Walawalkar Ees Economics
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ESA Annual Meeting 2008 May 21st 2008
ECONOMICS
ENERGY STORAGE TECHNOLOGIES IN NYISO AND PJM
OF
Rahul S. Walawalkar PhD, CEM, CDSM
OUTLINE ¾
Economics of EES in New York ISO and PJM
Energy Arbitrage
Regulation
Other Ancillary Services
Capacity resource
Net Present Value analysis for different applications
¾
Potential impact of large penetration renewable resources
¾
Conclusions
2
1
OVERVIEW OF NYISO & PJM
Source: PJM, NYISO & FERC
3
OPPORTUNITIES Profits from Location Based Marginal Price (LBMP)
differential between On Peak and Off Peak Ancillary A ill S Services i ¾ Regulation and Frequency Response Service ¾ 10 Min Spinning or Non Spinning Reserves ¾ Operating Reserve (30 Mins)
Demand Response Revenues Installed Capacity (ICAP) Revenues Deferral of capital investment in ¾ Generation ¾ Transmission & Distribution Supporting Renewable Energy Sources 4
2
ANALYSIS METHODOLOGY ¾ Grouped various zones in the NYISO and PJM markets
based on statistical analysis of LMPs and geographical considerations 11 NYISO zones were grouped into 3 regions 17 PJM zones were grouped into 4 regions
¾ Developed analytic framework to quantify the revenue
potential for different applications such as energy arbitrage, regulation, spinning reserve and capacity resource ¾ Conducted Net Present Value (NPV) analysis using 2001-07 market data for NYISO and 2005-07 market data for PJM analysis 5
GROUPING OF ZONES INTO REGIONS PJM
NYISO
East NY West
NY East
West
South
NYC
• • • 6
NYC: NYC, Long Island NY East: Capital, Hudson Valley, Millwood, Dunwoodie NY West: West, Genesee, Central, Mohawk Valley, North
Central
• • • •
PJM East: AECO, DPL, JCPL, METED, PECO, PPL, PSEG, RECO PJM Central: PENELEC, APS PJM South: DOM, BGE, PEPCO PJM West: COMED, AEP, DAY, DUQ
3
PJM –NYISO LMP PROFILES
7
EFFECT OF ROUND-TRIP EFFICIENCY ON ENERGY ARBITRAGE NET REVENUE (NYISO - NYC REGION)
8
4
CAPACITY CREDIT ¾ EES capable of offering 4 successive hours of energy
can receive ICAP credits ¾ NYISO has a locational ICAP requirement 80% for NYC and 99% for Long Island
¾ NYISO Annual Capacity revenues (2004-2007) NYC region : $90,000 - $140,000 / MW-Year Rest of NY State: $20,000 - $40,000 / MW-Year ¾ PJM had single g capacity p y market till 2007,, which was
replaced by locational market under RPM Historical value : $2,000 - $6,500 / MW-year Under RPM: $15,000 - $86,500 / MW-year
9
ANCILLARY SERVICE REVENUE ¾ Flywheels can be used for providing regulation
services in both PJM and NYISO Although regulation is net energy zero service,
flywheel will need to pay 15% in energy cost to cover losses. ¾ NAS Batteries can earn additional revenue by
providing synchronized reserves when not used for energy arbitrage Thus when used with 4 hour energy arbitrage, NAS
battery can provide 15 hours of synchronized reserves 10
5
NYISO AVERAGE PRICE CURVES
11
Based on NYISO Market data 2001-07
REGULATION MARKET CLEARING PRICE PROFILE NYISO (2001-07)
12
6
REGULATION MARKET CLEARING PRICE PROFILE PJM (2005-07)
13
ISSUES: REGULATION MARKET PARTICIPATION ¾ Traditional generators receive additional opportunity cost
payments, which are not available to flywheel
¾ PJM’s sample regulation signal indicates that flywheel
may be idle for up to 40% of the time
14
7
SYNCHRONOUS RESERVE MARKET RESULTS PJM (2005-07)
15
SUMMARY RESULTS: ANNUAL NET REVENUES (THOUSAND $/MW)
16
8
COMPARING NPV FOR FLYWHEEL (REGULATION) AND NAS (ENERGY ARBITRAGE & SYNCH RESERVE) IN NYISO AND PJM Inputs: •Capital Cost ($1.5M for flywheel and $2.0 M for NAS) •η (75% for NAS and 85% for flywheel) •Other Benefits ($150k/year for NAS and $100k/year for flywheel) • Triangular Distribution for Net Revenue for each region
17
