20200806RNW Initial Comments.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER’S )CASE NO. IPC-E-20-02
PETITION TO DETERMINE THE )
PROJECT ELIGIBILITY CAP FOR )INITIAL COMMENTS OF
PUBLISHED AVOIDED COST RATES AND )RENEWABLE NORTHWEST
THE APPROPRIATE CONTRACT )RE: ENERGY STORAGE
LENGTH FOR ENERGY STORAGE )
QUALIFYING FACILITIES )August 6, 2020
Initial Comments of Renewable Northwest in Case No.IPC-E-20-02
Re: Energy Storage
Renewable Northwest is grateful for the opportunity to submit comments to Idaho Public Utility
Commission (“IPUC” or “Commission”) responding to Staff and Idaho Power Company (“Idaho
Power” or “Company”) regarding energy storage resources and technology. As the region works
to transition to a cleaner, more modern electricity system that relies on renewable resources for
generation, storage resources will be increasingly important for integrating renewables, shifting
generation in time to meet load, and providing essential grid services, among other benefits.
Idaho Power is poised to be a key player in this transition,and as part of its commitment to
achieving 100% clean energy the Company reports that it “plans to continue its path away from
coal and invest in storage and additional clean generation sources like wind and solar.”Given1
this growing role for storage in the region and in Idaho specifically, we appreciate the
Commission’s order establishing an opportunity for public comment and Staff’s thoughtful July2
16, 2020 Request for Public Input and Initial Comments (“Request for Input”).
Renewable Northwest’s Initial Comments are framed as responses to the questions posed by
Staff’s Request for Input. Broadly speaking, we discuss the state of storage technology and the
benefits of storage resources, and we offer some initial thoughts on how to value, quantify, and
offer compensation for those benefits. We would welcome the opportunity to provide additional
comments or to answer any questions if helpful, and we look forward to reading Staff’s and the
Company’s responses on August 27, 2020.
2 Idaho Public Utility Commission, Case No. IPC-E-20-02,Order No. 34699 (June 23, 2020).
1 Idaho Power sets goal for 100-percent clean energy by 2045 (Mar. 26, 2019) (The Company also notes that
“battery-storage technology should help maintain Idaho Power’s impressive reliability while moving the company
closer to its goal.”).
https://www.idahopower.com/news/idaho-power-sets-goal-for-100-percent-clean-energy-by-2045/
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 1 of 7
RECEIVED
2020 August 6, PM 4:31
IDAHO PUBLIC
UTILITIES COMMISSION
Requests for Public Input
The time, costs, and resources required to develop a forecasted generation profile.
Since storage resources are not inherently “generation” resources, the forecasted generation
profile for a storage resource depends on the purpose or application of its operation. Storage QFs
can act as both generation and load . This operational profile makes them different from a solar
or wind QF. Typically, standalone storage resources like battery energy storage systems (“BESS”
or “battery storage resources”) are charged daily during off-peak or low-energy-price hours and
discharged during the peak or high-energy-price hours to deliver maximum value to the grid.
Pairing battery storage with variable generation technologies such as PV or wind can reduce
curtailment and related costs providing potential benefits to the grid. Additionally, NREL
reports that “[t]he potential for limited-duration storage to provide peak capacity is driven in part
by its ability to reduce net demand, which is a function of the duration of energy storage and the
shape of electricity demand patterns.”With the current level of battery management system3
(BMS) and output control, BESS are highly dispatchable,able to respond to signals on a
millisecond level and to provide much needed ramping capabilities.
To develop a typical forecast generation profile of a battery storage resource, market-optimized
dispatch models have to be run under multiple scenarios to optimize the hourly State of Charge
(SoC), charge and discharge profile. Models available in the market include E3’s RESTORE,
NREL’s SAM, Production Cost Models used by utilities such as PLEXOS and AURORA among
many others. These models usually take into account market prices, battery size, capacity, and
charge/discharge durations. The time and costs of the model depend on whether an in-house
model is used or a consultant is appointed to run the model and can widely vary.
Whether there are additional benefits to the utility's system that are achieved by battery
storage projects at specific thresholds.
Battery storage resources provide a myriad of grid benefits in today’s fast-changing electric
system. Apart from providing peak load reduction and easier integration of variable renewable
energy--a particularly important outcome given Idaho Power’s 100% clean energy goal --battery4
storage resources can provide additional value to the grid owing to its fast ramping capabilities
4 Idaho Power sets goal for 100-percent clean energy by 2045 (Mar. 26, 2019).
https://www.idahopower.com/news/idaho-power-sets-goal-for-100-percent-clean-energy-by-2045/
3 Denholm et al 2019,The Potential for Battery Energy Storage to Provide Peaking Capacity in the United States.
https://www.nrel.gov/docs/fy19osti/74184.pdf
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 2 of 7
(2-5 ms) and the ability to follow the load signals in a rapid manner. BESS can also provide
ancillary services such as frequency regulation, flexibility reserves and voltage regulation.They5
can also provide added benefits to the transmission & distribution system of a utility as a
resource to address T&D congestion issues and provide capital deferral benefits.6
While it is not clear that particular capacity thresholds offer additional benefits beyond those
discussed above, benefits associated with particular duration thresholds may be worth
considering as stakeholders study issues relating to storage QFs and BESS in general. As
dispatchable but carbon-intensive thermal resources throughout the west retire, utilities have
expressed concern regarding their ability to ensure system reliability during periods of time when
variable renewable resources may be unavailable for multiple hours. As a result, longer-duration
BESS may provide capacity or resource-adequacy benefits that are worth disaggregating from
the analyses discussed above and understanding as standalone values.
