Can We Get Market and Regulatory Designs Right for Energy Storage? - - PowerPoint PPT Presentation

▶
can we get market and regulatory designs right for energy
SMART_READER_LITE
LIVE PREVIEW

Can We Get Market and Regulatory Designs Right for Energy Storage? - - PowerPoint PPT Presentation

Jan 12, 2024 212 likes •555 views

Can We Get Market and Regulatory Designs Right for Energy Storage? Ramteen Sioshansi Department of Integrated Systems Engineering The Ohio State University Centre for Energy and Environmental Markets and School of Photovoltaic and

slide-1
SLIDE 1

Can We Get Market and Regulatory Designs ‘Right’ for Energy Storage?

Ramteen Sioshansi

Department of Integrated Systems Engineering The Ohio State University

Centre for Energy and Environmental Markets and School of Photovoltaic and Renewable Energy Engineering University of New South Wales Sydney, Australia 18 December, 2019

The following are my own views and not necessarily those of the Electricity Advisory Committee or the U.S. Department of Energy.

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 1 / 33

slide-2
SLIDE 2

Outline

1

What Can Energy Storage Do?

2

How Is Energy Storage Incompatible With Regulatory Practice?

3

Storage-Capacity Rights

4

Conclusion

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 2 / 33

slide-3
SLIDE 3

What Can Energy Storage Do?

Outline

1

What Can Energy Storage Do?

2

How Is Energy Storage Incompatible With Regulatory Practice?

3

Storage-Capacity Rights

4

Conclusion

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 3 / 33

slide-4
SLIDE 4

What Can Energy Storage Do?

Energy Storage Applications

1

Energy arbitrage/generation shifting

2

Capacity deferral

Generation Transmission Distribution

3

Ancillary services

4

End-user applications

Tariff management Power quality Backup energy

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 4 / 33

slide-5
SLIDE 5

What Can Energy Storage Do?

Energy Arbitrage

Thu Fri Sat Sun Mon Tue Wed −200 −150 −100 −50 50 100 150 200 Day Net Energy Sold (% of Power Capacity) 20 30 40 50 60 70 80 90 100 110 Electricity Price ($/MWh) Net Energy Sold Electricity Price

[Sioshansi et al., 2009]

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 5 / 33

slide-6
SLIDE 6

What Can Energy Storage Do?

Capacity Deferral

Generation Capacity Deferral Charge during low-load hours Discharge during high-load hours Transmission and Distribution Deferral Transmission/Distribution System with Storage Site storage on the constrained end of a line Store energy when line is lightly loaded Discharge when line is constrained Can also improve power quality

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 6 / 33

slide-7
SLIDE 7

What Can Energy Storage Do?

Ancillary Services

[Kirby, 2004]

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 7 / 33

slide-8
SLIDE 8

What Can Energy Storage Do?

End-User Applications

Managing Energy Costs With time-variant pricing or demand charges Power Quality and Service Reliability Improve power quality (e.g., voltage, frequency, harmonics) Backup during a service outage

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 8 / 33

slide-9
SLIDE 9

What Can Energy Storage Do?

Value Stacking

Operating Profits [cents/week] Avoided Load Case Arbitrage Regulation Curtailment Total Arbitrage 42.84 42.84 Outage 41.61 4.62 46.23 Distribution Deferral 34.31 144.48 178.79 Frequency 39.07 296.04 335.11 Regulation

Table : Illustrative case studies [Xi et al., 2014, Xi and Sioshansi, 2016]

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 9 / 33

slide-10
SLIDE 10

How Is Energy Storage Incompatible With Regulatory Practice?

Outline

1

What Can Energy Storage Do?

2

How Is Energy Storage Incompatible With Regulatory Practice?

3

Storage-Capacity Rights

4

Conclusion

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 10 / 33

slide-11
SLIDE 11

How Is Energy Storage Incompatible With Regulatory Practice?

Hybrid Market Designs

Market-Priced Services Energy Ancillary services Generation capacity Regulated Services Transmission capacity Distribution capacity Power quality Service reliability Regulatory treatment of assets differs Energy is priced in the market = ⇒ generators recover costs through wholesale prices Distribution and transmission are regulated = ⇒ recover costs through the ratebase Assets are barred from crossing these lines

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 11 / 33

slide-12
SLIDE 12

How Is Energy Storage Incompatible With Regulatory Practice?

Energy Storage Applications

1

Energy arbitrage/generation shifting ⇐ = market-priced

2

Capacity deferral

Generation ⇐ = market-priced Transmission ⇐ = market-priced/regulated Distribution ⇐ = regulated

3

Ancillary services ⇐ = market-priced/regulated

4

End-user applications

Tariff management ⇐ = market-priced Power quality ⇐ = regulated Backup energy ⇐ = regulated

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 12 / 33

slide-13
SLIDE 13

How Is Energy Storage Incompatible With Regulatory Practice?

