The Future Value of Storage in the UK with Generator Intermittency

THE FUTURE VALUE OF
STORAGE IN THE UK
WITH GENERATOR
INTERMITTENCY
CONTRACT NUMBER: DG/DTI/00040/00/00
URN NUMBER: 04/1877

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The Future Value of
Storage in the UK with
Generator Intermittency

CONTRACT NUMBER
DG/DTI/00040/00/00
URN NUMBER 04/1877





Contractor

MANCHESTER CENTRE FOR ELECTRICAL ENERGY
UMIST







The work described in this report was carried out under contract
as part of the DTI Technology Programme: New and Renewable
Energy, which is managed by Future Energy Solutions. The
views and judgements expressed in this report are those of the
contractor and do not necessarily reflect those of the DTI or
Future Energy Solutions.




First published 2004
? Crown Copyright 2004

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Executive Summary


Although penetration of intermittent renewable resources and other forms
of distributed generation by 2020 and beyond may displace significant amounts of
energy produced by large conventional plant, concerns over system costs are
focussed on the questions as to whether these new generation technologies will be
able to replace the capacity and flexibility of conventional generating plant.
Meeting a variable load with intermittent and uncontrolled generation (such as
wind, wave and pv) will be a challenge for secure operation of the sustainable
electricity systems of the future.

The purpose of this work was to provide magnitude of order estimates of
the potential value of storage in managing intermittency of wind generation in the
context of the future UK electricity system. In order to manage the balance between
demand and supply under increased uncertainty due to penetration of wind
generation, the system will need to hold increased amounts of reserve. This
reserve will be generally supplied by a combination of synchronised reserve,
provided by part-loaded generating plant and standing reserve, in the form of
storage and/or flexible generation, such as OCGTs. In this context, OCGT
technology is a prime competitor to storage.

In order for synchronised conventional plant to provide reserve it must run
part loaded. Thermal units operate less efficiently when part loaded, with an
efficiency loss of between 10% and 20%. Application of standing reserve would
reduce the amount synchronised reserved committed. This has two positive
effects: (i) an increase in efficiency of system operation by reducing the number of
part loaded generators and (ii) an increase in the amount of wind power that can be
absorbed as fewer generating units are scheduled to operate leaving more room
for wind to supply demand, which is particularly relevant when high wind
conditions coincide with low demand.

The inherent advantage of storage over OCGTs lies in its ability to exploit
(store) excesses in generation during periods of high wind and low demand, and
subsequently make a part of this energy available, and hence reduce the fuel cost
and CO2 emissions. The actual magnitude of this benefit will be primarily driven by
the amount of wind installed and the flexibility of the generation system. In
systems characterised by low flexibility generation and with large wind capacity
installed, the benefits of storage based standing reserve over OCGT solution will be
most significant.

In this work we evaluated the benefits of using storage for providing a part
of the reserve needs in the form of standing reserve, against the reserve being
provided by part loaded synchronised plant only (no standing reserve) and part of
the reserve being provided by standing OCGT plant. The benefits were evaluated in
terms of (i) savings in fuel cost associated with system balancing, (ii)

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corresponding reduction in CO2 emissions and (iii) indirectly, additional amount of
wind energy that can be absorbed.

Assuming a system with 26 GW of wind capacity installed, producing about
80TWh per year, the key factor affecting the value of storage was found to be the
flexibility of conventional generation mix. Other factors, such as amount of storage
installed, cost of fuel of OCGTs, are found to have potentially significant impact on
the value of storage. The impact of storage efficiency was also analysed and shown
to have relatively modest impact.

Given the assumption that storage facilities will be capable of providing
system backup, to cover the situations with failures of conventional plant (similar
to OCGT technology), this work focuses on the additional benefits that storage can
create when assisting with balancing task. It shown that the application of storage
in managing intermittency in the operational time horizons will reduce fuel
consumption and hence reduce corresponding fuel cost and CO2 emissions. In this
context, the additional value of storage that storage brings over and above that
from OCGT was quantified.

Given the assumptions adopted, the analysis suggests that in generation
systems of limited flexibility, with 3GW of storage installed, the additional value of
storage, manifested through a reduction in fuel cost associated with balancing, was
found to be between 470£/kW to 800£/kW (capitalised value of fuel cost reduction).
However, the value of storage over OCGT plant, in such systems was found to be
between 60£/kW and 120£/kW. Application of storage, rather than OCGTs, for
providing standing reserve reduced energy produced by conventional plant
(associated with system balancing) from 0.45TWh to 2.5TWh. This could be
interpreted as an increase in wind generation that can be absorbed. Furthermore,
application of storage reduced CO2 emissions in the range of 0.2 and 1.3 million
tonnes of CO2 per annum, when compared with OCGT based standing reserve.


