Strategen!Consulting! ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! !

www. strategen.com 

# Energy'Storage

— a'Cheaper'and'Cleaner'
Alternative'to'Natural'Gas

9 Fired'Peaker'
Plants

Prepared'for'the'California'Energy'Storage'Alliance

Authors :

" Janice!Lin,!Managing!Partner,!Strategen

" Giovanni!Damato,!Manager,!Strategen

Company'Acknowledgments:

" A123!Systems

" Applied! Intellectual!Capital

" EnerSys

Release'Date:

" February!8,!2011

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 1 of! 9 

## Introduction

Energy! s torage!is!vital!in!all!efficientl y! functioning!commodity!markets ; storage! smoothes! the! fluctuations!in!

sup ply! and! demand! and! e nsure s! availability! during! critical! periods! of! high! demand.! Energy! storage! systems! store!energy! for!use!at!a!later! time,!when!electric!power!is!most!needed!and!most!valuable,! such!as!on!hot!
summer! afternoons.! Energy! s torage! can! help! integrate! intermittent! renewable! sources,! supplant! the! most polluting! power! plants,! and! enhance! grid! reliability.! There! are! many! forms! of! energy! storage ,! including chemical!( e.g.,! batteries),!mechanical!( e.g.,! flywheels)

, and!thermal!( e.g.,! ice) technologies

. 1

Due! to! insufficient! energy! storage! for! the! electric! p ower! grid ,! utilities! must! size! their! generation! and! transmission!systems!to!deliver!the!full!amount!of!electricity!that!consumers!demand!(or!might!demand)!at!any! given!moment!of!the!year.!!Owning!and!operating! sufficient! assets!to!serv e!peak!demand!

X only! 5%!or!less!of! the!hours!per!year!

X results!in!increased!emissions!and!costs!to! electricity!custom ers.

Energy! storage! has! the! unique! potential! to! transform! the!electric! utility!industry! by!improving!existing!asset! utilization,! avoiding! the! building! of! new! power! plants,! and! avoiding! or! deferring! upgrad es! to existing!
transmission!and!distribution!networks.! U tility!CEOs and!policy!makers! frequently! refer! to!energy! storage!as!
the!“ ultimate!game!changer ”!for!the!electric power industry.

More!recently

, energy!st orage!has!achieved!recognition!as!a!foundational!element!of!the!Smart!Grid 2

, and!the! technical!community!speaks!of!energy!storage!as!a! key!enabling!resource to!facilitate!the!transition!away!from! a!fossil!fuel!dominated!generation!fleet!to!one!that!is!clea ner,!more!reliant!on!renewables,!“smarter

, ”!and!able! to!accelerate!the!electrification!of!the!transportation!sector.



## Cost'Comparison'Analysis
To!help!illustrate!the!cost!effectiveness!of!energy!storage!as!an!alternat ive!to!natural!gas

X fired!peaker!plants

,! we!compared!the!cost!of!a! kilowatt

X hour!( kWh ) of!electricity generated!on

X peak!by!a!gas

X fired!peaker!with!the! cost! of! a! kWh! of! electricity! provided! on

X peak! by! an! energy! storage! system.! For! simplicity,! t his! comparison! selected! a! commercially! available! ene rgy! storage! technology!

– lead

X acid batteries

– and! used! the! cost! and! specifications! similar! to! the! large! lead

X acid! energy! storage! peaking! facility! shown! below

. Located! in! Chino,! California,!t his!10!megawatt!(MW),!4

X hour

X duration! system!successfully!demonst rated!energy!storage’s!ability! to!manage!peak!load!from!1988!through!1996. 3

, 4

A ssumptions! for! the! gas

X fired! peaker! were! taken! directly! from! the! California! Energy! Commission’s! (“ CEC’s ”) Comparative+Cost+of+California+Central+Station+Electricity+Generation Technologies model.!To!calculate!the!cost! per!kWh!of!electricity!discharged!by!an!energy!storage!system,!the!same!20