IMPACT OF RENEWABLES ¾ NYISO is anticipating more than 3000 MW of
wind being added on the grid in next 3-4 years ¾ Represents around 10% of peak load for NYISO 20-30% of off peak load
¾ Will result in increased regulation and ancillary
service requirements ¾ Can improve the case for energy arbitrage by lowering off peak prices
18
9
26-Dec
14-Dec
2-Dec
20-Nov
8-Nov
27-Oct
15-Oct
3-Oct
21-Sep
9-Sep
28-Aug
16-Aug
4-Aug
35000
23-Jul
11-Jul
29-Jun
Days in Year 17-Jun
5-Jun
24-May
12-May
30-Apr
18-Apr
6-Apr
25-Mar
13-Mar
1-Jan 13--Jan 25-JJan 6-Fe eb 18-Fe eb 1-Mar
NYISO NET LOAD - 2006 NYISO - Net Load - Yr 2006
Summer Months
30000
25000
MW 20000
15000
10000
5000
0
S21 S17 S13 S9 Hrs in S5 S1 Day
19
NYISO SRMC CURVE
20
10
CONCLUSIONS ¾ Changes in current market rules and reliability criteria are
required to Permit EES in synchronous y spinning p g reserve market Eliminate uncertainty in market rules & valuation of regulation
¾ The analysis indicates that EES R&D efforts should include
focus on reducing capital costs and improving efficiency of the EES ¾ Due to higher capital costs of NAS batteries it is important to
select a location for EES installation by evaluating the T&D upgrade deferral potential ¾ Greater penetration of renewables could improve the economics for both energy arbitrage and ancillary services 21
ACKNOWLEDGEMENTS ¾ I would like to acknowledge contributions of Dr. Jay Apt, Rick Mancini
and Netra Thakur (Customized Energy Solutions) and Haresh Kamath (EPRI) in this analysis. analysis ¾ I would like to thank Dr. Lester Lave, Dr. Granger Morgan, Dr. Rahul
Tongia (Carnegie Mellon University), Stephen Fernands (Customized Energy Solutions), Joseph Sayer (NYSERDA) and Dr. Peter Balash (NETL) for guidance throughout this research. ¾ This research was supported in parts by NYSERDA, NETL, CEIC, EPRI
& Alfred Sloan Foundation and APPA
22
11
QUESTIONS ? [email protected] www.ces-ltd.com
12
ECONOMICS
ENERGY STORAGE TECHNOLOGIES IN NYISO AND PJM
OF
Rahul S. Walawalkar PhD, CEM, CDSM
OUTLINE ¾
Economics of EES in New York ISO and PJM
Energy Arbitrage
Regulation
Other Ancillary Services
Capacity resource
Net Present Value analysis for different applications
¾
Potential impact of large penetration renewable resources
¾
Conclusions
2
1
OVERVIEW OF NYISO & PJM
Source: PJM, NYISO & FERC
3
OPPORTUNITIES Profits from Location Based Marginal Price (LBMP)
differential between On Peak and Off Peak Ancillary A ill S Services i ¾ Regulation and Frequency Response Service ¾ 10 Min Spinning or Non Spinning Reserves ¾ Operating Reserve (30 Mins)
Demand Response Revenues Installed Capacity (ICAP) Revenues Deferral of capital investment in ¾ Generation ¾ Transmission & Distribution Supporting Renewable Energy Sources 4
2
ANALYSIS METHODOLOGY ¾ Grouped various zones in the NYISO and PJM markets
based on statistical analysis of LMPs and geographical considerations 11 NYISO zones were grouped into 3 regions 17 PJM zones were grouped into 4 regions
¾ Developed analytic framework to quantify the revenue
potential for different applications such as energy arbitrage, regulation, spinning reserve and capacity resource ¾ Conducted Net Present Value (NPV) analysis using 2001-07 market data for NYISO and 2005-07 market data for PJM analysis 5
GROUPING OF ZONES INTO REGIONS PJM
NYISO
East NY West
NY East
West
South
NYC
• • • 6
NYC: NYC, Long Island NY East: Capital, Hudson Valley, Millwood, Dunwoodie NY West: West, Genesee, Central, Mohawk Valley, North
Central
• • • •
PJM East: AECO, DPL, JCPL, METED, PECO, PPL, PSEG, RECO PJM Central: PENELEC, APS PJM South: DOM, BGE, PEPCO PJM West: COMED, AEP, DAY, DUQ
3
PJM –NYISO LMP PROFILES
7
EFFECT OF ROUND-TRIP EFFICIENCY ON ENERGY ARBITRAGE NET REVENUE (NYISO - NYC REGION)
8
4
