Optimizing microgrid systems: integrating renewable energy sources and battery storage

The right energy mix

Behind the meter support  

As the world becomes less dependent on coal and nuclear plants, new generation technologies and fuel sources such as wind, solar and natural gas are growing. The increase of renewable energy is good for the environment. But if not properly managed on the grid, it may lead to issues.

Renewables have a different capacity factor than traditional power generation assets. Nuclear power generation has a 92% capacity factor (time the facility is able to produce maximum power). Coal and natural gas are above 50%. However, wind and solar have a very low capacity factor. These limitations must be considered when designing the grid and matching up battery storage and fast responding reciprocating engines with these new assets.

Since they’re not 100% dependable, wind and solar power sources can’t be used on demand and dispatched at the request of power grid operators. Even on a sunny day, there will be a curve of power generation. If you’re dependent on a solar panel for all your power, you need something that can be turned off and on quickly to match the power you need with the variable power created by the sun or wind.
 

Not dispatchable  

A utility company may experience a capacity vs. demand mismatch. In California, there can be an underproduction or underavailability of renewables during the late afternoons and evenings, when energy demand rises as people come home. This is also when power reaches a high price, because it’s restricted due to high demand and short supply. Ideally, the energy should be stored--created during the peak of the day and dispatched later when price and demand is highest.  

Grid congestion is another issue that may arise as operators stretch the grid further to get the most from their resources. It occurs during periods of high demand greater than existing capacity. What you have to do – potentially – is perform energy efficiency upgrades. But you should also store some energy during the time of day when the demand is lower. Then, it can be dispatched to ensure you match your transmission or substation capacity during those maximum times of the year. To maximize value, you can defer costly upgrades to a later date when it’s more affordable.

Types of storage

Pumped hydro storage comprises 97% of all storage capacity in the United States. Water is pumped up a hill or into a pond or retention basin when power is at a low price. When it’s higher, the pond or retention basin is drained and the water runs through a turbine to make electricity. Huge volumes create many megawatts, but finding land to install new facilities is difficult.

The remaining 3% of U.S. storage capacity has been dominated recently by lithium-ion battery technology. Lithium-ion has captured both the power capacity markets (instantaneous power available from the battery) and energy capacity markets (megawatt hours available from the battery). It has become the technology of choice for these types of applications, due to its high-cycle efficiency and fast response time. The technology is available worldwide, offering high reliability and performance. It’s also great for short duration and long duration applications, which are the focus of bridge storage applications in the real world.

Trends in grid storage

New challenges in the energy industry have increased the need for flexible storage solutions. The grid is changing. And battery energy storage is becoming a highly effective tool to optimize energy systems and satisfy customers. Now more than ever, infrastructure customers need interconnected systems designed for lifecycle performance, energy flexibility and responsiveness.
 

Regional storage trends

In the United States, the types of applications and uses for batteries differ by region. Pennsylvania, New Jersey and Maryland (where PJM is the system operator) focuses on power capacity – short-time, high-power output applications dispatched almost instantaneously for grid and frequency stabilization. The region’s power capacity and energy capacity are almost at a 1:1 ratio.

The energy capacity market is in high demand in California, where the California Independent System Operator (CAISO) oversees the electric power system. In this region, there are longer duration outputs. Since energy capacity is three times larger than power capacity, the grid needs to bridge some issues to be able to supply long-term power. Many applications in California are looking for battery storage to accommodate a four-hour duration, or four-hour discharge.  

Applications

How can battery storage technology be used? The four main application types for battery functions are:  

Types of service operators

Battery storage is used by a variety of regional and local service operators.

ISO/RTO Services

• Energy arbitage
• Frequency regulation
  
• Spin/Non-spin reserves
  
• Voltage support
• Black start
  

Utility Services

• Resource adequacy
• Distribution deferral
• Transmission congestion relief
  
• Transmission deferral

Customer Services

• Time-of-use bill management
• Increased PV Self-Consumption
  
• Demand charge reduction
• Backup power

There are opportunities at every level for applications at different points in the grid—from transmission to distribution to “behind the meter.” The further downstream (closer to the customer) batterybased energy storage systems are located on the electricity system, the more services they can offer to the system. And with more services, comes more financial benefits.

