PG&E Compressed Air Project - Quick Thoughts

Now that the deadline has passed to file for grid storage projects under the ARRA , we're beginning to see some of the concepts and projects that have applied for funds - see post below - including the 300 MW compressed air project by PG&E I believe PG&E will have to deal with some of the following issues on this project.

• First, the $25 million requested is only for "initial analysis and design". The anticipated cost for the project will be $368 million. And that's before we see the cost over runs, delays and unexpected problems a huge project like this will invariably incur.
  
• Then the utility will have to explain why they want to take "clean" wind energy and make it "dirty". Because, you see, the compressed air will be used for natural gas turbines! The argument is that the compressed air will make the natural gas turbines run more efficiently, requiring less natural gas - which is great if you're trying to make your natural gas turbines more efficient. But we thought the point of wind energy was to produce clean and renewable power - not more fossil fueled power.
• And how much energy will we lose in this process? We create a certain amount of energy with wind and then burn it away by compressing it and burning natural gas. What is the net delivered energy when all of this is finished? I've seen reports of as little as 54%. So we take wind energy, throw away 40% or more, increase the price volatility through the natural gas market, and add emissions and GHGs. Why is this a good idea?

Utilities like CAES because it increases their power as a utility. They get to spend a bunch of ratepayer money on a huge central power plant which they control. This is why they have problems with distributed advanced batteries like the VRB-ESS. We could install 300 MW of the VRB-ESS in less time then they can get a CAES plant - if they ever get it built at all. And, the batteries would be built where it's needed, close to the load, reducing the need for more transmission wires, reducing the cost of distribution, improving energy security and power quality, and with greater efficiencies - less loss of wind energy - no emissions and no volatility on the cost of power.

Largest Grid Battery Ever? What's the Real Story?

Southern California Edison has announced, apparently, that they have applied to the DOE, under the smart grid stimulus program, for $25 million to build the largest grid battery ever. I have many questions about this story and I'm hoping we'll get more clarification in the near future.

We are well aware of the DOE grant program because we are involved in several applications for the VRB-ESS. We'll provide more information as we have developments we can share.

Here are the issues and questions I have with the story:

• First, I cannot find a press release from SCE. The story appears to based on an interview with Paul De Martini, Southern California Edison's vice president of advanced technologies. This makes it a bit difficult to get more detail or clarification. We'll ask Mr. De Martini for clarification.
• Next, the story says the grant is for 32 megawatt hours of storage. Since the current A123 grid systems in place are for grid stabilization, with only about 15 minutes of storage, Edison would need to install 128 MW of capacity to get 32 hours of energy. That would make it a huge, unheard of capacity battery, but with very short term storage. So, I'm not sure what the application would be for wind energy. 4:1 capacity to energy storage is normally conceived for frequency regulation, which is the current application for A123. That type of application can be anywhere on the grid - there is no need to place it at a wind farm. We normally think of storage for wind for the purpose of shifting generation from night time production to the day - something you can't do with 15 min. of storage.
• If the project is 32 MWHrs of storage, then it isn't the biggest project by a long shot. The 238 MWHr system by NGK in Japan wins that contest with their 34 MW by 7 hours of storage system. Sure, they can only use half the capacity at a time to avoid overcharging, but the total is still greater than the Edison project - if the story is correct.
• The ARRA grant is a matching grant, so we assume Edison will need to seek approval from the California Public Utilities Commission for an additional $25 million, or more, for a total cost of $50 million. That's $1,500 per kilowatt hour! - pretty darn expensive. For comparison, the flow batteries and NGK are between $500 and $700. However, on a capacity basis, at 128 MW, it's only $390 per kW.
• If the story meant to state a 32 MW capacity, then the economics make no sense.

I think the actual story is that Edison wants to install a large capacity system for grid stabilization, not an energy storage system to shift wind generation. Does it make sense? A 120 MW VRB-ESS with 6 hours of storage would cost around $300 million - 6X more expensive. However, along with fast response like the A123, you would also have 720 hours of energy storage! Is a 15 minute, fast response battery going to do the job, even if it is cheaper? This will be interesting to get the rest of the story and see how Edison presents the project to the CPUC.

VRB-ESS Government Incentives

This is a big month for us and many other energy storage companies. The American Recovery and Reinvestment Act - ARRA - a.k.a the Obama Stimulus Legislation - contains many incentives for energy storage and the smart grid. We're currently submitting several projects under the Smart Grid Demonstration Grant, which targets energy storage demonstrations. The deadline for submission is August 26th, and the total package will probably run to over 100 pages. We don't know how many projects will be submitted for the VRB-ESS - several sites are under evaluation - but, due to the complexity of the grant application process, we'll probably have to shut the door to additional projects around the 15th.

The Smart Grid Demonstration Grant is looking for several different types of demonstrations. The VRB-ESS is a good candidate for each category except one that is specifically set aside for compressed air energy storage. Grants are running from a couple million dollars for 1-3 MW installations to $25 million for 8-15 MW.

Here is the current breakdown of incentives for the VRB-ESS. We believe that the VRB-ESS specifically qualifies for these incentives in California - other energy storage technologies may not qualify.

• ARRA - Under the current grant opportunity, the Department of Energy will fund 50% of an eligible project.
• SGIP - the California Self Generation Incentive Program will provide a rebate of $2 Watt ($2 million per MW) for the VRB-ESS in association with on-site fuel cells or wind turbines. We believe the VRB-ESS will also qualify for an additional 20% ($2.40 per Watt) under a specific provision for California suppliers.
• ITC - The Investment Tax Credit cash grant is equal to 30% of a project cost when integrated with other renewable energy projects. There are many conditions to this grant, but it's actually very liberal for the VRB-ESS. It will apply to VRB-ESS retrofits to existing cogeneration, fuel cells, biomass, hydro, wind, solar, etc. installations.

Bottom-line - a short term opportunity exists to fund up to 90% of the installation cost for a VRB-ESS system. Such a system would provide a generator or industrial site with many economic benefits, including load / generation shifting, power quality, energy security - and provide the potential to earn revenue from CAISO ancillary services or demand response programs. Most evaluations we've done show a payback in months. If you think your site could qualify, contact us at ctoca @ utility-savings.com for an evaluation.