Value Stacking

Operating Profits [cents/week] Avoided Load Case Arbitrage Regulation Curtailment Total Arbitrage 42.84 42.84 Outage 41.61 4.62 46.23 Distribution Deferral 34.31 144.48 178.79 Frequency 39.07 296.04 335.11 Regulation

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 13 / 33

slide-14
SLIDE 14

How Is Energy Storage Incompatible With Regulatory Practice?

Would This Be Legal?

Operating Profits [cents/week] Avoided Load Case Arbitrage Regulation Curtailment Total Arbitrage 42.84 42.84 Outage 41.61 4.62 46.23 Distribution Deferral 34.31 144.48 178.79 Frequency 39.07 296.04 335.11 Regulation

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 13 / 33

slide-15
SLIDE 15

How Is Energy Storage Incompatible With Regulatory Practice?

Demonstrative Example: Texas

Because They Don’t Care Elsewhere

Oncor (a T&D utility) proposed building 5 GW of distributed batteries in its Texas service territory State law bars T&D utilities from owning assets that participate in the wholesale market, which is good from a price-formation perspective especially in an energy-only market [Sioshansi, 2010] The impasse:

The batteries are not worth the investment cost on the basis of unregulated distribution deferral and voltage support benefits only They would be economically prudent if they could participate also in the wholesale energy and frequency regulation markets [Chang et al., 2014]

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 14 / 33

slide-16
SLIDE 16

How Is Energy Storage Incompatible With Regulatory Practice?

Fundamental Issue

Mixing market-contingent and unpriced value streams Not harm price formation through rate-based/customer-subsidized storage assets participating in the wholesale market

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 15 / 33

slide-17
SLIDE 17

Storage-Capacity Rights

Outline

1

What Can Energy Storage Do?

2

How Is Energy Storage Incompatible With Regulatory Practice?

3

Storage-Capacity Rights

4

Conclusion

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 16 / 33

slide-18
SLIDE 18

Storage-Capacity Rights

Illustration

[He et al., 2011, Sioshansi, 2017]

auction revenues bids/payments capacity capacity-rights allocation cost recovery ES User 2 ES User N ES User 1 Allocation Auction ES Wholesale Market Ratebase · · ·

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 17 / 33

slide-19
SLIDE 19

Storage-Capacity Rights

Concept

1

Storage owner auctions-off storage-capacity rights to third parties wanting to use storage

2

Cost recovery of storage-capacity rights by third parties based on their intended use, e.g.:

Wind generator buys rights to shift wind production to a higher-priced period, cost recovered through wholesale transactions T&D utility buys rights for service reliability, cost recovered through ratebase

3

Different third parties compete for rights for different purposes, thus the full asset value can be captured

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 18 / 33

slide-20
SLIDE 20

Storage-Capacity Rights

Defining Storage-Capacity Rights

To a first-order approximation (e.g., neglecting degradation and nonlinearities), storage use has two governing constraints

1

power

2

energy

Depending on intended use, power and/or energy constraints are impacted, e.g.:

Wind Generator

buys rights to shift wind production to a higher-priced period cares only about charging/discharging power at specific times not what happens to the energy in the intervening periods

T&D Utility

buys rights for service reliability wants to charge/discharge power at certain times cares that the energy is available in the intervening periods

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 19 / 33

slide-21
SLIDE 21

Storage-Capacity Rights

Illustrative Storage-Capacity Rights

Power-Capacity Right: Entitles the holder to inject energy into or withdraw energy from storage at a given point in time Energy-Capacity Right: Entitles the holder to inject energy into and withdraw energy from storage at given points in time and keep the energy in storage between injection and withdrawal

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 20 / 33

slide-22
SLIDE 22

Storage-Capacity Rights

Illustration of Storage-Capacity Rights

energy in energy in energy in energy in energy out energy out energy out energy out charging power right discharging power right energy right (point-to-point) t = 1 t = 2 t = 3 t = 4 energy carried over energy carried over energy carried over energy carried over qd

3

qc

2

energy carried over qc

1

qe

1,4

qd

2

qd

4

qe

1,4

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 21 / 33

slide-23
SLIDE 23

Storage-Capacity Rights

Auction Model

max

q,s T

  • t=1
  • n∈Nt

(πd

t,nqd t,n − πc t,nqc t,n) + T

  • t=1

T

  • t′=t+1
  • m∈Mt,t′

πe

t,t′,mqe t,t′,m

s.t. st = ηsst−1 +

  • n∈Nt

(ηcqc

t,n − qd t,n) + T

  • t′=t+1
  • m∈Mt,t′

ηcqe

t,t′,m − t−1

  • t′=1
  • m∈Mt′,t

qe

t′,t,m

∀t (λt)

t

  • t′=1

T

  • t′′=t+1
  • m∈Mt′,t′′

qe

t′,t′′,m ≤ st ≤ H · ¯

R ∀t (σ−

t , σ+ t )

