Issue 7: Winter 2014
It’s payback time
TSO study finds
lithium ion batteries
still too expensive
Lead, glorious lead
Why the grid’s future
depends on the oldest
of battery chemistries
Lost in transmission
Italian utilities fight
intermittency with
energy storage
The next utility revolution
UBS, the multinational banking giant, reck-ons that a tipping point in energy storage and generation could arrive as early as 2020. At this point large-scale, centralized power stations could start to become a thing of the past.
The bank’s analysts, in a report to their professional investors, say they expect pho-tovoltaic technologies, cheaper energy stor-age and the rise in electric vehicles to signal the end of power stations with the transition likely to be complete within 20 years.
“Solar is at the edge of being a competi-tive power generation technology,” said the report.
“The biggest drawback has been its inter-mittency. This is where batteries and electric vehicles come into play. Battery costs have declined rapidly, and we expect a further de-cline of more than 50% by 2020.”
Centralized power stations, the briefing said, are too big and inflexible to continue to service the power needs of future gen-erations. The authors of the report instead suggest that households and businesses will increasingly find it cheaper and easier to generate and store their own.
The report said: “By 2025, everybody will
be able to produce and store power. And it will be green and cost-competitive, ie, not more expensive or even cheaper than buying power from utilities.”
The report urged UBS’ financial clients “to join the revolution”, identifying solar as the technology that will be the most disruptive to the status quo.
The combination of cheaper energy stor-age — irrespective of the chemistry used to store that energy — caused by greater PV efficiencies as well as mass produced electric vehicles suggest that a financial return on a home solar PV system could be as little as six years.
It suggested too that this return on invest-ment could be made without the need for government subsidies.
Separately, a recent report by the Interna-tional Energy Agency predicts that world-wide renewable power generation will exceed that from gas and be twice that of nuclear by 2016. It will make up almost a quarter of the global power mix by 2018.
Developing countries, with China at the forefront, are expected to account for two-thirds of the global increase in renewable power generation by 2018.
Days of large scale electricity
generation to end in a decade
Ergon Energy
orders battery
storage from
S&C Electric
S&C Electric is to sup-ply Ergon Energy with 20 lithium ion battery storage systems for the network in Queensland, Australia, following a deal announced in Octo-ber.
Ergon Energy, which manages the network in the state of Queensland, will install the grid utility support systems (GUSS), together amounting to 2MWh of energy capac-ity, in 2015. The GUSS units will use lithium ion batteries, battery manage-ment systems and enclo-sures from Saft.
S&C has been working with Ergon on the pro-ject close to two years. In 2013 Ergon piloted pro-totypes of the system in the far north Queensland region.
The systems, each 100kWh in size, will im-prove the quality and reliability of electricity supply to rural customers on constrained single wire high voltage distribu-tion voltage lines, called single wire earth return (SWER).
The batteries will be in-stalled wherever there are long SWER lines suffering power quality problems, managing peak demand, and will be connected via a dedicated transformer. Each unit is 5m long by 1.8m wide and is 2m tall.
Ergon wants to install hundreds of battery stor-age systems on its SWER network in coming years, which could reduce the cost of upgrading this part of the network by more than 35%.
Traditional network upgrades to reduce con-straint on SWER lines can cost more than A$2 mil-lion (€1.4 milmil-lion). Samsung SDI will supply Green Charge
Net-works with up to 25MWh-worth of lithium ion batteries over the next two years.
The contract, which the firms signed in September, guarantees Green Charge has adequate supply of batteries as it seeks to expand its leading position in the growing market for intelligent energy storage.
The company says its order book has doubled in recent months, in the wake of securing in excess of $50 million from investors to fund its business of installing no-money-down energy storage systems for commercial and industrial end-users across retail, hospitality, schools and mu-nicipalities.
Green Charge Networks has been qualify-ing Samsung SDI’s batteries for more than a year in its Greenstation energy storage sys-tems. chief executive Vic Shao says: “We’ve gotten through the R&D phase, and finally have a cookie cutter approach and process that can be scaled and that, in turn, needs partners with scale.”
