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Energy Storage for Distributed Energy Resources Deployments
Financial, Technical and Operational Challenges and Opportunities
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Executive Summary
Microgrids and distributed energy resources (DER), including renewable energy sources
and energy storage systems, create significant opportunities to transform the way energy is
generated, delivered and consumed. With these opportunities come financial, operational,
and technical challenges. An energy storage system that integrates flywheel and batteries can
solve these challenges and unlock the potential of these new approaches.
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Financial Opportunities and Business Case Development
Typical Deployments
A typical microgrid or DER deployment consists of the following key elements:
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Renewables generation: solar photovoltaic or wind turbines or both, for the prime renewable
energy, and the inverter systems to connect them to the grid.
Standby generators: one or more generators, either natural gas or diesel, to provide
supplemental power when renewable generation is insufficient and emergency power in
the case of a failure or disaster.
Power factor correction equipment, typical in the form of capacitor banks, to enhance the
power quality in a localized area
Ultracapacitors, providing very short-term (milliseconds to seconds) supplemental power
to smooth transitions among distributed sources and to support load steps.
A control system to orchestrate the power supply assets and balance that supply with the
load being serviced by the deployment.
New projects incorporating renewables are increasingly deploying energy storage as a way
to improve the economics of the project.1 Energy storage both reduces costs and generates
revenue by allowing the grid to match generation to the time of use, reducing reliance on utility
or generator sets, and enabling peak shaving applications.
The most common energy storage solution deployed today is lithium-ion batteries storing some
significant fraction of the renewables load for an extended period (typically hours, supporting
the night-time base load). Other batteries chemistries such as lead-acid and flow batteries are
less frequently seen.
Early deployments of batteries (of several different chemistries) as energy storage for
renewables have been economically and operationally challenging. Batteries have a defined,
limited lifespan, determined by a combination of the number of discharges, the depth (duration)
of discharges, the rate of recharge, and the age of the batteries. The more discharges a battery
sees, even short ones, the more quickly it will reach its end-of-life voltage for the application
and need to be replaced.
In renewables deployments, the batteries have been called into nearly continuous discharge/
recharge cycles – often but not always for short duration – to help keep the grid stable as the
supply of power generated by the renewable sources swings up and down, and as the demand
on the grid swings up and down. Operators have been surprised as they’ve been forced to
replace their worn-out batteries much more quickly than anticipated – in 3-7 years rather than
the expected 10-12. When calculated against a typical 20-year planning horizon for this type
of asset, the cost of energy storage has increased by 50 percent over the baseline assumption
– from the initial purchase plus one replacement to the initial purchase plus two replacements
– jeopardizing the business case for energy storage and the operational viability of renewables.
A New Hope
One solution to the challenges of battery energy storage is through the integration of flywheel
technology with the batteries.
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1
GTM U.S. Energy Storage Monitor, Q2 2015
Active Power has developed its CleanSource 750PD (for Power Driver) system to provide an
integrated approach to flywheels and batteries, resulting in a superior energy storage system
for both short- and long-run power needs.
Figure 1 - CleanSource 750PD with Extended Runtime Cabinet
The Power Driver solution comprises three key elements:
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The CleanSource flywheel, which stores kinetic energy – energy produced by motion – by
constantly spinning a compact rotor in a low-friction environment. When short-term power
is required because of fluctuations in renewable generation or load steps, the inertia of the
flywheel allows the rotor to continue spinning and the stored kinetic energy is converted to
electricity and delivered to the grid.
Figure 2 - CleanSource 750 flywheel
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The Extended Runtime Cabinet (ExRC), a DC/DC converter close-coupled to the
CleanSource 750PD. Additional energy storage, such as batteries of any chemistry,
attaches to the ExRC. The battery power for long-term energy storage is then discharged
through the Power Driver. The flywheel and the batteries connect to the grid as a single
energy source.
Power electronics in the CleanSource 750PD provide the bi-directional inverter function to
discharge both energy sources in less than 10 milliseconds from when called upon by the
control system, and to keep them charged. See Figure 3 below. The power electronics also
enable the Power Driver to deliver kVARs to the grid as required, providing essential power
factor correction functionality organically.
Line Inductor
Input
Contactor
Static Disconnect
Switch
Filter
Inductor
Flywheel
Machine
Bi-Directional
Inverter
Bi-Directional
Inverter
-
+
DC/DC Converter
Battery System
Figure 3 - CleanSource 750PD power path
This combination of flywheel and batteries unlocks the economic potential of energy storage
attached to renewables. An energy storage solution based on integrated flywheel and battery
technology will have an end-to-end project total cost of ownership 25-30% less than a batteryonly storage solution. The energy storage portion of these projects alone is reduced in excess
of 40%.
