould be important as new generation sources arelocated far from load centers. This improvementcould be a bridge until expanded transmissioncapacity is permitted and constructed and wouldsimilarly provide capacity factor benefits to some newtransmission facilities.

At the distribution level, energy storage can providebenefits similar to those it provides at the generationand transmission levels: providing localpeak power/time shifting capabilities, gridreinforcement against peak and against reliabilityincidents, and specialized power electronics-basedbenefits. Providing these benefits with fossil fuel-based generation is usually problematic because ofsiting and environmental issues, and distributionapplications require completely unmanned operation.

12 Source: Institute of Electrical and Electronics Engineers(IEEE), 2008.: Nourai, A., V.I. Kogan and C.M. Schafer, LoadLeveling Reduces T&D Line Losses, IEEE Transactions onPower Delivery, no. 23 (Institute of Electrical and ElectronicsEngineers, October 2008), TPWRD-00819-2007: 2168 2173.

Appropriate energy storage technologies do not sufferfrom these drawbacks. As an example, while pumpedhydroelectric facilities can only be located wheresuitable dam sites can be created (which is hardly anurban option), and compressed air energy storage(CAES) may be difficult to site in volume in anysuburban/urban area, other technologies, particularly

dry batteries, lend themselves to distributeddeployment in basements and garages. Table 2-2shows the potential applications of energy storage inthe transmission and distribution systems.

While the deployment of energy storage technologieson distribution systems can offer all of the benefitsavailable from larger storage units at transmission andgeneration levels, it can also offer some additionalvalue. The flattening of demand on stationtransformers and circuits enables the deferral of

Table 2-2: Transmission & Distribution Energy Storage Applications

12

Application Benefit QuantificationPower

RequirementsDuration

Requirements Issues Comments

Transmissioncapacity factorfor renewablesources

Capture renewableproduction and deliverwhen transmissioncapacity is available

2050% ofrenewablecapacity

2030% ofrenewablepeakproduction

612 hours Uncertain long-termeconomics ascapacity is built

Economic issuefor winddeveloperstoday

Transmissioncongestionrelief

Generalizedapplication of above

Potentially largein localizedapplications

Equal totypicalcongestedpower on path

Hours Uncertain long-termeconomics ascapacity is built

Likely to grow inimportance

Transmissionreliability limitrelaxation

Specialized technicalversion of congestionrelief relying on very

fast storage

$10 million tomore than $100million

0 MW to1000 MW

Seconds to 15minutes

Unexploredand will needrigorous

analysis anddemonstration

Would bebacked up byquick start

reserve in somecases

Transmissioncapital deferral

Relieve short-termcongestion

1several yearscarrying costs

Hours Very sitespecific

Similar tocongestion relief

Substationpeakload/Backup

Defer transformerupgrades (and otherupgrades) due to peakload growth

$M per stationfor 25 yearsdeferral

210 MW Hours Economicsunanalyzed

Links to loadingissues arounddistributedgenerationpenetration also

Voltagesupport

Storage can providelocal real power athigh power factor

Economicsneed analysis

Varies withapplication

Varies withapplication

Cost comparedwith alternativesolutions

This applicationis being pilotedby at least oneutility

Reliabilityenhancement

Provide down-circuitsupply while outages

are restored

Outage costsvary greatly

depending withduration andconsumer

210 MW Hours Economicsunanalyzed

Alternative toswitching on

long ruralcircuits

Source: Institute of Electrical and Electronics Engineers (IEEE) 2008.


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distribution upgrade capital. In addition, theavailability of the stored backup power closer to theend-use consumer at the distribution level would offerinherently higher service reliability than what couldbe offered with energy storage at transmission orgeneration levels. Due to the nonlinear nature of T&Dlosses, diurnal peak shaving of energy storage devices

would actually reduce T&D losses. The closer theenergy storage is located to load, the greater thereduction in T&D losses, particularly given that ahigh percentage of the T&D losses are on thedistribution circuits. Another additional value ofdistribution-level energy storage, compared to largerunits deployed at transmission and generation levels,is the inherent increased security and reliability instoring energy in multiple locations instead ofconcentrating them in fewer large centers. A uniquedistribution system has significant value and shouldbe considered in locating energy storage devices.

2.4 END-USER APPLICATIONS

Energy storage can be used as an asset forcommercial and industrial end-users. For theseapplications, the device may be utilized as astandalone asset or in combination with distributedgeneration (DG).

