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Economics and Market Impacts of Electricity StorageDale NesbittPresident, ArrowHead Economics
June 2020
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CEconomics and Market Impacts of
Electricity Storage
by
Dr. Dale Nesbitt
Dr. Antoine Calvez
Randy Begotka
ArrowHead Economics LLC
221 Main Street, Suite 1856
Los Altos, CA 94022
(650) 948-8830 [email protected]
June 20, 2020
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 2
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CDr. Dale M. Nesbitt
• Ph.D., Engineering Economic Systems, Stanford University, dissertation defense with honors, “Policy Ordering in semi-Markovian Decision Processes.”
• History
– Employee #70 at legendary Xerox PARC
– Stanford Research Institute, Decision Analysis Group .
– Co-founded and built Decision Focus Inc (DFI) into $25 million (sales) company
• Their energy practice has become ArrowHead
– Co-founded four new companies
• Altos Management Partners Inc. (management consulting)
• MarketPoint Inc. (enterprise software)
• Acquired by Deloitte 2011
• Reticle Inc. (high surface area carbon, water deionization/desalination)
• Ferritech Inc. (biotechnology/ferric oxidation)
– Founded ArrowHead Economics in 2012 to help clients make better decisions
• Lecturer at Stanford in MS&E since 2013
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 3
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CIf You Are a
Generator or Customer of Electricity
• You are critically dependent on storage
and storage profitability.
• It dramatically alters peak, off peak, and
average prices (and therefore power
acquisition cost).
• Storage won't be built unless it is profitable,
or subsidized.
• Storage doesn’t obey rules of thumb.
• A lot of the motivation for storage is
misguided.June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 4
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CIf You Are an Owner or Lessor of Storage
• You have to know all of this or you won't
know whether your storage process is in the
money and attractive to your ratepayers.
– Is your pumped hydro economically
competitive?
– Is your PowerWall economically competitive?
• If not, are your ratepayers willing to eat the
difference?
• Should you buy or finance or partner in or
contract with one?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 5
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CStorage Buffers Periodic Swings in
Consumption (or Generation)
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 6
Without storage, this has to
match deliveries by generators.
Time of use by
customers (outer
curve)
Qu
an
tity
Time
Load schedule is temporally irregular.
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CStorage Damps Periodic Swings
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 7
Deliveries by generators
Injection to storage
Withdrawal from storage
Time of use by
customers (outer
curve)
Qu
an
tity
Time
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CLarge Enough Storage
Will Completely Eliminate Swings
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 8
Injection to storage
Time of use by
customers (outer
curve)
Qu
an
tity
Time
Deliveries by generators
(aggregate)
Withdrawals from storage
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CThe Fundamental Issues in Storage
• Storage never produces a Btu of gas or a
MWh of electricity.
• Electricity is a real time, just in time business
(no storage).
• Storage merely shifts a commodity around in
time, and storage loses commodity as it does
so (thermal losses).
