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California Energy Storage Procurement in Action Prepared for Germany Trade and Invest

Chris Edgette Senior Director, CESA, Strategen Consulting July 16, 2014

© 2014 California Energy Storage Alliance

A sampling of our clients:

Strategic thinking and industry expertise creates profitable clean energy businesses

U.S. Department of

Energy

Strategen

1

CESA 2014 MEMBERSHIP

CESA STEERING COMMITTEE MEMBERS

1 Energy Systems, A123 Energy Solutions, AES Energy Storage, American Vanadium, Aquion Energy, Ares, Beacon Power, Bosch Energy Storage Solutions, Bright Energy Storage, Brookfield, CALMAC, ChargePoint, Clean Energy Systems Inc., CODA Energy, ConEdison Development, DN Tanks, Eagle Crest Energy, EaglePicher, EDF Renewable Energy, EnerSys, EnerVault EVGrid, FAFCO Thermal Storage Systems, FIAMM Energy Storage Solutions, Flextronics, Foresight Renewable Systems, Geli, Green Charge Networks, Greensmith Energy Management Systems, Gridscape, Gridtential Energy, Halotechnics, Hecate Energy LLC, Hydrogenics, Imergy, ImMODO Energy Services, K&L Gates LLP, KYOCERA Solar, LG Chem Ltd., LightSail Energy, LS Power, NRG Energy, OCI Company Ltd., OutBack Power Technologies, Panasonic, Parker Hannifin, PDE Total Energy Solutions, Primus Power, RedFlow Technologies, Rosendin Electric, S&C Electric Co., Saft America, Seeo, Sharp, Silent Power, Silent Power, Sovereign Energy Storage LLC, Stem, Stoel Rives LLP, Sunpower, TAS Energy, and Wellhead Electric Co.


Join us in San Jose on September 30 – October 2, 2014

3

JOIN THE INDUSTRY

LEADERS

Mike Florio Commissioner –

California Public Utilities Commission

Carla Peterman Commissioner –

California Public Utilities Commission

Mateo Jaramillo Director of Powertrain Business Development

Tesla Motors

Peter Rives Co-Founder & CTO

Solar City

Victor Vilaplana VP, Electric and Fuel Procurement, SDG&E

John Norris Commissioner

Federal Energy Regulatory Commission

Fong Wan SVP, Energy Procurement

Pacific Gas & Electric

JoAnne Butler VP, Electricity Resources Ontario Power Authority

Jeanne Fox Commissioner – NJ

Board of Public Utilities

Supporting Partners Media Partners

4

Global Energy Storage Alliance – New Global Non Profit

“Advance education, collaboration, knowledge and proven frameworks about the benefits of energy storage and how it can be used to achieve a more efficient, cleaner, reliable, affordable and secure

electric power system globally”

GESA Mission

© 2014 Strategen

TECHNOLOGY TYPE LEADING US STATES

PROJECTS BY COUNTRY (Top 14)

0 100 200 300 400

Compressed Air

Other

Flywheel

Thermal Storage

Pumped Hydro

Electrochemical

0

20

40

60

80

100

120

140

355

76 67 61 48

33 25 24 23 22 20 19 19 17

UnitedStates

China Japan Spain Germany Italy France Australia UnitedKingdom

Switzerland South Korea Austria Netherlands India

July 2014: 939 Projects Worldwide, 185 GW


California’s Electric Power System Faces Big Challenges

San Onofre Nuclear Generation Station (SONGS) has been permanently shut down since January of 2012, taking

2,254MW offline.

