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Energy Storage Management for VG Integration

UWIG FALL TECHNIICAL 

WORKSHOP

Brendan Kirby 

National Renewable Energy 

Laboratory Consultant

October 13, 2011

NREL/PR-5500-53295

Photo by NREL/PIX 19498
National Renewable Energy Laboratory Innovation for Our Energy Future

Increases Value Through Optimized Ancillary Service 

(AS) Provision: Pumped Storage Generator Example 

(320 MW pump, 200-400 MW gen, 40 MW reg, 200 MW spin, 400 MW non)

• Total profits increased 133%; 

• Energy profits reduced -48%; 

• Regulation profits added +41%;

• Spinning profits added +89%;

• Non-Spin profits added +50%. 

CAISO market modeled for all 2010

Very Flexible Plant:

10 MW Min Gen, 195 MW Reg, 390 MW Spin

 Total profits increased 281%;

 Energy profits reduced -152%; 

 Regulation profits added +156%;

 Spinning reserve profits added 

+258%; 

 Non-Spin profits added +20%.
National Renewable Energy Laboratory Innovation for Our Energy Future

$/KW/Yr MISO 2009 NYISO 2009 NYISO 2008 

Energy $40.63 $26.73 $49.39 

15% Reg $45.42 

111% 

$44.34 

166% 

$73.01 

148% 

77% Spin $49.89 

122% 

$60.25 

225% 

$97.15 

197% 

Comparing Energy & Ancillary Service Results

• Ancillary services during generation only;

• $5/MWH minimum spread;

• 80% efficiency;

• 16-hr storage.
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• Selling ancillary services requires generating at 

minimum load or above:

– Must be in the energy market.

• Selling ancillary services requires being below 

maximum load:

– Lost opportunity cost from energy market.

• Markets for energy and ancillary services clear 

each hour:

– Prices are not known until each market clears.

• It is essentially impossible for the generator to know 

what mix of energy and ancillary services to sell to 

maximize profits: 

– ISOs co-optimize energy and ancillary services for 

conventional plants. 

How Do You Know What to Provide Each Hour?
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Thermal and Renewable Generation

Bid variable production cost and the ISO will co-optimize and schedule output.
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• Average available energy depends on water inflow; 

• Storage capability depends on size of reservoir;

• Power capacity depends on size of generator;

• Variable O&M may be zero but with limited energy 

the plant wants to sell during the highest price 

hours:

– Forecast the hours of highest price;

– Forecast the prices themselves.

• Requires forecasting the energy market clearing 

prices:

– Load forecast;

– Availability of other generation;

– .... 

Energy Limited Hydro
National Renewable Energy Laboratory Innovation for Our Energy Future

Energy Limited Hydro
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• Like thermal generation, storage has a variable 

O&M cost:

– The “fuel” cost is not fixed: based on the cost of 

purchased energy and the round-trip storage 

efficiency.

• Like energy limited hydro generation, storage 

needs to schedule when it is best to sell its 

limited energy output;

• Unlike thermal and hydro, scheduling storage 

requires forecasting both the energy purchase 

price and the energy sale price.

Storage: The Most Complex
National Renewable Energy Laboratory Innovation for Our Energy Future

Storage 
National Renewable Energy Laboratory Innovation for Our Energy Future

• The cost to supply regulation and spinning reserve is 

dominated by opportunity costs:

– A thermal plant with a $35/MWh variable O&M cost selling into a 

$44/MWh energy market looses $9/MW-hr in profit if it backs 

down to provide reserves: 

• Variable O&M costs are saved, less fuel is burned, ...

• Costs are higher when selling regulation due to additional 

efficiency losses.

• Variable renewables have high opportunity costs and are 

expensive ancillary service providers:

– $44/MW-hr in this example;

– Wind, sun, or water must be spilled and are lost forever.

 Energy limited hydro costs depend on the next opportunity to 

sell:

– Water is not spilled, so is available to sell at a later hour;

– $4/MW-hr if the next-best energy sales opportunity is at $40/MWh.

Ancillary Services Further Complicate 

Hydro and PS Scheduling
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Spin Costs Depends on Next-Best Energy 

Sales Opportunity

Energy limited hydro cost to supply spinning 

reserve depends on the hour it is delivered and 

on how many other hours of spin are being 

provided.
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• ISOs co-optimize energy & AS for conventional 

generators each hour: 

– Resources tell ISO their capabilities & costs;

– Consider generator limitations: min gen, min run time, min 

off time, ...;

– ISO schedules energy & AS supply to simultaneously 

minimize system costs and maximize supplier fair-market 

profits:

• Supplier does not have to guess at opportunity costs when 

bidding AS supply.

– ISOs do not consider other inter-temporal constraints.

• ISOs starting to manage Energy Limited Regulation 

Resources (flywheels & batteries);

• It may be appropriate for ISOs to consider managing 

Pumped Storage energy and AS.

Co-optimizing Energy and Ancillary Services
National Renewable Energy Laboratory Innovation for Our Energy Future

• Society does not benefit from making hydro and 

pumped storage guess at future power prices;

• Allowing the system operator to schedule energy 

limited resources simply extends co-optimization 

over multiple market intervals:

– Suppliers offer their capabilities and costs;

– The ISO clears energy and ancillary service markets; 

– The ISO minimizes total costs while maximizing each 

supplier’s profits;

– The ISO would schedule energy limited hydro and 

pumped storage based on expected future conditions 

as well as on the current market interval.

Extending Co-optimization Over Time
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• Excellent regulation resource – very fast and very 

accurate;

• Bids very low every hour and is a price taker:

– No opportunity cost;

– Minimal direct variable cost (losses).

• Prefers regulation: highest price;

• Potential income is the hourly AS price;

 With no variable cost and a near zero bid, 

dedicated storage may collapse the AS market – 

• Regulation and spin might need to become regulated 

transmission services.

Storage Designed Exclusively for Ancillary Services