Whether there are limitations on the ability of battery storage QFs to disaggregate.
Battery storage resources are modular and flexible in nature. This makes it comparatively easier
for project operators to disaggregate, but it does not necessarily mean that the majority of battery
storage resources would be disaggregated to provide maximum value to developers. Battery
disaggregation is also limited by the inverter capacity of the battery. Disaggregation potentially
leads to electrical losses, which can have detrimental effects on the project cash flow, Net Present
Value, and Internal Rate of Return (IRR). These limitations may affect the viability of the project
from a developer standpoint.
The characterization that developers disaggregate battery storage resources in order to game the
PURPA eligibility requirements for standard rates,as suggested by Idaho Power Company,7
incorrectly assumes that the only reason to disaggregate battery storage is to gain unfair
economic advantage. A more thorough understanding of the exact operational characteristics of
the battery storage resources is required to make that determination.
7Idaho Power Company Comments re: Case No. IPC-E-20-02.Filed July 16 2020
https://puc.idaho.gov/Fileroom/PublicFiles/ELEC/IPC/IPCE2002/Company/20200716Comments.pdf
6 The Economics of Battery Storage, Rocky Mountain Institute 2017
https://rmi.org/wp-content/uploads/2017/03/RMI-TheEconomicsOfBatteryEnergyStorage-FullReport-FINAL.pdf
5 The Value of Energy Storage for Grid Applications.NREL 2013.https://www.nrel.gov/docs/fy13osti/58465.pdf
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 3 of 7
Whether Staff’s understanding of the prevailing state of battery technology and inverter
size is correct.
Staff’s understanding of the prevailing state of battery technology and inverter capacity broadly
reflects current market conditions in the US. Lithium-ion batteries -- more specifically,
Nickel-Manganese-Cobalt (NMC) Li-ion batteries -- are the prevalent technology for grid-scale
application, although other Li-ion chemistries are improving efficiencies and durations rapidly at
lower costs. Inverter sizing limits the battery’s capacity and thus places a lower limit on battery
power capacity, expressed in kW or MW.
The all-in costs to develop and build a battery QF.
Renewable Northwest understands that Staff is currently looking into the overall costs and
resource value of storage resources as part of a joint study with the Pacific Northwest National
Laboratory (“PNNL”) to quantitatively analyze contract lengths for battery QF projects. This
analysis will take the costs for a range of battery storage projects over 100kW and optimize the
generation profile of the project to maximize revenue under the Company's Incremental Cost
Integrated Resource Plan (“ICIRP”) Method. As additional resources for cost data, Staff can
refer to Lazard’s Levelized Cost of Storage and NREL’s Annual Technology Baseline 2020
which provide comprehensive installed, fixed and variable operation & maintenance costs for
grid-scale Li-ion batteries. RNW would like to note that the payback period for a storage project
is essentially dependent on the contract lengths.Limiting the contract length to successive 2-year
periods would result in high levels of financial uncertainty and risks for developers, thereby
inhibiting future project development in Idaho.
The expected life of different battery technologies.
Battery lifetime depends on two operational characteristics of the battery chemistry. These are
cycle life and calendar life. Cycle life provides information about how many times a battery can
undergo a charge/discharge cycle such that its capacity remains above a 80% level. Calendar life
of a battery is the time for which a battery can be stored, as inactive or with minimal use, such
that its capacity remains above 80% of its initial capacity.
Typically, Lithium-ion batteries have a calendar life of 11 to 15 years depending on how many8
times the batteries are cycled in a day. Other battery technologies such as Lead-Acid,
sodium-sulfur, and vanadium redox flow have lesser calendar lifetimes ranging from 8 to 10
years. Cycle life data offers a significant advantage for Lithium-ion technology with number of
8 Battke et al 2013.A review and probabilistic model of lifecycle costs of stationary batteries in multiple
applications.
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 4 of 7
cycles ranging from 5,000 to 15,000 with a median value of 10,250 cycles.Under deep9
discharge conditions when the battery cells are discharged up to 90% of their capacity on a daily
basis, Li-ion can provide 3,000 cycles.Only Vanadium-redox flow batteries perform better10
with a median value of 13,000 cycles, although they fare much worse in roundtrip efficiency
(70-75%) and energy density. Li-ion batteries, on the other hand, have high round-trip efficiency
(more than 85%) and high energy density.
How ancillary services provided by battery QFs could be valued and what impact this
would have on the payback period.
