When Spanish utility giant Iberdrola announced last June that it would acquire Maine-based Energy East for $4.5 billion, it signaled a potential surge in major foreign owners buying into U.S....
ERCOT’s February emergency suggests storage capacity is needed to support renewables.
to reduce off-peak maximum wind output to avoid curtailments, even if only a portion of the wind towers have batteries installed. If the published operating characteristics of large-scale batteries are accurate, they likely could qualify to provide spinning-reserve support during periods when the batteries are charged, potentially adding new revenue from battery installation. Wind-farm owners negotiating power-purchase agreements could also offer a firm capacity deliverable to enhance contract payment terms.
There are, however, some negative aspects of megawatt-scale battery-storage technology. First, the capital cost to buy and install batteries, generally quoted at around $200/kWh, still is quite expensive. Current battery technology also has a 20 to 30 percent loss of energy during the charge and discharge cycle, meaning for every 100 MW of wind output stored in a battery, only 70 to 80 MW reaches the grid for consumption. Because the development of large, megawatt-scale batteries constitutes new technology, there are questions about long-term durability and maintenance requirements. There also is uncertainty on how battery storage will affect renewable energy credits under different state-run RPS programs, as well as a lack of clarity on the status of battery storage as a qualifying technology for energy tax credits.
Finally, not all windpower advocates consider batteries a “green” resource, particularly since most batteries use large vats of chemical electrolytes.
Technology & Market Improvements
Many of the challenges facing battery storage technology will diminish over time. As in other industries, better economics derived from large-scale production and technology advancements inevitably will lead to better, cheaper battery products. In addition, there are currently some compelling market issues that make battery storage an increasingly attractive alternative.
For example, in ERCOT, recent wind expansion has begun to create significant zonal energy price differences across the system due to transmission congestion in exporting windpower from West Texas. ERCOT congestion charges from the West Zone to the North Zone, the corridor for moving windpower from West Texas into the Dallas-Fort Worth area, have skyrocketed in the last few months as wind generation has increased (see Figure 1) .
In 2009, ERCOT will move to a nodal market with locational marginal prices calculated at individual buses across the ERCOT system. One element of the market is the auctioning of congestion revenue rights (CRRs), where participants can buy the financial rights to congestion between their generation and load to hedge themselves against anticipated congestion costs.
In studies performed by Ventyx Energy Advisors, projected costs for purchasing the congestion rights for moving windpower from West Texas wind sites to Dallas load have been as high as $40 million for 2009. And congestion costs likely will continue to increase until at least 2012 when the first significant new transmission lines are slated for completion to export power from West Texas.
High congestion costs may provide a new role for battery storage in the ERCOT market, as a way to hedge against congestion. With battery storage in place, a wind-farm operator can choose to charge the battery during highly congested hours rather than pay the steep costs of exporting power to serve load. This congestion-cost