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Economic Valuation of ESS
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CES OVERVIEW
Introduction
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CES is at the forefront of Competitive Electricity Markets and Emerging Technology trends
Our consulting services enables competitive suppliers, technology providers, marketers, utilities
and customers to prosper through change, by turning knowledge into value
Resources
8000 MW assets
Headcount
160+ Global
Clients
400+ Clients Worldwide
CES Services
Generation Solutions,
Fuel Mgmt,
Renewables
Demand Response &
Emerging Tech
Market Intelligence &
Regulatory Support
Retail, Data
Acquisition
CES
Entry Strategy, Business Plan, Implementation Support, Partner Search, Feasibility
Studies, Project Mgmt, Technical & Commercial Due diligence, Tech Validation, Market
Landscape Reports etc.,
Location
Headquartered
Philadelphia, PA
9 Regional offices in
US, Pune in India,
Canada, Japan &
Mexico
under management
Conventional, RE, DR
and storage
Awards and Recognitions
Inc. 5000 – Ten Time Honoree, Philadelphia 100 - 2001, 2004 – 2012
Best Places to work: 2014, 2016
2016 Energy Storage Association Brad Roberts Award Winner(200 MW storage)
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Integrating Energy Storage Into Energy Markets
CES Manages Advanced Energy Storage Resources into the RTOs in US and Canada
Over 200 MWs (over 10 separate projects) in PJM, NYISO, California, IESO (Canada), ISO-NE
CES also manages ~ 8,000 MWs of Conventional Generation, Solar, Wind, Demand Response and Retail Load at the ISOs/RTOs
Also previously scheduled: 32 MW battery facility in PJM: 2 years and 8 MW battery facility in NYISO: 1.5 years
We offer Bidding Strategies, State of Charge Management, Scheduling, and Dispatch.
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Regulatory and Market Rules for Storage Storage IQ
Market Overview Reports
Market Sizing Analysis
CoMETS Price forecasts
Project economic analysis and valuation
Optimization of product configuration
Renewable and Storage
Storage Technology Due Diligence
Strategy Consulting
Microgrid services
CES Storage and Microgrid Services
CES assists clients from Concept to Market Implementation
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CES is a Leader in the Global Storage Industry
Prime Contractor:
Company Highlights
‘State of Charge’ and the Energy Storage Initiative
The Winner of the Brad Roberts Award 2016 For recognition of role played by CES over past 12 years in helping growth of energy
storage opportunities through competitive electricity markets and range of services
IRENA Renewable Power and Energy Storage Global Evaluation Framework
India Energy Storage Alliance (IESA)
Microgrid Initiative for Campus and Rural Opportunities (MICRO)
Advisors to the Energy Storage Association (ESA)
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India Energy Storage Alliance (IESA)
IESA was launched in 2012 by CES to help technology and system integration companies
involved in energy storage and microgrids to understand and capture opportunities in thro
growing market
In 2013 launched IESA-Knowledge Partner Network with a goal of addressing energy
storage applications in over 10 key sectors
In 2016 created IESA leadership Council to help companies to play strategic leadership in
developing IESA roadmap.
For more details,
visit www.indiaesa.info
IESA Members
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NORTH AMERICA
Context
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Source: US DoE
database
Note: Grid connected
projects only
Total Capacity (MW) by regional markets (ISO/RTO), as on Jan 2018
North America Grid Energy Storage MarketCurrent Status
800 MW+ operating assets of advanced energy storage across various markets. All ISOs have advanced storage projects in the interconnection queues / under development. All ISOs have active stakeholder processes focusing on expanding opportunities for advanced storage. The high number of new storage projects in California is driven by mandates, and incentives; whereas PJM has seen more
large-scale grid connected projects being developed due to attractive frequency regulation market.
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Wholesale (ISO) Market Products and Participation Models
Energy Storage Participation Models:
In Front of the Meter (FOM)
Behind the Meter (BTM) / Demand Response
Distributed Energy Resources (DER)
Capacity (in some regions)
Energy
Ancillary Services
Ramping
Frequency Regulation
Spinning Reserve or Synchronized Reserves
Non-Spinning Reserve or Non-Synchronized Reserves
Reactive Supply / Voltage Control
Black Start
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COMMON TERMS
Storage 101
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Types of Storage
Mechanical Storage
Pumped Hydro
Compressed Air Energy Storage
Flywheel
Electrochemical Storage
Batteries
Flow Batteries
Fuel Cells
Lead acid / Advance Lead acid
Sodium based (NAS/ Na-NiCl2)
Lithium ion family of batteries
Nickel based (NiCd/ NiMH)
Zinc air
Vanadium redox
Iron – chromium
Zinc – bromine
Hydrogen - bromine
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1
23
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Source: IRENA
1) Storage Batteries: Cell based
batteries consist of individual
cells connected into modules
and then into packs.
