An Overv rview of f Power System Transformation Th The Im - - PowerPoint PPT Presentation

An Overv rview of f Power System Transformation – Th The Im Impacts of f New Technologies and In Innovations

Owen R. Zinaman, Clean Energy Transition Partners

Sao Paulo State Department of Infrastructure and Environment Wednesday, July 24 2019

Power r System Transformatio ion

• There is an established and quickly growing body of knowledge on the

successful management of modern power systems in transition

• The ‘Status of
• f Power

r System Tran ansformatio ion’ series codifies global policy, market and technological developments and trends in the power sector

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Overvie iew of f Se Selec lect t Trends

• 1. Technology Cost/Performance Improvements
• 2. Power System Flexibility: A Global Priority
• 3. Decentralization of Supply
• 4. Electrification and Sector Coupling
• 5. Shifting Planning Paradigms and Practices

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Not t Co Covered Today (S (Sorry! rry!)

• Utility business model and regulatory innovations*
• Wholesale energy market price formulation re-design
• Transportation electrification*
• Trends in digitalization, advanced metering

infrastructure (AMI),and cyber security

• Resiliency efforts and microgrids
• Community solar initiatives
• “Transactive” peer-to-peer energy trading futures

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Overvie iew of f Se Selec lect t Trends

1.

• 1. Technology Cost/Performance Im

Improvements

• 2. Power System Flexibility: A Global Priority
• 3. Decentralization of Supply
• 4. Electrification and Sector Coupling
• 5. Shifting Planning Paradigms and Practices

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Varia iable le renewable le energy costs ts conti tinue to declin line

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Image Source: IRENA Renewable Power Generation Costs in 2018

How is is th this is happenin ing?

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Competitive tenders/auctions are th the key driving force for cost reductions

Source: GTM

Th The Br Broader St Storage Ecosystem

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Image Source: Zinaman et al. (forthcoming)

Lit Lithiu ium-io ion Ba Batterie ies: : Why all ll th the hype?

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85% cost reduction since 2010 due to technology improvements, economies

• f scale, manufacturing competition

To-date, storage deployment following similar trajectory to PV deployment in early 2000s

Lithium-ion battery price survey, 2010-18 ($/kWh) Source: Bloomberg New Energy Finance (March 2019) Projected Cumulative Global Storage Deployment 2016- 30 (GW) Source: Bloomberg New Energy Finance (November 2017)

Record-breakin ing utili tility-scale le so sola lar + storage pric rices

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The New Record?

Developer: 8Minute Energy Offtaker: LADWP PPA Term: 25 years 400 MW Solar @ USD SD $1 $19. 9.97/MWh (≈75 BRL/MWh) 200 MW / 800 MWh Storage@ USD $1 $13. 3.00/MWh (≈49 BRL/MWh) Designed to maximize transmission capacity utilization Hours of Operation: ~7am – 11pm

Source: Utility Dive (2019)

Most t Co Common Ba Battery ry Use se Ca Case: Frequency Regula latio ion

• Significant deployment

for frequency regulation

(regulating reserves/ secondary frequency response)

• Often most cost effective

early application – Short duration requirements – High utilization of storage assets

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Source: US Energy Information Administration (2017)

Emergin ing Trend: Ba Battery ry Hybrid idiz izatio ion with ith Co Conventio ional l Power r Pla lants

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Southern California Edison hybrid battery storage, gas turbine peaker system

Pairing battery electricity storage systems with peaking plants can allow for the provision of spinning reserves without the power plant actually running.

Quick-start capability of hybrid facility

A Vir irtuous Cycl cle? Higher penetrations of wind and solar may increase the market potential for batteries

Source: Denholm, Paul. Utility-Scale Battery Storage: When, Where, Why and How Much?. Greening the Grid. 2019.