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Contents



1.


Report
Summary
5

2.
Intermittency
and
balancing

19

3. Managing intermittency: synchronised and standing reserves
22

4. Benefits of storage over OCGT based standing reserve

24

5.
Key
inputs
and
assumptions
26

6.
Results
of
case
studies
31

7.
Conclusions
54




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1. Report
summary


Background

1.1
Although penetration of intermittent renewable resources and other forms
of distributed generation by 2020 and beyond may displace significant
amounts of energy produced by large conventional plant, concerns over
system costs are focussed on the questions as to whether these new
generation technologies will be able to replace the capacity and flexibility of
conventional generating plant. As intermittency and non-controllability are
inherent characteristics of renewable energy based electricity generation
systems, the ability to maintain the balance between demand and supply
has been a major concern. Clearly, meeting a variable load with
intermittent, and/or uncontrolled and/or inflexible generation (such as wind,
wave and pv) will be a challenge for secure operation of the sustainable
electricity systems of the future.

1.2
The recently completed SCAR project1 investigated a number of possible
scenarios showing that extending renewable generation to 20% or 30% of
demand by 2020 would increase system costs associated with integration of
this generation in the UK power systems. The extent of the additional
system costs was found to vary considerably, depending on the technology
and location of renewable plant. An analysis of the breakdown of the total
costs, between the three elements examined – balancing and capacity,
transmission, and distribution, demonstrated that balancing and capacity
costs, principally the cost of maintaining system security, dominate all
other costs. These costs arise because of the intermittency of many
renewable technologies, in particular wind, which represents a large
proportion of Great Britain’s (GB) renewable resource. Large-scale pumped
storage was shown in the SCAR report to be beneficial but the question of
its value was not specifically addressed.

1.3
Bulk energy storage systems appear to be an obvious solution to dealing
with the intermittency of renewable sources and the unpredictability of their
output: during the periods when intermittent generation exceeds the
demand, the surplus could be stored and then used to cover periods when
the load is greater than the generation. The purpose of this work is to
provide magnitude of order estimates of the potential value of storage in
managing intermittency of wind generation in the context of the future UK
electricity system2. We studied a number of generation systems

1 ILEX, UMIST, System Cost of Additional Renewables, study for DTI, October, 2002.

2 In principle, this analysis applies to any form of storage that posses assumed flexibility. Hence, the exact storage
technology is not specified and could take any form, from dedicated large scale bulk storage facilities (such as pump-
storage) to highly distributed smaller scale storage technologies.

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characterised by different mixes of generation technologies, representative
of the size of the GB system with some 26 GW3 of wind capacity installed.





Managing intermittency: synchronised and standing reserve

1.4
In order to deal with the increased uncertainty due to penetration of wind
generation, the system will need to apply increased amounts of reserve.
This will be generally provided by a combination of synchronised and
standing reserve.

1.5
In order for synchronised conventional plant to provide reserve it must run
part loaded. Thermal units operate less efficiently when part loaded, with
an efficiency loss of between 10% and 20%. Since some of the generators
will run part loaded to provide reserve (in case the output of wind
generation reduces), some other units will need to be brought onto the
system to supply energy that was originally allocated to the plant that is
now running at reduced output. This usually means that plant with higher
marginal cost will need to run, and this is another source of cost.

1.6
In addition to synchronised reserve, which is provided by part-loaded plant,
the balancing task will also be supported by standing reserve, which is
supplied by higher fuel cost plant, such as OCGTs and storage facilities.

1.7
Application of standing reserve could improve the system performance
through reduction of the fuel cost associated with system balancing. This
can be achieved by reducing the amount of synchronised reserved
committed. This has two positive effects: (i) an increase in efficiency of
system operation by reducing the number of part loaded generators and (ii)
an increase in the amount of wind power that can be absorbed as fewer
generating units are scheduled to operate, which is particularly relevant
when high wind conditions coincide with low demand. Both of these effects
lead to a reduction of the amount of fuel used. The cost of using OCGTs to
provide standing reserve will be driven by their efficiency and fuel used
while the cost of using energy storage facilities for this task will be
influenced by their efficiency and the fuel cost of CCGT plant (used to
charge the storage).

