In our last entry, we discussed the application of the VRB Energy Storage System (ESS) to a 7.5 MW industrial customer for full facility UPS, Power Conditioning and Emergency Power.  Now we'll talk more about the costs and benefits of such a system.

Economics:  Although an energy storage system can provide many valuable benefits, it has been difficult to cost justify a system to a single customers requirements.  In testimony before the House Committee on Science and Technology’s Subcommittee on Energy and Environment, Thomas S. Key, of the Electric Power Research Institute, stated in October 2007, "While there is little doubt that the net social benefits of these large storage plants are positive, the benefits are distributed among power producers, system operators, distribution companies, end users, and society at large".  Speaking about financing a large project in Texas in 2002, he said, "Not any single value stream, by itself, could secure financing."

The obvious answer to this conundrum is to sell services to more than one customer.  In our example, a third party operator (TPO) could own and operate the ESS and sell services to multiple customers.  Let's explore some of the customers available to the TPO.

Industrial Host:  The industrial host will receive UPS, Power Conditioning and Emergency Power.  What is the value to the host for these services?  The host knows what they will save in downtime and scrap from outages, and is happy to provide space to the ESS in return.  In addition, the host no longer needs their diesel generators and will save on fuel costs and maintenance and in reduced emissions.  Finally, our studies indicate that the power conditioning benefits of the ESS will reduce their energy use by 5 - 7%.

Utility:  The utility looks very favorably on the ESS.  The ESS is not a generator, although it provides many of the benefits of on-site generation.  Since it doesn't make electricity, it's not competition to the utility.  In addition, the power quality of the distribution grid is improved.  Finally, the host can now provide demand response to the utility.  The TPO can discharge energy to the customer and reduce usage by 5 MW as needed by the utility.  Current tariffs value such services at over $500,000 per year for a 5 MW ESS.

Grid Operator:  The regional grid operator needs certain ancillary services from generators to keep the grid stable.  For example, the California Independent System Operator (CAISO) needs generators to quickly ramp up or down to maintain system frequency at 60 Hz.  Some studies have indicated that energy storage systems can provide faster service than the slower moving fossil fueled generators, and with no emissions.  The VRB ESS can cycle many times per hour to provide this service with no degradation in storage capacity.  This service would generate revenues to the TPO of over $1.5 million per year.  Additional services to grid operator include black start, voltage control and spinning reserves.

Expansion:  The storage capacity of the ESS can be expanded by adding additional electrolyte.  In this example, the ESS could expand its energy storage from 4 hours to 8 hours or more.  This would allow the TPO to increase revenue by storing off peak power for on peak sales to the host or by providing capacity to the utility or reserves to CAISO.  The TPO can reduce costs by only installing only enough storage to meet current needs, and then expanding if  the economics make sense.

The purpose of this post was to suggest a potential application for the VRB ESS, utilizing the unique capabilities of the ESS for multiple charge-discharge cycles, long life and scalable storage.  Other energy storage systems have similar applications.  For additional information, please see the recent report funded by the DOE and the National Energy Technology Laboratory, "Market Analysis of Emerging Electric Energy Storage Systems".  The report is 118 pages, and was authored by Dr. Rahul Walawalkar, who produced a similar study for the New York market a few years ago.