X year!project!time!horizon!and!5%! capacity!factor!w ere used.! This!analysis!found!that!the!levelized!cost!of!generation!for!energy!storage! is! less
than that!of a!simple!cycle!gas

X fired!peaker

.! Below!is!a!detailed!overview!of!the!analysis!methodology:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 Pumped!hydro!energy storage,!which!has!been!in!wide!use!for!many!years,!is!another!form!of!mechanical,!or!kinetic,!energy!storage

2 Title! XIII! of! the! Energy! Independence! and! Security! Act! of! 2007! de scribe d! the! Smart! Grid! as! including “deployment! and! integration! of! advanced!

electricity!storage!and!peak

X shaving!technologies,!including!plug

X in!electric!and!hybrid!electric!vehicles,!and!t h ermal

X storage!air!conditioning”

3 Energy!storage!performance!spec ifications based!on!commercially!deployed!lead

X acid!grid!storage!projects,!including!the!EPRI

– funded! grid! level!energy!

st orage!demonstration!project!in!Chino,!California

4 EPRI!Chino!Study!TR

X 101787,! Chino+Battery+Energy+Storage+Power+Plant:+Engineer

< of

< Record+Report (December!1992)

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 2 of! 9 Energy'Storage'Technologies'Today'Can'Deliver'On

9 Peak'Electricity'at'a'Lower'Cost'than'Gas

9 Fired'Peakers

Gas

9 Fired'Turbine'Peaker'Plant Energy'Storage'Peaker'Substitution

Gas

9 Fired'Peaker'Plant 5 Energy'Storage'Peaker'Substitution 6

General'Assumptions
Technology: Simple!Cycle!Combustion!Turbine
Plant'Size 49.9MW Efficiency 37%!(9,266!Btu/kWh!Heat!Rate) Ownership POU!Owned/Financed Project'Life 20!years Capacity'Factor 5% Plant,'T&D'Losses 6%!(Centralized!Plant) General'Assumptions
Technology: Lead

X Acid!Battery
Plant'Size 49.9MW!(4h!duration) Efficiency 84%!(AC!to!AC!Roundtrip) Ownership POU!Owned/Financed Project'Life 20 years Capacity'Factor 5% Plant,'T&D'Losses 6%!(Centralized!Plant)

Costs Assumptions LCOG ($/MWh) LCOG ($/kW

9 yr)

Fixed'O&M $24/kW/yr $69 $29 Corp.'Taxes 0% $0 $0

Insurance 0.6%!of!CAPEX $23 $10 Property'Tax 1.1%!of!CAPEX $29 $12
Natural'Gas
Fuel $61/MWh $100 $41

Variable'O&M $0.04/kWh $5 $2
Subtotal $227 $93 Costs Assumptions LCOG ($/MWh) LCOG ($/kW

9 yr)

Fixed'O&M $6/kW/yr $17 $7 Corp.'Taxes 0% $0 $0

Insurance 0.6%!of!CAPEX $22 $9 Property'Tax 1.1%!of!CAPEX $28 $12
Off

9 Peak' Grid' Charging $24/MWh 7 $48 $20

Variable'O&M $0.04/kWh $5 $2
Subtotal $121 $50

Costs Assumptions LCOG ($/MWh) LCOG ($/kW

9 yr)

Installed'Cost $1,394/kW $265 $109

Grand'Total $492 $203 Costs Assumptions LCOG ($/MWh) LCOG ($/kW

9 yr)

Installed'Cost $1,351/kW 8 ($338/kWh) $256 $105

Grand'Total $377 $155

Levelized'Cost'of'Generation'for'Energy'Storage'is'Less'Than'a'Simple'Cycle Gas

C Fired Peaker!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 5 Source:! CEC+2009+Comparative+Cost+of+California+Central+Station+Electricity+Generation+Technologies (CEC_COG_Model_Version_2.02

X 4

X 5

X 10)

6 Source:!StrateGen Consulting,!Level ized!Cost!of!Generation!Model

7 Assumes! most!recent!sample!of!average!summer!off

X peak!wholesale!price!from!CAISO!OASIS!database

8 EPRI!Chino!Study!TR

X 101787,! Chino+Battery+Energy+Storage+Power+Plant:+Engineer

< of

< Record+Report (December!19 92)