Green Charge Networks is one of a grow-ing number of energy storage providers, including Germany’s Younicos and
Green-smith, in Maryland, using Samsung SDI’s batteries.
For Green Charge Networks, Samsung SDI’s batteries are supported with a 10 year warranty. “This means a great deal to a com-pany like ours, which does not have a large balance sheet but Samsung does,” says Shao. He believes that aligning with established industrial manufacturers and partners can give his company credibility with investors, customers and various other stakeholders, in a market that is fast attracting high-tech start-ups from Silicon Valley.
For 14 years Samsung SDI has been pro-ducing lithium ion batteries, in significant cumulative quantities, for consumer elec-tronics, transport and stationary storage markets. Recent projects include supplying 2MW of batteries to Italy’s national trans-mission grid operator Terna, with partner Younicos.
In October 2015 China’s largest automo-tive lithium ion battery factory, in Shaanxi province, will come online, financed with a $600 million investment from Samsung SDI. The plant will supply over 40,000 EVs an-nually.
Green Charge Networks signs
THE EUROPEAN GRID COMES OF AGE
Snatching defeat from the jaws of vic-tory. That was the way one energy commentator described moves by the German parliament this June to cut subsidies on renewable energy tariffs.
Yet, just a month before, headlines across Europe blazoned the news that renewable energy had — for a brief afternoon in May — provided three quarters of Germany’s electrical sup-ply.
The push-pull in Germany’s ap-proach to balancing the introduction of PV and wind power into the grid and its cost is just part of a wider de-bate that is running across Europe.
It’s now less about integrating newables into the grid — May’s
re-cord levels in Germany, earlier in the year, show that this can be achieved — the focus is now shifting to its cost and energy storage on an industrial scale.
The transition to a smarter, more flexible, grid, increasingly dominated by wind and solar generation, is a bal-ancing act, it requires scaling back of existing generation capacity, as more renewables are added.
And this is where energy storage — at least in theory — should bridge the gap.
But as with the German govern-ment’s desire to cut subsidies — and so reduce the price of electricity to its citizens — energy storage has to
be commercially viable if it’s to move from theory to fact.
Putting huge amounts of energy into expensive industrial-scale batteries has to be made cost effective.
According to the UK’s Department of Energy and Climate Change there are over 250 energy storage projects in operation in Europe, with nearly €1billion ($136 million) of EU fund-ing.
Battery banks are cropping up like mushrooms on all parts of the high, medium and low voltage networks.
But, in most cases, storage is being used to tackle one specific issue or problem on the grid.
In Italy, for example, where Terna is procuring 75MW of batteries, the transmission system operator (TSO) is investing in the technology to ad-dress the most immediate challenges, identified in separate grid defence and development plans presented to the regulator.
In Germany, the state-funded bank, KfW, has been running a subsidy
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Turning theory into reality.
That’s the next step for
Europe where future grid
developments have been
characterized by energy
storage pilots rather than
bankable investments.
But, the technology’s full
commercial potential is
starting to appear.
Grid storage moves to the
fore in Europe as momentum
for change gathers
scheme since 2013 to incentivize new solar PV installations and also stor-age, at the domestic and small-scale commercial level.
Other countries, such as the UK and Spain, are also commissioning storage pilots on the grid. The size may not be huge — the UK has just 12MW of en-ergy storage projects of at least 1MW in size — that are either operational or are in planning.
Drivers in Europe
Olivier Vallée, an analyst from Paris-headquartered cleantech finance firm Natureo Finance, which has been tracking over 120 grid-scale energy storage projects — 500KWh or larger — worldwide, says that in Europe, re-newable energy integration has been the main driver.
In the US it’s another story — its older, less well-interconnected grid has meant that frequency regulation has been the focus. More recently, in Europe there is a shift to frequency regulation, while the US is increasing-ly focused on renewables integration, according to Vallée.
Storage investments will need to do different things and have several in-come streams if these assets are to be commercially viable without subsidy.
In Europe, most demonstrators and pilots have focused on testing the vari-ous functions of grid-integrated bat-teries.
One example is a 1MW lithium ion battery that has been connected to the low and medium voltage grid in the city of Dietikon in Switzerland since March 2012.
The plant, operated by Swiss utility EKZ, has been designed to carry out frequency regulation, peak shaving, voltage regulation and uninterruptible power supply.
Commerciality concerns
Energy storage projects that aim from the outset to demonstrate real commercial business cases are fewer in number. However, this is chang-ing. US-headquartered independent power producer AES Corporation announced plans in April to build a 100MW lithium ion battery bank in Northern Ireland, where the company already operates power stations.
The Kilroot storage facility will be used to integrate more wind into the local grid, reducing the need to cur-tail this form of green energy so the amount of traditional, dispatchable power reserves usually needed to com-pensate for the spiky unpredictable
flows of wind-generated power can be gradually cut back.
Both the north and the south of Ire-land plan to have 40% of the isIre-land’s electricity consumption met by renew-ables by 2020. Today the percentage is already high compared to many grids in Europe and grid operators Eirgrid and System Operator Northern Ire-land (SONI) are forced to address challenges that larger systems have yet to encounter.
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THE EUROPEAN GRID COMES OF AGE
AES’ investment shows that in cer-tain cases large-scale storage on the grid does not need to be subsidized.
The IPP already has 100MW of bat-teries connected to the grid in West Virginia and Ohio for the TSO PJM Interconnection, which act as efficient alternatives to peaking plants provid-ing frequency regulation, an ancillary service in the wholesale power market.
In Northern Ireland AES’ Kilroot project is coinciding with changes to the grid and grid codes, where new re-newable energy capacity will have to provide frequency regulation services, so AES could potentially supply this service to wind power generators in future
Andrew Jones, managing direc-tor at S&C Electric Europe, believes
there will be a growth in the number of companies that set up IPP arrange-ments for storage and some of the first companies that will deploy the tech-nology will be renewables developers. Because of the network unbundling that came with the privatization of Europe’s electricity markets in the late 1990s, distribution and generation are separate and current rules prevent net-work operators from owning storage, which can be both distribution or gen-eration assets.
In the UK, for instance, historically storage was deemed to compete with generation so it is generally classed as such an asset.
In the case of a 6MW (10MWh) storage project in the UK, which S&C Electric Europe is building for the dis-tribution system operator (DSO) UK Power Networks, at a primary substa-tion in Leighton Buzzard on the out-skirts of London, the plant has to sell energy into the market for the invest-ment to generate revenues.
This requires a supply licence, so Smartest Energy, which is the UK’s leading buyer of energy produced by independent and renewable energy generators, is the licensed supplier. It is the first energy storage project, glob-ally, to test what value can be achieved on a commercial and the findings could inform market design changes.
“The challenge is we have a free market and storage is at the mercy of the market in terms of how profit-able it can be, whereas government or municipal-owned utilities are finding it easier to install storage as they see the whole benefit and not the broken value chain as we are dealing with it,” says Jones.
This is the case in Italy, where the TSO, Terna, is in the middle of procur-ing its 75MW of storage (see follow-ing feature).
Out of this NGK, in Japan, is pro-viding sodium sulphur batteries for all 35MW of Terna’s energy-intensive storage, which will be connected to high voltage lines to reduce conges-tion and open up the grid to absorb more wind-generated electricity, in-stead of shedding hundreds of GWhs through curtailment.
The remaining 40MW for power-intensive applications will be installed on the islands of Sicily and Sardinia, to provide quick bursts of power to overcome loss of inertia in these small grids. The 40MW will be installed in two phases, the first as part of a stor-age lab to pilot the various battery and storage technologies, which
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Engineers installing lithium ion batteries in a 5MW (5MWh) energy storage system in Schwerin for German electricity producer Wemag, which Younicos is supplying as a turnkey installation.
The same installation for Wemag during construction. The project has been supported with €1.3 million from the Federal Ministry for the Environment.
clude lithium ion and sodium nickel chloride chemistries.