2) Battery management system,
that provides safety and
prevents individual cells from
overcharging, and controls
charge and discharge of the
battery.
3) Power conversion system which contains bi-directional inverters,
converts DC stored in battery to AC power for grid or site demand
4) Energy management systems are tools to allow for remote tracking,
control and management of battery storage systems, information about
wind and sun forecasts, expected electricity demand etc.
Basic Components of ESS
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Duration The discharge time at rated power from the upper state of charge limit to lower state of charge limit as specified for the application
Energy It is the total energy stored in the system and can be made available for any application at the rated power. Measured in Wh, kWh or MWh.
State of charge (SOC) An expression of the present battery capacity as a percentage of maximum capacity.
Energy It is the total energy stored in the system and can be made available for any application at the rated power. Measured in Wh, kWh or MWh.
Roundtrip Energy EfficiencyThe ratio of energy discharge energy and charge energy of the battery. It is always less than 100% due to internal losses.
C-rate It is a measure of the rate at which a battery is discharged relative to its maximum capacity. If the entire battery capacity is discharged in 1 h the c-rate is 1C, if 2 h it is C/2.
PowerThe maximum rated power at which the system can be charged or discharged. Measured in kW or MW and depends on the size of the system and the prescribed C-rate.
Common Terms
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Cycle life The number of discharge-charge cycles the battery can experience before it fails to meet specific performance criteria (Normal EOL criteria is 80% of initial capacity).
Depth of discharge (DOD)
The percentage of battery capacity that has been discharged expressed as a percentage of maximum capacity. A discharge to at least 80 % DOD is referred to as a deep discharge.
DOD vs. Cycle Life
Duty Cycle
A charge/discharge profile that represents the demands associated with a specific application that are placed on ESS
Common Terms
Energy DensityThe volumetric energy storage density of a battery, expressed in Watt-hours per litre (Wh/l). The gravimetric energy storage density of a battery, expressed in Watt-hours per kilogram (Wh/kg).
Power DensityThe volumetric power density of a battery, expressed in Watts per litre(W/l).
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Understanding Cycle Life
DoD Full Equivalent Actual Cycles
10% 23,651 236,510
20% 17,133 85,667
30% 13,321 44,403
40% 10,616 26,539
50% 8,518 17,035
60% 6,803 11,339
70% 5,354 7,648
80% 4,098 5,123
90% 2,991 3,323
100% 2,000 2,000
Equivalent Full DoD cycles = Total energy discharged (MWh) / Energy Rating (MWh)
A few deep cycles that cause greater degradation compared to many shallow cycles
with the same energy throughput
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Understanding Cycle Life
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Comparison: Technical ParametersENERGYDENSITY
POWER DENSITY
SAFETY(THERMAL)
ROUNDTRIPEFFICIENCY
COMPLEXITY OFBMS
COST
CYCLE LIFE
SELF-DISCHARGE
Lead AcidENERGYDENSITY
POWER DENSITY
SAFETY(THERMAL)
ROUNDTRIPEFFICIENCY
COMPLEXITY OFBMS
COST
CYCLE LIFE
SELF-DISCHARGE
Li-ionENERGYDENSITY
POWERDENSITY
SAFETY(THERMAL)
ROUNDTRIPEFFICIENCY
COMPLEXITY OFBMS
COST
CYCLE LIFE
SELF-DISCHARGE
Advanced Lead Acid
ENERGYDENSITY
POWER DENSITY
SAFETY(THERMAL)
ROUNDTRIPEFFICIENCY
COMPLEXITY OFBMS
COST
CYCLE LIFE
SELF-DISCHARGE
NASENERGYDENSITY
POWER DENSITY
SAFETY(THERMAL)
ROUNDTRIPEFFICIENCY
COMPLEXITY OFBMS
COST
CYCLE LIFE
SELF-DISCHARGE
VRBENERGYDENSITY
POWER DENSITY
SAFETY(THERMAL)
ROUNDTRIPEFFICIENCY
COMPLEXITY OFBMS
COST
CYCLE LIFE
SELF-DISCHARGE
ZBR
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FINANCIALS OF ENERGY STORAGE
Key Considerations
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System Level Modeling
Monetizable benefits due to policy measures
2121
CoMETS is a suite of models that help technology and project developers Evaluate and Optimize energy storage
resources for Grid-connected and Behind-the-Meter applications.
