Current Energy Storage Issues: 1) Short-Duration Batteries Replacing Gas Peaker Plants: A Trend That Will Continue

Current Energy Storage Issues: 1) Batteries Replacing Gas Peakers: Short-Duration Batteries Successfully Replacing Some Natural Gas Peaker Plants in California and the Potential for Batteries to Replace Peaker Plants


While a fair amount of solar and wind generation can now compete economically with some coal generation in some areas, especially with subsidies, not much can compete with natural gas. The exception is batteries competing with natural gas peaker plants to back-up wind and solar. These gas peaker plants require fast and frequent start-ups and idle-downs which put some wear-and-tear on them. They also run only occasionally to handle demand peaks during low generation times of wind and/or solar. Thus, they are fated to run inefficiently and for short periods. This makes the economics of building them generally poor. In reality, they should be considered a part of the intermittent renewables system since they really mainly exist to back the wind and solar responsible for most of the demand peaks due to their intermittency. Thus, when a headline says batteries are out-pricing natural gas, often what they really mean is that batteries can be a cheaper back-up for renewables than a small natural gas plant that is forced to run hard (frequent starts and stops) and very inefficiently (often less than 10% of the time – one recent estimate is that gas peaker plants will run only 5-6% of the time this decade). Thus, it is predicted that eventually batteries and other energy storage will routinely out-price gas peakers. Gas peaker plants are also expensive for rate payers due to the high cost of building them combined with their low usage. Their main job is to prevent blackouts. This might be seen as one of the “low-hanging fruits” of economically viable decarbonization, especially if prices continue to drop. Overall, storage is growing globally as well as in the U.S., even more than predicted a few years ago. However, it should be noted that short-duration batteries cannot at present even come close to replacing baseload combined-cycle natural gas plants.


Whether a storage project will be economic depends on the project criteria. If a demand peak is temporary and in a predictable range of both intensity and timing, then the less expensive short-duration battery could be the most economic solution. It would take less energy to charge as well. This is what has happened in at least one case in California. Even so, short-duration batteries can only deliver power for a short period of time. Predictions are that 8-10 hour storage can replace 74-97% of gas peakers with most of the opportunities in California, Arizona, and Texas. For peaking requirements longer than 8 hours gas peakers will remain the better choice economically for some time to come.


4-Hour Lithium Storage Outbids Natural Gas for Peak Demand in California Project


Batteries, like gas peaker plants (more or less), can dispatch on command. One advantage they have over gas peakers is that they can be built in urban areas not practical for a thermal plant. That is the case in a new 20 MW, 80MWh 4-hour short-duration battery plant planned for downtown Oakland that will replace a decades-old jet-fuel-burning-peaker. Another advantage of these batteries over gas peakers is that they can also participate in some grid activities during non-demand peak times which helps to defray their investment costs. There are probably many other opportunities for 4-hr and 6-hr batteries to replace peakers. Some energy utility execs predict that such short-duration battery plant projects will become quite popular through the 2020’s and perhaps get California to their goal of 60% renewable energy by 2030. After that, however, the economics don’t look as good as longer duration energy dispatching will be needed. Longer duration storage options include pumped hydro, compressed air, and cryogenic storage but their economics have not been improving like lithium battery storage which continues to benefit from economies of scale. The Oakland project is spearheaded by community-choice aggregators (CCAs) who also have planned solar generation plants. CCAs have managed to cut into the power procurements of investor-owned utilities (IOUs) helped by California regulator requirements. The Oakland battery plant is expected to come online in 2022 and decrease particulate pollution in the vicinity (although due to its quite low run times the pollution is intermittent).


Other Significant Projects Incorporating Renewables and Short-Duration Storage


A planned project to extend the evening loss of solar generation by 4 hours with the battery being charged by the excess solar generation is a proposed solar plus storage project in LA. Such projects allow solar to be somewhat dispatchable. The battery can be run on full power for 4 hours or say on ¼ power for 16 hours, depending on power needs. The project has been bidded very low, under $2 per KWh. While the Forbes article referenced below suggests it “crushes” fossil fuels and “buries” nuclear, that is a bit misleading as the storage part would still require additional resources (likely gas) to power the non-generation time period.