− ¯ R ≤

  • n∈Nt

(ηcqc

t,n − qd t,n) + T

  • t′=t+1
  • m∈Mt,t′

ηcqe

t,t′,m − t−1

  • t′=1
  • m∈Mt′,t

qe

t′,t,m ≤ ¯

R ∀t (γ−

t , γ+ t )

0 ≤ qc

t,n ≤ Qc t,n

∀t, n 0 ≤ qd

t,n ≤ Qd t,n

∀t, n 0 ≤ qe

t,t′,m ≤ Qe t,t′,m

∀t, t′ > t, m

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 22 / 33

slide-24
SLIDE 24

Storage-Capacity Rights

Pricing Rules

Lagrange multipliers associated with power limits for power-capacity rights + Lagrange multipliers associated with energy limits for energy-capacity rights Analogue to locational marginal pricing, except we’re paying to move energy around in time, not space

Detailed Pricing Rules Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 23 / 33

slide-25
SLIDE 25

Storage-Capacity Rights

Auction Properties

Proposition The allocation and prices are equilibrium-supporting. Proposition The storage-device owner earns non-negative revenues from the allocation of storage-capacity rights. Moreover, the net revenues earned by the storage-device owner equals its imputed marginal value.

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 24 / 33

slide-26
SLIDE 26

Storage-Capacity Rights

Implementation Details

Who runs the auction? Timing of the auction/long-term contracting

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 25 / 33

slide-27
SLIDE 27

Conclusion

Outline

1

What Can Energy Storage Do?

2

How Is Energy Storage Incompatible With Regulatory Practice?

3

Storage-Capacity Rights

4

Conclusion

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 26 / 33

slide-28
SLIDE 28

Conclusion

To Conclude

Energy storage breaks the traditional classification of assets from the perspective of regulation and cost recovery This has hampered storage investment or has/will give rise to price distortions Storage-capacity rights can overcome this cost-recovery hurdle May allow currently regulated services (e.g., power quality and voltage) to become market-priced

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 27 / 33

slide-29
SLIDE 29

Conclusion

References I

Chang, J., Karkatsouli, I., Pfeifenberger, J., Regan, L., Spees, K., Mashal, J., and Davis, M. (2014). The Value of Distributed Electricity Storage in Texas: Proposed Policy for Enabling Grid-Integrated Storage Investments. Technical report, The Brattle Group. He, X., Delarue, E. D., D’haeseleer, W., and Glachant, J.-M. (2011). A novel business model for aggregating the values of electricity storage. Energy Policy, 39:1575–1585. Kirby, B. J. (2004). Frequency Regulation Basics and Trends. Technical Report ORNL/TM-2004-291, Oak Ridge National Laboratory. Sioshansi, R. (2010). Welfare Impacts of Electricity Storage and the Implications of Ownership Structure. The Energy Journal, 31:173–198.

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 28 / 33

slide-30
SLIDE 30

Conclusion

References II

Sioshansi, R. (2017). Using Storage-Capacity Rights to Overcome the Cost-Recovery Hurdle for Energy Storage. IEEE Transactions on Power Systems, 32:2028–2040. Sioshansi, R., Denholm, P ., Jenkin, T., and Weiss, J. (2009). Estimating the Value of Electricity Storage in PJM: Arbitrage and Some Welfare Effects. Energy Economics, 31:269–277. Xi, X. and Sioshansi, R. (2016). A Dynamic Programming Model of Energy Storage and Transformer Deployments to Relieve Distribution Constraints. Computational Management Science, 13:119–146.

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 29 / 33

slide-31
SLIDE 31

Conclusion

References III

Xi, X., Sioshansi, R., and Marano, V. (2014). A Stochastic Dynamic Programming Model for Co-optimization of Distributed Energy Storage. Energy Systems, 5:475–505.

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 30 / 33

slide-32
SLIDE 32

Conclusion

Thank you!

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 31 / 33

slide-33
SLIDE 33

Appendix

Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 32 / 33

slide-34
SLIDE 34

Pricing Rule

Hour-t power-capacity charging rights priced at: −ηcλt − ηc · (γ−

t − γ+ t )

Hour-t power-capacity discharging rights priced at: −λt − (γ−

t − γ+ t )

Energy-capacity rights consisting of an hour-t injection and hour-t′ withdrawal priced at: ηcλt − λt′ −

t′−1

  • τ=t

σ−

τ + ηc · (γ− t − γ+ t ) − (γ− t′ − γ+ t′ )

Pricing Overview Ramteen Sioshansi (OSU ISE) Market and Regulatory Design for Energy Storage 18 December, 2019 33 / 33