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Large Scale, Long Duration Energy Storage, and the Future of Renewables Generation

Large Scale, Long Duration Energy Storage, and the Future of Renewables Generation


Renewables widespread adoption across the globe is at the core of sustainable energy transition just for all.

To effectively manage larger scale of variable renewable energy, power system flexibility is the name of the game and indeed storage is and will be one of the core enablers in decarbonized energy system.

Looking at the US experience and, in particular, in the framework of Corporate Power Purchase Agreements (PPAs) with merchant risk exposure - an increasingly common arrangement for deployment of renewable energy in markets like the U.S. - variability translates into additional risk borne by both developers and off-takers. To enable fast-paced deployment of renewables, as required to limit emissions driving climate change, effective mitigation of these risks is necessary.

Enel Foundation and Form Energy - a US based startup which is developing ultra-low cost, long-duration energy storage  –  crafted  in cooperation with Enel Green Power a white paper exploring the way co-located long duration storage can mitigate the impact of variability on risk and returns for merchant-risk exposed long-term contracted windfarms in the Southwest Power Pool (SPP), a market covering mainly Kansas, Oklahoma, Nebraska, South Dakota and portions of other ten nearby States.

The historical data used for the analysis refers to two years of operations of three wind farms operating in SPP. Day-ahead bidding of the modeled wind farms relies on state-of-the-art weather forecasts, resulting in an average energy output uncertainty of about 15%. Across the modeled power plants, the average total energy availability of the farms is 90%, and average energy curtailment for congestions is about 5%, with a maximum of about 24%.

The study adopts a technology-agnostic view to long duration storage, considering more than 200 combinations of capital costs and charge-discharge efficiency, to model a wide range of hypothetical long duration storage technologies. Most of the combinations modeled are not commercially available today. However, this novel asset class is the subject of extensive R&D activity and is the target of growing venture and grant funding (e.g. the United States ARPA-E DAYS program). For this reason, the authors opted for a broad survey of the design space, with the objective of providing an understanding of the value of various technologies in addressing risk-management challenges.

Main Results

Quantitative results of the study demonstrate the ability of storage technologies to effectively manage risk and returns across a variety of scenarios with exposure to volume and basis risk. Currently available short-duration (up to 3-4 hours) storage technology shows a positive yet limited impact, whereas longer durations (more than 10 hours) offer much more significant benefits.

As an illustrative example, a storage system with specification corresponding to a pumped-hydro storage (energy and power capital costs of $5/kWh and $562/kW respectively, and 80% charge-discharge efficiency) is modeled across the three sample wind farms. Results show an optimal long duration storage power between 20% and 40% of nameplate windfarm power and an optimal duration between 13 and 23 hours. Depending on modeled wind farm, simulations show a long duration storage with these features can boost the net present value of the wind farm up to 50% with respect to the case without storage, while reducing the downside risk up to 10% under today’s market conditions.

In contrast, in the same sample installations, lithium-ion storage has an optimal duration of up to 1.4 hours and show an increase of the net present value by up to 27%, with a benefit on downside risk up to 6%. The analysis shows that the value of long duration storage in managing risk and returns will increase with deeper renewable penetration and the expected increase in price volatility and transmission congestion over extended time scales.

Therefore, the availability of long duration storage technologies can offer significant improvement in managing risk and returns, in contrast with today’s short duration storage which results in a more limited ability to modulate risk and returns. Of course, the specific target performance criteria for storage will depend on a particular investor’s risk and return preferences. Likewise, profitability must be assessed case by case considering the specific power plant in its geographical and market setting.

This work has been carried out considering assets located in the US regulated markets, and thanks to the methodology and scientific approach can be extended to other locations and markets. As the underlying conditions and risk factors are common across locations and market settings, the results of this study have a clear implication for a wide range of geographies.

While storage could affect day-ahead bid strategy, the present analysis focuses on managing real-time risk factors only, in particular wind shortage and corresponding penalties and real-time price dynamics. Future work may incorporate storage in day-ahead bid decisions.

Download the White Paper.

Large Scale, Long Duration Energy Storage, and the Future of Renewables Generation_White Paper

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