10.000 20.000 30.000 40.000 50.000 60.000 70.000 12 AM 3 AM 6 AM 9 AM 12 PM 3 PM 6 PM 9 PM 12 AM Megawatts Hour

Shorter duration peak  Lower storage capacity needed  Lower storage cost  More storage deployment Demand Residual Demand Wind Generation Solar Generation

Some power systems are nearing a tipping point for 4-hour storage providing capacity services instead of conventional generators

In Innovativ ive technolo logy can brin ring inn innovativ ive busin iness models ls

Example le: GI GI Energy + + Con

• nEd
• Four 1 MW / 1MWh batteries located in

front-of-the-meter at customer sites throughout NYC area

• Located in constrained network areas
• Customer receives lease payment
• Reg

egulated ed: ConEd granted priority dispatch during peak local demand

• Co

Competit itive: GI Energy can otherwise sell flexibility services on NYISO

• In

Innovation: Value stackin ing across regulated and competitive market segments

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Image Source: T&D World

Overvie iew of f Se Selec lect t Trends

• 1. Technology Cost/Performance Improvements

2.

• 2. Power System Fle

lexibil ility: A Glo lobal Prio iority

• 3. Decentralization of Supply
• 4. Electrification and Sector Coupling
• 5. Shifting Planning Paradigms and Practices

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Power r system fle flexib ibil ilit ity has as become a a glob lobal l prio riorit ity

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Figure source: NREL Report No. FS-6A20-63039

Dif ifferent le levels ls of f VRE penetratio ion requir ire an evolv lvin ing approach to provi vidin ing power system fle flexib ibil ilit ity

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Source: 21st Century Power Partnership and International Energy Agency. (2019). Status of Power System Transformation 2019.

0% 10% 20% 30% 40% 50% 60% % VRE of annual electricity generation Phase 1 - No relevant impact on system Phase 2 - Minor to moderate impact on system operation Phase 3 - VRE determines the operation pattern of the system Phase 4 - VRE makes up almost all generation in some periods

Growing Recognition of Importance of “Institutional” Flexibility

• Fas

aster power system / / market dis ispatch*

– Reduces flexibility requirements

• Better win

ind an and so solar production forecastin ing

– Reduces flexibility requirements

• Im

Improved bala alancin ing ar area coordination

– Increases access to flexibility resources

• Sm

Smart plan lannin ing an and procurement str trategies

– Integrated generation-transmission planning finds system-optimal VRE resources to reduce aggregate flexibility requirements

• Fle

Flexible le contract str tructures for power plan lants

– Avoiding “lock-in” of long-term take-or-pay contracts enables flexible

• peration and leaves headroom for lower cost resources at a later time

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Overvie iew of f Se Selec lect t Trends

• 1. Technology Cost/Performance Improvements
• 2. Power System Flexibility: A Global Priority

3.

• 3. Decentralization of Supply
• 4. Electrification and Sector Coupling
• 5. Shifting Planning Paradigms and Practices

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Key Trend: Decentrali lizatio ion of f Su Supply ly

• Increasing permeation of distributed energy

resources (DER) in power markets

• Geographically diverse spread of power

generation resources

– Predominantly variable renewable energy resources, but also batteries and natural gas to some extent

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Key Trend: Decentrali lizatio ion of f Su Supply ly

• In

Increasin ing permeation of dis istributed energy resources (DER) in in power markets

• Geographically diverse spread of power

generation resources

– Predominantly variable renewable energy resources, but also batteries and natural gas to some extent

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Th The Utili tility Persp spectiv ive: Dis istrib ibuted So Sola lar Chall llenges Our Tradit itio ional l Busin iness Model

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• Selli

lling power creates revenue to pay y for in infrastructure

• DPV deployment reduces

revenues and may y reduce regula lated capit ital exp xpenditures

• DPV most appealin

ing and accessible to customer groups that typ ypic ically subsidize the system

How big ig are these exp xpected utilit ility tarif iff im impacts?

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Usually smaller than predicted…

Ca Categorie ies of f potentia ial l utili tility responses to DER

Impede program development, impose fixed charges, restrictive permitting and interconnection, etc.

Constrain

Establish passive regulatory frameworks for compensation and interconnection, allowing market to function without intervention

Enable

Restructuring of traditional utility business model, establishing new revenue streams, performance regulation and incentives, etc.

Transform

Amended from: IEA-RETD 2014: http://iea-retd.org/wp-content/uploads/2014/09/RE-PROSUMERS_IEA-RETD_2014.pdf

Create proactive regulatory frameworks for interconnection and compensation, providing market with framework to monetize value create by innovation

Accelerate

Enable/Accelerate Str trategy: Alt lternative Retail Rate Str truct ctures to Ensu sure Cost t Recovery ry

• Default customer rate.
• Volumetric kWh energy charge + fixed charge + adders.