San Onofre Plant Name MW

Scheduled Phase-Out

Date El Segundo, Harbor (LADWP), Morro Bay

550 December 31, 2015

Encina, Contra Costa, Pittsburg, Moss Landing

950 December 31, 2017

Haynes (LADWP) 1,581 December 31, 2019

Huntington Beach, Redondo, Alamitos, Mandalay, Ormond Beach, Scattergood (LADWP)

888 December 31, 2020

Diablo Canyon Power Plant 2,240 December 31, 2024

Many power plants could go offline in the next decade for a variety of reasons

(1) Sierra Club Report: “Meeting California’s Electricity Needs Without San Onofre or Diablo Canyon Nuclear Power Plants”. CEC Docket 13-IEP-1D, TN 71790, Jul 29, 2013

Once-Through Cooling Phase-Out Schedule(1)

7

Retiring OTC Capacity 6,209 MW


California’s Electric Power System Faces Big Challenges

Planned renewable procurement will drastically affect California’s net load

8


Energy storage is a better flexible resource for California

9

(1)Excluding start-up and shutdown time

(2)http://www.energy.ca.gov/2011_energypolicy/doc

uments/2011-02-15_workshop/comments/California_Energy_Storage_Alliance_03032011_TN-59863.pdf

100 MW Gas Turbine

10 minute ramp

50 MW flexible range

2768 useable hours/year(1)

6500 gallons per hour

Status quo GHG emissions

Energy storage can provide much greater benefits per MW as a flexible resource!

Energy Storage

Benefits

>600x the ramp rate

>4x the flexible range

>3x the operational

hours

Less water usage on

many sites

Lower GHG

emissions

100 MW Energy Storage

<1 second ramp

200 MW of flexible range

>8300 useable hours/year

Little to no water usage

Reduces GHG emissions by up to

90%(2)

VS.


AB 2514 Overview – A Unique Mandate for California

Cost-Effectiveness is a REQUIREMENT Under AB 2514

10

1. Targets the procurement of viable and cost-effective energy storage systems.

2. IOUs must achieve first procurement target by December 31, 2015, and a 2nd target by December 31, 2020.

o POU procurement targets end of 2016 and 2021

3. The California Public Utilities Commission (CPUC) must reevaluate targets every 3 years.

4. CPUC must consider policies to enable cost-effective deployment of energy storage systems.


Historic Assigned Commissioner’s Ruling: 1.325 GW Goal!

Use case category, by utility 2014 2016 2018 2020 Total

Southern California Edison

Transmission 50 65 85 110 310

Distribution 30 40 50 65 185

Customer 10 15 25 35 85

Subtotal SCE 90 120 160 210 580

Pacific Gas & Electric



Customer 10 15 25 35 85

Subtotal PG&E 90 120 160 210 580

San Diego Gas & Electric



Customer 3 5 8 14 30

Subtotal SDG&E 20 30 45 70 165

Total – all 3 Utilities 200 270 365 490 1,325


AB 2514 Supports Energy Storage’s Diversity & Modularity

12

Bulk Storage

Ancillary Services

Distributed Storage

Distributed Storage

Commercial Storage

Residential Storage


Jan. Feb. Mar. Apr. May June July August Sept. Oct. Nov. Dec.

AB 2514 Implementation Process and Timeline

Final Decision implementing recommendations

Conduct Cost-Effectiveness Evaluation of Key Applications

Propose procurement recommendations

Revise Recommendations Set Cost-Effectiveness Methodology

2013

2014 Jan. Feb. Mar. Apr. May June July August Sept. Oct. Nov. Dec.

February 28 , 2014

IOUs to file procurement application

October 1, 2014

POU Compliance Deadline

December 1, 2014

First round of solicitations

Complete Cost Effectiveness Evaluation

June 19, 2014

Final Day to Request Evidentiary Hearings

Late August, 2014

Proposed Decision Mailed (anticipated)

October, 2014

Final Decision (anticipated)


Storage is Now Part of Ongoing Utility Procurement

CPUC Decision Approves $26M in SDG&E’s 2012 General Rate Case May 9, 2013

$26 million for distributed storage/grid reliability $4.8 million per year ($19 million total) for additional RD&D projects including energy storage Procurement to occur immediately and over next few years


Storage Is Now Part of Long Term Procurement Planning

LTPP decision requires minimum of 50MW (SCE) for local capacity requirements

LTPP Track 4 Decision, D14-03-004 March 13, 2014. page 83

SCE Procurement Authorization and Requirements (Track 1 and Track 4)


Storage Is Now Part of Long Term Procurement Planning

LTPP decision requires minimum of 25MW (SDG&E) for local capacity requirements

SDG&E Procurement Authorization and Requirements (Track 4)

