Will Energy Storage Replace Peaker Plants? · AEC 2018: Meeting Peak Demand Through Energy Storage....

Prepared For:

March 28, 2018

Director, Energy [email protected]

Ravi Manghani

Will Energy Storage Replace Peaker Plants?

1AEC 2018: Meeting Peak Demand Through Energy Storage. Ravi Manghani, GTM Research

GTM, MAKE & Wood Mackenzie form the premier market intelligence provider on the decarbonization and decentralization of energy

Power MarketFundamentals

Regional Market Dynamics

Technology Value Chain Evolutions

We guide companies leading the electricity transformation

1 POWER & RENEWABLES RESEARCH

Long-term Supply & Demand Outlooks

20-year Wholesale & Retail Price Outlooks

Thermal & Renewable Databases and Demand Outlooks

Policy and Regulation Analysis

Technology Cost and Performance Outlooks

Wind, Solar, Storage, and Grid Edge Competitive Landscapes


Contents

1. Federal and State Policies Barriers Coming Down 3

2. Solar-Plus-Storage as Peakers 6

3. Aggregated Behind-the-Meter Storage as Peakers 10

4. Wind-Plus-Storage as Peakers 12

5. Peaker Replacement: The Next Frontier 15

AEC 2018: Meeting Peak Demand Through Energy Storage. Ravi Manghani, GTM Research

Federal and State Policies Barriers Coming Down1.


On February 15th FERC released draft final rules adopting participation and eligibility requirements for energy storage in ISOs and RTOs. The participation model for electric storage resources must:

Ensure that a resource using the participation model for electric storage resources in an RTO and ISO market is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing

Ensure that a resource using the participation model for electric storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyerconsistent with rules that govern the conditions under which a resource can set the wholesale price.

Account for the physical and operational characteristics of electric storage resources through bidding parameters or other means.

Establish a minimum size requirement for participation in the RTO and ISO markets that does not exceed 100 kW. Also requires that the sale of electric energy from the RTO or ISO market to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.

Biggest Shot in the ArmFERC Rules Energy Storage Must be Eligible to Participate in Wholesale Markets

FERC Order 841

Source: GTM Research


AZ

CO

FL

NC

VAWV

MW in Resource Plan

Specific Storage

Capacity

“As Much As…”

TBD

WA

SC

IN

KY

MA

CA

OR

NM

Estimated Total Opportunity: 5.1 GW, 16.8 GWh


There are several utility resourceproceedings all over the countrythat explicitly include storage intheir resource plans. There’sabout 5.1 GW of opportunity inexisting utility IRPs. These IRPsoffer a view of storage as aflexible resource on the grid, andcomplementary, not necessarilya direct threat to CT plants.

The Momentum Builds: Energy Storage in Integrated Resource PlansStorage Modeled, Eligible or Mandated in Utility IRPs (MW)


Solar-Plus-Storage as PeakersCase Study 1

2.


Tucson Electric Power’s Recent “Historically Low Price” Solar-Plus-Storage PPA

0

10

20

30

40

50

60

70

80

90

1 3 5 7 9 11 13 15 17 19 21 23

Sola

r-Pl

us-S

tora

ge O

utpu

t (M

Wh)

0

10

20

30

40

50

60

70

80

90

1 3 5 7 9 11 13 15 17 19 21 23

Sola

r Out

put (

MW

h)


Average Solar Only Profile by Month Average Solar-Plus-Storage Profile by Month


‘Laugh Test’ Storage Price and WACC

Reasonable Storage Price & WACC with Post-PPA Solar Value – I

Reasonable Storage Price & WACC with Post-PPA Solar Value – II

Reasonable Storage Price & WACC with Storage Capacity Value

Solar System Price ($/W) $1.05 $1.00 $0.95 $1.00

Storage System Price ($/kWh) $215 $330 $330 $330

WACC (%) 3% 5% 5% 5%

Post-PPA Term Residual Solar Value ($/kWh) $0.00 $0.015 $0.025 $0.00

Capacity Value ($/kW/yr) $0 $0 $0 $46

Real LCOE ($/MWh) $45

Tucson Electric Power’s Recent “Historically Low Price” Solar-Plus-Storage PPAPaths to $45/MWh LCOE



Ultra-Competitive Renewables Paired Storage Bids Dominate Xcel Colorado’sAll-Source Solicitation

$18.1$19.9 $21.0

$29.5

$36.0

$30.6

$1.8 $2.9

$6.5

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Wind + Solar Wind +Solar

+ Storage Wind +Storage

Solar (PV) + Storage Solar +Storage

Wind +Solar +Storage

Med

ian

Leve

lized

Pric

e ($

/MW

h)

Median PremiumSource: GTM Research


Aggregated Behind-the-Meter Storage as PeakersCase Study 2

3.


