Storage + Storage Renewable Energy Projects: A Canadian Opportunity?

By Kimberly J Howard, Zachary Masoud, Lynn Parsons, Christopher Zawadzki for mccarthy tetrault

One of the themes of Ontario’s revised 2017 Long-Term Energy Plan, Delivering Fairness and Choice (the “LTEP”), was that “innovative technologies have the potential to transform Ontario’s energy system”[1]. A key example of innovation includes storage solutions. The LTEP noted that “energy storage is a game-changing technology” and highlighted a report published by the IESO on energy storage in March 2016 which found that “energy storage facilities could provide many of the services needed to ensure the electricity system in Ontario operates reliably”.[2]The LTEP called for the IESO and the Ontario Energy Board (“OEB”) to take appropriate steps to identify market and regulatory barriers that disadvantage energy storage, specific rules and codes that “prevent the cost-effective development of energy storage where it can provide value to customers and the electricity system”[3].

Since 2016, energy storage and storage solutions have gained momentum in Canada. As the price of storage technology lessens and growing markets further drive down costs, low costs energy storage should materially expand in Canada.

Solar + Storage: A New Opportunity?

One recent trend in the United States has been the adoption of storage-plus-renewable energy projects, particularly in the solar space. Many major developers in the United States have made significant investments in large-scale solar-plus-storage projects. For example, Florida Power & Light announced plans to power its 409 megawatt Manatee Energy Storage Center by utility-scale solar, “the largest battery project unveiled so far in the U.S. on a megawatt basis”[4] and Hawaiian Electric sent seven solar-plus-storage power purchase agreement (“PPA”) contracts to state regulators which “would add 262 megawatts of solar and 1,048 megawatt-hours of storage distributed over three islands”[5] and which are all at a price of $0.10/kWh or below. What is significant in both of these examples and others in the United States is the low PPA price for projects which combine energy storage technologies and renewable resources.

In a report by Navigant Research (“Navigant”) entitled “How Utilities Can Look Beyond Natural Gas with Cost-Effective Solar Plus Storage Strategies” (the “Navigant Report”), Navigant highlighted that lithium-ion batteries, which “account[ed] for 29.4% of the non-pumped storage capacity installed and 70% of the advanced battery capacity deployed since 2011” was driving market growth and decreasing technology risk and costs associated with energy storage solutions.[6] Highlighting the trend of energy storage solutions being developed together with renewable resources at competitive prices, Navigant predicts “storage-plus Power Purchase Agreement (PPA) prices to fall as adoption of this technology expands”.[7] The Navigant Report urged utilities and regulators both in the United States and abroad to adopt storage-plus renewable energy projects.

Energy Storage in Alberta

Alberta is in the process of phasing out coal-fired power and has a legislated target of 30% renewable electricity generation by 2030.  In late 2017 and early 2018, as part of its plan to achieve these goals, the Alberta Electric System Operator (“AESO”) assessed the potential need for dispatchable renewables and energy storage to maintain system reliability, flexibility and ramping capability. The AESO concluded that there was no emerging need to specifically procure additional flexibility on the system.  This conclusion was based upon Energy+ Environmental Economics Inc. (E3) study commissioned by the AESO.  E3 assessed two common types of energy storage to determine its cost effectiveness: (1) lithium-ion batteries (short-term duration); and (2) pumped hydro storage (long-term duration). 

E3’s Key findings regarding the potential cost effectiveness of energy storage on the Alberta system included:

  • Alberta’s current transmission tariff makes it difficult for storage to be cost-effective.
  • Large-scale storage projects (greater than 50 MW) are unlikely to be cost effective in Alberta due to: (1) early reserve market saturation (AESO’s operating reserve market may provide high revenues per MW but the market is small); and (2) insufficient daily pool price spreads (even with 12 hours of daily “energy arbitrage” (charging 12 hours at low prices and discharging 12 hours at high prices), storage would need more than a $60/MWh daily price spread to cover a $2500/kw capital cost. AESO projected daily spreads instead range from $15-30/MWh).
  • Smaller storage projects (below 50 MW) may provide market positive revenues in Alberta from operating reserve and the future capacity market if: (1) Alberta’s transmission tariff is revised for charging costs; (2) and price saturation in the operating reserve markets can be avoided.

Although the AESO concluded that there was no requirement to procure storage capacity, it is nonetheless developing an Energy Storage Roadmap for Alberta’s system. Alberta’s recent election and pending energy policies change could result in opportunities. If Alberta proceeds with its capacity market transition, partnering with energy storage could provide a mechanism for renewables to participate. We will continue to monitor and provide updates on the AESO’s development of the Alberta Energy Storage Roadmap.

Energy Storage in Ontario

While the presence and buzz surrounding energy storage technologies has been developing rapidly in Ontario, the regulatory landscape has not developed at a corresponding pace. In recent months, electricity regulators in Ontario have taken significant steps to close the gap and prepare for future investment and integration of energy storage technologies in the electricity grid. Advisory bodies have been formed such as the Independent Electricity System Operator’s (“IESO”) Energy Storage Advisory Group to engage feedback and involve industry stakeholders in the development of procurement processes, technical standards, metering and permitting for energy storage. Similarly, the OEB has developed a special license and related exemption for energy storage projects in the province.

In December 2018, the IESO published a report entitled Removing Obstacles for Storage Resources in Ontario (the “IESO Report”). The IESO Report set out a number of recommendations towards removing the regulatory barriers facing energy storage technologies and sector participants in Ontario in order to encourage investment and realize on the benefits available from energy storage. The IESO Report looked primarily at changes within the IESO’s regulatory jurisdiction, but also advocated a collaborative approach with other regulatory bodies recommending that the OEB review and update relevant codes and that the Ontario government consider energy storage more directly in amendments to existing legislation and future legislation.

The information contained in this article and provided by VanadiumCorp is sourced from third-party content in the public domain and is for general information purposes only, with no representation, guarantees of completeness, warranty of any kind, express or implied regarding the accuracy, adequacy, validity, availability, completeness, usefulness or timeliness of any information contained within. Please also excuse any syntax as authors and reposted articles are sourced from global origins. UNDER NO CIRCUMSTANCE SHALL WE HAVE LIABILITY TO YOU FOR ANY LOSS OR DAMAGE OF ANY KIND INCURRED AS A RESULT OF THE USE OF THIS REPOSTED ARTICLE. THE USE OF THIS ARTICLE AND YOUR RELIANCE ON ANY INFORMATION CONTAINED HEREIN IS SOLELY AT YOUR OWN RISK. VANADIUMCORP ALSO ASSUMES NO RESPONSIBILITY OR LIABILITY FOR ANY ERRORS OR OMISSIONS IN THE CONTENT OF THIS ARTICLE.

Continue reading the full story here >>
 

This Post Has 0 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *