SANDIA REPORT SAND2010-0815 Unlimited Release Printed February 2010

Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide A Study for the DOE Energy Storage Systems Program

Jim Eyer

Garth Corey

Prepared by Sandia National Laboratories Albuquerque, New Mexico 87185 and Livermore, California 94550

Sandia is a multiprogram laboratory operated by Sandia Corporation, a Lockheed Martin Company, for the United States Department of Energys National Nuclear Security Administration under Contract DE-AC04-94AL85000.

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SAND2010-0815

Unlimited Release

Printed February 2010

Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide

A Study for the DOE Energy Storage Systems Program

Jim Eyer

Distributed Utility Associates, Inc.

1530 Holmes Street

Livermore, CA 94550

Garth Corey KTech Corporation

10800 Gibson SE

Albuquerque, NM 87123

Contract #10612

Abstract

This guide describes a high-level, technology-neutral framework for assessing potential benefits from and economic market potential for energy storage used for electric-utility-related applications. The overarching theme addressed is the concept of combining applications/benefits into attractive value propositions that include use of energy storage, possibly including distributed and/or modular systems. Other topics addressed include: high-level estimates of application-specific lifecycle benefit (10 years) in $/kW and maximum market potential (10 years) in MW. Combined, these criteria indicate the economic potential (in $Millions) for a given energy storage application/benefit.

The benefits and value propositions characterized provide an important indication of storage system cost targets for system and subsystem developers, vendors, and prospective users. Maximum market potential estimates provide developers, vendors, and energy policymakers with an indication of the upper bound of the potential demand for storage. The combination of the value of an individual benefit (in $/kW) and the corresponding maximum market potential estimate (in MW) indicates the possible impact that storage could have on the U.S. economy.

The intended audience for this document includes persons or organizations needing a framework for making first-cut or high-level estimates of benefits for a specific storage project and/or those seeking a high-level estimate of viable price points and/or maximum market potential for their products. Thus, the intended audience includes: electric utility planners, electricity end users, non-utility electric energy and electric services providers, electric utility regulators and policymakers, intermittent renewables advocates and developers, Smart Grid advocates and developers, storage technology and project developers, and energy storage advocates.

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ACKNOWLEDGEMENTS

The authors give special thanks to Imre Gyuk of the U.S. Department of Energy (DOE) for his support of this work and related research. Thanks also to Dan Borneo and John Boyes of Sandia National Laboratories for their support. Joel Klein and Mike Gravely of the California Energy Commission, Tom Key of the Electric Power Research Institute Power Electronics Applications Center and Susan Schoenung of Longitude 122 West also provided valuable support. Finally, authors are grateful to Paul Butler of Sandia National Laboratories who provided a thoughtful, thorough, and very valuable review.

This work was sponsored by the DOE Energy Storage Systems Program under contract to Sandia National Laboratories. Sandia is a multiprogram laboratory operated by Sandia Corporation, a Lockheed Martin Company for the DOEs National Nuclear Security Administration under Contract DE-AC04-94AL85000.

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CONTENTS

Executive Summary ....................................................................................................................xv

Acronyms and Abbreviations ................................................................................................. xxiii

Glossary ....................................................................................................................................xxv

1. Introduction .............................................................................................................................1

1.1. About This Document ....................................................................................................1

1.2. Background and Genesis ................................................................................................1

1.3. Intended Audience..........................................................................................................1

1.4. Analysis Philosophy .......................................................................................................2

1.4.1. Application versus Benefit........................................................................................2

1.4.2. Internalizable Benefits ..............................................................................................2

1.4.3. Societal Benefits .......................................................................................................3

1.5. Grid and Utility-related General Considerations............................................................3

1.5.1. Real Power versus Apparent Power..........................................................................3

1.5.2. Ancillary Services .....................................................................................................4

1.5.3. Electricity Transmission and Distribution ................................................................4

1.5.4. Utility Regulations and Rules ...................................................................................5

1.5.5. Utility Financials: Fixed Charge Rate.......................................................................5

1.6. Standard Assumption Values .........................................................................................6

1.6.1. Standard Assumption Values for Financial Calculations .........................................6

1.7. Results Summary............................................................................................................9

2. Electric Energy Storage Technology Overview....................................................................11

2.1. Overview of Storage Types ..........................................................................................11

2.1.1. Electrochemical Batteries .......................................................................................11

2.1.2. Capacitors ...............................................................................................................11

2.1.3. Compressed Air Energy Storage.............................................................................12

2.1.4. Flywheel Energy Storage ........................................................................................12

2.1.5. Pumped Hydroelectric ............................................................................................12

2.1.6. Superconducting Magnetic Energy Storage............................................................12

2.1.7. Thermal Energy Storage .........................................................................................13

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2.2. Storage System Power and Discharge D