LTPP Track 4 Decision, D14-03-004 March 13, 2014. page 86


Reforms at the CAISO enabling storage in wholesale market

21

» Market Design – New rules for storage set for: Effective flexible capacity / Flexible RA Net qualifying capacity / System and Local RA

» Transmission Planning Non-Conventional Resource study methodology

piloted in 2013; implemented system-wide in the 2014 study process

» Resource Interconnection Approximately half of CAISO’s most recent queue cluster (QC7) have storage

components representing more than 1,500 MW of new storage capacity! CAISO allowing generators to add storage to existing projects via material

modification process Stakeholder initiative underway to reform generator interconnection process

• Use cases and study assumptions • How to handle charging in the generator interconnection process

CAISO leading multi-jurisdictional roadmap for Energy Storage


Hundreds of Storage Projects are Underway Behind the Meter Attractive value propositions are possible with the SGIP and PLS

Size Restriction:

» Maximum size: A standalone system can be no larger than the host customer’s previous 12-month annual peak demand at the proposed site. A generation-paired system can be no larger than the generation system it is paired with

» Must meet onsite load – Max. 25% export to grid

Discharge Capacity Criteria:

» Rated Capacity = average discharge kW over 2 hours » Standalone systems must be able to discharge once per

day » Wind-coupled projects must be able to handle “hundreds”

of partial discharge cycles per day.

Incentive Payment Method:

» Tech Based, 50% up front, 50% PBI (100% up front if <30kW)

» Incentive calculations are separate for companion technologies

Minimum Required Round Trip Efficiency (AC to AC)

67.9%

Capacity Factor 10%

(% total yearly capacity the system is in operation)

Cost Cap » Applicants must pay a minimum of 40% of the eligible

project cost » $5 million maximum incentive amount per project

Warranty Requirement » All SGIP-eligible systems must have a minimum 10 year

warranty on all major components of the system

SGIP General Requirements for Energy Storage After Tax IRR Impacts*

8%

13% 12%

18%

13%

20%

17%

23%

0%

5%

10%

15%

20%

25%

Base Case StorageOnly

Storage w/PV

No Incentives SGIP FITC SGIP + FITC

*Assumes 100kW, 2h storage system, Base Case CAPEX & OPEX, High School Load, Year 1 in 2014, 3.5% escalation rate, SCE TOU-8B Secondary Service, 350kWp PV system


Behind the Meter SGIP Applications (767 by 1/14)

134

183212

253 253 253 253

109124

136 143 143 143 143

145

155157

684604

132

276273

258

229

76

2013 Q1-Q3

2,382

136

2012

2,271

117

2011

1,715

77

2010

1,544

519

299

79

2002

260

138

2001

70

920 920

81

920 920 920 920 920

2009

1,390

2008

1,360

2007

1,353

2006

1,316

920

2005

1,007

651

2004

898

595

2003

86 83

920

684

276

157

136 86

76 24 14

Total

2,382 9

1. Other is comprised of pressure reduction turbines and waste heat to power Note: Cancelled projects excluded Source: SGIP Quarterly Statewide Reporting Q3 2013 (www.cpuc.ca.gov) Chart courtesy of Bryan Early, Conservation Strategy Group

Cumulative number of SGIP projects 2001-2013

Other1

Gas

turbine

Wind

Fuel Cell Elec.

Bio Gas

Fuel Cell CHP

Fuel Cell Elec.

Microturbine

Internal

Combustion

A.E.S. (Adv. Electrical Storage)

Photovoltaic

Technology

SGIP

inception

SGIP

Timeline

06/07: PV

phased out of

program

07/08: CHP

phased out of

program

08/09:

A.E.S., Fuel

Cells and

Wind

become

eligible for

SGIP

10/11: revamp;

technology

neutral, focus

on emission

reductions

Cumulative Data

http://www.cpuc.ca.gov


SGIP Reauthorization Finalized - $415 Million!

Five Year Extension @$83M/year (2015-2019) is complete….