NextEra Resources recently announced a triple hybrid plant incorporating wind, solar and storage. It is the largest such proposed plant in the US and is expected to be fully functional by the end of 2023. This is in Oklahoma in combination with the Western Farmers Electric Cooperative. It includes 250MW of wind capacity which should be built and online now, 250MW of solar, and 200MW/ 800MWh of storage. This is much larger than the other big NextEra triple hybrid project with Portland General Electric (300MW wind, 50MW solar, and 30MW/120MWh storage) scheduled to be online by the end of 2021. The economics of these projects are competitive with gas peakers, particularly with government subsidies. It is unclear how the recent lessening/loss of the federal solar and storage subsidies will affect these projects. However, state renewable energy credits are not a part of the Oklahoma project. Of course, Oklahoma has a better solar resource than Oregon and so the wind/solar balance is better in Oklahoma. The complementary timing is better too – ie. wind tends to pick up at night when solar is down. The Oklahoma project will be the second largest such project in the world. That project is also aided by the investment by an electric cooperative which has less duty to investors and less of a profit motive. They can also “brag” about their portfolio capacity of renewables – the Oklahoma case it brings them to 50% renewable in terms of nameplate capacity (which is also misleading since solar and wind are far less efficient compared to fossil resources – ie. generally half as efficient for wind and between a third and a quarter for solar if the fossil resource is run at near full capacity – which is less common for coal plants due to better pricing for gas as some baseload coal plants are running at near half capacity though they were designed to run at full capacity which is a capacity factor of about 80%). 


Storage Market Dynamics


Storage projects are becoming more profitable. As mentioned above the Oklahoma project does not need any state incentives. Costs for utility-scale battery storage continue to drop. The advantages of batteries are instant on/off, ease of placement, no pollution, and perhaps most important to provide ancillary services. If needed and available, battery energy can be sold in energy markets, utilized for frequency regulation, and participate in some capacity markets. Another potential revenue stream can be gained if the battery sources are outfitted with sophisticated energy management software so they can be automated in an optimized way. To do this requires detailed modeling of the system and its needs as well as access to capacity markets and predictable supply and deliverability. Another advantage of automated controls by sophisticated energy management software is enabling the fast response times needed for frequency regulation.



References:

What Comes Next After Batteries Replace Gas Peakers – by Julian Spector, in GreenTech Media, July 1, 2019


Just How Much Business Can Batteries Take from Gas Peakers – by Julian Spector, May 16, 2018


Oakland to Swap Jet-Fuel-Burning Peaker Plant for Urban Battery – by Julian Spector, in GreenTech Media, June 26, 2019


New Solar + Battery Price Crushes Fossil Fuels, Buries Nuclear – by Jeff McMahon, in Forbes, July 1, 2019


‘Cheaper Than a Peaker’: NextEra Inks Massive Wind+Solar+Storage Deal in Oklahoma – by Julian Spector, in GreenTech Media, July 25, 2019


From Science Project to Money Maker: Energy Storage Hits Inflection Point – by GTM Creative Strategies, Sept. 23, 2019


Coal Plants Increasingly Operate As Cyclical, Load Following Power, Leading to Inefficiencies, Costs: NARUC – by Catherine Morehouse, in Utility Dive Jan 20, 2020

Ending Tax Credit Subsidies for Solar Energy, Electric Vehicles, and Energy Storage is a Bad Idea

Ending Tax Credit Subsidies for Solar Energy, Electric Vehicles, and Energy Storage is a Bad Idea


Congressional Democrats just agreed to Trump’s new budget that ends federal tax credit subsidies to solar installations and to buyers of electric vehicles. Aside from the obvious detriments to the energy transition to lower carbon sources of energy there are several other detriments. These include detriments to solar companies from component manufacturers to installers and all the automakers building electric vehicle and those supplying parts. Ford just announced plans to build new facilities and hire many in Dearborn, Michigan, in part to build EVs. The new rule might affect the EV plans.