1.8
The allocation of reserve between synchronised and standing plant is a
trade-off between the cost of efficiency losses of part-loaded synchronised
plant (plant with relatively low marginal cost) and the cost of running
standing plant with relatively high marginal cost. The balance between

3 This amount of wind capacity installed is expected to produce 80TWh of total electrical energy demanded.

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synchronised and standing reserve could be optimised to achieve a
minimum overall reserve cost of balancing.

1.9 The
value of standing reserve (both storage and OCGT based) is quantified
as the difference in the performance of the system (fuel cost and CO2
emissions) when system balancing is managed via synchronised reserve
only, against the performance of the system with combined synchronous
and standing reserves are used to balance the system.


Methodology

1.10
In contrast to SCAR, this analysis is not based on the high level statistical
assessment of system operation based on an analytical (closed form)
solution technique, but on a more detailed simulation of the operation of
the system. We simulated, hour by hour, year round operation of the
system (including 26 GW of wind capacity) taking into consideration daily
and seasonal demand variations and variations in wind output. One of the
key advantages of this approach is the ability to optimise more precisely the
amount of synchronised reserve required (in each hour) as a function of
wind output forecast and the amount of standing reserve available, while
taking into account characteristics of generating plant and storage. This was
shown to be an important advantage of the simulation approach over the
analytical assessment employed in earlier studies, particularly in the
context of the accuracy of quantified cost of operation and hence the value
of storage.

1.11
This analysis is concerned with the evaluation of additional fuel costs
associated with balancing the system with considerable contribution of
intermittent generation and it does not deal with market arrangements and
mechanisms for cost recovery (e.g. value of storage in short term energy
markets with dual cash out price, such as NETA, capacity payments etc, are
not part of this work). It is important to stress that this analysis excludes
purposely the assessment of the value of arbitrage activities and the
application of flexible storage in managing TV pickups and focuses only on
the question of additional fuel cost associated with system balancing.

Generation systems considered

1.12
This analysis demonstrated that one of the key factors determining the
additional value of storage when involved in system balancing is the
flexibility of conventional generation mix. We have therefore studied the
behaviour of three generating systems of distinctly different flexibilities.
Among dynamic parameters of generating units considered, the ability of
plant to be turned on and off and the ability to run at low levels of output

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(minimum stable generation) were found to play a critical role4. The
characteristics of the systems studied are presented in Table 1.1.

1.13
The so-called base load segment of the generation mix considered
generally consists of inflexible plant that runs at full output and cannot be
turned on and off frequently (such as nuclear). We have also incorporated a
segment of the generation mix that includes plant that is moderately
flexible, that can be turned on and off but with somewhat limited ability to
run part loaded (with relatively high minimum stable generation) and a
segment of relatively flexible plant.

Table 1.1 Characteristics of generation systems considered


Inflexible
Generation
Flexible
Generation System Parameter
Generation of moderate
Generation
s
flexibility
Low Flexibility (LF)
MSG5 100%
77% 50%
Generation System Capacity
8.4GW 26GW >25.6GW
installed
Medium Flexibility
MSG 100%
62% 50%
(MF) Generation
Capacity
8.4GW 26GW >25.6GW
System
installed
High Flexibility (HF) MSG N/A
N/A 45%
Generation System Capacity
0 GW
0GW
>60GW
installed


1.14
In the subsequent analysis we will assume that the amount of conventional
plant on the system is adequate for supplying the demand while
maintaining the historical levels of security (24% capacity margin). Hence,
given a specific generation system, both capital cost of the generation
system and the corresponding fuel cost associated with meeting the
demand are specified. In addition to these capital and fuel cost associated
with supplying the demand, there will be additional fuel costs associated to
balancing of the system in real time. These costs are effectively fuel cost
associated with holding and exercising reserve necessary to manage
fluctuations of demand and generation.

1.15
As OCGT technology, we assume that storage would be used to provide
some of the system backup (capacity margin) in situations with failures of
conventional plant, particularly when coincide with low wind outputs. In
addition to this capacity oriented function, storage will be used to assist
with the balancing task, which is the subject of this work. In the context of
this additional fuel cost incurred in the balancing task, the application of

4 Ramp rates were not found to be particularly important, as long as the maximum rate of change of output of plant
that provides synchronised reserve was above 5MW/min, which is well within existing gas and coal technologies.
5 MSG stands for Minimum Stable Generation and is expressed as percentage of the maximum generator capacity

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