Efforts to develop more RTOs in the West came to a near standstill again after talks last year among key players Bonneville Power Administration (BPA), Grid West, and the Transmission Improvements...
Understanding the value of pumped storage.
process, pumped-storage units start quickly and qualify as spinning-reserve services. Pumped-storage units also have very fast ramp rates, and can qualify to provide regulation-up and regulation-down services, potentially in both pumping and generating modes, depending upon their specific designs.
Pumped-storage assets do run the risk of becoming a dominant force in their regional AS markets. For example, in a 50,000-MW peak-demand market, the maximum amount of operating reserves needed (spinning plus non-spinning) may be only 3,000 MW (based on a 6 percent operating reserve criterion). A 1,000-MW pumped-storage facility potentially could provide one-third or more of that market’s operating reserves. This creates an issue where the full capability of the asset materially could impact AS prices, so the asset owner would need to develop a dynamic bidding strategy for optimizing revenue from its joint participation in the energy and AS markets.
While it sounds innocuous at first, each ISO sets its own standards for AS product definition, accreditation standards and market-price formation. The whole concept of administratively designed, competitive AS markets is relatively new and is continuing to evolve, making the pumped-storage owner subject to various administrative risks related to future rule changes. Similar administrative risks exist in the ICAP markets.
Pumped storage offers significant value for integrating storage with variable generation sources, including wind and solar power. Renewable portfolio standards established in many states are leading grid operators to become concerned about their ability to integrate wind resources into the balance of the power-delivery system. Wind generation is variable and non-dispatchable, and if no remedial action is taken, this can lead to unstable grid conditions.
Beyond the grid-operations issues, wind-asset owners suffer because wind generation often occurs during lower load periods, when energy prices are lower, thereby reducing their energy revenues. Asset owners also have seen conditions, such as those in West Texas, where the amount of wind generation has led to curtailed output and reduced (or even negative) energy prices, and has resulted in the need for significant new transmission investments.
Storage technologies offer an intriguing answer to address these concerns. A small localized storage technology (such as batteries) could be located at a wind turbine site and be used to transform the time pattern of the generation before it hits the grid. Pumped storage is a more land-intensive alternative and therefore typically would connect at the grid separately from a wind farm. As a result, the variable nature of the wind resource still might require a local transmission investment to avoid negative grid impacts.
That said, pumped storage could provide grid regulation to offset wind-generation variability. It could store energy during lower value periods, prevent wind curtailment and avoid new transmission investments. Pumped-storage capacity could even shape prices by optimizing schedules of wind output and storage.
This last item is particularly noteworthy because—as in the context of ancillary services—a pumped-storage plant commercially integrated with a wind farm could be used to reduce downward pressure on off-peak prices. So in addition to just realizing value for the off-peak, on-peak spread, storage potentially can change the off-peak prices, benefiting