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 3 of! 9 

## En ergy'Storage'Has'the'Ability'to'Deliver'More'than'Peaker'Substitution Value

I n! addition!to!cost!savings!for!electricity!consumers ,!energy!storage!provides! multiple!value!streams!above!and! beyond! peaker! substitution

, making! the! economic! case! for! energy! storage! stronger.! For! example,! by! their!
nature,! gas

X fired! peaker! plants! cannot! be! economically! siz ed! below! 50 MW! and! therefore! are! not! easily! installed!in!a!distributed!footprint.!Energy!storage!systems!do!not!have!this!limitation,!opening!up!the!potential! for! many! technical! and! economi c benefits! available to! distributed! energy! resources

, such! as! reduction! of! transmission! and! distribution! losses.! Additional! benefits! include! electric! energy! time

X shift,! voltage! support,! electric!supply! reserve!capacity,! transmission!congestion! relief,!and! frequency! regulation.! Ranges! for!each!of! these!value!streams!have!recently!been!quantified!by!Sandia!National!Laboratories,!and are! presented in!the! chart!below!in!terms!of!additional!benefits!per!MWh!delivered!on

X peak.

Additional'System'Benefits'of'Energ y'Storage 9



## Energy'Storage'is'the'Most'Cost

9 Effective'Resource
When! these! benefits! are! factored! in! and! compared! to! the! total! installed! cost! for! a! range! of!energy! storage! technologies,!energy!storage emerges!as!a comprehensive,! cost

X effective!system! resource.

The! bars! in! the! chart! below represent! the! total! installed! cost! per! kWh! of! energy! storage! capacity! by!major! storage! technology

, assuming! four! hours! of! capacity! for! each.! The! red! dashed! line! indicates! where! energy! storage!costs!are!at!cost parity with!a!natural!gas

X fired!peaker.!The!green!dashed!line!indicates!the!grid!system! level!costs!avoided!with!energy!storage!

– in!other!words,!this!line!is!representative!of!other!real!system!costs! that!are! borne! by! electricity! customers .!Finally,! the! blue! ar row represents! the! total! societal! cost!avoided! by! energy! storage,! including! its! ability! to! help! achieve! a! smart! grid,! accelerate! and! facilitate! renewables! integration,!and avoid GHG!emissions.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9!!! Source:!SANDIA!Report!SAND2010

X 0815,! Energy+Storage+ for+ the+Electricity+Grid:+Benefits+and+Market+Potential+Assessment+Guide ,! Jim!Eyer!&!Garth!

Corey!(February!2010) 0! 400! 800! 1200! 1600!Levelized'$/MWh'Benefit' Frequency!Regulalon!

Transmission!Congeslon!Relief!

Electric!Supply!Reserve!Capacity!

Voltage!Support!

Electric!Energy!TimeXShim!

Peaker!Subsltulon!

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 4 of! 9 Fossil'Fuel'Societal,'Grid,'and'Peaking'Costs'vs.'Energy'Stor age'Costs 10
, 11 Avoided'Costs'Realized

Societal'Level:

X GHG!&!Air!Quality

X Renewables!Integration

X Smart!Grid!Implementation

X Streamlined!Permitting

Grid'System'Level:

X Electric!Energy!Time

X Shift!

X Voltage!Support!

X Electric!Supply!Reserve!Capacity!

X Transmission!Congestion!Relief

X Frequency!Regulation

Peaker'Level:

X Peaker!Plant!Substitution



## Energy'Storage'is'a'Cleaner'Alternative'to'Natural'Gas

9 Fired'Peaker Plants

G rid!storage! displaces!less!efficient,!dirtier!peaker!generation!by!time

X shifting! more!efficient,!cleaner!base

X load! generation! to! peak! periods.!This! results!in substantial! system

X wide! air!quality!benefits

. The! first! chart!below! compares!actual!carbon!dioxide!(CO 2 )!emis sions!of!peak!vs.!off!peak!generation!in!Southern!California!Edison’s! service! territory.! Peaker! plant! generation! produces! far! more! CO 2! emissions! per! MWh! than! base! load! generation ,!especially!during!the!summer!months.!This!is!true!of!California’s!other!util ities!as!well.

