Ontario Wind Energy Storage Case Study

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Ontario Wind Energy Storage Case Study

• Melanie Chamberland
• 15 June 2008

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Navigant Distributed Generation Cost-Benefit
Study

• 6 DG case studies in Ontario with costing data
  and operating history
• 3 CHP projects, 1 landfill gas project, 2 wind
  farm projects
• Study conducted by Navigant Consulting Inc.
• Asses 20 year NPV costs and benefits for DG
  owner, LDC/ratepayers, and society

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Why Ontario case studies?

• Competitive electricity market
• Nuclear, coal, hydro, gas electricity mix
• Planned coal fired generation shut-downs
• New generation and peak shaving needed
• Standard Offer Program tariff structures in
  place
• Clean Energy Standard Offer Program (CESOP)
  Wholesale Hourly Ontario Energy Price (HOEP)
  price plus on-peak and off-peak premiums
• Renewable Energy Standard Offer Program (RESOP)
  Flat kWh rate plus a premium for on-peak
  generation

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Presentation Objective
Hypothetical 900 kW Energy Storage system
Navigant Cost-Benefit Case Study for the 8.9 MW
Huron Wind project
Hypothetical Cost-Benefit analysis of the Huron
Wind farm with Energy Storage on the Ontario
market
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Huron Wind

• First commercial wind farm in Ontario, developed
  in partnership between OPG and Canadian
  consortium
• 5 x 1.8 MW (V80) turbines installed in Bruce
  County, Ontario in 2003
• 44 kV, 35 km distribution feeder
• All power locally consumed

Photo courtesy of Huron Wind
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Huron Wind

• Located in a capacity constrained area
• Hydro One open issues
• Is wind a solution or issue for voltage
  management?
• Does project backfeed through TS and how does
  this affect loss savings?
• Negative NPV for DG owner

Photo courtesy of Huron Wind
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Huron WindCost-Benefit Case Study

• NPV evaluated by Navigant Consulting Inc. with
  operation data from Huron Wind
• Energy generation 25,215 MWh/yr
• Major Costs
• Equipment installation
• Operation and Maintenance
• LDC connection costs
• Major Benefits
• Wholesale Ontario electricity revenue ( 1.2
  million/yr at average HOEP of 4.8 /kWh)
• WPPI (1.2 /kWh)

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Huron Wind Cost-Benefit Case Study

• 6.0 discount rate, 5.0 Interest rate, 2.0
  Inflation rate
• 20 yr project life
• Average HOEP 4.8 /kWh for 2007
• 20 capacity factor for wind
• 81.9/kW generation capacity value
• 5.46/kW-yr voided transmission investment cost
• 7 average transmission losses
• 2500/ton NOX, 1300/ton SOX, 20/ton CO2
  (hypothetical)

As per Exhibit D of the OPAs IPSP Taken from
NCIs Avoided Cost Analysis for the Evaluation of
CDM Measures, prepared for Hydro One
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Huron WindCost-Benefit Case Study
Cost/Benefit values shown in (000s)
Credit Navigant Consulting Inc.
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Huron WindCost-Benefit Case Study

• Negative NPV for DG owner
• Overall positive net NPV for all stakeholders
• Can adding energy storage improve the NPV for the
  DG owner?
• Use the case study results as baseline for
  comparison against two hypothetical scenarios
  with energy storage
• Evaluate NPV for scenarios with and without
  incentives on the Ontario market
• Yield rough estimate of the potential value of
  adding storage

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Huron WindEnergy Storage Scenarios

• Scenario 1 Wholesale market plus premium
• Generation sold on wholesale market
• Add electricity storage to arbitrage energy to
  peak hours with higher wholesale market price
• Include CESOP peak premium (8.10 /kWh) for
  generating at peak hours, in addition to
  wholesale price
• Scenario 2 Flat rate plus premium
• Wind generation sold at 11 /kWh RESOP rate
• Add electricity storage to arbitrage energy to
  peak hours to receive 3.52 /kWh peak premium

