A 2007 law essentially prohibits California utilities from signing long-term contracts for power, including those from out of state, unless they emit less than 1,000 pounds of CO2/MWh...
Understanding the value of pumped storage.
The key value driver for electric power is time; that is, the exact clock time at which it is produced. Time determines the demand for electricity, the resources competing to supply the power and the state of congestion in the delivery system.
Benjamin Franklin once said that “lost time is never found again.” While there is much truth to this, the time value of electric energy can, in a way, be deferred and “found again” by storing energy in some form and then retrieving it later.
This is the key factor in understanding the value of energy storage. Storage allows one to conquer time, as it were, and deliver power when it is needed, not just when it is generated.
Various schemes exist to store energy, with the most common being chemical energy ( e.g., batteries) and hydroelectric pumped storage. The concept of pumped storage is deceptively simple. When its value is low during off-peak periods, electricity is used to pump water from a lower reservoir to a higher reservoir (see Figure 1) . Later, when the value of the electricity is much greater (on-peak periods), the water is allowed to flow from the upper to lower reservoir, and this movement is used to generate electricity. The pump and generator often constitute the same device, just operating in an opposite direction. Either reservoir can be a natural body of water or a man-made lake.
While pumped-storage projects have been difficult to develop in the past, their economics are improving along with increasing market demand for ancillary services and standby capacity.
Capital costs for pumped-storage plants vary widely according to local conditions ( e.g., is there a pre-existing lake?) and economies of scale, and easily can exceed $2,000/kW. While there is no “fuel” as such, the cost of the output energy depends on the cost of the input energy. The total consumption of energy during the cycle of pumping and generating is called the “round-trip efficiency” and is typically in the range of 70 to 75 percent; that is, 25 to 30 percent of the input energy is consumed by the storage facility. For example, if the “round trip” efficiency is 70 percent, then 1 MWh off-peak = 0.70 MWh on-peak, or 1.43 MWh off-peak = 1 MWh on-peak.
The round-trip efficiency therefore defines the difference—the spread—between off-peak and on-peak prices needed to dispatch economically a pumped-storage facility. For example, focusing on one month in PJM East—September 2005—average on-peak prices were $122.53/MWh, and average off-peak prices were $59.41/MWh. At an assumed 70 percent efficiency, the margin for a pumped-storage asset was [122.53 - (59.41 x 1.43)], or $37.57/MWh (see Figure 2) .
While this example explains what drives the energy value of pumped storage, those who actually operate such assets likely would cringe at this over-simplification. In a real-time operating environment, pumped-storage calculations constitute very complex problems in optionality,