The remaining 24MW, installed in the second phase, will be deployed in these two types of batteries on the is-lands. Terna will operate all 75MW of the storage assets.
This is different to what is taking place in California where the regula-tor’s storage target 1.3GW by 2020 obliges the state’s large public utilities to procure services from suppliers, as well as operate their own assets. The California Public Utilities Commis-sion’s mandate was crafted in such a way as to help establish a market where different business models,
in-cluding third party ownership, can po-tentially thrive.
The role of integrator
Terna’s approach, which is also hap-pening across Europe in other storage pilots, reflects how utilities have tra-ditionally done things. According to Jones: “Utilities are comfortable with going out and buying the transform-ers, cables and other components to build grid assets, and take on the risk.”
But even though batteries have oc-casionally been used on the grid, en-ergy storage is proving to be a differ-ent beast. This is why companies such as S&C Electric, ABB and Siemens, all
with decades of experience of supply-ing power infrastructure components for grids are jostling with each other to do the integration.
These types of companies have the track records and the balance sheets to take on the risk of multi-million euro projects and are also familiar to utili-ties.
ABB, which is supplying Italian DSO Enel Distribuzione with a 2MW energy storage system on Sicily, has histori-cally done energy storage on a project-by-project basis. “That was until 2009 when renewables really began to take off and stimulus funding became avail-able in Europe, and also the US, to fi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m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FOR RENEWABLES INTEGRATION
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THE EUROPEAN GRID COMES OF AGE
nance pilots and projects,” says Stephen Clifford, who is in charge of global mar-keting and business development within ABB’s smart grids business.
The company then decided to for-malize its energy storage activities and the 2MW project with Swiss utility EKZ, completed in 2012, was one of the first one of these. “Although the system was developed by EKZ as a pi-lot, this is a commercial system from us. We’ve also done some projects in the US,” says Clifford.
ABB supplies both turnkey energy storage systems, such as for EKZ and Enel Distribuzione, as well as power conversion system equipment to cus-tomers.
Similarly, for AEG Power Solutions grid-scale energy storage presents a two-fold opportunity. The company is a supplier of hardware components such as power conversion system equipment but is also increasingly fo-cused on becoming an integrator of energy storage systems.
To date, AEG Power Solutions has provided a turnkey battery storage system for an off-grid project in Mali, in Africa. Orders for the company’s storage converter, Protect.SC, for use in large battery energy storage systems are also increasing, it says.
One of these is for a vanadium redox flow battery installation in northern Germany, with Vanadis Power, where the 1MWh storage plant banks locally generated wind power. The other pro-ject is in Spain in a storage system us-ing lead acid batteries.
The energy storage systems will mainly be used for frequency regula-tion, peak load shifting and other cur-rent management functions.
Typically integrators buy batteries, often lithium ion, from manufactur-ers, which include companies such as LG Chem, Samsung SDI and Saft.
The acquisition trail
However, as with any disruptive tech-nology, the energy storage industry is attracting players from other in-dustries as momentum gathers pace. Earlier this year, Japanese technol-ogy company NEC leapfrogged to the top in providing grid-scale storage, through a $100 million acquisition
— from Wanxiang Group — of A123 Energy Solutions, the non-automotive lithium ion battery and system inte-gration division of A123.
The company has installed more than 110MW of its lithium ion storage systems around the world. The new subsidiary, NEC Energy Solutions, will continue to supply energy storage using A123 Systems’ nanophosphate lithium ion cells and provide support for existing installations.
In addition, NEC’s own lithium ion technology will also be available for use in the new company’s grid-scale storage projects.
“Full system integration, by taking the lead on projects, as in providing turnkey project services, is key. We are not only a battery provider. As the energy storage market develops and the company increases its customer base, designing systems based on the customer’s needs will be important for success,” says Ciro Scognamiglio, NEC business analyst.
The value chain
But for some other companies, their strategy is dependent on not moving too far up the value chain. Samsung SDI, for the foreseeable future any-way, is interested in supplying battery systems for different storage markets and not doing the integration, prefer-ring to work with companies such as S&C Electric.
Italian industrial battery maker Fi-amm, which helped develop sodium nickel chloride — the so-called ‘salt’ — batteries originally for telecoms customers as an alternative to lead acid, has won tenders with utilities, including Terna, to supply large-scale on-grid as well as off-grid storage pro-jects.
“With energy storage we are moving from supplying a battery to a system, but we don’t want to escalate up the value chain. We want to stay out of the way of our customers,” says Nico-la Cosciani, chief executive of Fiamm Energy Storage Solutions, in reference to the energy management system por-tion of an energy storage installapor-tion.
Some power conversion system sup-pliers, like S&C provide the energy management system, as does NEC.
“What is very important is the man-agement of the technology. We don’t want to only provide energy storage but provide the intelligence needed to manage these technologies, to optimize their functioning within the regula-tory framework,” says Scognamiglio.
In the case of Terna, the TSO is doing the energy management system side, integrating the various storage instal-lations into its grid system. The energy management system, which is based on software controls, instructs — and coordinates — the battery system in its operation, based upon the require-ments of the grid and other loads, such as renewable energy plants, that are also connected.
One company specializing in energy management system is software start-up Younicos, headquartered in Berlin. In north-east Germany Younicos supplied a 5MW (5MWh) energy storage system in Schwerin for the green electricity producer Wemag. The company delivered the battery instal-lation as a turnkey project, which uses lithium ion batteries from Samsung SDI. The plant was connected to the grid in August.
From pilot to profit
The battery array can store or release up to 5MW to stabilize the grid in West Mecklenburg, where there are lots of wind turbines, to provide the equivalent power of a conventional 50MW fossil fuel fired turbine, creat-ing further grid capacity for electricity generated by renewables.
Even though the project is a pilot, funded with a €1.3 million from Ger-many’s environment ministry, the unit will compete on the primary control market and generate a profit. To do this requires a pre-qualification by the grid operator at 50 Hertz transmis-sion.
Younicos’ background is in renewa-bles and the company found from early work on small island grids that adding some storage — even just a few minutes of it — will enable 60% of an island’s electricity to come from renewables such as wind and solar, whereas without some form of storage this amount is around 15% before the island grid becomes unstable.
The company investigated and tested different energy storage technologies, including various battery chemistries, flywheels and supercapacitors, before settling on lithium ion as the best for short-term storage requirements, typically in the minutes or hours, on a daily basis.
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Philip Hiersemenzel, a Younicos of-ficial, says: “Back in 2006 there was not that much available information on lithium ion batteries for stationary storage as the biggest market was con-sumer electronics.
“For stationary storage, because lithium ion is expensive, the batteries have to be able to operate for a long time before needing replacing. You-nicos found that Samsung SDI had some of the best cells on the market and contacted the company.”
The last few years have been spent on developing the company’s software to be able to find the battery’s sweet-spot.
“How you treat batteries makes a big difference to their lifetimes,” says Hiersemenzel.
For UK Power Networks’ energy storage project on the Leighton Buz-zard primary substation, S&C Electric Europe is lead supplier, with Samsung SDI supplying lithium ion batteries.
However, it is Younicos’ software technology that will react to price sig-nals and optimize the performance of Samsung’s batteries.
The software also guarantees avail-ability, charging and discharging as required and maximizes lifetime by maintaining the batteries at their opti-mum state-of-charge, to ensure a long lifetime, thus helping to bring down the asset’s overall operational expend-iture (OpEx) costs.
“S&C has its own software for man-aging batteries for grid-scale station-ary storage applications, but as the Leighton Buzzard project has to prove multiple business cases Younicos is one of a few start-ups, focused on software, which was able to deliver a platform that can make batteries carry out such a multiplicity of services and functions.
“This reflects the complexity of the full extent of what is being asked of the battery bank in this particular pro-ject,” says Jones.
But Younicos has ambitions to be more than a software provider to the industry. The company’s project with Wemag is important to show the com-pany also acts as integrator, which seems to be the most dynamic portion of the grid-scale energy storage indus-try at present.