• Storage can be extremely valuable in an
energy system.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 9
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CStorage Can Be Implemented…
1. “Production Area.” Point of generation such as storage in a solar or wind farm
2. “Market Area.” Point of wholesale consumption such as large businesses or municipalities or large junction points away from generation (e.g., San Luis)
3. “Retail Area.” Point of consumption (retail) (e.g., PowerWall, industrial batteries)
• Each competes with and complements the other.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 10
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CStructure of Regional
Wholesale Power Systems
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 11
6. BUSBAR
10. STORAGE
3. HYDRO
9. OUTBOUND TRANS7. DEMAND (LOAD)
8. INBOUND TRANS
1. FUELS
5. EMISSIONS
4. RENEWABLES
2a. EXISTING GEN
2b. NEW GEN
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CStructure of Regional Retail Power Systems
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 12
INDUSTRIALRESIDENTIAL
GENERATION
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C
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 13
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CActual Wind Generation Pattern
(Annual by Hour Tranche)
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 14
0
0.001
0.002
0.003
0.004
0.005
0.006
0.007
0 4 812
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
80
84
88
92
96
100
104
108
112
116
120
124
128
132
136
140
144
148
152
156
160
164
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172
176
180
184
188
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196
200
204
208
212
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CStorage to Turn an Energy Machine to a
Capacity Machine
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 15
0
100
200
300
400
500
600
700
800
900
1000
Average generation by the windmill
You have to size the deliveries to this level.G
en
erati
on
(M
W)
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CSpecial Services in the Electric System
Matter to Storage
– Synchronized Regulation• Frequency support
• Voltage support
• Reactive power
– Contingency Reserves (outage response)• Black start
• Spinning reserves
• Cold standby
– RMR (transmission system support)
– System protection
– Renewable generation
– Electric vehicles
• Storage is queued up to provide these services.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 16
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CElectric Storage Technologies
Are Expensive and Not Super Efficacious
• CAES (compressed air energy storage)
• Flywheels
• Capacitors
• Batteries (chemical conversion such as
lithium ion or lead acid or nickel cadmium)
• Redox batteries (liquid metal)
• Hydrogen fuel cells
• Pumped hydro (conversion to mechanical)
• Vehicle to grid
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 17
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CStorage Issues
• Risk of base retirement (base to peak price spread) is crucial).
– Storage depends on a low-cost charging source…
• Overdependence on thin markets
– Flavors of ancillary services – if too much projected revenue comes from AS – watch out.
• Subsidies to solar in your region
– Solar kills peak price.
• How much can you sell your storage facility for?
• Does it have to be electric? Can a gas reservoir with a black start generator suffice? Gas stores the energy. Can they beat you and grab the premium markets?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 18
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Storage is one of the most difficult
processes in the entire economy to
understand.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 19
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CWhat Is the Purpose of Storage?
• Quantity: acquiring quantity when available (injection) and dispensing quantity when not enough available (withdrawal)?
• Price: buy when price is low and sell when price is high?
• Operate according to a rule of thumb?
• Assume that storage is “atomistic” and cannot affect the market (like StorageVET)? It is just a “dispatch” problem?
• To access “premium” markets with cheap energy and capacity?
• To subsidize intermittents and renewables?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 20
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CTwo Types of Storage
• One-Sided Storage: Injections come from
mother nature (e.g., spring runoff). Withdrawal
is the only systematic decision.
– Oroville dam and run of river hydro are examples.
• Two-Sided Storage: Injections are a systematic
decision, and withdrawals are a systematic
decision.
– San Luis reservoir pumped hydro has both.
– Castaic pumped hydro has both.
– All natural gas storage is two sided.
– Oil storage is two sided.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 21
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CThe Big Money (and the Risk)
Is Targeted Toward Two-Sided Storage
• Regulations/public law in California are
explicit.
But
• Do they miss the mark?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 22
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CWhat Goes Wrong with Storage Evaluation?
• Storage pencils out “too good to be true.”– Calculations based on exogenous commodity and service
prices (e.g., Cal ISO histories) overstate.
– This has been known in gas storage for years.
• Storage serves painfully small/thin markets.
• Storage can be a “frontrunner” in those markets, killing the peak price and elevating the off-peak price if overbuilt.
• Overbuilding may be a matter of MW, not 100’s or 1000’s of MW.
• For gas, we have concrete analysis (Jefferson Island 1, Jefferson Island 2, Spindletop, Egan salt dome storage).