Total Project Cost
The integrated energy storage solution lowers TCO in a number of ways:
First, it directly improves the life of the battery by reducing the number and duration of battery
discharges. In normal operating mode, the flywheel reacts first, and engages the battery only if
needed; if the demand is less than 8-10 seconds the batteries will not be used. The CleanSource
flywheel suffers no degradation of runtime when discharged. The flywheel can be called upon
to protect the load frequently and deeply for its 20 year life and still provide the same amount
of stored energy as on day one. The result is lower maintenance and replacement costs over
a 20 year deployment, with battery replacement required only once with the CleanSource PD
integrated storage solution as opposed to twice in a battery-only deployment.
Second, the CleanSource PD reduces the size of the battery system needed. Batteries
experience a phenomenon known as the “coup de fouet” (French for “bullwhip”), a sharp voltage
dip upon initial discharge, followed by a recovery.2 See Figure 4 below. Battery installations are
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See Hua, Zhou, Song, http://www.conferenceworks.net.au/13abc/post-conference/3.11%20
revised%20shou%20nan%2013ABC.ppt
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sized to provide enough voltage to overcome the coup de fouet, resulting in larger installations
than needed to provide power over their entire lifecycle.
Voltage
Vp
Vd
tp
td
Cut off
Time
Figure 4 - Coup de Fouet effect on batteries
As shown in Figure 5 below, in the CleanSource PD system, when a battery discharge is
required, the flywheel will transfer the load to the batteries in a controlled manner, thus reducing
the initial step load discharge. The size and cost of the battery energy storage asset can be
reduced by roughly 15 percent, lowering both initial and ongoing battery replacement costs.
Load walk on reduces CDF
Voltage
Vp
Vd
tp
td
Cut off
Time
Figure 5 - Reduced Coup de Fouet effect with CleanSource Power Driver
Third, an integrated solution reduces or eliminates the cost of ancillary systems required by
the renewables deployment. CleanSource PD provides power factor correction functionality
natively, and thus eliminates the need for capacitors. It reacts to supply/demand smoothing
requirements in milliseconds, eliminating the need for ultracapacitors. And backup generator
sets and supporting switchgear and inverters can be “right-sized” due to the reduction in the
size of the battery system and elimination of that extra equipment.
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A sample microgrid use case which illustrates this TCO reduction is as follows:
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Site definition – Microgrid application with average load of 2.5 MW and a peak load of
3.57 MW. We believe this to be a representative microgrid deployment in the energy
marketplace in the coming years.
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Solution definition – The battery-only solution consists of a photovoltaic array, backup
generator, 1 MW / 4 MWh of lithium-ion batteries and ancillary equipment, and capacitors
and ultracapacitors for supplementary energy services. The integrated solution includes
Active Power’s CleanSource 750PD system to provide short-term energy storage and the
supplementary services and eliminates the need for capacitors and ultracapacitors.
Figure 6 below illustrates the approximate costs for each of the components comparing batteries
alone versus an integrated, hybrid energy storage approach (in $000s):
Solution Component
Without Power Driver
With Power Driver
Initial Investment
Photovoltaic Array
$7,857
$7,857
Energy Storage
$3,500
$3,000
Gas Gen Set
$936
$720
Switch Gear
$325
$250
Monitoring & Control
$71
$71
Capacitors for PFC
$250
$0
Ultracaps for Smoothing
$600
$0
CleanSource Power Driver
$0
$1,060
Total Cap Ex
$13,539
$12,958
Maintenance and Replacement Costs
Energy Storage
$6,800
$2.900
Capacitors for PFC
$750
$0
Utracaps for Smoothing
$600
$0
Total Op Ex
$8,150
$2,900
20 Year TCO
$21,689
$15,858
Figure 6 - 20-Year TCO of Greenfield DER Deployment
As shown above, the addition of the Power Driver flywheel solution greatly improves the 20year TCO of a greenfield renewables-plus-energy storage deployment by nearly $6 million,
a reduction of 27 percent. The primary driver of this savings is the reduction in spend on
batteries, both now and in the future, due to the presence of the Power Driver system. This
result holds even forecasting substantial cost reductions in batteries over the next 10-20 years.
Similar savings are achievable with other battery technologies or renewable assets.
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As shown in Figure 7 below, existing renewable deployments looking to add energy storage
see an even sharper economic gain when comparing solutions with and without Power Driver.