Acquiring the assets and staff of Xtreme Power in May, which filed for bankruptcy this year, will help Younic-os get a foot in the door of the market stateside.
“Xtreme can be thought of as a US cousin of Younicos. Historically both
companies considered battery manu-facturing as part of their energy stor-age business,” says Hiersemenzel. The German company is in the process of merging each business’ different tech-nologies and will be picking up with Xtreme Power’s utility and power cus-tomers, which include companies such as Duke Energy and GE.
“The US market is very promising, as it is potentially very big — even in terms of frequency response demand and California mandates alone. It will grow rapidly and we are now in a good position,” he says.
Supply chain in a state of flux
Trying to predict the fortunes of an emerging industry is a fool’s game. But what is becoming clear is that the highest rewards may be reserved for those with their eye on global oppor-tunities in grid storage, as illustrated by acquisitions by NEC and Younicos, and AES’ big battery project in North-ern Ireland.
Terna, too, is getting in on the ac-tion with plans to spin off a company that will provide services based on the TSO’s accumulated experience of how energy storage can exist as grid assets, especially in terms of ensuring a func-tioning grid as penetration of inter-mittent renewables increases.
To date, Terna’s procurement pro-gramme makes Italy one of the larg-est markets for energy storage, in the near-term, and this has attracted the interest of many grid operators from around the world, particularly from California, South Korea, Japan, Aus-tralia, Switzerland, Hawaii, Chile, Spain and the UK.
Even though such a company would be a competitor to the likes of S&C and ABB, according to Jones, it would play well in the industry. “As part of one of the leading TSOs it would, therefore, help make energy storage more credible and that is what this in-dustry needs going forward,” he says.
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The Kilroot power station in Northern Ireland, owned by AES Corporation, is also the proposed location for a 100MW lithium ion storage plant that AES will build and operate to integrate more wind into the local grid.
PROFILE: THE ITALIAN GRID
Two countries united by a common language.
It’s an odd phrase. But one that de-fines modern day Italy. To the north, an energetic industrialized centre for manufacturing. Think Milan, Turin.
But in the more rural south, a less developed pace prevails.
In terms of the grid: in the north it’s a sophisticated, extensively intercon-nected network. But further south in the agricultural central and southern parts of the long, narrow country, the grid is far less well developed.
The trouble is that it’s in the south where the growth of renewables has been strongest — particularly for wind power in provinces such as Puglia.
The result is that the high voltage cables and connections, which serve as the transmission grid’s backbone, are under strain. Getting wind power from the south, where demand is low, up to the north, has been a headache for Terna, the country’s transmission network operator.
“2010 was a crunch point for Terna. Congestion was a massive problem, with 500GWh of wind curtailed in that year,” says Anna Carolina Tor-tora, head of innovation and storage at Terna Plus, a subsidiary of the trans-mission system operator (TSO).
To introduce flexibility into this sys-tem for the region, Terna is procuring 35MW of energy-intensive batteries, under its 2011 Grid Development plan. This will avoid the loss of hun-dreds of GWh of wind energy, provid-ing economic savprovid-ings as generators have to be paid for energy produced even if it cannot go into the grid.
Under its 2012 Grid Safety and De-fence plan, Europe’s largest TSO and the sixth largest in the world, is buy-ing 40MW of power-intensive energy storage, which is being installed on the islands of Sicily and Sardinia, to
com-pensate for the loss of inertia in these smaller mainland-connected grids and provide services such as frequency regulation.
Terna’s investment in 75MW of en-ergy storage, which is in the region of €300 million ($400 million), is in re-sponse to government-level interven-tion, as opposed to a change in market mechanisms, which has occurred in the wholesale power markets in the US.
In the US TSOs, such as PJM Inter-connection, pay more for fast response storage to provide some frequency regulation, an ancillary grid service.
However, both Terna as well as dis-tribution system operators, are able to achieve a 2% additional return on storage over and above the current 6% for network assets, reflecting the cost and risk associated with these types of technology investments.
Terna is obliged to provide the regu-lator, Autorità per l’energia elettrica il
gas e il sistema idrico (Italy’s gas and energy authority), with performance data and analysis every six months and on an annual basis.
