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
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