This model excludes the cost of the PV system and initial costs of the generators and other
ancillary gear from the comparison, as they are assumed to be already deployed. Power Driver
reduces the 20 year system spend by $4.7 million, a savings of 40 percent, primarily through
the reduction in size and extended life of the battery asset.
Solution Component
Without Power Driver
With Power Driver
Initial Investment
Energy Storage
$3,500
$3,000
CleanSource Product
$0
$1,060
$3,500
$4,060
Energy Storage
$6,800
$2,900
Capacitors for PFC
$750
$0
Utracaps for Smoothing
$600
$0
Total Maintenance & Replacement Costs
$8,150
$2,900
20 Year TCO
$11,650
$6,960
Total Initial Investment
Maintenance & Replacement Costs
Figure 7 - 20-Year TCO of Existing DER Deployment
Operational Value Drivers
The improvement in project economics can also be demonstrated through the costs of energy
on a per-kilowatt-hour basis.
In the battery-only solution, the costs of energy are approximately 30.9¢/kWh over the life of
the deployment ($21.7M total cost over 20 years, with 9.6 hours of usable energy per day).
In addition, energy storage creates additional sources of incremental value for the customer,
including:
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Approximate worth of carbon offsetting resulting in an incremental 3.4¢/kWh of value.
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Interruptible tariffs which can have an incremental value of 1-3¢/kWh depending on the
contract.
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Incremental tax incentives which vary over time and by customer type
Figure 8 below illustrates the combination of the total project costs and incremental value
sources compared to typical utility rates. From the starting point of 30.9¢/kWh, and subtracting
3.4¢/kWh for carbon offsetting and 1.5¢/kWh as an estimate for interruptible tariffs, the net
generated cost of energy is 26.0¢/kWh. This is significantly higher than the average price
of electricity for commercial customers in the California market for July 2015 – 18.3¢/kWh,
according to the U.S. Energy Information Administration (solid purple line). Thus, even with
assumptions of future cost reductions and additional sources of value, a typical renewables
deployment with battery-only energy storage does not make economic sense.
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35.0
30.0
3.4¢
1.5¢
25.0
Cost of Energy w/Battery only Energy Storage
Additional Value Drivers
20.0
15.0
July 2015 California Commercial Energy Cost
30.9¢
26.0¢
10.0
5.0
0.0
kWh Cost
Carbon Offsetting
Interruptible Tariffs
Potential Energy
Cost (/kWh)
Figure 8 - Net Generated Cost of Renewables Deployment with Battery-Only Energy Storage
Deployment of an integrated energy storage approach dramatically changes the economics
of the DER system. With the integrated energy storage system, the costs of energy for this
microgrid application are approximately 22.6¢/kWh over the life of the deployment ($15.9M
total system cost over 20 years at 9.6 hours of usable energy per day). This is a significantly
less expensive alternative to renewables alone, renewables plus batteries, or traditional
backup generation sources such as diesel. Depending upon market conditions and zonal
pricing signals, this cost of localized generation in a grid-tied microgrid environment will be
competitive with utility power on a regular basis especially during peak hours.
Beyond the base cost, the total energy cost associated with the deployment can then be
calculated by subtracting 3.4¢/kWh for carbon offsetting, and 2¢/kWh (slightly more than
batteries-only due to improved dispatchability) as an estimate for interruptible tariffs. The result
is the generated cost of energy given these assumptions is 17.2¢/kWh, significantly below
the cost with batteries alone and below the 18.3¢/kWh average commercial power price in
California. See Figure 9.
25.0
3.4¢
20.0
Cost of Energy w/Integrated Energy Storage
2.0¢
15.0
10.0
Additional Value Drivers
22.6¢
July 2015 California Commercial Energy Cost
17.2¢
5.0
0.0
kWh Cost
Carbon Offsetting
Interruptible Tariffs
Potential Energy
Cost (/kWh)
Figure 9 - Net Generated Cost of Renewables Deployment with Integrated Energy Storage
In short, including an integrated energy storage solution in a photovoltaic deployment makes
the entire solution economically feasible.
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Recommendations
By taking an integrated, hybrid energy approach, the lifetime costs of DER are greatly decreased
and the economic value of these resources is increased. As a result, our recommendations for
current and prospective DER operators are:
1. Requiring your systems integrator or project team to evaluate the use of an integrated
energy storage solution for photovoltaic and wind DER deployments incorporating either
photovoltaic or wind power, including an itemization of component costs over a 20 year
period.
2. Analyzing any existing DER deployments which don’t currently include energy storage
for opportunities to leverage and extend the value of your current asset base and the
generated energy.
