Store and Deliver

Bulk storage vs community energy storage vs compressed air storage: what are the benefits and drawbacks of each? Ali Nourai, Manager of Distributed Energy Resources for American Electric Power, helps P&E fill in the blanks.

“One of the key things AEP is trying to promote is that energy storage is very, very cost effective if, and only if, we learn how to have multiple benefits on each installation”
-Ali Nourai, American Electric Power

What kind of market size do you see for a community storage approach for load management?
Ali Nourai. One way of measuring the trend is to look at conferences. In energy storage, as far as the conferences are concerned, a few years ago you could barely find one to go to. Now you get too many invitations. Two years ago, we had under 100 people coming to the Electricity Storage Association’s annual meeting on energy storage. This year we had 300 and we ran out of everything.

Another indication of the growth in this field is that a year or a year and a half ago, we had to go to some effort to reach congressmen and congresswomen and talk to them about energy storage. Now members of the ESA are routinely getting invitations to go to congressional briefings and talk to them about energy storage.

An interesting change we’ve noticed in energy storage is that up until about five months ago, smart grid had its buzzwords and energy storage was doing its own thing. Now these two groups are talking together. There is conference after conference about how energy storage is at the heart of smart grid.

A lot of changes have happened. A lot of waking up has happened. One level where this is very, very clear is at the congressional level. I talked to a congressman just the other day, and there is another congressional briefing coming up. We keep being invited to these things – we were just dreaming about that a year ago.

The biggest barriers to deployment of energy storage were regulatory and legislative. Those people are waking up. In Texas, we are putting four megawatts of energy storage. We were blocked by legislative rules that you cannot own storage because storage is generation. After six months of talking, the rules changed. Now we have the approval of the Public Utility Commission to go ahead and do that. So a lot is happening and these are the indicators that determine the market.

When will AEP and other utilities include the community energy storage concept in their planning and commercial deployment?
AN. When we started with the NaS battery in 2005, we went after that as an R&D project and installed it. It was operational in 2006. In 2007, our planning people ordered six more megawatts and our transmission ordered another four megawatts. They did that on their own. In other words, they bought into it. Once the storage is functional, they see the value. They pick it up. Planning departments have picked it up. When you look at other utilities, a lot of them look at the storage as an R&D thing. Just put it in the lab and see what happens.

What AEP did was say, “We’ll go right to the field. We’ll put it on the real circuit serving real people.” And we saw the results. Planning bought into it within a year because planning goes in a yearly cycle. From this experience we say that once it’s on the ground and people see that, it just goes by the cycle of the planning.

Another factor to consider is when it comes to big storage like a substation, it takes a lot of high-level management decision-making to go into a multimillion-dollar project, to start one. With community energy storage, you can start it withas little as $56,000. It doesn’t need a high-level management decision to get started, which means we expect a lot faster and broader acceptance of community energy storage once the first one is installed and operating, and the results are shown, which is going to be the case next summer.

AEP has gone after a proposal in the State of Michigan. If we win that proposal – and we expect to win – that will be one megawatt in Michigan of community energy storage. That one megawatt will be installed next March. As soon as it’s available, we’ll start talking about and share the results.

How do centralized fast response energy storage and decentralized fast response storage coexist?
AN. In terms of frequency regulation, for the time being it would primarily be done at substation level – it needs a few years to establish itself to that point. Altair Nano has a trailer of batteries that will be operational and be leaders in the next two or three years. Community energy storage may pick up sooner, because it is not the little box run locally.

A control hub isn’t a substation. The control hub sees a minimum of one megawatt, so for all practical purposes it can do the same thing as a substation battery. The only difference is that substation batteries exist today. AEP has about seven megawatts running right now, and we’ll have 11 megawatts before the end of the year, and lithium ion-based ones are just being added. So they’re just about a year or two years ahead of distributed energy storage, but once distributed is in place, there is no difference.