For residential end-users, energy storage can addvalue as a backup power device, providing powerduring outages for vital appliances. In addition, it can

play a role with renewable energy, such as rooftopsolar power, as a way to store excess renewableenergy production for use when the renewable energyresource is unavailable (i.e., when the sun is notshining or the wind is not blowing), allowing theconsumer to avoid using grid energy at those times.Of course, grid electricity (where available) may be amore cost-effective option for maintaining powerduring these periods.

For commercial end-users, energy storagetechnologies can fill a unique niche in providing

backup power for short-term interruptions. Typically,a facility will use DG technologies to supply backuppower. However, many interruptions are often shortin duration and happen before a generation device canramp up. In combination with DG, energy storagecan provide ride-through protection for short-terminterruptions and serve as a bridge to a facilitygenerator in case of long-term outage.

This short-term storage market is the very matureuninterruptible power supply (UPS) market arena thatis currently booming. According to researchconducted by the Uptime Institute, total sales this yearin the United States will be over $1.4 billion andgrowing.

UPS devices have been used by commercial end-userswith specialized reliability requirements (high-valueprocess/production industries). With environmentallyand economically attractive energy storage, possiblyassisted economically by price arbitraging andlinkages to demand response / load management, thisapplication may become increasingly relevant forother commercial end-users.

Energy storage can be considered simply anothergeneration option for an end-user. Todays usermay be able to use all power sourcesthe grid,

energy storage, and DGin combination to optimizeusage and costs for power, and as a result, maximizeeconomics and profits. If, in the future, the utilitydecouples rates and implements a demand or capacitycharge, the user may be able to pay a lower demandcharge if they are willing to accept curtailed servicefor essentials onlywhen the renewable productionis absent and the energy storage is exhausted. Energystorage technology can serve individual residences oreven a microgrid serving a number of commercialusers.

It is also conceivable that energy storagetechnologies, interconnected with end-user controlleddemand-side resources and DG, will be used to shiftgrid demand to low-priced periods and avoid peakreal-time prices. Again, this is also a viableapplication for commercial as well as residentialusers. It is anticipated that significant PHEVpenetration will lead to such applications, asconsumers realize the desirability of charging theirvehicles at off-peak prices.

There is also the possibility for the linkage of end-

user energy storage with utility operations to achievesome of the same benefits as described in the T&Dapplication section. Because of the costs of controlinterconnection and the need for some assurance thatthe energy storage technology will perform whenneeded, this system is likely to first appear inhigh-value/high-density locations, such as downtownurban underground networks. The particularoperational problems of underground networks andthe high costs of capital expansion and energy in


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these areas make inter-controlled end-user DG andenergy storage an interesting opportunity for the T&Dutility. This opportunity implies that end-user energystorage is capable of discharging back to the grid viaa net metering scheme under utility control.

A very specialized end-user application, under

investigation in Europe and by the New York StateEnergy Research and Development Authority(NYSERDA), is the use of energy storagetechnologies to levelize the peak power demands ofelectric rail operations and to reduce rail powerdistribution losses; trains consume as much as 75% oftheir power when they are accelerating out of astation. Energy storage deployed at stations wouldreduce the losses in delivering power to the train(catenary losses are quite highmore than doubletypical T&D losses due to the need to use steel for thecatenary conductor) and would allow for the capture

of regenerative braking as well.13

Using energystorage avoids the expensive or impracticalretrofitting of trains, which would be necessary forthe use of flywheels for similar purposes.

One of the most appealing benefits of deploying aSmart Grid is that the smart technologies can beused to shift or control demand to reduce peaks. Somedemand response / load management programsrequire altering consumer behavior, although otherdemand response / load management programs canoperate automatically and without the consumer being

aware of its deployment. A virtue of energy storagetechnology is that it can accomplish the samesupply/demand balancing without imposingbehavioral constraints on consumers. On the otherhand, the benefit of demand response / loadmanagement measures is that they are typically lowerin cost.

Demand response / load management is increasingly amarket resource, incorporating the provision ofancillary services such as reserves and real-timeenergy, as well as some demand response / load

management aggregators that aim to provide systemregulation. Utility-scale energy storage coupled withdemand response / load management provides theaggregator a higher responsiveness and certainty ofresponse, making demand response / loadmanagement participation in ancillary servicesmarkets more attractive.