The TSO will also be assessing each installation’s performance based on how the energy storage systems oper-ate in the grid, delivering various ser-vices, in terms of speed of response, life cycle and other criteria.
Battery technologies and suppliers
Japan’s NGK, announced in 2013, is supplying 35MW (252MWh) of so-dium sulphur batteries to reduce local congestion on Italy’s high voltage grid, as well as increase primary, and also tertiary, reserves and provide voltage support.
By the end of this year, the batter-ies will be installed and operational on two 150kV lines, in three separate locations in the region of Campania, in southern Italy; 12MW in
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Energy storage offers way to
unify renewable power gap
in Italy’s north-south divide
A 2MW (2MWh) energy storage system, supplied by NEC, which will be installed at Enel Distribuzione’s Chiaravalle primary substation in Calabria.
to province, 12MW in Flumeri and 10.8MW in Scampitella, which are both in Avellino province.
For its 40MW of power-intensive de-mands, Terna has, so far, chosen lithi-um ion as well as sodilithi-um nickel chlo-ride batteries from various suppliers.
Saft is supplying 2MW (2MWh) of lithium ion, Samsung 2MW (2MWh), in a consortium that includes energy storage software controls provider Younicos, BYD 2MW (2MWh), Toshi-ba 2MW (2MWh) and LG Chem 1 MW (0.5MWh), with Siemens build-ing the energy storage system. Fiamm is supplying 2.4MW (8.3MWh) and GE 1MW (2MWh) of sodium nickel chloride batteries.
The batteries are being installed on Codrongianos, in Sassari province on Sardinia and in Ciminna and Casu-zze, both in Palermo on Sicily, in two phases.
NGK was selected by Terna, based on its global installations which amounted to some 200MW, reflecting the company’s experience and refer-ences.
In comparison, at the time, technolo-gies such as lithium ion had a much smaller installed base, mainly in pilots and demonstrations.
“These companies were chosen as part of a worldwide tender, based on whether the technical specifications were high enough to meet with our demands,” says Tortora.
“But, as part of requirements set out by the economic development min-istry and the energy and gas author-ity, Terna must test out different tech-nologies, to reduce the single supplier risk and gain experience by gathering knowledge on the state-of-the-art elec-trochemical storage.”
Terna is in the process of procuring the remaining 28MW of energy stor-age for its power-intensive needs. In its tenders the TSO specified a maxi-mum of 4MW of flow batteries as well as lithium supercapacitors.
How-ever, most of the storage under Terna’s Grid Safety and Defence plan will be lithium ion, followed by sodium nickel chloride batteries.
Calculating ROI
Because different end services are po-tentially possible with batteries the whole process of calculating the return on investment is complex, based on the battery’s energy capacity, speed of response, efficiency, its ability to per-form as primary or secondary reserve and so on.
For wind curtailment, specifically, the return on investment is proving elusive to calculate. “There are many different variables that can affect this ultimate outcome, such as battery ca-pacity, grid developments and factor-ing in works deferral and so on,” says Tortora.
Terna is modelling return on invest-ment with the regulator and also Mc-Kinsey.
The nearest comparison on invest-ment returns might be solar PV tech-nology. “PV is not as complicated as energy storage, as it only generates en-ergy,” she says. “However, PV panels have been very expensive and policy measures and subsidies have helped bring down the cost by stimulating market demand. Batteries are capital-intensive. But, like PV, their opera-tional costs may not be as high as with other technologies.”
According to the Italian National Renewable Action Plan (NREAP) by 2020 some 8GW of PV will have to be installed. At the end of 2013 PV gen-eration produced over 17GW. “This amount of renewables — more than double set by our targets — means
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PROFILE: THE ITALIAN GRID
new flexibility is needed to ensure the electricity market functions and without resorting to measures such as curtailment,” says Ciro Scognamilio, a business analyst in NEC’s smart en-ergy solution division, within the com-pany’s Europe and Middle East and Africa business.
