Battery energy storage used on the grid for ancillary services has been gaining momentum ever since the United States changed its frequency regulation markets by introducing a concept known as pay-for-performance.
Ancillary services, which are critical for a stable and reliable electricity grid, are mechanisms, including frequency regulation, which are used by electricity grid operators to match the generation of electricity with its consumption, keeping everything in sync and running smoothly. Under pay-for-performance, providers of frequency regulation would be rewarded for providing fast, precise, and accurate power to the system operator for balancing generation and load. The notion of a significant amount of resources on the grid that could respond very quickly and accurately was previously not practical, but with the advent of lower cost, high reliability battery-based energy storage systems, system operators are now finding that the business of balancing the grid can be made more effective and more efficient all at once. The most notable example in the US is the service area of regional transmission organisation PJM, which is considered among the most robustly priced markets for the service in the country.
New Ancillary Service in the UK
Recently, in the United Kingdom, a comparable change is taking place. Balancing the grid at exactly 50Hz is not easy; managing many disparate generation types, ever-changing load, and the introduction of more variable intermittent generation like wind or PV makes this balancing of generation and load more challenging. National Grid, the grid system operator in the UK, relies on resources (generators and some loads) to respond to changes in system frequency by paying them to provide an ancillary service called frequency response. These resources react directly to changes in grid frequency by either increasing or decreasing power output, and provide these services at different levels. However, National Grid has now introduced a much faster type called Enhanced Frequency Response (EFR), to be added to existing frequency response services, as a new tool to ensure stability of the grid. This more powerful form of frequency response is needed because the UK grid is threatened by the loss of something called “system inertia”, which is a quality related to how well the grid resists changes. As opposed to traditional generation such as gas turbines, which use rotating equipment that naturally resist changes in frequency due to the sheer mass of the spinning turbines, renewable resources like wind and solar have less inertia per unit generation capacity. With predicted losses of system inertia somewhere between 15%-20% by 2020, and up to 40% by 2025, a supplemental source of this important quality is needed.
The EFR service seeks to provide this quality, albeit of a more synthetic nature than the spinning masses of gas turbines that provide inertia today. EFR requires response times of under 1 second to deviations in grid frequency which are typically caused by disturbances like generator shutdowns or downed power lines, versus 10 seconds or even 30 seconds for traditional frequency response. This speed of response is critical to impart “synthetic inertia” to the grid and results in two major benefits. The first is that management of grid frequency by National Grid becomes more effective; grid frequency will be more stable than before. The second is that with very fast responding resources, National Grid may actually be able to procure less of this important resource but achieve the same results, thus improving their costs for managing the grid.
Sizing and Configuring for EFR
An important question in all of this is – how much energy storage is needed to provide EFR? Since EFR is procured in MW, which is power capacity, the missing relevant parameter is energy storage capacity. As a limited energy resource, storage will only be able to deliver frequency response service until it either runs empty (0% state-of-charge), or in high frequency cases, runs full (100% state-of-charge). As it turns out, National Grid is only requiring 9 seconds of sustained delivery – at which point Primary complements EFR in a “relay race” of the various ancillary services that National Grid employs. To be in full compliance and help size the energy storage, full second-by-second frequency data is available, and early estimates from the operator suggest 45 minutes of storage would be required, but suppliers are able to freely size and offer the amount needed given their storage technology and frequency response offer type.
In addition, availability factor will be used to measure performance of the resource. While more of a stick than a carrot, poor performance can result in penalties ranging from a 25% to 100% deduction from each settlement payment, depending on the resource’s availability factor and its adherence to its promised response. However, value for EFR could be up to double that of traditional frequency response in some hours of the day. Today, traditional frequency response is paid around £11 (US$15.81) to £20 per MW per hour today, and so EFR energy storage could earn up to £22 to £40/MW-hr. Compared to PJM, where historically, storage could have earned about US$35 (roughly £23) per MW-hr in 2015, EFR could be one of the most lucrative markets for storage in the world. It should be noted that National Grid values not only speed of response for EFR, but also availability and duration – the higher the better. Thus the right balance of energy storage total cost and value to the system operator will be critical for a successful tender. Clearly, frequency response offer design, storage sizing and costing, and evaluation will be iterative as participants seek to craft the most attractive frequency response service for the lowest possible cost, maximizing the value to cost spread. This analysis, configuration, sizing and forecasting typically requires in depth technical and economic modeling to arrive at an optimized solution and while most providers of energy storage can simply ‘quote’ a system price, far fewer are able to conduct the kind of detailed analytical work required to maximize this value to cost spread or even understand its significance.
UK's 200MW EFR tender and the impact it could have on other markets
Currently, 200MW of EFR is scheduled to be procured by National Grid via open tender process beginning in April 2016, with the possibility for 600MW of future procurement. This future plan for procurement is larger than PJM’s Frequency Regulation “Reg D” market, which today is about 200 to 300MW depending on capped hours. However, the key question is this - as EFR begins operation sometime in mid-2017, will other countries begin stakeholder processes to introduce similarly-designed ancillary services for their own grids, and introduce a method to place greater value on faster response times and predictable, flexible, clean resources? As regulators and system operators consider the best approaches for the future of their own electricity grids, one thing is certain – a much cleaner but less controllable generation fleet consisting more of wind and PV than fossil-fuel-based generators will need fast, flexible, dispatchable resources to achieve the most important grid function of all – keeping the lights on.
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