Energy! storage! usage! results! in! significant! a ir! quality! benefits.! Assuming! Pacific! Gas! and! Electric’s! base! load!
electric! mix! as! the! off

X peak! source! of! electricity,! energy! storage! would! provide! 55%! CO 2! savings,! 85%! NOx! savings,! and! up! to! 96% savings! of! CO! per!MWh! of! on

X peak!electricity! delivered! (shown! in! the second chart!
below ) .! These! emissions! benefits! increase! as! more! off

X peak! renewable! generation! comes! on

X line.! Energy! storage! will! also! help! optimize the! use! of existing! transmission! and! distribution! capacity ,! enabling! the! deploy ment!of!more!renewable!energy.! Finally,!because!of!its!ability!to!store!locally!generated!power!and!be! remotely!dispatched,!energy!storage!is!an!indispensable!component!of!a!more!affordab le,!s ecure!and!reliable! smart!grid.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 10 Assumptions:! All! energy! storage! technology! costs! shown! are! normalized! for! a! four

X hour! duration;! Technology! comparison! is! for! modern! energy!

storage!systems!only,!but does!not!include!pumped!hydro or!high

X speed!flywheels!which!are!not!designed!for!long

X dura tion!peaking!applications

11 Source:! Average! estimated! total! installed! cost! estimate! from:! Sandia! Report! SAND2008

X 0978

,! Susan! M.! Schoenung! and! Jim! Eyer

, Benefit/Cost+

Framework+for+Evaluating (February!2008) 0! 500! 1000! 1500! 2000! 2500!Installed'Cost'($/kWh)'

High!Eslmated!Total!Installed!Cost!by!Technology!

Average!Eslmated!Total!Installed!Cost!by!Technology! 

### Societal'Costs

Grid'System'Level'Costs

Peaker'Subs]tu]on'Costs

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 5 of! 9 Peak'vs.'Off

9 Peak'CO 2 Emission'Rate'(Tons/MWh) 12

Energy'Storage'is'a'Cleaner'Alternative'to'Gas'Peakers 13



## S mart,'Clean,'Cost

9 Effective'Energy'Storage:'Ready'for'Deployment'
Modern!energy!storage!technologies,!some!of!which!have!been!in!existence!for!decades,! cover!a!wide!range!of! sizes,!power! (measured!in!MW),!and!discharge!durations (measured!in!hours) .!An!energy!storage!system!can!
be!either! centralized! or! distributed!and! ca n! be! utility

X owned,! customer

X owned! or! third

X party! owned.!Today,!
there! are more! than!2,000!MW!of! installed!grid!connected! energy!storage! technologies!deployed!worldwide! with!a!comparable!amount!under!development. 14!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 12 Source:!2006!CPUC!Update!for!Energy!Efficiency!P roceeding ( Brian!Horii ,!E3)

13 Assumptions!from!CEC!C ost!of!Generation Model!for!simple!cycle!peaker!and!standard!combined!cycle!for!off

X peak!base!load;!generation!mix!based!on!

annual!report!of!actual!electricity!purchases!for!Pacific!Gas!and!Electric!in!2008

14 Source:!!StrateGen!and!CESA!research.!Ex cludes!pumped!hydro capacity,!estimated!at!~123!GW! 55%! 85%! 96%!

77%! 84%!

0.00! 0.25! 0.50! 0.75! 1.00! 1.25!

CO2! NOx! CO! SOx! PM10!lbs/MWh'(lbs/GWH'for'CO2)' Peaker!Plant! Storage!System! Percent!Reduclon!

