Economics of Storage

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CAISO Data Highlights Critical Flaws In The Evolving Renewables Plus Storage Mythology John Petersen; Seeking Alpha blog; 6 May 2019

Evolving mythology holds that a combination of renewables plus storage will soon replace fossil fuels and relegate conventional power systems to the ash heap of history.
Data from CAISO’s Renewables Watch website highlights critical flaws in that mythology and shows why renewables plus storage can never replace fossil fuels.
Battery-based energy storage systems for the grid are quite profitable in situations that require rapid cycling and can aggregate multiple functions in a single facility. Unfortunately, the total demand for high-value services like frequency regulation is limited. In its Q4 2018 Report on Market Issues and Performance, CAISO sized its peak frequency regulation demand for 2018 at roughly 2,000 MW. While battery arrays that are installed to support short-duration renewables integration may be able to underbid current service providers and win a share of the frequency regulation revenue, additional battery capacity that exceeds total demand is likely to drive frequency regulation prices down to levels that are currently unthinkable. It may ultimately be good for electricity consumers, but it will be very bad for facility owners.
If one looks solely at intra-day effects, the peak intermittency during my 30-day sample period was about 2,500 MW. Since Tesla’s Powerpack for commercial customers and the large PG&E project discussed in this article both have power to energy ratios of 0.25, it seems reasonable to assume that remediating a peak intra-day intermittency of 2,500 MW would require battery arrays with a combined capacity of 2,500 MW / 10,000 MWh that cost about $4 billion. If battery arrays were used to remediate 100% of the intra-day intermittency, some of the systems would be in a position to aggregate short duration renewables integration with other grid services and the rest would have to settle for a single revenue stream. The systems with multiple revenue streams would probably offer solid economic returns for their owners, but the systems that could only garner a single revenue stream would probably offer marginal returns. Therefore, in the real world, it’s unlikely that battery systems will be deployed to serve 100% of the theoretical demand for intra-day intermittency remediation.
When the analysis progresses from intra-day intermittency to day-to-day intermittency, power becomes less of an issue and total energy capacity takes center stage. In my 30-day example, the maximum power production was 67,300 MWh greater than average and the minimum was 71,700 MWh less than average. The average daily deviation from the mean was 24,200 MWh. While remediating the day-to-day intermittency during my sample period would require battery arrays with an incremental capacity of 61,700 MWh that cost about $25 billion and weigh 500,000 tonnes, the batteries would only generate the equivalent of 10 revenue events per month as opposed to several revenue events per day for an optimized intra-day system. Those economics can’t work without a couple of billion dollars a year in standby charges for reserve capacity. While it’s a meaningless gee-whiz statistic, a 61,700 MWh wall of Tesla Powerpacks would extend for 158 miles, more than enough to fence the 140-mile California-Mexico border.
Where using 61,700 MWh of batteries to remediate day-to-day intermittency would be prohibitively expensive, using an additional 55,000 MWh of batteries to remediate predictable multi-day intermittency would be preposterous because the incremental batteries would only generate a few revenue events per year. While some might argue that doubling the height of the border wall could be a good thing, it’s no way to provide plentiful, cheap and reliable electricity for all.