• Using an “at the margin” model can really mislead because it is not coupled with economics and markets.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 23
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CUnderstanding Storage
Profitability and Impact
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 24
Storage Market
Price
Quantity
The easy part ArrowHead:
the hard part
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CWe May Have the Longest History of Economic
Analysis of Storage in the Industry
• CEC Padd 5 refinery model (1990)
• Short term world and North American gas
• Castaic/California Water Project dispatch model
• Salt domes (Jefferson Island 1, Jefferson Island
2, Spindletop, Egan)
• Pumped hydro (Ohio)
• CAES (Texas)
• Southern California electricity storage
• Northern California electricity storage
• Southern California gas storageJune 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 25
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CStorage Buys from and Sells to a Market
(Which We Term a “Market Hub”)
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 26
Inputs (Sources)
Outputs (Destinations)
Storage
• Capacity
• Rates
• Costs
Injections
Withdrawals
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CEvery Destination Has a Demand Curve and
Every Origin Has a Supply Curve
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 27
Inputs (Sources) All Carry a Supply Curve
Outputs (Destinations) All Carry a Demand Curve
Storage
• Capacity
• Rates
• Costs
Injections
Withdrawals
p
q
p
q
p
q
p
q
p
q
p
q
p
q
p
q
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CGeneration in the Region
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 28
Hy
dro
(Cumulative) Capacity
Plant Supply Stack in the Region
Margin
al
Cost
($/M
cf)
Nu
clea
r
Coal
Gas
CC
Gas
Ste
am
CT
Ren
ewab
les
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CWhat Do You Buy “From” and
What Do You Sell “To?”
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 29
You buy
“from” this
plant
(Cumulative) Capacity
Plant Supply Stack in the Region
Margin
al
Cost
($/M
cf)
You sell “to”
this plant
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CThere Are Multiple Storage Points
Scattered Throughout the System
• All storage in the system competes with all
other storage.
• The competition reduces the peak price and
elevates the off-peak price with every new
entrant.
• You must know entry, exit and current fleet
composition very, very, very well.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 30
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The Southern California System
What can we say about the profitability and
effect of electricity storage in Southern
California?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 31
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CWeekly Load by Hour – Very Hot Week
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 32
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,0002
,01
4.0
0
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
D_Retail Load St_Capacity
Source: Cal ISO, Summer Head Wave Week
Satu
rday
Sun
day
Mo
nd
ay
Tues
day
Wed
nes
day
Thu
rsd
ay
Frid
ay
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CSimple Model Used to Quantify Storage
Profitability
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 33
Generation
Storage
• Capacity
• Inj./withdrawal maxima
• Costs
Injections
Base ($32)Intermediate
($48)Peak ($80)
Withdrawals
Demand (Load)
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CGeneration Capacity in Place (with
Generation Cost)
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 34
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0 10,000 20,000 30,000 40,000 50,000 60,000
Gen
era
tio
n C
ost
($
/MW
h)
Generation Capacity (MW)
24,510 MW
$32/MWh11,700 MW
$48/MWh
$80/MWh
20,000 MW
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CGeneration Capacity in Place with
Load Limits
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 35
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0 10,000 20,000 30,000 40,000 50,000 60,000
Gen
era
tio
n C
ost
($
/MW
h)
Generation Capacity (MW)
24,510 MW
$32/MWh11,700 MW
$48/MWh
$80/MWh
20,000 MW
22,722 MW 44,601 MW
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CBase Case Southern California
Storage Parameters
• Injection/Withdrawal Capacity
– Varying levels of injection and withdrawal capacity
• O&M Cost
– $5/MWh injection
– $5/MWh withdrawal
• Fractional Losses
– 0.10 injection
– 0.10 withdrawal
• Inventory Limits (“Size of Tank”)
– 0 minimum
– 50,000 maximum (no effective limit)
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 36
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CImpact of Storage from 0 to Massive
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 37
0 M
W
2000 M
W
4000 M
W
6000 M
W
8000 M
W
15000 M
W
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CNo Storage Means JIT Supply and Demand
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 38
Inputs (Sources)
Outputs (Destinations)
Market Price (t)
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CMarket Price – 0 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 39
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
$32 (base) for low demand hours
There is “no place to put” some of the base, much less any
intermediate or peak.
The “duck curve” is just a manifestation of this same effect.
$80 (peak) for high demand hours
Demand goes up on the high tranche; that defines peak.
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$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
Market Price – 2000 MW Storage
• A mere 2000 MW of storage completely consumes base.
• Baseload units run 100 percent of the time.
• That is one of the main objectives of storage – to fully occupy base.– Baseload customers are hurt by storage (industry).
