Walawalkar EES Economics

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ECONOMICSONOMICS OFF ENERGYERGY STORAGEORAGE TECHNOLOGIESCHNOLOGIES

ESA Annual Meeting 2008May 21 st 2008

INN NYISOYISO ANDND PJMJM

Rahul S. WalawalkarRahul S. Walawalkar PhD, CEM, CDSMPhD, CEM, CDSM

OUTLINE

Economics of EES in New York ISO and PJM

Regulation

Other Ancillary Services

Capacity resource

Net Present Value analysis for different applications

Potential impact of large penetration renewableresources

Conclusions

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OVERVIEW OFNYISO & PJM

3Source: PJM,NYISO & FERC

OPPORTUNITIESProfits from Location Based Marginal Price (LBMP)differential between On Peak and Off Peak

nc ary erv cesRegulation and Frequency Response Service10 Min Spinning or Non Spinning ReservesOperating Reserve (30 Mins)

Demand Response RevenuesInstalled Capacity (ICAP) Revenues

GenerationTransmission & Distribution

Supporting Renewable Energy Sources

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ANALYSIS METHODOLOGY

Grouped various zones in the NYISO and PJM marketsbased on statistical analysis of LMPs and geographicalconsiderations

11 NYISO zones were grouped into 3 regions17 PJM zones were grouped into 4 regions

Developed analytic framework to quantify the revenuepotential for different applications such as energyarbitrage, regulation, spinning reserve and capacityresourceConducted Net Present Value (NPV) analysis using2001-07 market data for NYISO and 2005-07 marketdata for PJM analysis

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GROUPING OF ZONES INTO REGIONS

NYISO PJM

NY WestNY

EastWest

Central

East

South

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NYC

PJM East: AECO, DPL, JCPL, METED,PECO, PPL, PSEG, RECO

PJM Central: PENELEC, APS PJM South: DOM, BGE, PEPCO PJM West: COMED, AEP, DAY, DUQ

NYC: NYC, Long Island NY East: Capital, Hudson Valley, Millwood,

Dunwoodie NY West: West, Genesee, Central, Mohawk

Valley, North


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PJM NYISO LMP P ROFILES

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EFFECT OF ROUND-TRIP EFFICIENCY ONENERGYARBITRAGENET REVENUE(NYISO - NYC REGION)

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CAPACITYCREDIT

EES capable of offering 4 successive hours of energycan receive ICAP creditsNYISO has a locational ICAP requirement

80% for NYC and 99% for Long IslandNYISO Annual Capacity revenues (2004-2007)

NYC region : $90,000 - $140,000 / MW-YearRest of NY State: $20,000 - $40,000 / MW-Year

PJM had sin le ca acit market till 2007 which wasreplaced by locational market under RPM

Historical value : $2,000 - $6,500 / MW-yearUnder RPM: $15,000 - $86,500 / MW-year

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ANCILLARYSERVICE REVENUE

Flywheels can be used for providing regulationservices in both PJM and NYISO

Although regulation is net energy zero service,flywheel will need to pay 15% in energy cost tocover losses.

NAS Batteries can earn additional revenue byproviding synchronized reserves when not used

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Thus when used with 4 hour energy arbitrage, NASbattery can provide 15 hours of synchronizedreserves


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NYISO AVERAGEPRICE CURVES

11 Based on NYISO Market data 2001-07

REGULATIONMARKETCLEARINGPRICE PROFILENYISO (2001-07)

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REGULATIONMARKETCLEARINGPRICE PROFILEPJM (2005-07)

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ISSUES : REGULATIONMARKETPARTICIPATION

Traditional generators receive additional opportunity costpayments, which are not available to flywheel

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PJMs sample regulation signal indicates that flywheelmay be idle for up to 40% of the time


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SYNCHRONOUSRESERVE MARKETRESULTSPJM (2005-07)

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SUMMARY RESULTS:ANNUALNET REVENUES (THOUSAND $/MW)

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COMPARING NPV FOR FLYWHEEL(REGULATION) AND NAS(ENERGY ARBITRAGE& SYNCHRESERVE)IN NYISOAND PJM

Inputs:

Capital Cost ($1.5M forflywheel and $2.0 M forNAS)

(75% for NAS and85% for flywheel)

Other Benefits($150k/year for NASand $100k/year forflywheel)

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Triangular Distributionfor Net Revenue foreach region

IMPACT OFRENEWABLES

NYISO is anticipating more than 3000 MW ofwind being added on the grid in next 3-4 yearsRepresents around 10% of peak load for NYISO

20-30% of off peak loadWill result in increased regulation and ancillaryservice requirementsCan improve the case for energy arbitrage bylowering off peak prices

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NYISO NET LOAD - 2006

30000

35000

NYISO - Net Load - Yr 2006

Summer Months

- J a n

J a n

a n

e b b r

0

5000

10000

15000

20000

25000

MW

1 1 3 -

2 5 -

6 - F

1 8 - F

1 - M a

1 3 - M a r

2 5 - M a r

6 - A p r

1 8 - A p r

3 0 - A p r

1 2 - M a y

2 4 - M a y

5 - J u n

1 7 - J u n

2 9 - J u n

1 1 - J u l

2 3 - J u l

4 - A u g

1 6 - A u g

2 8 - A u g

9 - S e p

2 1 - S e p

3 - O c t

1 5 - O c t

2 7 - O c t

8 - N o v

2 0 - N o v

2 - D e c

1 4 - D e c

2 6 - D e c

S1S5S9

S13S17S21

Days in YearHrs in

Day

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NYISO SRMC CURVE

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CONCLUSIONS

Changes in current market rules and reliability criteria arerequired toPermit EES in synchronous spinning reserve marketEliminate uncertainty in market rules & valuation of regulation

The analysis indicates that EES R&D efforts should includefocus on reducing capital costs and improving efficiency of theEES

Due to higher capital costs of NAS batteries it is important toselect a location for EES installation b evaluatin the T&D upgrade deferral potentialGreater penetration of renewables could improve theeconomics for both energy arbitrage and ancillary services

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ACKNOWLEDGEMENTS

I would like to acknowledge contributions of Dr. Jay Apt, Rick Manciniand Netra Thakur (Customized Energy Solutions) and Haresh Kamath

.

I would like to thank Dr. Lester Lave, Dr. Granger Morgan, Dr. RahulTongia (Carnegie Mellon University), Stephen Fernands (CustomizedEnergy Solutions), Joseph Sayer (NYSERDA) and Dr. Peter Balash(NETL) for guidance throughout this research.

This research was supported in parts by NYSERDA, NETL, CEIC, EPRIre oan oun a on an

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Walawalkar EES Economics