Governor Jerry Brown

AB 1466

Assembly member Nancy Skinner

AB 1499

Assembly member Richard Gordon

AB 1624

SB 861 signed into law by Governor Brown 6/20/14


EV Update: SDG&E Pilot

»Overview $103M VGI Pilot Targeting workplace and multi-unit dwelling (MuD) 10 years 5,500 charging stations

»CESA Response - Key Principles • Create a fair, balanced, and competitive market for EV charging that supports

multiple business models and ownership structures and encouraging investment, and healthy growth of all market participants

• Accelerate market penetration of EVs and EV infrastructure in a sustainable way

• Adopt Programs to minimize ratepayer subsidies and use EV adoption to manage overall ratepayer cost

• Create programs that facilitate consumer choice and attract private capital

• Implement pilot programs & use data to enable cost-effective EV infrastructure deployment

25


Key Takeaways

California is a now ‘bankable’ market for energy storage

26

1. California policy makers and utilities recognize energy storage as key to grid

planning and operations

2. California IOUs will procure at least 1.325 GW by 2020 (and maybe even much more)

3. California now has $415 million in new incentive funding for behind the meter storage projects

Best way to learn more about California and N. American market is to Attend Energy Storage North America and

Join CESA!


More Information

» Contact : Chris Edgette • Email: [email protected] • Office: 510 665 7811 extension 101 • Mobile: 415 595 8301

» Strategen – custom consulting advisory http://www.strategen.com

» CESA Membership

http://www.storagealliance.org/

» GESA information http://www.globalesa.org

» Energy Storage North America

Sep 30-Oct 2, 2014 San Jose Convention Center, CA http://www.esnaexpo.com/

mailto:[email protected]

http://www.strategen.com



http://www.globalesa.org

http://www.esnaexpo.com/

http://www.esnaexpo.com/


Comparing Energy Storage With The Status Quo

28

• Siting Constraints

• Installation Speed

• Available Flexible Range

• Capacity Factor (hours of operation/year)

• Multiple Value Stream Capture

• Ramp/Response Rate

• Total Emissions

• Water Usage

VS.

Natural Gas Peaker Energy Storage

Key Criteria to Consider


0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Syst

em

Lo

ad (

MW

) California’s Electric System Is Not Being Efficiently Utilized

29

The current electric system must have enough transmission, distribution, generation capacity for the largest annual peak load

Most of the year, the system is operating at

about 55% of peak

Weekly average load

California Load

Data Source: CAISO 2011 OASIS Data – Graph is for illustration purposes only.


Storage lets us utilize the system assets we have more efficiently

30

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Syst

em

Lo

ad (

MW

) During peak times, storage helps to reduce overall load, reducing the need for excess generation capacity

With storage, we can better utilize existing grid resources during off-peak times

Data Source: CAISO OASIS Data – Graph is for demonstration purposes only.


Energy Storage Can Be Sited Closer to the Load

Russell City Energy Center Hayward, Ca

ES Siting Source: Powertree Integrated Energy Services

31


Energy Storage: Diverse, Modular, Faster to Install! Battery and thermal storage resources can be installed much more quickly

than traditional resources, reducing risk and increasing technology flexibility

0 1 2 3 4 5 6 7

CCGT

Combustion Turbine

Battery/Thermal Storage

Time in Years

Minimum Time

Maximum Time

Siting, Permitting, and Installation Time by Resource

32


Energy Storage: Four Times the Flexible Range

33

Important to compare benefits, not megawatts

100MW LMS 100

Gas Peaker Plant1

100MW Energy Storage System

50MW Min. Output

100MW Max. Output

50 MW Range 100MW Discharge

-100MW Charge

200MW Range

1. Source: http://yosemite.epa.gov/R9/air/EPSS.NSF/e0c49a10c792e06f8825657e007654a3/8a153d8ab24cb6868825723400679b82/$FILE/WCE%20Evaluation.pdf

http://yosemite.epa.gov/R9/air/EPSS.NSF/e0c49a10c792e06f8825657e007654a3/8a153d8ab24cb6868825723400679b82/$FILE/WCE Evaluation.pdf