CoMETS models include consideration of Wholesale energy and ancillary services products, Demand Response, Demand
Charge Management, Transmission and Capacity Obligations
Competitive Market Evaluation Tool for Storage (CoMETS)
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Timeline and Resource Specific
6 to 12
months
10 to 25
years
Low efficiency
=> high op
costs
Parameters based
on specific market &
applications
Source: CES | CoMETS
Potential assumptions for Li-ion battery project
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Capital Cost Breakdown
$200 – 300
/kW
Potential assumptions for Li-ion battery project
$300 – 600
/kWh for Li Ion
ESS
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Operating Cost Breakdown
Warranty and Guaranty
Highly dependent on the
Technology, Application and
Market
Typically 3 types of Warranties:
Defect Warranty
Capacity Guarantee
Availability Guarantee
Backed by Liquidated Damages
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Other Cash Flow Drivers
Potential assumptions for Li-ion battery project
Available based
on charging on
Renewable
Energy
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Economics of Energy StorageCase I: Behind the Utility Meter
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Behind-the-Utility-Meter Applications
Factors Influencing Battery Storage Economics
Battery Size – Power, Energy, Duration Technology Cost Curves– Capex Sensitivities Operating Strategies – State of Charge (SOC) Management Signal Characteristics – Frequency Regulation Signal, Biases Fast Resource Penetration – Available Market Size Renewable Energy Penetration – Impacting Ancillary Services
Market Other Macro Factors – Market Dynamics Regulatory Risk - Tariff and Revenue mechanism changes
Behind-the-Utility-Meter Energy Storage refers to the ownership and operation of the energy storage asset for the benefit of the utility. Assets may be deployed to help mitigate Peak Demand in addition to other economic market participation opportunities.
Value Stack
Energy Arbitrage
Ancillary – Spin/Non Spin
Resource AdequacyAS -Frequency Regulation
Peak Demand Management
Resiliency & Power Quality
Storage
Behind the Utility Meter Energy Storage
Transmission Level
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Case Study I: Behind the Utility Meter ESS in ISO-New England
Revenue Analysis on Behind-the-Utility Meter Storage in ISO-New England ESS to prioritize Peak Demand Management services to the local Utility Examine performance over multiple ESS Configurations
Customer Needs
Analysis Highlights
Outcomes
Full Financial Analysis for Battery operating Behind the Utility Meter Sensitivities for Peak Demand Management Insights into optimal energy storage duration to meet defined goals
Peak Loads Assessment in ISO-NE – Transmission and Capacity Peaks Price Forecasts –Energy, Capacity, Transmission, Regulation Energy Arbitrage, Frequency Regulation services to ISO-NE Wholesale
Market Operating Strategies and Sensitivities Revenue Analysis for Asset Operations
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Case Study I: Sample Dispatch
Source: CES-CoMETS Analysis
ISO-NE Frequency Regulation Signal
Asset Operates to provide Frequency Regulation service over entire day
Capacity Savings
Transmission Savings
Frequency Regulation
Energy Arbitrage
Available Revenue Streams
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Case Study I: Sample Dispatches
Capacity Discharges - To mitigate System Peak Energy Arbitrage + Frequency Regulation
Capacity Discharges
Asset Charges after Capacity Discharge to provide Frequency Regulation service
On-Peak Discharging
Off-Peak Charging
Asset provides Frequency Regulation service during interim market hours
Capacity Savings Transmission SavingsFrequency Regulation Energy Arbitrage
3131
Economics of Energy StorageCase II: Frequency Regulation
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Frequency Regulation
Value Stack
Ancillary – Frequency Regulation
Factors Influencing Battery Storage Economics
ISO Dispatch: Energy neutrality, throughput. Each ISO has unique of way of dispatch.
Resource duration: Longer duration improves performance but also increases the cost
Technology cost curves: Benefits to cost ratio Fast resource penetration: Impacts clearing
price RE penetration: Impacts market size Round-trip Efficiency (RTE): High RTE -> low
charging costs, better performance EMS, BMS and data communication:
Communication errors SOC management: to achieve high performance
as well as maintaining operating life Regulatory Uncertainty
Short-duration grid-connected energy storage can provide frequency regulation services 24x7 due to increased revenue after FERC 755. Recent cost reductions in Li-ion battery prices is expected to help the case.