13 New York State Energy Research and Development Authority,Program Opportunity Notice 1217, July 2008.

As with distributed generation, energy storage at theend-user site is a natural complement to demandresponse / load management applications and has thechance to play a vital role in demand response / loadmanagement programs. Ultimately, end-users mayuse their storage in net metering situations, as somerenewable energy resources are used today, to sell

power back to the grid at peak times. Whether energystorage economics will make this option viable is notyet known.

Other niche applications for energy storagetechnologies include cranes, container ports, andother applications characterized by short bursts ofpeaking power in which managing local demandand/or losses is of value.

These niche applications are mentioned only toillustrate that many other high-value, end-user

applications will come forth once the energy storagetechnology is proven effective. Table 2-3 shows theend-user applications and value propositions thatcould be derived from energy storage.


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Chapter 3Regulatory Issues and

Potential Barriers to

Deploying Energy Storage

Technologies

3.1 REGULATORY UNCERTAINTY

Energy storage technologies face regulatory barriersto their implementation in the electric power industry.

Like any new or emerging technology, energy storagehas a lack of regulatory history to guide regulators onits use. In addition, there is no overall strategy orpolicy on how energy storage technologies can beincorporated into existing components of the electricpower industry. In fact, there are very few regulationsthat explicitly address energy storage. The lack of anyspecific regulations leaves utilities uncertainregarding how investment in energy storagetechnologies will be treated, how costs will berecovered, or whether energy storage technologieswill be allowed in a particular regulatory

environment. The primary reason for the lack ofregulation is that energy storage on a utility-scalebasis is very uncommon and, except for pumpedhydroelectric storage, is relegated to pilot projects orone-time deployments. Utilities have not used energystorage to address capacity issues and are perhaps notaccustomed to considering the use of a nontraditionaltechnology, such as energy storage, to address issuesin ways different from those used in the past.

An additional reason for the uncertainty regarding thetreatment of energy storage technology stems fromwhether energy storage technology is seen as beingrelated to generation or transmission. The problem,

from a regulatory perspective, is that energy storageapplications can provide functions related to both, asdiscussed in Chapter 2. The bulk storage ofelectricity, for example, if used by a utility to shift thegeneration of electricity from a time of low-costgeneration, such as in the middle of the night, to atime of high-cost generation, such as during peak use,would be seen as similar to generation. On the otherhand, in addition to reducing or eliminating the needfor peaking facilities, this type of action could alsoreduce transmission congestion, provide voltagesupport at a time of peak use, and provide other

ancillary services that support transmission functions.The ability of energy storage technology to fillmultiple roles in both transmission and generationleads to confusion and uncertainty about how energystorage should be regulated.

3.2 UTILITY RELUCTANCE

The multiple applications of energy storage spreadout the transmission and generation benefits that


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energy storage provides as well as the income streamsprovided by these benefits. Regulated investor-ownedutilities generally need to be assured of cost recoverybefore proceeding with major investments, and a newtechnology such as storage may present challenges inobtaining regulatory approval. Such reluctance resultsin a barrier to deploying widespread energy storage

technology due to the indeterminate state of thetechnology and the costs of implementation. Thisconfusion affects the cost recovery status of energystorage projects because these utilities are uncertainthat a basis can be made for the cost recovery of thisnew, innovative technology. If an energy storageproject is compared directly to a peaking generationfacility or to developing a new transmission line,without taking into account the system benefits ofenergy storage, the cost of the energy storage projectmay not seem justified if the problem can beaddressed through a less-expensive solution.

However, it may be difficult to quantify or comparethe costs and benefits of all of the different functionsprovided by an energy storage project to those of asingle generation or transmission project.

Because multiple benefits can be provided by energystorage applications, the potential income streamsfrom energy storage are also diverse. For example, anenergy storage project may provide the benefits ofimproved reliability and deferral of transmissionimprovements. An owner of storage may also attemptto arbitrage the price of electricity by storing when

the price of electricity is low and selling back to thegrid at peak demand when the price is higher or byproviding other ancillary services. However, thesebenefits would not provide sufficient income if theywere considered individually, but combining multipleincome streams would allow for full cost recovery ofthe energy storage project.