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 6 of! 9 Current'Estimated'Worldwide'Installed'Adva nced'Energy'Storage'Capacity'(2128'MW'as'of'2010)



## Why'Isn’t' Energy'Storage Being'Widely'Used'in'California?
Current! California! policy! has! not! kept! pace! with! advances! in! energy! storage,! yet! energy! storage! can! cost

X effectively! help! address! California’s! many! energy! policy! challenges,! such! as! green! house! gas! emissions! reduction,! renewables! integration,! transmission! and! distribution! constraints,! increasing! peak! demand! and!
enabl ing!electric!vehicles.! Energy!storage!is!particularly!relevant,!as!many!of!these!complex!challenges!need!to! be!addressed!in!the!near!term,!and!storage!technology!is!currently!available!and! deployable!on!a!large!scale.

Energy! storage! technologies! are! well! established! in! other! industries! and! market! applications,! such! as! the! transportation and! consumer! electronic s industrie s .! Grid! storage,! a! key! component! of! the! electric! power! industry,! repres ents! a large! new! market! application! for! both! existing! and! emerging! energy! storage! technologies .! ! Unfortunately,! the! electric! power! industry! is! a! highly! regulated! industry! that! has! historically! overlooked! using! storage! for! grid! optimization.! As! a! result,! cu rrent!market! structure! does! not! allow! for! the! buyer! of! the! energy! storage! equipment! to! easily! capture! all! the! value! streams! provided! by! energy! storage! across!the!entire!electric!power!system.!

T he! barrier! is! neither! the! availability! of! a! reliable! energy! s torage! technology! nor! its! cost;! the! barrier! is! the!

current! accounting!of!disaggregated!benefits!in!a! regulated!utility!industry!and the lack!of clear!policy!direction!
to!utilitie s!that!energy!storage!is a!superior!a lternative!to! na t ural! gas

X fired!peakers.! Thus,!while!energy!storage! presents! compelling! social! and! economic! benefits,! California’s! current! market! structure! has! led! to!
underinvestment.!



## Key'State'and Federal'Policy'Recommendations

Energy!storage!can!cost

X effectively!help!address!California’s!many! near!term,!complex!and!inter

X related!energy! policy! challenges,! such! as! green! house! gas! emissions! reduction,! renewables! integration,! transmission! and! distribution!constraints,!increasing!peak!demand!and! enabl ing!electric!vehicles.!



### State'Recommendations

1) Re quire! utilities! to! evaluate! procurement! targets! for! cost

X effective! energy! storage! deployment! (e.g.,! AB! 2514)

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 7 of! 9 2) Encourage!diversity!in!energy!storage!technology!deployment,!including!market!application!and!ownership! options

, to!foster!utility,!third!party

, an d!customer

X owned!applications!!! 3) Fully! implement! SB! 412! to! provide! S elf! Generation! Incentive! Program! ( “ SGIP ” )! incentives! for! energy! storage!coupled!with!solar!and!used!standalone!on!the!customer!side!of!the!meter 4) Implement!energy

X storage!focused! rulemaking ,!require!consideration!of!energy!storage!as!a!valued!system! resource! in! all! regulatory! proceedings ( e.g.! distributed! generation,! smart! grid,! renewables,! and! demand! response/permanent!load!shifting ) 5) Include!energy!storage!in!a!standardized!cost

X effectivene ss!methodology!applicable!to!all!resources 6) Require! utilities! to! include! energy! storage! as! a! bidding! option! in! peaking! capacity! R equests! for! O ffers! (RFOs) 7) Require! energy! storage!as!part!of! the! long!term!procurement!process,!including!pursuing!standard!offer s! for!permanent!load!shifting! 8) Explore!tariff!design!that!encourages!load!shifting! 9) Increase!Feed

X in

X Tariff!price!for!renewables!firmed/shifted!with! energy! storage! 10) Accelerate!the!CAISO's!stakeholder!processes!to!achieve!comparability!of!energy!storage!(im plementation! of!FERC!!Orders!890!and!719) 11) Consider!peak!reduction!standard!for!state!agency!power!purchases! 12) Clarify!net!metering!rules!for!renewable!energy!projects!with!storage!



### Federal'Recommendations

1) Support!extension!of!the!existing!federal! investment!tax!credit!to!energy!storage!systems!(e.g.,!S.1091) 2) Add!energy!storage!as!its!own!category!in!the!FERC's!Uniform!System!of!Accounts



## Glossary 15
, 16

Levelized' Cost' of'Generation: According! to! the! CEC,! levelized! cost! of! generation! of! a! resource! repre sents! a! constant!cost!per!unit!of!generation!computed! to!compare!one!unit’s!generation!costs!with!other! resources! over! similar! periods.!This! is! necessary! because! both! the! costs!and!generation! capabilities! differ! dramatically! from!year!to!year!between!gener ation!technologies,!making!spot!comparisons!using!any!year!problematic.!The! levelized!cost! formula!used!in! this!model! first!sums! the!net!present!value!of! the!individual!cost!components! and!then!computes!the!annual!payment!with!interest!(or!discount!rate)!r equired!to!pay!off!that!present!value! over!the!specified!period.!These!results!are!presented!as!a!cost!per!unit!of!generation!over!the!period!under! investigation.!This!is!done!by!dividing!the!costs!by!the!sum!of!all!the!expected!generation!over!the!time!ho rizon! being!analyzed.!The!most!common!presentation!of!levelized!costs!is!in!dollars!per!megawatt

X hour!($/MWh)!or! cents!per!kilowatt

X hour!(¢/kWh).

Capacity' Factor:' The! capacity! factor! is! specified! as! a! percentage! and! is! a!measure! of! how!much! the! power! plan t!operates.!More!precisely,!it!is!equal!to!the!energy!generated!by!the!power!plant!during!the!year!divided! by!the!energy!it!could!have!generated!if!it!had!run!at!its!full!capacity!throughout!the!entire!year!(Gross!MW!x! 8,760!hours).!For!the!purposes!of!thi s!analysis,!specifically!for!energy!storage,!the!capacity!factor! is! measured! using! the! number! of! hours! discharged! only! and! does! not! include! the! number! of! hours! used! to! charge! the!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 15 Source:!CEC!2009!Comparative!Cost!of!California!Central!Station!Elect ricity!Generation!Technologies!Report

16 Source:!SANDIA!Report!SAND2010

X 0815,!Energy!Storage! for! the!Electricity!Grid:!Benefits!and!Market!Potential!Asse ssment!Guide,! Jim!Eyer!&!Garth!

Corey!(February!2010)

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 8 of! 9 energy storage!system.

Electric'Energy'Time

9 Shift: Electric!energy!time

X shift!involves!purchasing!inexpensive!electric!energy,!available! during!periods!when! the! price!is!low,! to!charge! the! energy! storage! system so! that! the!stored!energy!can!be! used!or!sold!at!a!later!time!when!the!price!is!high. This!is!a lso!sometimes!referred!to!as!“arbitrage.”

Voltage'Support:' An!important!technical!challenge!for!electric!grid!system!operators!is!to!maintain!necessary! voltage! levels! with! the! required! stability.! In! most! cases,! meeting! that! challenge! requires! management! o f! a! phenomenon! called! “ reactance .” Reactance! occurs! because! equipment! that! generates,! transmits,! or! uses! electricity!often!has!or!exhibits!characteristics!like! those!of!inductors!and!capacitors!in!an!electric!circuit.!To! manage! reactance!at! the!grid! system level,!grid! system!operators! rely!on!an!ancillary! service!called! “ voltage!
support. ” The! purpose! of! voltage! support! is! to! offset! reactive! effects! so! that! grid! system! voltage! can! be!
restored!or!maintained.

Electric'Supply'Reserve'Capacity: Prudent!operati on!of!an!electric!grid!includes!use!of!electric!supply!reserve! capacity! that! can! be! called! upon! when! some! portion! of! the! normal! electric! supply! resources! become! unavailable!unexpectedly.!In!the!electric!utility!realm,!this!reserve!capacity!is!classified!as an!ancillary!service.