Storage
Short duration grid connected storage
Transmission Level
FERC 755: Pay-for-performance
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Case Study II: Frequency Regulation: Signal Characteristics
Same resource will have different duty cycles, energy throughput, mileage in different ISOs
PJM NYISO CAISO
Source: CES-CoMETS Analysis
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PJM Example – No Active SOC Management
PF Score Corr Score Delay Score Prec Score
92.34% 94.22% 99.76% 83.05%
Signal Response with no Active SOC
Management
State-of-Charge
Operational strategy impactsperformance score and product warranties
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PJM Example – With Active SOC Management
Signal Response with Active SOC and
Communications Management Strategy #1
Operational strategies to actively manage SOC and communication improves performance score and product life
PF Score Corr Score Delay Score Prec Score
96.98% 99.68% 100.00% 91.28%
State-of-Charge
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Case Study II: Frequency Regulation Economics
Note: For MISO proposed signal is assumed
» Factors affecting the economics• ESS Size
• Technology cost curves
• Operating strategies (SOC management)
• Signal Characteristics
• Fast resource penetration
• RE penetration
• Other macro drives
» Regulatory uncertainty is the greatest risk to ESS projects
3737
Economics of Energy StorageCase III: Behind the Meter (BTM) Applications
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BTM Applications
Storage Only Solar + Storage Aggregations
Behind the Meter Energy Storage Configurations
Time of Use Management
Demand Charge Management
Value Stack
Energy Arbitrage
Ancillary – Spin/Non SpinResiliency & Power Backup
Power Quality
Resource Adequacy
Ancillary – Frequency Regulation
Demand Response
Customer Benefits Utility Benefits
Wholesale Market Services
Utility OR Wholesale Services
Factors Influencing Battery Storage Economics Load Shape – Peaks, Max Demand Solar Irradiance - Generation, Forecasts Rate Plans – Demand Charges, Coincident Demand Net Metering/Feed-in-Tariff Rules – Value, Duration Incentives – Benefits and Rebates for Infrastructure Wholesale Market Participation – Bidding Strategies, Mutual
Exclusions Volatility – Market Prices Warranties, Performance and Cycling Limits
Behind the Meter (BTM) storage has multiple opportunities for avoiding costs and generating revenues individually. The benefits can be potentially greater, when operating as an aggregation – as seen in case of CAISO
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Case Study III: BTM Resources for Proxy Demand Response
Revenue Analysis on multiple distributed BTM Energy Storage sites across various California IOU territories
Aggregation opportunities and value stack analysis for providing Utility DR & participating as Proxy Demand Response (PDR) in the wholesale market
Customer Needs
Analysis Highlights
Outcomes
Full financial Analysis across Portfolio of Assets Asset Operation modes to maximize Revenues Sensitivities for Asset Warranties, Cycling, Market Bid Prices
Load Analysis, Demand Change Management and Dispatch modelling for BTM Energy Storage sites
Site Aggregations as Resources providing Utility DR and PDR Market Rules for Wholesale Market Participation, Procurement Contracts Sensitivity analysis across key levers – Operating Constraints, Performance, Market
Prices Long Term Forecasts and Financial Analysis across Resources
4040
Case Study III: Individual Location Load & Battery Performance
Aggregated
Load with
Storage &
DCM
Solar
Irradiance
(Indicative)
% State of
Charge
4141
Case Study III: Individual Location – Revenue Analysis
Electricity Bill
Energy Charge
Demand Charges
Overall Revenues
Revenue Analysis
PDR - Energy PDR – Spin Energy Arbitrage Utility DR Resource AdequacyDemand Charge
Management
4242
Case Study III: Resource Level Load & Aggregated Battery Performance
Aggregated Load with Storage &
Demand Charge Management
Solar Irradiance (Indicative)
% State of Charge
PDR - Energy PDR – Spin Energy Arbitrage Utility DR Resource AdequacyDemand Charge
Management
4343
Case Study III: Sample Dispatches
Energy Arbitrage & PDR Energy DCM & PDR Ancillary
Services
PDR Ancillary & Energy
4444
Case Study III: Outcomes
Aggregation Level AnalysisMultiple Asset Locations
Value Stream Revenues
Operational Constraints
Optimal Value Stacking
Long Term Revenue Forecasts-
PDR*
Outcomes
Market Bid Sensitivities
R
R
RB
B
B
B
BB
B
BB
B
BB
B
B
B
B
BB
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IESO RFP
Storage Contract Example
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Tender details
Tender particulars
Issuer Independent Electricity System
Operator (IESO)
Type In Front of Meter
Location Ontario
Year 2017
Minimum
Capacity
2MW to maximum 50 MW
Term 3-7 years
ISO was seeking to procure a sufficient quantity of incremental Regulation Capacity from all manner of facilities,
either currently existing or registered in the ISO-Administered markets, or that will be registered in the IESO-
Administered markets. The ISO’s goal was to increase the amount of scheduled Regulation capacity by approximately
50MW.