However, because these benefits address differentfunctions (generation vs. transmission), it may bedifficult to measure the different benefits and allowfor full cost recovery based on these benefits. Energy

storage provides benefits that can transcend narrowlyfocused applications categories; for example, energystorage that increases the effective capacity factor of arenewable energy resource improves the economicsof that resource and also reduces overall emissions. Inaddition, the deployment of energy storagetechnology may allow deferral of transmissionexpansion (or more realistically, allow higher-prioritytransmission expansion to take precedence).Application of energy storage avoids a need to carry

higher-spinning or short-term generation reserves ona renewable energy project and frees up generationcapacity, thus allowing deferral of traditionalgeneration expansion. The challenge for publicpolicymakers is to design incentive structures thatfully recognize all of the potential benefits withoutcreating an incentive-driven competition between

energy storage and other desirable investments.

Generators, or residential consumers with small-scalerenewable energy generation, may deploy energystorage technology for arbitrage purposes; however,the revenue from arbitrage may not be sufficient tocover the costs of an energy storage project and maypresent another potential barrier to adding moreenergy storage to the electric power delivery systeminfrastructure.

A utility that is guaranteed to receive cost recovery of

either a transmission or generation project, or both,may have little incentive to put an energy storageproject in place. Rather than invest in energy storagetechnology, a utility may simply opt to construct atransmission and/or generation facility, the costs ofwhich are more likely to be approved and recovered.In addition, state utility regulators may be reluctant toallow cost recovery for an innovative energy storagetechnology. State utility regulators may instruct theutility to rely on proven technology to address issuesthat could be solved through energy storagetechnology.

3.3 ELECTRICITY PRICING ANDENERGY STORAGETECHNOLOGIES

The current typical pricing structure of flat rates doesnot provide consumers with any incentive to invest inenergy storage applications. Consumers that areexposed to time-of-use or real-time prices will havean incentive to invest in storage if the pricedifferentials are significant, but today relatively fewresidential or small commercial customers are under

such pricing schemes. However, energy storageapplications for larger consumers may provide otherbenefits, such as reducing or eliminating demandcharges. Energy storage for all consumers could alsobe used for demand-side resource programs, if there isan incentive associated with this benefit for theconsumer.

To successfully overcome regulatory obstacles todeploying energy storage technologies, a definition of


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such technologies must be adopted by regulators as aclass of assets within the generation, transmission,distribution, or distributed/end-user sectors accordingto their ownership and application. Furthermore,regulators must then provide appropriate regulationson the use of energy storage in each case. Incentivesor allowances for cost recovery should be made by

either allowing the energy storage technology ownerto obtain multiple income streams to offset the costsor allowing cost recovery through rates. By explicitlyaddressing the issue of implementation of energystorage technology and indicating that the technologyis a cost-effective option that is available to addressmarket issues, the largest barrier to successfuldevelopment and deployment of energy storagetechnologies will be overcome.


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Chapter 4

Potential for Energy Storagein Plug-in Hybrid Electric

Vehicles

Plug-in Hybrid Electric Vehicles (PHEVs) are one ofa cluster of technologies that can provide a way toreduce carbon emissions (CO2), as well as pollutantssuch as nitrogen oxides (NOx), sulfur oxides (SOx),and mercury. PHEVs will also contribute toincreasing energy security by reducing the nationsdependence on foreign oil as a strategic commodity.Finally, PHEVs will combat the rising costs oftransportation.

This chapter discusses the potential impact of asignificant penetration of PHEVs both in terms ofincreased demand on the electric power deliverysystem and the possible benefits of the distributedenergy storage this technology can offer. Asdescribed in Chapter 2, using a PHEV to provideenergy storage is called vehicle-to-grid (V2G) power,and it leads to what some call the cashback hybridapproach. This approach is further discussed in thischapter.

It is likely that PHEVs that have an all-electric rangeof approximately 40 miles will penetrate the UnitedStates market in significant numbers in the nearfuture. While the exact timetable is uncertain, manyanalysts expect that the trend will begin in 2010 andbe in full swing by 2050. One study predicts adeployment of 30% of new light-duty vehicle sales by

2030. 14 The study suggests that plug-in hybridvehicles, building upon the engineering and marketacceptance of traditional hybrids, are expected toenter the U.S. market around 2010 and to gain marketpenetration through 2050 because of their superiorfuel performance and environmental benefits.15

Another study concludes that with proper changes inthe operational paradigm, [the U.S. electric system]

could generate and deliver the necessary energy tofuel the majority of the U.S. light-duty vehiclefleet.16 The study does not address any additionalbenefits or costs of V2G electric power generation orspinning reserve services that PHEVs may provide inthe future.