Italy has become one of Europe’s leading test-beds for energy storage, with both the TSO and various distri-bution system operators (DSOs), pro-curing batteries to test the various pos-sible functions of the technology on different portions of the overall trans-mission and distribution network.
Storage on the distribution network Enel Distribuzione, which operates the majority of the Italian electricity distri-bution network, is also installing stor-age, in addition to rolling out smart meters and trialling other smart grid technologies.
In April, the NEC commissioned a 2MW (2MWh) energy storage system, installed at the DSO’s Chiaravalle pri-mary substation in Calabria, a
south-ern region in the ‘toe’ of Italy’s boot. The batteries are being used by Enel Distribuzione to test a potential new dispatching service for DSOs with the national grid. “The system will be used to control the flow of electricity from Enel’s substations, using electric-ity demand forecasts, which are sent to Terna, though during the trial the TSO’s role will be simulated by com-puter software,” says Donata Susca, head of networks development at Enel Distribuzione.
The system does this by storing sur-plus energy produced by renewable energy generators, releasing stored energy when the sun is not shining or the wind is not blowing. The batter-ies will enable local consumption of stored surplus energy. Rapid varia-tions in capacity due to sudden wind gusts or clouds will be softened. This energy storage system will reduce the variability of energy transmitting be-tween the distribution and transmis-sion portions of the grid in areas such as Chiaravalle, where there is a large
installed base of renewables.
Due to the increase in distributed generation, in particular PV power plants, many primary substations are seeing a reverse flow from medium voltage to high voltage lines, causing a high variability in the energy exchange profile at the primary substation.
“This means several issues, for in-stance the increase of prices on the an-cillary services market,” says Scogna-milio.
Performance evaluation
The Chiaravalle storage system will test a range of functionalities and ser-vices, including peak shaving, power balancing, power quality, voltage reg-ulation and frequency regreg-ulation.
“After the first year of operation we should have all the elements to evalu-ate performance over all the four sea-sons, which are critical for renewable energy plants. The first operational re-sults should be available by the end of 2014,” says Susca.
The NEC project was awarded as part of a larger tender for batteries by Enel Distribuzione. SAET is supplying a 2MW system for Campi Salentina, in Puglia, and ABB is supplying a 2MW of batteries on the Contrada Dirillo distribution substation in Ragusa, on Sicily. The plant will use lithium ion batteries made by Italian battery mak-er FAAM.
The main aims of Enel Distribuzi-one’s Chiaravelle and Contrada Dirillo projects are similar, to optimize renew-able generation from solar and wind sources as well as soften the intermit-tent and unstable generation profile inherent in wind and solar, harmoniz-ing flows of renewable energy into the grid.
Enel Distribuzione’s existing energy storage installations include a 0.7MW (0.5MWh) lithium ion battery stor-age plant in Isernia, in the south-east region of Molise. The system, built
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by Siemens, has been running since 2011. The batteries combine genera-tion from distributed energy resources with reliable and safe management of the system.
The project is part of Enel’s wider use of smart grid technologies connected to the Carpinone substation in Molise. These include devices for estimating electricity generated from renewable resources, sensors for monitoring grid volumes, interaction with electricity generators to provide advanced regula-tion of input flows, recharging staregula-tions for electric vehicles, and equipment installed in homes to allow roughly
8,000 households, which are con-nected to the Carpinone substation, to monitor their consumption.
These projects in Italy, though pi-lots, are important because they will enable utilities and also the regulator to be able to see how storage provides different functions and potential ancil-lary services, such as frequency regu-lation, which could generate future revenues.
Existing regulatory frameworks in Europe do not play to the different advantages of energy storage — the technology can be both a distribution and a generation asset — making it
challenging to gauge the real economic value, or return on investment of stor-age.
For example, an accurate energy exchange profile, which Enel Dis-tribuzione’s energy storage system will provide to the TSO, could potentially incentivize utilities to invest in stor-age as the only way to ensure power forecasts accurately match real-time generation. In anticipation of changes to regulatory frameworks the Italian DSO has identified 44 other potential storage installations totalling between 60-80MW (more than 100MWh), for installation by the end of 2015.
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