– Baseload generators benefit by storage.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 40
59.0
59.0
48$
81.69$ +
+
=
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CGeneration Capacity in Place with
Load Limits
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 41
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0 10,000 20,000 30,000 40,000 50,000 60,000
Gen
era
tio
n C
ost
($
/MW
h)
Generation Capacity (MW)
24,510 MW
$32/MWh11,700 MW
$48/MWh
$80/MWh
20,000 MW
22,722 MW 44,601 MW
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$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
Market Price – 4000 MW Storage
• Why $70?????
• It is $48 plus the total cost of storage.
• It is where storage withdrawal will be the
marginal source of supply into the market.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 42
59.0
59.0
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81.69$ +
+
=
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con
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ics
LL
CThe End of the Duck Curve?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 43
Arr
ow
Hea
d E
con
om
ics
LL
C
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14.0
0
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14.0
0
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
2
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
Market Price – 6000 MW Storage
• The peaks are narrower, and only weekday.
• There are more MW and more MWh of peak
capability (as long as there is no inventory
limitation).
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 44
Arr
ow
Hea
d E
con
om
ics
LL
C
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14.0
0
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14.0
0
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
2
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
Market Price – 8000 MW Storage
• This magnitude of injection and withdrawal covers
everything except peak on the hottest day.
• You still need all that generation capacity on that
day. Ouch!
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 45
Arr
ow
Hea
d E
con
om
ics
LL
C
$0
$10
$20
$30
$40
$50
$60
$70
$80
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
Market Price – 15000 MW Storage
• Buy intermediate and sell it at peak.
• The cost is intermediate purchase cost plus full storage cost and losses.
• Because this is lower than peak generation cost, it wins.
• Storage is a lower cost marginal source of peak supply than peaking generation.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 46
Arr
ow
Hea
d E
con
om
ics
LL
CSales to Market
• Sales to the market (hub) come directly from
– Generators
– Storage withdrawal
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 47
Storage
Injections
Base ($32)Intermediate
($48)Peak ($80)
Withdrawals
Sales to Market –
Generation plus
Withdrawals
Arr
ow
Hea
d E
con
om
ics
LL
CSales to the Market – 0 MW of Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 48
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
SS_Baseload SS_Intermediate SS_Peak St_Capacity
SS_IntermediateSS_Baseload St_CapacitySS_Peak
Arr
ow
Hea
d E
con
om
ics
LL
C
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
SS_Baseload SS_Intermediate SS_Peak St_Capacity
Sales to the Market – 2000 MW of Storage
• Some “green” is sold off peak to storage so that it can become “red” on peak.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 49
Arr
ow
Hea
d E
con
om
ics
LL
CSales to the Market – 4000 MW of Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 50
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
SS_Baseload SS_Intermediate SS_Peak St_Capacity
SS_IntermediateSS_Baseload St_CapacitySS_Peak
Arr
ow
Hea
d E
con
om
ics
LL
CSales to the Market – 6000 MW of Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 51
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
SS_Baseload SS_Intermediate SS_Peak St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CSales to the Market – 8000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 52
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
SS_Baseload SS_Intermediate SS_Peak St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CSales to the Market – 15000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 53
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
SS_Baseload SS_Intermediate SS_Peak St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market
• Purchases from the market (hub) go directly
to
– Load
– Storage injection
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 54
Storage
Injections
Base ($32)Intermediate
($48)Peak ($80)
Withdrawals
Purchases from
Market – Load plus
Injections
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market – 0 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 55
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
D_Retail Load St_Capacity
D_Retail Load St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market –
2000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 56
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
D_Retail Load St_Capacity
D_Retail Load St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market –
4000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 57
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
D_Retail Load St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market –
6000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 58
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
D_Retail Load St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market –
8000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 59
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.00
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14.0
1
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.01
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14
.02
2,0
14.0
2
2,0
14
.02
D_Retail Load St_Capacity
Arr
ow
Hea
d E
con
om
ics
LL
CPurchases from the Market –
15000 MW Storage
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 60
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
0
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
1
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
2,0
14.0
2
D_Retail Load St_Capacity
Arr
ow
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d E
con
om
ics
LL
CPeak and Base Generation Levels as a
Function of Storage Capacity
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 61
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0 2000 4000 6000 8000 15000
Pea
k a
nd
Base
Gen
erati
on
Magn
itu
des
(M
W)
Size of Storage Injection/Withdrawal (MW)
Base (MW) Peak (MW)
8391.28 MW reduction in peak
1787.45 MW increase in base
Arr
ow
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con
om
ics
LL
CImpacts of Storage
• Damps price variability/volatility– Raises the baseload price
– Decreases the peak load price
– Squeezes them to a less volatile mean
– Overcomes the JIT nature of electricity
• Affects price. No other model of storage endogenizes the price.