CAPACITY CREDIT ¾ EES capable of offering 4 successive hours of energy
can receive ICAP credits ¾ NYISO has a locational ICAP requirement 80% for NYC and 99% for Long Island
¾ NYISO Annual Capacity revenues (2004-2007) NYC region : $90,000 - $140,000 / MW-Year Rest of NY State: $20,000 - $40,000 / MW-Year ¾ PJM had single g capacity p y market till 2007,, which was
replaced by locational market under RPM Historical value : $2,000 - $6,500 / MW-year Under RPM: $15,000 - $86,500 / MW-year
9
ANCILLARY SERVICE REVENUE ¾ Flywheels can be used for providing regulation
services in both PJM and NYISO Although regulation is net energy zero service,
flywheel will need to pay 15% in energy cost to cover losses. ¾ NAS Batteries can earn additional revenue by
providing synchronized reserves when not used for energy arbitrage Thus when used with 4 hour energy arbitrage, NAS
battery can provide 15 hours of synchronized reserves 10
5
NYISO AVERAGE PRICE CURVES
11
Based on NYISO Market data 2001-07
REGULATION MARKET CLEARING PRICE PROFILE NYISO (2001-07)
12
6
REGULATION MARKET CLEARING PRICE PROFILE PJM (2005-07)
13
ISSUES: REGULATION MARKET PARTICIPATION ¾ Traditional generators receive additional opportunity cost
payments, which are not available to flywheel
¾ PJM’s sample regulation signal indicates that flywheel
may be idle for up to 40% of the time
14
7
SYNCHRONOUS RESERVE MARKET RESULTS PJM (2005-07)
15
SUMMARY RESULTS: ANNUAL NET REVENUES (THOUSAND $/MW)
16
8
COMPARING NPV FOR FLYWHEEL (REGULATION) AND NAS (ENERGY ARBITRAGE & SYNCH RESERVE) IN NYISO AND PJM Inputs: •Capital Cost ($1.5M for flywheel and $2.0 M for NAS) •η (75% for NAS and 85% for flywheel) •Other Benefits ($150k/year for NAS and $100k/year for flywheel) • Triangular Distribution for Net Revenue for each region
17
IMPACT OF RENEWABLES ¾ NYISO is anticipating more than 3000 MW of
wind being added on the grid in next 3-4 years ¾ Represents around 10% of peak load for NYISO 20-30% of off peak load
¾ Will result in increased regulation and ancillary
service requirements ¾ Can improve the case for energy arbitrage by lowering off peak prices
18
9
26-Dec
14-Dec
2-Dec
20-Nov
8-Nov
27-Oct
15-Oct
3-Oct
21-Sep
9-Sep
28-Aug
16-Aug
4-Aug
35000
23-Jul
11-Jul
29-Jun
Days in Year 17-Jun
5-Jun
24-May
12-May
30-Apr
18-Apr
6-Apr
25-Mar
13-Mar
1-Jan 13--Jan 25-JJan 6-Fe eb 18-Fe eb 1-Mar
NYISO NET LOAD - 2006 NYISO - Net Load - Yr 2006
Summer Months
30000
25000
MW 20000
15000
10000
5000
0
S21 S17 S13 S9 Hrs in S5 S1 Day
19
NYISO SRMC CURVE
20
10
CONCLUSIONS ¾ Changes in current market rules and reliability criteria are
required to Permit EES in synchronous y spinning p g reserve market Eliminate uncertainty in market rules & valuation of regulation
¾ The analysis indicates that EES R&D efforts should include
focus on reducing capital costs and improving efficiency of the EES ¾ Due to higher capital costs of NAS batteries it is important to
select a location for EES installation by evaluating the T&D upgrade deferral potential ¾ Greater penetration of renewables could improve the economics for both energy arbitrage and ancillary services 21
ACKNOWLEDGEMENTS ¾ I would like to acknowledge contributions of Dr. Jay Apt, Rick Mancini
and Netra Thakur (Customized Energy Solutions) and Haresh Kamath (EPRI) in this analysis. analysis ¾ I would like to thank Dr. Lester Lave, Dr. Granger Morgan, Dr. Rahul
Tongia (Carnegie Mellon University), Stephen Fernands (Customized Energy Solutions), Joseph Sayer (NYSERDA) and Dr. Peter Balash (NETL) for guidance throughout this research. ¾ This research was supported in parts by NYSERDA, NETL, CEIC, EPRI
& Alfred Sloan Foundation and APPA
22
11
QUESTIONS ? [email protected] www.ces-ltd.com
12
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