Option 1 Option 2 Option 3

$6,501/customer Total = $488K

Green Mountain Power to Use Behind-the-Meter Storage to Reduce Peak Capacity and Transmission Costs

Forward Capacity Market (75%)Transmission Costs (50%)Total benefit = $81K per year

75 225 200

Total Grid Services Benefits = $205K per year

$6,501/customer Total = $488K

Forward Capacity Market (100%)Transmission Costs (70%)Total benefit = $124K per year

Rate rider = $37.5/month/customerTotal = $91K per year

Bill credit = $31.8/month/customerTotal = $81K per year

Source: Green Mountain Power, GTM Research

System Sale/LeaseCash TransactionGrid Service


Wind-Plus-Storage as PeakersCase Study 3

4.


-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

1 3 5 7 9 11 13 15 17 19 21 23

MW

h

Hours

Gas CCGT Gas OCGT ImportsWind Solar Residual demandLoad Wind curtailments

Source: Wood Mackenzie, GTM

No wind curtailments in

February

Higher residual demand necessitates gas* and/or

imports capacity

Battery Storage is a Potential Solution to Manage the Evening Peak Load in South Australia

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

1 3 5 7 9 11 13 15 17 19 21 23

MW

h

Hours

Gas CCGT Wind SolarBattery Storage Residual demand LoadWind curtailments

Source: Wood Mackenzie, GTM

Battery charging during off-peak hours using combined-cycle units

Evening peak removed by battery storage

2025 February – Peaking Residual Demand in the Evening 2025 May – Battery Solution to Flatten Evening Peak

400-MW/1,600-MWh battery storage will take care of the highest peaking residual demand in May in 2025. This storageasset will be unlike the 100 MW/129 MWh Tesla’s Hornsdale facility, which is designed for reliability needs.


0

20

40

60

80

100

120

140

160

CCGT- Existing CCGT - NewBuild

Solar Wind Integrated Solar &Battery

Battery OCGT - Existing OCGT - New

US

$/M

Wh

Fixed cost Variable cost - gas@A$7/mmbtu Variable cost - A$10/mmbtu

Variable cost - A$13/mmbtu Firming cost Charging Cost

Solar + 25% Storage Solar + 50% Storage Solar + 75% StorageSource: Wood Mackenzie, GTM

2025 LCOE by technology

By 2025, Renewables and Batteries Will Offer a Low Cost Alternative to CCGT Plants Depending on the Future Gas Price in South Australia

Batteries/integrated solution is a better option for peaking than OCGTs – even at a gas price of A$7/mmbtu

Renewables are generally cheaper than new-build CCGTs

Renewables become increasingly competitive. However, OCGTs will still be required forback-up generation to ensure system security 24/7


Peaker Replacement: The Next Frontier5.


120 GW of Peaker Plant Capacity Operational in the U.S.Median Capacity Factor of 3%, Median Hours Per Start of 5.3 Hours

-10

0

10

20

30

40

50

-10% 0% 10% 20% 30% 40% 50%

Aver

age

Hou

rs P

er S

tart

Capacity Factor (%)

80 GW (73%) of peaking capacity has average hours per start of 8 hours or less.

91.5 GW (84%) of peaking capacity has average capacity factor of 10% or less.

73 GW (67%) of peaking capacity has average capacity factor of 10% or less AND average hours per start of 8 hours or less.

Source: Wood Mackenzie based on EIA


$0

$20

$40

$60

$80

$100

$120

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Leve

lized

Cos

t ($/

MW

h)

Gas CT 4-Hour Battery Storage

Natural Gas Peakers At RiskBase Case Levelized Cost of Energy – Peaking Gas Combustion Turbine vs. 4hr Li-ion Battery Storage ($/MWh)

Within Five Years, Storage Begins To

Compete Head-to-Head

Within Ten Years, Storage Almost Always Wins

4-Hour Storage Should be Sufficient to Meet Peaker Needs ~40% of Starts

Source: GTM Research, Wood Mackenzie


6,3936,923

3,229

1,780

786342 247 384

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

<=4 <=6 & >4 <=8 & >6 <=10 & >8 <=12 & >10 <=14 & >12 <=16 & >14 >16

Estim

ated

New

Gas

Pea

king

Cap

acity

(MW

)

Hours/Per Start

32% of New Peaker Capacity at Risk from 4-Hour Storage by 2027In Aggressive Case, 82% of New Peaker Capacity at Risk from 8-Hour Storage by 2026

Aggressive Case: 13.1 GW, 82% of New Capacity at Risk by 2026

Source: GTM Research, Wood Mackenzie

Base Case: 6.4 GW, 32% of New Capacity at Risk by 2027

Interested in other GTM Research products and services? Please visit www.gtmresearch.com or contact [email protected]

Thank You!

Ravi Manghani

[email protected]

March 28, 2018

Will Energy Storage Replace Peaker Plants? · AEC 2018: Meeting Peak Demand Through Energy Storage....

Documents

Transcript of Will Energy Storage Replace Peaker Plants? · AEC 2018: Meeting Peak Demand Through Energy Storage....