PHEVs will rely principally on the electric power gridfor their fuel. At present, there are dozens of newhybrid vehicles planned for 2010 by variousmanufacturers around the world. It is estimated thatby 2016, there will be two million hybrid vehicles on

the road in the United States.

14 EPRI Energy Technology Assessment Center, The Power toReduce CO2 Emissions: The Full Portfolio, Prepared for theEPRI 2007 Summer Seminar, August 2007: 14.15 Ibid.16 Michael Kintner-Meyer and others,Impacts Assessment OfPlug-In Hybrid Vehicles On Electric Utilities And Regional U.S.

Power Grids Part 1: Technical Analysis (Pacific NorthwestNational Laboratory, 2007): 1.


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A hybrid electric vehicle (HEV), such as the ToyotaPrius, has both an electric motor and a combustionengine. The battery pack is small (about 1 kilowatthour [kWh]) because the electric drive is used onlyfor assisting acceleration and generally managing thealternations that occur between electric and enginepower. This system provides good overall

performance using a smaller combustion engine. Thisconfiguration improves fuel economy by 2035%,allows for optimized operation of the engine, cancapture braking energy and store it in the battery, andcan reduce engine emissions due to improved enginecontrol. The batteries sustain their charge during thedriving cycle and are not normally designed to becapable of accepting a charge from the grid. TheHEV, like conventional automobiles with onlycombustion engines, has a range limited only by thesize of the fuel tank.

Today, the average commuter drives less than40 miles per day. A PHEV is an HEV with a muchlarger battery pack (510 kWh) and the ability tooperate for 2040 miles in an electric-only mode. Thecombustion engines are smaller and can be optimizedby functioning as a generator that charges thebatteries using onboard fuel. PHEVs store enoughelectricity, presumably from an overnight charge, topermit the first 40 or so miles to be driven solely onelectric power. Beyond this range, PHEVs functionlike HEVsthey are intended to be charged from thegrid, and the small combustion engine would only be

used when the automobiles battery is substantiallydepleted of charge.

In addition, as mentioned in the introduction of thisreport, some utilities are implementing a Smart Gridthat will contain a high level of smart technologiestechnologies with embedded computers thatcollectively can provide a network of distributedintelligence. The Smart Grid will incorporatestandardized communication protocols, affordingsignificant interoperability with other devices. It willbe integrated with a smart electricity infrastructure at

the distribution level, with the energy managementsystem (EMS) at the transmission level, and with gridoperations and planning. Some predict this vision willbe implemented by 2025. One study suggests thatwith parallel advances in smart vehicles and thesmart grid, PHEVs will become an integral part of thedistribution system itself within 20 years, providingstorage, emergency supply, and grid stability.17 The

17 Revis James, The Full Portfolio,Electric Perspectives ,Jan/Feb 2008,

confluence of advances in batteries and gridintelligence may provide the potential to transformthe transportation sector over the next 20 years.

4.1 CURRENT STATUS

Support for energy storage technology applications is

growing. Recent projects implemented by the Instituteof Electrical and Electronics Engineers (IEEE) andthe American Institute of Chemical Engineers focusedon PHEVs and massive electricity storage in theelectric power grid, respectively.18

In July 2008, General Motors (GM) announced that itis collaborating with utilities and the Electric PowerResearch Institute (EPRI) to prepare the nationselectric power delivery system infrastructure for thewidespread sale of PHEVs, such as the ChevroletVolt, which will likely use a 1.4 L, non-turbo, 4-

cylinder engine. This is a landmark, first-of-its-kindeffort through which GM will work directly withutility companies and EPRI to ensure that codes,standards, and grid capabilities are in place so that theinfrastructure will be able to support the Volt when itcomes to market.19 This collaboration involves 34utility companies spanning 37 states and 3 Canadianprovinces. Most of the major utility companies areincluded and represent a very large volume of theU.S. population. Even so, neither EPRI nor GM canunilaterally speak for their respective industries andsupply chains, making it important going forward to

ensure that developing a successful PHEV is openand responsive to a broad range of industryparticipants from both sectors.