Full of potential

Battery storage is mainly dispatched for demand charge reduction, backup power and renewable self-consumption. However, engineers have yet to tap into the full potential of battery technology. Currently, less than 50% of the battery’s capacity is used for its primary application. There is more potential energy available to the customer, the end-user and the grid. The best way to tap into the energy is by stacking values. Because the value of a microgrid comes from multiple sources, all value streams must be understood, measured and added up for each project. Combining multiple value streams can increase a grid storage project’s profitability.  

Case #1 Commercial demand-charge management – San Francisco  

How does this look from a real-world commercial perspective? The graph above shows load levels before and after energy storage deployment for a building in San Francisco. The building is used from 1am to 12pm. The tariff for the demand management is about 500KW. To save energy costs, the battery in the utility charges when energy costs are low, and discharges when it approaches the 500KW tariff. As the pie chart illustrates, the building uses about 53% of the time on the demand charge reduction, roughly twice a day. This is projected to produce $400,000 out of $600,000 total revenue.  

Case #2 Distribution upgrade deferral – New York
 

The graph above shows how a distribution network is applied to an area with a traditional infrastructure in place. In this application, when the time of day reaches the afternoon, without energy efficiency or energy storage, the substation will be over capacity, which will lead to severe issues. Combining grid storage with different energy efficiency measures creates an opportunity to manage the load to make sure it doesn’t exceed substation capacity.  

The different revenue streams, resource adequacy and distribution upgrades are a very small portion of the percentage used. But they’re very high on the revenue scale. In this case it’s a mismatch on the cost of the project -- this is also a study in deferred costs as well. These are some of the factors that utilities must consider as they look at these kind of projects. There are upfront costs on the installation and operation of the system, along with long-term costs to defer these upgrades to ensure a stable and secure grid.  

Applications  

Example #1:
Off-Grid Greenhouse – California  

Site details

• 160,000 sq. ft. European-designed facility
• Limited three-phase power available for office area only
  
• Abundant natural gas available
• Cooling loads are the major challenge
  

Challenges

• Island mode operation
• Load swings based on changing loads
• Annual uptime guarantees
• Low transient and load acceptance of natural gas generators
• High ambient temperatures
  

Solutions

• Engines sized to match loads (1 x 1151kW, 2 x 1550kW) 
• Battery used for load leveling and backup generation during low load periods
• Full heat recovery for chilled water system
• Control of system from mtu microgrid controller with inputs from greenhouse building management system 

Example #2:
Off-grid hospital – Caribbean  

Site details

• Renewable self-consumption healthcare facility serving island community
• 99,000 patients annually
  

Challenges

• Only 30% of residents have access to electricity
  
• Electricity is costly - $.30kW/hr
  

Solutions

• 650kW installed PV
• 600kW / 350 kW / 200kW diesel generators
• 450kWh battery – Reduced fuel 35 gallons/day, offset 2,000 tons CO₂/year and saved 500,000 Euro/year
   

Barriers and incentives

As new technologies and new ways to distribute, store and use energy emerge, system operators and transmission operators have to figure out how to use those assets. Many FEC (Federal Energy Commission) regulations are outdated, but evolving. A lot of these regulatory restrictions make it harder to stack the value of those batteries. The grid was originally designed when customers were strictly power users. Significant upgrades are necessary to handle new ways customers use electricity.

Rules and regulations that place behind-the-meter energy storage on an equal playing field with large central generators have been developed and implemented slowly. A three-year rollout of FERC Order 755 required ISO/RTO markets to provide compensation to resources that provide faster-ramping frequency regulation. In addition, regulatory restrictions make it difficult or impossible for a utility to collect revenue from a behind-the-meter energy storage asset that provides value to multiple stakeholder groups. Under prevailing ISO/RTO rules, utilities can’t stack the value of batteries.
 

