Pumping Up Pump Storage
Allowing multivalue cost recovery for bulk storage similar to treatment enjoyed by transmission project developers under federal regulations could be the final policy piece that unlocks the potential of storage to integrate renewable energy and strengthen the grid.
Large-scale or regional bulk energy storage projects have characteristics similar to transmission projects. On the one hand, they bring a variety of economic and social policy benefits to a multitude of stakeholders and ratepayers, often across multiple jurisdictions.
On the other hand, for this very reason, achieving adequate cost recovery is difficult.
The Federal Energy Regulatory Commission issued Order 1000 in part to address the multivalue and cost-recovery aspects of transmission, in effect allowing the cost of multivalue projects to be allocated, or socialized, across an ISO, RTO or utility footprint. An earlier FERC ruling allows incentive rates for certain transmission projects.
Bulk storage can be advanced by applying these same or similar principles. No one benefits when wind energy has to be curtailed or spilled. All electricity consumers are at risk when higher penetrations of renewable energy cause instability with grid operations.
Because most of the subsidies for wind and solar are federal, all taxpayers suffer when renewable energy is not well integrated into grid operations. Reliability risks are typically felt at the regional level.
Daily and seasonally, wind energy is most available when electricity is least in demand. Solar production more closely aligns with electricity demand, but cloud cover causes minute-by-minute, hourly and even daily fluctuations.
Until other technologies are fully commercial and scaled up, bulk energy storage means today, and for the near future, compressed air energy storage and pumped hydroelectric storage. Its role is best understood as a shock absorber for the grid. Uniquely, bulk storage provides incremental and decremental reserves to the system. That is, it can deliver a few, or hundreds, of megawatts to the grid or absorb megawatts and give most of them back at a later time. Response times can be seconds, minutes or hours, and daily and even seasonal load balancing may be involved.
In addition to its ability to provide ancillary services to the grid such as frequency regulation reliability reserves, bulk storage helps optimize transmission line loading, shifts off-peak and on-peak loads, avoids or postpones transmission upgrades and investment, reduces emissions and helps attain renewable portfolio standards by displacing fossil unit operation.
Other options provide some of these benefits. Fast-acting or flex gas turbine-based units respond faster than earlier models, for example, but can't absorb megawatts. Synchronous condensers absorb megawatts but don't give them back. Demand side solutions inconvenience ratepayers. None of them provide all the elements necessary for regional balancing.
This is multivalue in the truest sense of the word. A new transmission line delivers renewable energy from one area to a dense load center and strengthens reliability of the grid generally. The positive social impact of reliably connecting a wind-rich area with an urban load center accrues to the region as a whole. Bulk storage offers flexible grid optimization benefits to the entire region.
Fortunately, FERC is establishing a policy framework that removes barriers to storage projects. Order 755 supports the use of storage for ancillary services. The notice of inquiry on electric energy storage technologies and ancillary services seeks to determine how storage assets should be treated for accounting purposes. Recently, FERC Commissioner John Norris stated publicly that Order 1000 and the earlier Order 890 emphasize nonwire solutions, a good fit with storage. He noted that there's interest by the commission in having energy storage take advantage of Order 679 and incentive rates.
Published In: EnergyBiz Magazine July/August 2012