A clear and strong majority of climate scientists say an energy transition to lower carbon sources is necessary and most call for an accelerated transition to stay within precited emissions limits. This combined action of Congress and the Trump administration could only be considered a deceleration. It may even erode emissions commitments around the world and unravel the COP29 Paris Accords, if other countries follow suit. One might argue that the accord is already unraveling (perhaps partially due to the U.S. pull-out) as many countries have so far failed to adhere to their stated planned reductions. 


Statistics show, quite obviously, that when subsidies go down market share goes down for these industries and installations goes down. The subsidies are still needed to ensure profitability and keep industries healthy and innovative, industries that will very likely be needed far into the future.

According to research firm Rhodium Group the rollback of the tax credits is predicted to result in 125 million tons of added greenhouse gas emissions by 2025. There was a one-year extension of the wind energy tax credit that was set to expire at the first of the year.


With talk earlier in the year of a Green New Deal, a super-massive governmental financial commitment to clean energy development it seemed as if a continuation of the solar and EV subsidies would be relatively assured but apparently that is not the case. So instead of adding to clean energy development the government is taking away from it. It appears we went from one extreme to the other. The Trump administration has already modestly cut renewable energy research. 


Will the cutting of these subsidies affect state, city, and regional plans for greenhouse gas reductions and clean energy mandates? No doubt. Several states have made pledges and laws to transition to 100% clean energy in certain time periods. Such transitioning will be slowed by the pulling of federal tax credits. 


For the consumer interested in purchasing an EV, whether full or hybrid, or a solar energy system, the non-extension of the subsidies is a deal-breaker, although for solar it is a 3-year phase out so the slow-down will be more gradual. EVs and solar are questionably economic with subsidies and clearly uneconomic without them. Although, it is true that at the consumer level such subsidies predominantly end up benefitting those that can afford them, the upper and middle classes, they are still useful. If they were to be expanded the benefits could reach further to help the poorer consumers. 


Accelerated ice loss in the Arctic, historic heat and catastrophic fires in Australia, a warm winter so far in the U.S. Midwest, and other indicators suggest global warming’s influence, despite the detractor’s claims about the pause or hiatus in warming as indicated by satellite data. Some climate scientists are saying the satellite data is incorrect and needs adjusted to match abundant surface data that clearly shows warming. I have yet to read the arguments but if that is true then the evidence for global warming just got a huge boost. Significant warming in the Arctic is indisputable. Of course, the Trump administration is banking on global warming not actually occurring and so by that logic there would be no need to advantage clean energy sources.


Environmentalists applauded the guidance in the budget that suggests that federal loan guarantees for fracking related plastics production and ethane storage in Appalachia may not be provided. However, eventually they may be. Plastic made from cheap available ethane is both cheaper and better for the environment than plastic made from petroleum. 


The budget also included money to shore up pensions for coal miners in a strongly contracting industry beset by bankruptcies. While that is good, other means to shore up a clearly dying industry are sure to end up being wasted money, especially those that mainly help the upper management of the industry. The coal industry will continue to be beset with costs such as helping black lung victims (whose federal benefits have been extended for a mere one year) and decommissioning and clean-up of mining sites. Efforts by former Energy Secretary Rick Perry to help the coal industry from the federal level have largely failed due to inadequate arguments or demonstration of the benefits of such action. However, some states have managed to help coal. Here in Ohio, the state mandated subsidizing two coal plants which will be paid for by electricity rate-payers, ie. us. Cheap natural gas continues to limit coal burning. The recent FERC decision to counteract renewables integration into the PJM regional power system by subsidizing coal and natural gas bids in the capacity market is also a way to favor fossil fuels over renewables, especially where states have mandated renewables ramping. Advocates say it makes competition fairer, but detractors say it denies the need for an energy transition. It is debatable but a middle ground would be to favor natural gas a little but not coal. There has been no demonstrable need for coal stocking except for very cold periods where natural gas infrastructure is inadequate to supply certain areas. 


References:


Clean Energy Loses Out in Congress’s Last-Minute Budget Deal – by James Bruggers and Marianne Lavelle, in Inside Climate News, Dec. 20, 2019


Energy Regulator’s Order Could Boost Coal Over Renewables, Raising Costs for Consumers – by Dan Gearino, in Inside Climate News, Dec. 20, 2019