Transmission'Congestion'Relief: In!many!areas,!transmission!capacity!additions!are!not!keeping!pace!with!the! growth!in!peak!electric!demand.!Consequently,!transmission!systems!are!becoming!congested!during!periods! of!peak!demand,!dr iving!the!need!and!cost!for!more!transmission!capacity!and!increased!transmission!access! charges.!Additionally,! transmission!congestion!may!lead! to!increased!use!of!congestion!charges!or!locational! marginal!pricing!for!electric!energy.

Frequency' Regulatio n: regulation! is! used! to! reconcile!momentary! differences! between! supply! and! demand.! That!is,!at!any!given!moment,!the!amount!of!electric!supply!capacity!that!is!operating!may!exceed!or!may!be! less!than!load.!Regulation!is!used!for!damping!of!that!differenc e.



## Analysis'Methodology:'Peaker'v s.'Energy'Storage
For! further! examination! of! the! analysis! above! and! access! to! the! spreadsheet! model! used! for! the! above! analysis,!see!the!following!website: http://www.storagealliance.org/work

X whitepapers.html

.


## Analysis'Methodology:' Additional'Benefits
Unlike!a!single

X use!centralized!peaker!plant,!energy!storage!can!be!used!for!a!multitude!of!applications!beyond! those!of! simple!peaker!plant! substitution.!Wh en! reasonable!and!“stackable”!additional!benefits!are! factored! into!the!maximum!allowable!installed!cost,!energy!storages’! “ cost!effective ” price!point!increases.!This!means! that!energy!storage!technologies!that!are!technically!capable!of!capturing!these!additional!benefits!should!be! cost!effective!even!at!higher!installed!costs.

To! help! illustrate! the! impact! of! additional! value! streams! to! the! maximum! allowed! installed! cost! of! grid

X Start!with!Storage!as! Central!Peaker!Subsltulon! Levelize!Addilonal!Benefits! in!$/MWh! Adjust!Addilonal! Operalng!Costs!as! Necessary!for!Each!Benefit! Solve!for!the!Maximum! Allowable!Installed!Cost!of! Storage!

## Energy' Storage

— a' Cheaper' and' Cleaner' Alternative' to'
Natural'Gas

9 Fired'Peaker'Plants

CESA ! 2150!Allston!Way,!Suite!210,!Berkeley,!CA!94704 ! 510.665.7811! ! www.storagealliance.org

Page! 9 of! 9 integrated!storage ,!we!utilized!the!midpoint!of!the!Sandia!report benefit!estimate!for!each!value!stream 17

,! and! utilized!the!same!20!year!time!horizon!and!targeted!return!for!investors!and!solved!for!the!maximum increase in!installed!cost!of!the!storage!system!resulting!from!these!added!benefits.!The!incremental!allowable!installed! cost! for!energy!storage!was! then!added! to! the!maximum!allowable!installed!cost!per!kWh!of! energy! storage! capacity!calculated!for!the! peaker!substitution.! To!be!conservative,!we!further!adjusted!operating!assumptions! for!each!benefit!to!allow!for!increased!transaction!and!maintenance!costs!for!distributed!systems!to!arrive!at! the!final!installed!cost/kWh!capacity!of!the!energy!storage!sy stem,!as!indicated!in!the!chart!below.

Stacking'Additional'Levelized'Benefits Total'Levelized'Cost'of'Generation'Breakdown!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 17 Source:!SANDIA!Report!SAND2010

X 0815,!Energy!Storage! for! the!Electricity!Grid:!Benefits!and!Market!Potential!Assessment!Guide,! Jim!Eyer!&!Garth!

Corey!(February!2010) 0! 400! 800! 1200! 1600!Levelized'$/MWh'Benefit' Frequency!Regulalon!

Transmission! Congeslon!Relief! Electric!Supply! Reserve!Capacity! Voltage!Support!

Electric!Energy!TimeX Shim! 0! 400! 800! 1,200! 1,600!

Gas!Peaker! Storage! Peaker!
Subsltulon! Distributed! w/Electricity!
Time!Shim! Distributed! w/Mullple!
Benefits!Levelized'$/MWh'Benefit' Variable!O&M!

Fuel!&!GHG!Emissions!Costs!

Fixed!O&M!

Property!Taxes!

Insurance!

Installed!Cost!