4.2 ATHREE-PHASE APPROACHFOR FUTURE DEVELOPMENT

At present, most experts agree that the adoption ofPHEVs will begin in the short term with vehiclecharging managed by pricing that encouragescharging in off-peak times. This grid-to-vehicleconcept gives cost benefits to those agreeing to

http://mydocs.epri.com/docs/CorporateDocuments/AssessmentBriefs/The_Full_Portfolio.pdf.18 Bernard Lee and David Gushee,Massive Electricity Storage:

AICHE White Paper(New York: American Institute of ChemicalEngineers, June 2008),http://www.aiche.org/uploadedFiles/About/DepartmentUploads/PDFs/MES%20White%20Paper%20submittal%20to%20GRC%206-2008.pdf.19 Chuck Squatriglia, GM Joins Utilities to Ensure Plug-InHybrids Can Plug In, Wired.com, July 21, 2008,http://blog.wired.com/cars/2008/07/gm-joins-utilit.html.


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charge their vehicles at night, thus filling in the loadvalley, and penalizes those charging during the day.However, there are only about 54 million garages forthe 247 million registered passenger vehicles in theUnited States today. Because most consumers withoutgarages do not have a way to charge a plug-in vehicle,there is a substantial amount of infrastructure that will

have to be built. Fortunately, that work has alreadybegun with companies such as CoulombTechnologies, which offers products and services thatprovide a smart-charging infrastructure for plug-invehicles.20 Long-term, successful management ofvehicle charging will require significant deploymentof Smart Grid technologies, which will take time todesign and implement.

Phase One

Today, the prospects for any PHEV charging arelimited to vehicle owners who can provide a nightlyparking location with access to a power outlet. Asnoted above, this need is a challenge for the vastnumber of owners who rely on street parking orparking facilities for nighttime parking. Thedistribution of early PHEV sales may skew only toowners who have garages, and the lack of aconvenient charging location may also influencebuying decisions. However, the long-term availabilityof charging locations is a critical infrastructure need,if PHEVs and HEVs are to become the dominantvehicle type in the United States. Even when ownershave garages, it is not uncommon for automobiles tobe parked in drivewayswhether because thehousehold owns more automobiles than they havegarage space or because the garage is used forstorage, as a workshop, or for some other purpose.

Owning a PHEV and recharging it every night for aminimum charge would increase the average U.S.consumers electric consumption by approximately50%. For a 40-mile range PHEV, the maximumconsumption would be about 14 kWh. An averagehousehold with a monthly consumption of 850 kWhwould increase its demand by no more thanapproximately 420 kWh. According to a PacificNorthwest National Laboratory 2007 report,providing 73% of the daily energy requirements ofthe U.S. light-duty vehicle fleet with electricity wouldadd approximately 910 billion kWh21 to the current

20 CNET, Green Tech, Coulomb unveils electric-car chargingstations, July 22, 2008,http://news.cnet.com/8301-11128_3-9996353-54.html.21 Michael Kintner-Meyer and others,Impacts Assessment OfPlug-In Hybrid Vehicles On Electric Utilities And Regional U.S.

load. While this is an energy load, it is also a potentialsource of energy storage. If it is assumed that there isa uniform distribution of battery charge, thatautomobiles are driven on average two hours per day,and that the automobiles are available for use by autility when they are not being driven, the averageenergy storage available for discharge or charge

would be 417 billion kWh. This capability is valuableto the electric power grid for peak shaving, valleyfilling, and reserve spinning for guarding againstlosses due to contingencies.

A major challenge to consider is how PHEV usagewill interact with high levels of renewable energygeneration capacity, especially wind and solar power.Some types of renewable energy generation havestrong diurnal characteristics, which are obvious withsunlight limitations for solar power and which varysomewhat according to geography for wind power. If

the PHEV charging load matches peak renewableenergy production, then the electric power industrywill be provided with an ideal situation. If the PHEVcharging does not match daily renewable energygeneration cycles well, then the mismatch isproblematic, and deployment of energy storagetechnology has an even more important role insupporting the attainment of high renewable portfoliostandards.