Standard Rate

• Increasing the fixed charge component of the bill
• Commonly proposed option (may incl. lower energy charge)

Increased Fixed Charge

• Sets the lower limit that a customer will pay each billing period

Minimum Bill

• Volumetric charge that cannot be offset by DPV kWh credits
• May require additional metering; essentially Net Billing

Nonbypassable Volumetric Charge

• Add time-based pricing for consumed/exported energy
• Volumetric kWh energy charge + fixed charge + adders.

Time-of-Use Energy Rates

• Demand charge component of the bill is based on the maximum

kW used over specified time interval; coincident vs. non-coincident

• Typically has a lower energy charge

Demand-Based Rate

There ar are man any ways for

• r utilit

tilitie ies to

• cr

create new revenue fr from DE DER

Transform Strategy: New Utili ility Busin iness Models ls

• Who reaches out to customer to garner interest?

Customer Acquisition

• Who brings the project to financial close, including pricing

the DPV system for the customer?

Transaction Facilitation

• Who installs the system?

Project Design / Construction (EPC)

• Who is responsible for certifying the system and registering

with the distribution?

Interconnection Certification and Registration

• Who manufactures and/or procures the DPV system

components?

PV Supply Chain

• Who invests the capital to build the system?

Project Financing

• Who ensures that financing payments are delivered?

Facilitation of Financing

• Who is the legal owner of the DPV system?

DPV System Ownership

• Who owns the location where the DPV is sited?

DPV Site Ownership

• Who is responsible for investing and operating the

distribution grid under increased DPV penetration?

Distribution Grid Management

• Residential customers are at a

significant disadvantage during procurement, leading to higher system pricing

– Potential justification for monopolistic force entering into competitive/private market

• Utility plays role of:

– Periodic aggregation of customer interest – Competitive procurement (and financing) facilitator on behalf

• f customers

– Can offer both individual and community DPV systems

Utility “Facilitation” Business Model

Trend in in USA: : St Storage-plu lus-DPV under NEM

• NEM with time-of-use or demand-based charges

– may be be si signific icant incentive to install storage by exporting / avoiding consumption during peak periods – Th This is is is val aluable to

• po

power system br broa

• adly if

if retail il rates ar are suf suffic iciently ly gran anula lar

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• NEM with time-invariant rates:

– grid rid is is effectiv ively ly a a fr free ee-to to-access fi financial ba battery ry – minimal economic benefit for storage-plus-DPV – some reliability benefit, if valued

Trend: : Emergence of f DER Aggregatio ion

Example: South Australia’s AGL Vir irtual Power Pla lant

1000 residential BTM storage- plus-DPV customers (5 MW, 12 MWh) Intended Use:

– Voltage support for distribution feeders with high solar penetrations – Capacity and frequency regulation at wholesale market level

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Image credit: twitter.com/aglenergy

Customer Compensation:

– $1,000 incentive to install storage – 1-year contract: $100 signing bonus, $45 / 3 months (bill credit)

Trend: : Emergence of f DER Aggregatio ion

Fortrum Vir irtual l The herm rmal l Energy St Storage Agg ggregation Plan lant

• Pilot pr

prog

• gram:

~2 ~2,0 ,000 res esid identia ial l water bo boil ilers ag aggregated

• Fix

Fixed bill bill cr credit it for

• r cus

customer

• Stagg

aggered use use

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Trend: : Evolv lvin ing regula latory ry fr frameworks for r dis istrib ibutio ion companie ies accele leratin ing DER in investments

• Regulatory incentives are driving distribution

utilities to weigh traditional grid capacity upgrades against emerging alternatives

• Examples:

– New York – Non-wires Alternatives – Australia – The $5M Rule – California – Demand Response Auction Mechanism – U.K. – Network Innovation Competition

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Key Trend: Decentrali lizatio ion of f Su Supply ly

• In

Increasin ing permeation of dis istributed energy resources (DER) in in power markets

• Geographic

icall lly div iverse spread of varia iable renewable energy resources

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Geographic icall lly disp ispersed fle fleet t of f su supply ly-sid ide reso sources