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Technical Guarantees
Capacity Guarantee:
The facility will have to provide a minimum of 2 MW of Regulation capacity at any applicable hour.
Performance Guarantee:
• The Facility will have a minimum ramp rate of 7 MW per minute.
• The facility must be capable of providing Regulation service for a minimum duration of 6 minutes for each
occasion when scheduled by IESO.
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Financial guarantee
A Proponent will have to provide a proposal security with its proposal payable to IESO in an amount equal to the
lesser of1) $9000 per MW of Offered Regulation capacity
2) $90,000 the proposal security. For greater certainty, in no event shall Proposal security be less than $18,000.
The proposal security must be in the form of irrevocable and unconditional standby letter of credit issued by a
financial institution.
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Evaluation Criteria
Stage1: Completeness requirements:
Each proposal will pass or fail depending upon whether the proposal meets all of the completeness requirements.
Stage2: Mandatory requirements:
• A single proposal submitted in response to the RFP must be in respect of no more than one Facility.• Minimum of 2 MW of Regulation capacity at any applicable hour throughout the term of contract.• Service commencement should be no later than 36 months from the date of execution of the contract.• Must be a registered facility or capable of registering under Market rules.• Service –minimum 3 years to maximum 7 years• The facility must not be subject to a contract with the IESO to provide regulation service that, as of June1, 2017,
had a term extending beyond February1, 2018.• Existing or proposed connection location.
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Evaluation Criteria (Continued)
Stage3: Technical Evaluation:
Technical Criteria spreadsheet of each proposal will be evaluated and scored by the technical evaluation team based
on the technical evaluation criteria and will be awarded up to a maximum of 70 points:
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Technical Evaluation (Continued)
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Technical Evaluation (Continued)
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Technical Evaluation (Continued)
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Technical Evaluation (Continued)
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Technical Evaluation (Continued)
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Technical Evaluation (Continued)
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Technical Evaluation (Continued)
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Evaluation Criteria (Continued)
Stage4: Pricing Strategy:
The proposal would be passed only if the proposed total facility cost per MW per year is less than or equal to
Individual Cost Cap else it would be rejected. After that each pricing proposal spreadsheet will be evaluated and
scored by the pricing evaluation team and will be awarded up to a maximum of 30 points.
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Financial evaluation (Continued)
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Financial evaluation (Continued)
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Financial evaluation (Continued)
Where:
• Offered availability cost component per year is provided by the Proponent in
Row W
• Opportunity cost rate is provided by the Proponent in Row X
• Residual variable cost rate is provided by the Proponent in Row Y
• Offered Regulation Capacity is provided by the Proponent in Row Z
• Offered availability rate is the value provided by the Proponent in Row AA
(which must be identical to the value in ROW Q of
• The corresponding Prescribed Form: Technical Requirements Spreadsheet)
divided by 8760 hours per year.
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Evaluation Criteria (Continued)
Stage 5: Ranking List:
Ranking will be decided based on the total score, which would be evaluated based on the points given in the
technical and pricing section.
Stage 6: Proposal selection:
Each project will be assessed in the order of ranking list from the highest to the lowest ranked proposals based on
following rules:
1) The cumulative total facility cost per MW per year of all selected proposals must remain less than or equal to the
overall Cost Cap.
2) The cumulative availability-weighted regulation capacity of all selected proposals must not exceed the overall
MW Cap by more than 5MW.
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Customized Energy Solutions Ltd.1528 Walnut Street, 22nd Floor
Philadelphia, PA 19102 USA
Phone: +1-215-875-9440Fax: +1-215-875-9490
Vinayak Walimbe, CFADirector - Emerging Technologies
Thank you!