Uncertain Future

The most influential factors affecting the PHEVindustry between now and 2030 are uncertainregulatory requirements, including consumptionregulations, carbon taxes, and emissions standards.Technology breakthroughs, primarily in batteries,manufacturing technology advancements anddeployment, incentives for early adopters, and thedevelopment of industry standards for componentsand technologies are also important uncertainties.Infrastructure design and associated costs aresignificant issues, but they are currently beingaddressed by several entities in anticipation of thesuccessful adoption of PHEV technology. The nextgeneration of vehicle purchasers is expected to bemore conscious of green benefits and be aware ofthe negative effects of emissions. Nevertheless, theUnited States appears to be on a path to the adoptionof a significant number of PHEVs, and the electricpower grid will have a central role in assuring theiradoption.

Power Grids Part 1: Technical Analysis (Pacific NorthwestNational Laboratory, 2007).


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Phase Two

The next logical stage of infrastructure developmentis the vehicle-to-home (V2H) and/or the vehicle-to-building (V2B) concept. Here, a PHEV would havethe ability to communicate with the home or smallbusinesses. The PHEV battery might be operated in a

way that makes it available for emergency backup forthe home or business in addition to allowing the hometo manage its charge/discharge schedule.Optimization of onsite renewable energy sourceswould be a strong benefit because the consumer couldtake advantage of the additional production of the on-site energy, such as wind power at night, when thereis minimal demand from the home or business. Thissystem would be the first instance of bidirectionalflow with smart charging.

Phase Three

In the long term, the envisioned V2G concept allowsfor full bidirectional controlled flow between thevehicle and the grid. Control of the bidirectionalelectric flow could include payments to owners foruse of their automobile batteries for load leveling orregulation and for spinning reserve (the cashbackhybrid incentive). Kempert and Wellinghoff say that,it is our opinion that the potential benefits of vehicle-to-grid PHEVs are so compelling that the technologyis clearly an enabler of both the Smart Grid and thesuccessful market penetration of the PHEV itself.22An article in the magazine Public Utilities Fortnightly

argued that the payments to individual PHEV ownersusing V2G technology could be as much as $2,000 to$4,000 per year per vehicle for just spinning reserveor regulation services.23 Because the flow of energy isbidirectional, electric service providers can benefit inaddition to PHEV owners by controlling or at leastmonitoring the flow between PHEVs and the grid.Possible benefits to utilities include the ancillaryservices mentioned earlier, demand response / loadmanagement assistance from PHEVs, and greenpower credits.

22 Jon Wellinghoff and Willett Kempton, March 2007 commentsonDOE Plug-In Hybrid Electric Vehicle R&D Plan, External

Draft, http://www.ferc.gov/about/com-mem/wellinghoff/3-30-07-wellinghoff.pdf.23 S. Letendre , P. Denholm, and P. Lilienthal, Electric & HybridCars: New Load or New Resource? Public Utilities Fortnightly,December 2006, 2837.

Next Steps

In order to support this model, considerable workmust be undertaken to develop the market protocols,information exchange standards, and possibly theelectronic interfaces that will govern V2G integrationand interaction. PHEVs will bring together the entire

value chains of the automotive/transport sectors andthe electric supply sectorswhich currently do notshare common standards or standards bodies.

To implement this concept, third-party ownership ofbatteries may be needed. The third-party entity wouldbe a party other than the PHEV owner or theautomobile manufacturer and may include an electricservice provider, a generic profit center, aninformation technology company such as Google, oran emissions credit-trading organization. Consumerbenefits may include a free or reduced-price batteryaccompanied with warranty service to ensureperformance, reliability, and safety. In addition,automotive original equipment manufacturer (OEM)or third-party ownership would likely enhance theprospects of environmentally secure end-of-lifedisposal of the batteries, an issue of highenvironmental importance. Furthermore, there is apossibility that after batteries have reached the end oftheir useful life for vehicular purposes (afterdegradation of charge capacity has reduced vehiclerange), they may still have economic use in powerbackup or utility applications when suitablyrepackaged. This repackaging prospect, coupled withthe possibility of a vehicle retrofit with a futurehigher-performance battery is very real. However, thefirst-generation PHEV vehicles will not include V2Gcapability primarily due to warranty concerns aboutthe batteries and a desire to avoid additionalcomplexity and cost.

4.3 REGULATORY ANDINSTITUTIONAL POLICYISSUES

PHEVs, as distributed energy storage solutions forV2G applications, face the same issues as otherenergy storage projects. The lack of regulatory clarityon how energy storage is defined and regulated aswell as how cost recovery issues will be resolved arepotential barriers to investment, as discussed inChapter 3. The extent to which PHEV owners canparticipate in V2G applications (such as providingload smoothing and ancillary services) and receive


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compensation for participating in these programs isstill unclear.

