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Batteries Included:
The 'Grid of the Future' Takes Shape

by Bodhi Rader, November 21, 2012

Lithium ion batteries provide storage of electricity at Maui's wind project in Hawaii The end of October marked the one-year anniversary of Hurricane Sandy, whose electrical system aftermath continues to drive calls for an updated and more resilient energy infrastructure nationwide. Earlier in August, the Hurricane Sandy Rebuilding Task Force released its full strategy, chock full of references to "smarter" and "more flexible" energy infrastructure. Recent reports and initiatives from NREL and the Department of Homeland Security echoed those sentiments.

Clearly, the importance of resiliency is part of the national-level conversation, and it seems that more communities are taking notice. "Islandable," renewable, resilient microgrids are a promising strategy, yet their widespread implementation in commercial applications is still mostly conceptual.

Moving from concept to action in Maryland

The first commercial, significantly islandable (meaning it can work fully off the grid -- the hurdle for "microgrid" designation), solar PV and battery hybrid project in Maryland came online this October in Laurel, demonstrating the reality these post-Sandy conversations are aiming to create. While at an elevation of 200 feet and not in danger of storm surge effects, Laurel and many inland communities on the East Coast nonetheless can be heavily impacted by broader grid shutdowns from hurricanes and other natural or man-made disruptions.

Konterra, a real-estate developer of mixed-use, sustainable communities, recently installed 402 kilowatts of solar generation, two EV charging stations, LED parking lot lighting, and notably, battery storage capacity. The project was inaugurated with much fanfare by the likes of Maryland Gov. Martin O'Malley and the Federal Energy Regulatory Commission's (FERC) Chairman Jon Wellinghoff.

Konterra's project brings the developer closer to its vision of sustainable, fully integrated communities. The solar installation, which supplies 20 percent of the site's annual power, doubles as a parking canopy. Its battery banks can power a critical load of 50 kilowatts for just over four hours should grid power should go down completely, and are set to recharge during the day while the solar panels power the site. It also brings Maryland closer to its goal of reaching 20 percent in-state renewable generation by 2022. But perhaps most interestingly, the site will be using its integrated grid-connected storage to generate revenue by participating in the ancillary services market (primarily through the provision of frequency regulation, synchronized reserve, and volt-ampere reactive compensation [PDF] acquired on a cost-basis).

Open markets are critical to microgrids

The Laurel project's market participation was made possible by two FERC orders that importantly redefined the ways by which energy storage interacts with the grid. Orders 755 and 784 provide a more equitable framework for on-grid energy storage to participate on the open energy market. They also outline the compensation and evaluation strategies used by Independent System Operators (ISO) when selecting and using these assets to balance the grid and stabilize power quality.

These orders specifically look to rectify the current market inequities that often favor older methods of balancing demand. They require ISOs to consider speed (how readily and quickly these resources can dispatch services) and accuracy (how exacting these resources are in regulating energy quality) when evaluating potential resources to perform these functions -- functions that battery storage is particularly good at.

Going beyond simple energy: How batteries support the grid

The grid requires the constant balance of load (demand) and generation (supply). Shifts in these throughout the day cause deviations in the 60-Hz standard frequency that must be maintained minute by minute. Although small deviations are normal, large deviations negatively can affect energy-consuming devices, cause damage to generation and transmission equipment, or in severe cases precipitate cascading blackouts. This is why it is so important to have resources available that can be called upon quickly to maintain this delicate balance.

By incorporating speed and accuracy into the assessment of these dispatching assets, batteries begin to realize their full competitive advantage in an on-grid application. Solar Grid Storage, the company that provided Konterra with its lithium-ion batteries, is taking advantage of FERC's ruling to realize profitability with these otherwise costly battery systems. The firm has become quite deft at cobbling together various revenue streams to turn a profit, so deft in fact that the system was provided to the host site virtually free of cost. Such innovations begin to literally "change the game" regarding the economics of hybrid renewable and storage systems, shifting how customers engage with the grid and their utility.

The revenues Solar Grid Storage partially relies upon come from providing ancillary services to the grid. FERC defines these as: "those services necessary to support the transmission of electric power from seller to purchaser" and those required "to maintain reliable operations of the interconnected transmission system." The fast-acting batteries at the Konterra site fetch these funds primarily by providing services in two general forms:

First, by providing load-balancing, moving energy back and forth to and from the grid to achieve instantaneous balance between supply and demand: This service is best delivered by resources that are capable of dispensing energy quickly and can act as "spinning" reserves (resources that are always available to the ISO at any given moment, historically associated with "spinning" generators rather than batteries). Due to FERC Order 755 this service is paid for by the ISO on two levels: for the capacity provided (covering the opportunity costs of each unit) and for performance (correlating to the amount and quality of real energy dispatched).

Next, by providing power regulation services to the grid mainly in the form of managing power quality (reactive power and voltage control): This is best performed by resources that very accurately can dispatch energy in order to modify power quality. FERC Order 784 requires each public utility transmission provider to make data on instantaneous shortcomings of energy balancing between specific control areas ("Area Control Error") available to make sure resources that provide this level of accuracy are being prioritized in the market.

Between these revenue streams (and some government incentives), Solar Grid Storage is able to provide to Konterra with otherwise prohibitively expensive energy storage. Although some of the math is elusive (Solar Grid Storage's exact business model is proprietary), other companies -- for instance, AES Energy Storage -- insist that by leveraging these new ways to play, the bottom line does indeed work. Commercial renewable microgrid growth won't stop at Laurel

In fact, we are seeing more of these systems come online (like Sacramento's 2500 R development by SMUD), and increased demand in both a commercial and regulatory sense (see California's Energy Storage mandate [PDF]). Some uncertainties still lurk that might impinge on the widespread adoption of microgrids, notably "standby charges" that utilities assess to microgrids to maintain grid connection, but we know that the clarity provided on energy storage definitely has made a noticeable impact on the business models adopted for these projects.

"Energy storage not only provides substantial value to the electric grid, it makes the integration of solar PV and other distributed generation systems reliable, efficient and cost-effective as well," said FERC Chairman Jon Wellinghoff. "Distributed storage is an important piece of the puzzle as we deploy new resources to generate energy."

Wellinghoff's quote merely hints at the many benefits that storage is beginning to offer: emergency power supply, demand charge reductions, ancillary service market participation, and grid stability, to name a few. As neatly summed up by Tom Leyden, CEO of Solar Grid Storage, "Simply put, PV plus storage is ushering in the grid of the future."

Bodhi Rader
Batteries Included: The 'Grid of the Future' Takes Shape, November 21, 2012

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