Energy storage can be utilized more fully throughout the year

Energy Storage: Three Times the Utilization

34

100 MW LMS 100

Gas Peaker Plant1

100MW Energy Storage System

>95% Utilization Utilization

20%-40%

0% 50% 100%

Startup Time

Shutdown Time

Min Utilization

Max Utilization

Unutilized

1. Source: http://yosemite.epa.gov/R9/air/EPSS.NSF/e0c49a10c792e06f8825657e007654a3/8a153d8ab24cb6868825723400679b82/$FILE/WCE%20Evaluation.pdf

0% 50% 100%

Startup Time

Shutdown Time

Min Utilization

Max Utilization

Unutilized





Status Quo: CT Operation at EME Walnut Creek Energy Park

35

State of the art LMS 100 installations require significant start-up and shutdown operating hours, accounting for at least 20% of operations:

Startup Hours; 350h

Shutdown Hours; 350h

Min Operating Hours; 1.052h

Max Operating Hours; 1.716h

Not Utilized; 5.292h

EME Walnut Creek Energy Park SCAQMD Analysis(1)

Capacity Factor - min 20%

Capacity Factor - max 40%

Operating Hours - Normal 2768

Operating Hours - Start-up 350

Operating Hours - Shutdown 350

Service Factor - Normal 32%

Service Factor - Total 40%

Minimum load 50%

Average load 75%

Starts/year 350

Max starts/day 2

Max start-ups/year 350

Start-up time (minutes) 35

1) http://yosemite.epa.gov/R9/air/EPSS.NSF/e0c49a10c792e06f8825657e007654a3/8a153d8ab24cb6868825723400679b82/$FILE/WCE%20Evaluation.pdf

Chart of Annual Plant Operation





Energy Storage Can Capture Multiple Value Streams

36

Energy storage can be fully utilized throughout the year, providing multiple services from a single asset

99,7%

4,2% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EnergyStorage

CombustionTurbine

0%

100%

% U

tiliz

atio

n

% Total Annual Hourly Asset Utilization

Graphs based on EPRI cost effectiveness model data, “Bulk Peaker substitution application” CPUC Workshop March 25, 2013

Energy storage is a cost effective way to provide numerous benefits to many stakeholders, few of which can be monetized today.

Down Regulation

Up Regulation

Spinning Reserves

Energy

Services Provided by Energy Storage Over the Year*

*All services include charging and discharging bids


Energy storage responds far more quickly and is more effective

Energy Storage Can Respond Faster and is More Effective

37

Energy Storage System

Full Power Ramp

<1 second

Graph Source: Kirby, B. “Ancillary Services: Technical and Commercial Insights.” Wartsilla, July, 2007. pg. 13 1. http://www.cpvsentinel.com/about.html

LMS 100 Gas Peaker Plant

Full Power Ramp

10 Minutes

http://www.cpvsentinel.com/about.html


Conventional Peakers are Expensive and Use Tons of Water

38

1) Source: CEC http://www.energy.ca.gov/2009publications/CEC-800-2009-003/CEC-800-2009-003-CMF.PDF

J-Power Orange Grove Peaking Plant

• 100 MW (2 x LM6000)

• $174/kW-year in capacity revenue (Source: FERC EQR)

• 25 year tolling agreement with SDG&E

“Water delivery will require approximately one [6500 gallon] truck per hour for fresh water and one truck per hour for reclaimed water during times when the plant is operational.”1

http://www.energy.ca.gov/2009publications/CEC-800-2009-003/CEC-800-2009-003-CMF.PDF
















Even Repowered Peakers are Expensive

39

LADWP Haynes Repower 6 x LMS100 $782M / 577.8 net MW Cost: $1353/kW1 Due to repower, cost excludes: • Land aquisition & permitting • New transmission infrastructure • Site access construction

1) Source: http://www.powermag.com/ladwp-harnesses-lms100-to-solve-once-through-cooling-dilemma/

Repower: Building a new power plant on the same site as an old, decommissioned plant

http://www.powermag.com/ladwp-harnesses-lms100-to-solve-once-through-cooling-dilemma/



