• More efficiently utilizes the base– Increases the load factor on your better merit order
plants.
• Does storage favor wind/solar and other intermittent sources?
• Does the cost of storage matter?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 62
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CInsights
• Electric storage cuts the size of the fleet, and by a lot.
• That is what reduces power cost – reduction of generation cost.
• The reduction is generally less than the cost of storage.
• You need subsidies or mandates to effectuate it.
• Storage subsidizes base load and hammers; it doesn’t match up with intermittents all that well.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 63
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C
Dispatch of California Water Project
(Castaic)
Bonus Appendix
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 64
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CIs the California Water Project a
Water Project?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 65
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CEver Been Down I-5 to Grapevine? West
Side of the Freeway? Is This Green?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 66
Chrisman pumping station
California aqueduct
Up and over the Tehachapi
Mountains
Arr
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CCalifornia Water Project
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 67
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CMore Accurate Map
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 68
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CDo You Just Pump It Up and Over the
Tehachapi's to Dodger and Angel Fans?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 69
California
Aqueduct
L.A.
Drinking
Water
Chrisman
Pumps
Tehachapi
Mountains
Edmonston
Pumps
1,926 feet Total
Elevation
Arr
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C
Pow
er P
rice
Time
How Would You Run the System if You
Owned It?
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 70
Peak (100-200 PM): Price $120/MWh +; 70,000 MW; all
capacity in California running; public safety
Base (200-300 AM): Price $25/MWh -;
20,000 MW running; overcapacity
Day 1 Day 2 Day 3 Day 4
Arr
ow
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con
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CPumped/Reservoir Hydro Is Important (e.g.,
Castaic Pumped Hydro Project)
• You think about profit seeking behavior and impact of the project on the market.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 71
Pyramid
Lake
Elderberry
Forebay
Lake
Castaic
California
Aqueduct
1200 MW
generator/
pump
pennstocks
L.A.
Drinking
Water
Chrisman
Pumps
Tehachapi
Mountains
Edmonston
Pumps
1,926 feet Total
Elevation
Arr
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con
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ics
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C
Pow
er P
rice
Time
How Would You Run the System if You
Owned It?• You’d “speculate.” You’d “buy low/sell high.” You would give your
profits to the City and County of Los Angeles (who owns the facility and
benefits from it).
• We developed the price/operational/dispatch logic for them.
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 72
Pu
mp
(L
ow
Pri
ce)
Pu
mp
(L
ow
Pri
ce)
Pu
mp
(L
ow
Pri
ce)
Pu
mp
(L
ow
Pri
ce)
Pu
mp
(L
ow
Pri
ce)
Gen
era
te (
Hig
h P
rice
)
Gen
era
te (
Hig
h P
rice
)
Gen
era
te (
Hig
h P
rice
)
Gen
era
te (
Hig
h P
rice
)
Day 1 Day 2 Day 3 Day 4
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CArrowHead Representation of
Pumped Hydroelectric
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 73
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C
Questions and Answers
Submit Additional Questions:
ArrowHead Economics LLC
(650) 948-8830 [email protected]
June 19, 2020Copyright 2020 ArrowHead Economics LLCSlide No. 74
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