Battery QFs can provide essential reliability services,commonly referred to as “ancillary
services” to the electric grid. As NREL sums it up,“There are various categories of operating
reserves and ancillary services that function on different timescales, from subseconds to several
hours, all of which are needed to ensure grid reliability.”BESS can rapidly charge or discharge11
in a fraction of a second, faster than conventional thermal plants, making them a suitable
resource for short-term reliability services, such as Primary Frequency Response (PFR) and
Regulation. Appropriately sized BESS can also provide longer-duration services, such as
load-following and ramping services, to ensure supply meets demand.
In ISO/RTO regions, ancillary services are usually valued through specific market products like
Regulation Up, Regulation Down, Spinning and Non-Spinning reserves. In non-market regions,
as is the case here, utilities tend to determine the difference between the expected load and
resources and actual load and resources. The difference between load and resources is calculated
every four seconds and is represented by the Area Control Error (“ACE”). ACE must be
maintained within the pre-set limits, so Idaho Power must estimate the amount of regulation
reserve that is necessary in order to maintain ACE within these limits in their Balancing
Authority Area. Since battery storage resources have the ability to respond to the ACE signals
rapidly by quickly charging or discharging, the ancillary services they provide should be valued
and should take into consideration the marginal cost to provide these services.
11 Denholm et al,supra n1.
10 Chen et al 2020.Applications of Lithium‑Ion Batteries in Grid‑Scale Energy Storage
Systems.
9 Id.
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 5 of 7
The contract term necessary in order for a battery storage QF to have a reasonable
opportunity to obtain financing.
According to NREL, “Utilities have begun adopting Li-ion storage because of the technology’s
high round-trip efficiency, high power density, ample supply chain availability, falling cell and
system costs, and favorable performance metrics. Most Li-ion applications to date have provided
short-duration power and grid stabilization, capturing value from various services including
frequency response, voltage regulation, spinning reserves,transmission deferment, peak shaving,
and demand response.”These applications often provided a positive rate of return through12
value stacking, although a project’s return is highly dependent on contractual terms and
obligations between a utility and the developer.
Due to the limited energy market and lack of an ancillary service market in Idaho, battery QFs
have significantly lesser revenue streams to recover capital costs and must obtain their revenue
from avoided cost rates set by IPUC or determined according to IPUC-established methodology
and implemented in either case by IPC. This regulatory construct makes it imperative that longer
contract lengths are permitted to allow flexible grid resources such as batteries to generate a
positive NPV over their lifetime. As per previous discussions on storage lifetime, contract
lengths between 10 and 15 years would likely offer the opportunity for developers to generate
positive returns at a reasonable payback time. RNW welcomes further discussion on the issue of
contract lengths to support storage QFs and would be happy to provide additional information if
requested.
Using multiple successive contracts with shorter length terms to maintain accuracy of
avoided cost pricing over the life of a PURPA project and the QFs ability to obtain
financing.
Using multiple successive contracts with shorter lengths would offer an opportunity for utilities
to update the “avoided cost pricing” used for the ICIPR method over the life of the project but
could create significant project financing-related uncertainties for developers. Developers usually
conduct a financial analysis over the project lifetime to determine its profitability and payback
time. Removing that certainty could cause projects to fail the initial screening, posing a barrier to
obtaining equity financing and thus inhibiting the growth of storage QFs in Idaho. RNW
welcomes Staff’s decision to engage with PNNL on a study to evaluate the effects of these
factors and would welcome the opportunity to provide further comments on this issue once the
report is out.
12 Fu et al 2018,2018 U.S. Utility-Scale PhotovoltaicsPlus-Energy Storage System Costs
Benchmark.https://www.nrel.gov/docs/fy19osti/71714.pdf
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 6 of 7
Best practices in surrounding states and analysis on the development of QFs in those states.
Staff’s summary on development of QFs in surrounding states of Oregon, Washington, Utah and
Wyoming reflects the regional treatment of PURPA resources in a succinct manner. Staff’s
observation that contract types and contract lengths are key factors in determining project
financing capability and eventual deployment as a QF is also correct. Battery storage QFs offer a
flexible and dispatchable resource for the electric grid. Contract lengths reflecting the actual
lifetime of battery storage resources would provide greater financial certainty for project
development and provide added value to the utility.
Conclusion
Addressing issues related to storage QFs and storage resources in general is critical for the
growth of the clean, flexible, and modern grid in Idaho. Storage resources assist in integrating
renewable energy and will play a key role in achieving Idaho Power’s goal of 100% clean power.
Renewable Northwest thanks the Commission and Staff for consideration of these comments and
would welcome the opportunity for continued participation in this docket.
Respectfully submitted,
/s/ Sashwat Roy
Technology & Policy Analyst
Renewable Northwest
421 SW Sixth Ave. #975
Portland, OR 97204
[phone]
/s/ Max Greene
Regulatory & Policy Director
Renewable Northwest
421 SW Sixth Ave. #975
Portland, OR 97204
[phone]
Initial Comments of RNW in IPC-E-20-02 re: Energy Storage Page 7 of 7