New policy actions for energy storage

• California – The California Public Utility Commission (CPUC) implemented Assembly Bill 2514 by setting a mandate for its investor-owned utilities to procure 1,325 MW of energy storage across the transmission, distribution, and customer levels by 2020
• California – The California Self-Generation Incentive Program designated $48.5 million in rebates for residential storage systems 10 kW or smaller, and $329.5 million for storage systems larger than 10 kW
• Federal - Energy storage installed at a solar or wind facility can be considered part of the energy property of the facility and can receive a portion of the Investment Tax Credit (ITC)
• Maryland - Offers a tax credit of 30% on the installed costs for residential and commercial systems
  
• Massachusetts - Set an energy storage target of 200 MWh by 2020
• Nevada - Allows storage systems to be included in renewable portfolio standards
• New York - Announced a target of 1.5 GW of energy storage by 2025
  
• Oregon - Passed a law directing two electric utilities to each procure 5 MWh by 2020
  

Conclusion

Microgrids optimize the use of solar, wind, energy storage and other resources to allow communities to obtain renewable, low-cost energy and maintain reliability. As renewable generation capacity continues to grow, more dispatchable power through battery storage is needed to provide grid stability. Placing a value on microgrids is challenging, since each individual project is unique. The microgrid must be carefully designed with services as close to the end user as possible with intelligent controls that optimize the interaction between energy sources. When considering the benefits of all value streams, cost savings and risk management, you may find that a microgrid is well worth the investment.
 

References

1. Fitzgerald, Garrett, James Mandel, Jesse Morris, and Hervé Touati. The Economics of Battery Energy Storage: How multi-use, customer-sited batteries deliver the most services and value to customers and the grid. Rocky Mountain Institute, September 2015. rmi.org/electricity_battery_value
   
2. U.S. Energy Information Administration. U.S. Battery Storage Market Trends, May 2018. Form EIA-860, Annual Electric Generator Report www.eia.gov
   

• Bloomberg New Energy Finance and The Business Council for Sustainable Energy, 2018 Sustainable Energy in America Factbook
  
• Energy Storage Association
• International Renewable Energy Agency, Electricity Storage and Renewables: Costs and Markets to 2030, October 2017
  
• U.S. Energy Information Association
   

Glossary

BESS - Battery Energy Storage System
C Rating - The rate that the battery can be charged or discharged, ex. a battery rated 2000kWh would provide 2000kW for one hour
Dispatchable gener ation - Sources of capacity that can deliver power on demand, through starting and stopping, and varying power output.
DoC - Depth of Charge
Energy capacity - Total amount of energy that can be stored or discharged or MMh
ISO / RTO - Independent System Operator and Regional Transmission Organization
Large-scale storage - Connected to the grid and are 1MW or greater
Lifecycle - Number and types of discharges and the effect on battery life
Power capacity - Maximum instantaneous power output or MW
Regional transmission organizations
— CAISO California Independent System Operator
— ERCOT Electric Reliability Council of Texas
— ISO-NE Independent System Operator of New England
— MISO Mid-Continent Independent System Operator
— PJM Pennsylvania-New Jersey-Maryland Interconnection
Small-scale storage - 1MW or below and connected to a distribution network
SoC - State of Charge
 

Rolls-Royce provides world-class power solutions and complete lifecycle support under our product and solution brand mtu. Through digitalization and electrification, we strive to develop drive and power generation solutions that are even cleaner and smarter and thus provide answers to the challenges posed by the rapidly growing societal demands for energy and mobility. We deliver and service comprehensive, powerful and reliable systems, based on both gas and diesel engines, as well as electrified hybrid systems. These clean and technologically advanced solutions serve our customers in the marine and infrastructure sectors worldwide.