Emission Impacts Due to Cycling CCGTs & CTs

40

NREL concluded that cycling conventional power plants has significant impacts on emissions

CO2 Emissions Penalties(1)

Power Plant Type Part-Load(2) Ramping(3) Start/Stop

Gas Combined Cycle (CCGT) 15% 1% 30%

Gas Combustion Turbine (CT) 17% 1% 40%

NOX Emissions Penalties(1)

Power Plant Type Part-Load(2) Ramping(3) Start/Stop

Gas Combined Cycle (CC) 29% 8% 610%

Gas Combustion Turbine (CT) 16% 1% 180%

1) Listed as percentage penalty over the equivalent full‐load operation for one hour 2) Assumes operation at 50% of capacity 3) Ramping leads to far less emissions compared to startups, but occurs more often

Source: National Renewable Energy Laboratory (NREL/PR‐6A20‐55828): Impacts of Renewable Generation on Fossil Fuel Unit Cycling: Costs and Emissions (May 20, 2012)


Cost Effectiveness Results: Bulk Peaking Power Plant Use Case

41

Preliminary results by EPRI using stakeholder input showed a benefit to cost ratio over one for nearly every scenario

» Projects were assumed to be utility scale projects starting in 2015 and 2020

» Cost effectiveness results did not include GHG benefits of storage or GHG costs due to AB32 implementation

» High renewable penetration cases had the highest benefit to cost ratios for storage.

» GHG benefits for storage are greater the more renewables we have on the grid.

© 2014 California Energy Storage Alliance 42

Storage effect on flexible capacity

Longer duration energy storage can shift larger amounts of

energy, adding flexible capacity while reducing the flexible

capacity need overall1

Reducing the need for flexible capacity (raising the red line) will

lead to a cleaner grid due to a greater reliance on long-duration

energy sources

1. Using CAISO’s proposed structuring of flexible capacity, from the fifth FRAC-MOO straw proposal

© 2014 California Energy Storage Alliance 43

Fast storage contribution to the three hour ramp Regulation is a key component of flexible capacity, though it only

makes up a percentage of the overall flexibility requirement


Storage Can Help Optimize Existing Fossil Assets

Build cleaner CCGT’s, let them run at max efficiency

» Generation comes on “in

order”

» Cheaper & cleaner “baseload”

is always on

» More expensive, dirtier

“peakers” turn on in

succession.

» Let storage be load following

» Energy Storage can even cut

costs & reduce emissions!

Daily System Energy Demand

$ and CO2

44


Storage Can Help Optimize Existing Fossil Assets

Build cleaner CCGT’s, let them run at max efficiency

» Generation comes on “in

order”

» Cheaper & cleaner “baseload”

is always on

» More expensive, dirtier

“peakers” turn on in

succession.

» Let storage be load following

» Energy Storage can even cut

costs & reduce emissions!

Daily System Energy Demand

$ and CO2

45

Charge

Discharge


Energy Storage Can Help Address California’s New Net Load

46


Why Renewable Energy + Energy Storage Is the Future

47

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028

Inst

ant

Co

sts

($/k

W)2

Photovoltaic Solar (Single Axis) Conventional Simple Cycle CT

1. Source: California Energy Commission 2. 2009 starting dollars, escalated at 2.5% per year

Upfront Cost of Solar vs. Traditional Generators1

$0

$200

$400

$600

$800

$1.000

$1.200

$1.400

$1.600

$1.800

$2.000

2012 2015 2020

CA

PEX

($

/kW

h)

NEDO/DOE 2010 Li Ion Cost Projections

Key Trends » Industry is tracking DOE & NEDO cost reductions for Li-ion (10X improvement in ten years) » Upfront costs for traditional generators are increasing » Renewable costs are decreasing, reducing the charging costs for energy storage


Energy Storage Is A Very Broad Asset Class

48

Chemical Storage

(Batteries)

Mechanical Storage

(Flywheel)

Bulk Mechanical Storage

(Compressed Air)

Thermal Storage

(Ice) (Molten Salt)

Bulk Gravitational Storage

(Pumped Hydro) (Gravel)

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