3. Quantifying the value of interruptible tariffs in your area of operation.
4. Quantifying carbon offsetting calculations (including operational commitments required to
achieve credits) as part of the microgrid deployment based on market rates or contractual
arrangements when applicable.
Technical and Operational Considerations
Use Cases
Distribution network operations will still typically be performed by the utility in DER and energy
storage deployments. However, utilities and operators will need to collaborate and exchange
relevant operational data associated with the microgrid or DER on a near-time or real-time
basis. Based on the market structure being implemented in several US territories, the control
system will need to provide operational awareness and control of the microgrid on a real-time
basis. These operations will include, but not be limited to use cases for:
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Scheduling and/or limiting the real power output of the microgrid or DER
Setting the schedule of energy storage
Setting power factors
Setting curves for volt-var control
Changing the anti-islanding settings
Issuing a connect or disconnect to the microgrid and/or receiving notification of a disconnect
or reconnection of the microgrid.
Sending and receiving both zonal and nodal price signals
Within the microgrid, sub-second response by the various components will be required to
comply with the use cases listed above. Additional use cases inside the microgrid will include:
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Fast frequency response
Frequency regulation
Load forecasting
Microgrid balancing of generation, storage, and load requirements
Enabling of enhanced reliability (decreased outages and brownouts)
Localized load shedding
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Grid forming capabilities, including frequency reference, when the microgrid disconnects
from utility power.
An integrated approach of control systems, inverters, and flywheel technology can address
sub-second requirements associated with each of these use cases. Battery technology isn’t
well-suited for sub-second operational response, so the integrated approach enables these
use cases to be addressed without impacting battery performance. Requirements of demand
response applications aren’t nearly as stringent, so sub-second response would be overkill
for load shedding events. Many of these use cases are contemplated by IEC 61850 for utility
grids, but adaptation is needed for a microgrid environment.
Power quality and power factor correction are also key considerations locally within the microgrid
and can greatly impact both the operations and financial impact of microgrid technology.
Overvoltage and under voltage and supply/demand imbalance can cause damage to various
assets within the microgrid operations.
An integrated energy storage solution provides optimal technology to address power factor
issues. By injecting kVARs into the system, this technology can prevent or minimize utility
penalties, minimize impacts to the distribution network, enhance reliability inside the microgrid,
and prevent damage to assets inside microgrid operations.
Implementation of standards for data models and data payload is a critical success factor
for incorporating DER and energy from microgrids into the energy market. Microgrid system
balances will require close coordination with utilities, aggregators, and distributed energy
resources. In addition, standards for quality of service are also required for both control systems
and components of the microgrid solution because of the nature of the actions and signals sent
to and from the microgrid control systems. Timely, accurate data which can be orchestrated
in the control system, acted upon and quickly executed by the microgrid components will be
vitally important to delivering the value outlined in the previous section which focused on the
business case.
Recommendations
In order to address the technical and operational requirements both inside the microgrid and
when tying the microgrid to the distribution network, operators should consider:
1. Incorporating technology which complies with standard data models in order to streamline
end-to-end technology associated with the DER deployment.
2. Partnering with grid operators and utilities to establish clear protocols for connecting and
disconnecting the microgrid from utility service.
3. Creating clear requirements for their project team or systems integrator to specify how
the microgrid components comply with sub-second requirements associated with each
discrete use case of energy storage and DER.
4. Ensuring all key stakeholders in the energy value chain understand the algorithms used to
forecast and balance the system inside the microgrid environment including all generation
sources, DR technology, and load requirements.
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5. Clearly stratifying, documenting and executing a comprehensive plan of how the grid-tied
microgrid enhances reliability of energy services inside the microgrid. Standard metrics
such as CAIFI and SAIFI should be used to measure performance on an ongoing basis.
6. Quantifying and validating the approach to power factor correction associated with the
DER deployment. This analysis should include addressing any penalties incurred by the
utility or distribution system operator.
Conclusion
The complexity of the electric grid and distribution networks will increase significantly as
microgrids, renewable energy, and DER is propagated throughout the system, raising economic
and operational challenges. Microgrid and renewables deployments which add energy storage
via an integrated flywheel and battery solution can address both these challenges, delivering
solutions which are both technically and financially feasible.
About Active Power
Active Power (NASDAQ: ACPW) designs and manufactures flywheel uninterruptible power
supply (UPS) systems, modular infrastructure solutions (MIS), and energy storage products
for mission critical and renewable applications worldwide. For more information, visit www.
activepower.com.
To offer feedback and comments on the content of this white paper, please visit
www.activepower.com/ask-an-expert.
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