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Huron WindEnergy Storage Scenario 1

• Storage sized to 10 of wind farm 900 kW
• Storage increases Capacity factor to 30 from 20
• In base case all energy sales (25,215 MWh/yr)
  sold at 4.80 /kWh average HOEP
• With storage arbitrage 3 hours/day to peak hours
  sold at 9.60 /kWh HOEP
• 30 capacity factor yields 2.7 MW firm capacity
• 2.7 MW 3 hours/day 365 days 2,957 MWh/yr
• Assume 500/kWh cost for 2.7 MWh electricity
  storage system (1,350,000 total)
• Evaluate NPV with different energy storage costs
  and CESOP peak premium 8.10 /kWh

Calculated from OPA 2007 data
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Huron WindEnergy Storage Scenario 1

• Improved NPV for DG owner, storage provides
  positive benefit on the wholesale market without
  incentives or premiums!
• LDC/Ratepayer benefits increase from avoided
  losses, generation capacity and transmission
  capacity due to 30 capacity factor (up from 20)
  from electricity storage
• Shift some of the LDC/Ratepayer value to the DG
  owner through on-peak premium

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Huron WindEnergy Storage Scenario 1

• Assume a 8.10 /kWh peak premium (as per CESOP)
  in addition to peak wholesale price of 9.60 /kWh
  
• Total price paid to DG owner is 17.70 /kWh
  during peak hours vs. 4.80 /kWh during off-peak
  hours leads to positive net NPV
• Perform sensitivity analysis for different
  parameters in reference to the last analysis

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Huron Wind Energy Storage Scenario 1
Sensitivity Analysis
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Huron WindEnergy Storage Scenario 2

• Storage size 900 kW, 8 hours, 7.2 MWh
• Assume 500/kWh cost for 7.2 MWh electricity
  storage system (3,600,000 total)
• RESOP incentive for wind generation
• 11 /kWh, cannot be combined with HOEP
• Peak premium of 3.52 /kWh for 8 hours/day (11 am
  to 7pm) in addition to 11 /kWh
• Evaluate NPV with different energy storage costs
  and the RESOP incentive and premium

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Huron Wind Energy Storage Scenario 2

• First consider RESOP 11 /kWh flat rate without
  peak premium
• RESOP incentive huge impact on DG owner and
  LDC/Ratepayer
• LDC/Ratepayer bears the cost of the RESOP
  incentive, DG owner reaps the benefits

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Huron Wind Energy Storage Scenario 2

• Adding energy storage with a 3.52 cents/kWh peak
  premium does not show an overall benefit
• 3.52 cents/kWh is not enough of a price
  difference between off-peak and on-peak to make
  economic case for storage
• In addition, increased benefits to LDC/Ratepayers
  from improved capacity factor overridden by cost
  of peak premium

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Huron Wind Energy Storage Scenario 2

• Only a small increase in the peak premium needed
  to meet the same gains without storage (or slight
  decrease on storage cost)
• Are the benefits of firming wind and the storage
  accruing to the LDC/Ratepayer and society well
  accounted for?
• Perform sensitivity analysis for different
  parameters in reference to the analysis with 3.52
  cents/kWh incentive

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Huron Wind Energy Storage Scenario 2
Sensitivity Analysis
DG owner loses significant RESOP rate revenue
from efficiency losses
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Conclusion

• Speculative analysis using existing project and
  incentive programs
• Storage on the wholesale market does improve NPV
• Need a large enough price difference between
  off-peak and on-peak electricity sale price to
  make storage valuable
• With the right incentive tariff similar to those
  already in place energy storage can be cost
  effective
• There is value for firm wind generation to
  society and the LDC/ratepayer in the long-term
  not captured
• Need electricity storage cost figures to
  determine tariff for stand-alone electricity
  storage projects