Phase one, as described above, in which PHEVowners are encouraged to charge their vehicles atnight, would require changes in pricing and/ormetering policy to ensure that consumers fulfill their

responsibilities. Policymakers could provideincentives to PHEV owners through time-of-daypricing, with higher rates at times of peak use andlower rates at night, to encourage PHEV off-peakcharging. In phases two and three, additionalregulatory approval would be required for meters orother communication technologies that can regulatethe charging or discharging of PHEV batteries tooccur at specific times. Charging would occur, asdescribed above, at night or other times of low load,while discharging would occur at times of peak loador when necessary to provide other ancillary services.

Regulatory approval would be most likely required toensure that these strategies are properly implementedand that PHEVs are incorporated into a broader planfor overall grid transformation, the development ofDG, or the implementation of Smart Gridtechnologies.

PHEVs and electric vehicles (EVs) were awardedincentives up to $7,500 per vehicle in the EmergencyEconomic Stabilization Act of 2008 passed byCongress on October 3, 2008.24 This incentive isintended to make the price of a PHEV competitive

with other similar-class vehicles for early adopters. Inaddition, the development of these vehicles will likelybenefit from direct tax incentives to suppliers orpurchasers as well as locally specific indirectincentives, such as high-occupancy vehicle laneaccess, parking access, and incremental cost rebates.There is already concern from policymakers abouthow to replace declining gasoline tax revenues thatare a crucial element in the support of highwayinfrastructure. In the event that PHEV adoptionsucceeds wildly, two important concerns will includehow to fund utility infrastructure to support PHEVs

and how to replace the gasoline tax revenues to fundhighway infrastructure. Utility infrastructuremodernization costs could be socialized throughgeneral T&D tariff increases, funded incrementallythrough a mechanism tied to local PHEV sales, orfunded through some other mechanism. Funding gridmodernization is an important question thatemphasizes the importance of understanding the

24Emergency Economic Stabilization Act of 2008, HR 1424, 110th

Cong., 2nd Sess., (October 3, 2008): Doc. 110-343.

specific local and regional infrastructure needed tosupport different levels of PHEV and EV adoption.


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Chapter 5Meeting the Mandates of the

Energy Independence and

Security Act of 2007

For the United States to be competitive in energystorage technologies, a focused implementation anddeployment effort will be required by DOE, theelectric power and transportation industries, and otherimpacted stakeholders. To ensure energy storagetechnologies full potential and a leadership role forthe United States, the government, utility, and

transportation sectors must commit to such asustained endeavor.

To meet the mandates of Subtitle D, Section641(c)(4), of the Energy Independence and SecurityAct of 2007 (EISA), this chapter outlines arecommended five-year plan for integrating basic andapplied research so that the United States retains aglobally competitive domestic energy storage industryfor electric-drive vehicles, stationary applications, andelectricity transmission and distribution (T&D).

5.1 RESEARCH &DEVELOPMENTEFFORTS

Making energy storage technologies a vital part of thenations energy future starts with developing energystorage systems capable of satisfying practicalapplications. The demands of transportation energystorage applications with consistently high energydensities per unit of weight (in joules/kilogram and/orjoules/cubic meter) will be more intense than those

for electric power grid energy storage applications, inwhich cost is of greater concern than weight. The lifecycle of electric vehicle (EV) batteries in terms oflifetime charge/discharge cycles will be dictated byexpected vehicle warranty and lifetime considerationsas well as the overall cost of driving the vehicle. Bycontrast, large-scale utility applications will place a

higher value on reducing the technologies costs andachieving the decades-long durability that utilitiestypically expect of their assets.

Therefore, the drivers for battery materials researchfor EV and utility applications diverge due to thepriorities of different performance metrics. Today,utility energy storage technology applications arebeing piloted based on technology derived fromEV-targeted applications, but the cost parameterslimit the usefulness of these technologies tospecialized ancillary services. Continued U.S.

Department of Energy (DOE) efforts in materialsresearch and energy storage technologies for centralenergy storage grid applications should beencouraged. Distributed energy storage opportunitiesoffered by the transportation sector should beexplored by DOE in the context of their potential usesin the electric power delivery system.

Although much of this report is focused on batteries,improving the performance of large-scale systems

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