• Smaller projects due to use of modular

technologies

• Broader distribution of economic benefits

– Creation of good-paying long-term rural jobs – Land lease payments to rural communities

• Potential need for more network infrastructure

– Project development timeframe for network infrastructure far exceeds renewable energy

• Greater need for proactivity in transmission planning

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Th The Poli litic ical l Economy of f Energy Decentrali lizatio ion

Large centralized thermal power plants are increasingly being retired in lieu of a more economically competitive and geographically diverse portfolio

• f smaller-scale wind, solar,

natural gas, and battery energy storage resources, as well as more customer-sited DERs

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Navajo Generation Station: 2.25 GW coal-fired power plant ≈ 1000 jobs for indigenous community

Image Source: Navajo-Hopi Observer

Trend: Taxpayer and ratepayer-financed “Just Energy Transition” initiatives to help re-train thermal power plant staff.

Th The Poli litic ical l Economy of f Energy Decentrali lizatio ion

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Source: Zinaman et al. Principles for Power System Transformation in Emerging Economies 21st Century Power Partnership Report. https://www.nrel.gov/docs/fy19osti/73931.pdf

In In the lo long run, , the trend toward decentrali lization may y le lead to more broad-based and resili ilient lo local economic growth, where the future lo loss of a la large power sector enterpris ise is is le less lik likely to sig ignific icantly depress lo local economie ies.

Overvie iew of f Se Selec lect t Trends

• 1. Technology Cost/Performance Improvements
• 2. Power System Flexibility: A Global Priority
• 3. Decentralization of Supply

4.

• 4. Ele

lectrification and Sector Couplin ing

• 5. Shifting Planning Paradigms and Practices

36

Se Selec lect optio tions for r elec lectr trif ific icatio ion of f heatin ing and tr transport

37

Sector coupling efforts have the potential to enroll new flexible loads at scale to enhance power system flexibility.

A Virt irtuous Cy Cycle le: : Posit sitiv ive feedback betw tween declin linin ing grid rid- based carb rbon in intensit ity and elec lectr trif ifie ied end use ses

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As electricity supply becomes increasingly decarbonized, the benefits of electrification grow with positive feedback.

Cy Cyber se securit ity im impli licatio ions of f dig igit itali lizatio ion and elec lectr trif ific icatio ion - example le: Elec lectric ic Vehic icle les

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▪ Communic ication between vehicle les an and grid rid/buil ildin ing ar are entry ry pathways for se security breaches ▪ Vehicle software or firmware is most likely point of entry ▪ Malware could damage or infect charging infrastructure or vehicles ▪ Emerging field of research and development

Source: Rohde, K. (2017). GMLC 0163 Diagnostic Security Modules. GITT Deep Dive Review Meeting, Idaho National Laboratory.

Overvie iew of f Se Selec lect t Trends

• 1. Technology Cost/Performance Improvements
• 2. Power System Flexibility: A Global Priority
• 3. Decentralization of Supply
• 4. Electrification and Sector Coupling
• 5. Shifting Planning Paradigms and Practices

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Pla lannin ing paradigms and practices are shif ifting

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How we have planned, operated and even conceptualized the power system is driven by acc ccommodating th the technology th that provides th the most t energy for r th the lo lowest cost

We are now re-desig ignin ing our r approach to th the power system based on th the lo lowest cost t so source of f bulk lk power generatio ion

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• Energy volu

lume con

• ntrib

ibutio ion is an indicator of the extent to which a resource provides low-cost, bulk energy to satisfy demand over a given time period.

• Energy op
• ptio

ion con

• ntribution is an indicator of the extent to which a

resource is available to satisfy demand for energy and other critical system services over a given time period.

Growin ing In Integratio ion in in Power r System Plan lannin ing Exercis ises

• Integrated planning incorporating distributed

energy resources

• Integrated generation and network planning

– Integrated or hybridized modelling techniques – “Renewable energy zone” process

• Integrated planning between the power sector

and other sectors

– e.g., natural gas, transportation and urban planning

• Integrated inter-regional planning

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QUESTIONS?

Owen en Zin Zinaman – Chief Analyst Clean Energy Transition Partners www.cleanenergytransitionpartners.com E-mail il: Owen.Zinaman@gmail.com Whats tsApp: +1-847-436-6431

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