Whichever storage you have, you’ll use it for that purpose. One of the key things AEP is trying to promote is that energy storage is very, very cost effective if and only if we learn how to have multiple benefits on each installation. This is the way to go. That means I’m not going to put one kind of storage and say, “This is only for backup,” and put in another storage and say, “This is only for frequency regulation.” Storage is too expensive for that.

Whatever storage we put down, we try to use it as many ways as we can. We’re going to use it for frequency regulation. We’re going to use it for backup. We’re gonna use it for deferred capital, for all of the above, for as many uses as we can – our intelligence allows us to do this because it takes some thinking to have multiple use and multiple functions, and we are going through that exercise. With that kind of thinking to justify storage, I don’t see any reason to say that I’m not going use this storage for frequency regulation just because I don’t like it. I have to.

This is the most efficient way of doing things, especially with the high cost. If you look at what AEP is doing, the first storage we put in was capital deferral only. The one we put in 2008 was capital deferral and islanding, which is backup power at the substation level. What we’re going to do with community energy storage is all of them plus frequency regulation. We have a frequency regulation project going on to be able to learn how to do it. Learning how to do multiples takes some time, but that is the target. Any storage we put down, we’re going to try to use it for at least two or three different benefits, including frequency regulation.

Utilities are struggling to quantify the return on investment for energy storage, specifically energy storage devices supporting good stability, because standard economic models don’t exist for energy storage. How can utilities and storage providers overcome this challenge?
AN. That is a very interesting challenge and AEP has developed its own model. We hired an external provider to develop the financial model because internally people found it hard to imagine we could do so many things in storage. The key answer to that question when it comes to justification is multiple benefits on each application. If you say, “I’m going to put in storage just to handle wind,” it’s not justifiable. It’s too expensive.

If you say, “I have a solar system here. I’m going to put in a battery just to buffer, to handle when the cloud comes in,” it’s difficult to justify that. What we try to do with the community energy storage, it has a DC input. That means if a customer has solar, we’ll take it. If a customer has wind, we’ll take it. At the same time, we do provide backup power. At the same time, we level out the load of the substation and deferred capital. At the same time, we’re doing frequency regulation. This is the only way we can justify it.

AEP has a two-tier approach towards cost and economics. One is multiple use. The other one is that community energy storage does not have any chemistry. It could be any storage. It’s a platform to take advantage of the synergy of electric transportation. We are going after the market size to help us. We believe that in a few years, once the electric cars start to roll on the roads, and especially being able to use a used electric car battery, we can master the economics, but without the electric transportation, without multiple benefits, no way. It won’t happen for years to come.

What’s on the horizon in terms of the wide-scale deployment of bulk electric storage technologies?
AN. We started in the 1980s as a leader in bulk storage. We put a lot of that there. The problem is it did not spread as fast as we wanted it to for several reasons. Number one, there’s not enough competition, and it takes a long time before competition comes to life. If we want to put in another substation battery in the next two months, for example, we have no choice but to use an NaS battery. And because there’s not enough competition; the price is high. The price went up instead of down.

The second problem is if another utility wants to do it, they have to put in some good money to get started. These are the two disadvantages in bulk storage the way it is formatted today. That is why we designed this new bulk storage called community energy storage. It appears not to be bulk, but the control is designed to be at least one megawatt. We tried to solve the challenge of the bulk storage through the system for those two reasons I mentioned.

One, there’s no competition in bulk. There’s too much competition on electric transportation. Everybody in the world is trying to come up with a car battery. The second issue is it’s difficult to justify the next project. With little boxes, you’ll gradually phase it in. You don’t have to justify it all in one year.

There is one thing I see in bulk that I don’t see in CES. Utilities have their temporary transformers on trailers on wheels. When disaster hits, they move these transformers around the system. We need batteries on wheels for disasters. You cannot unplug the battery from the backyard of people and move them around.

You may say that with electric cars you can just send a signal out on the radio: “Hey, people, we need your cars plugged in at such and such hour because of an emergency.” Maybe we can do it that way; I don’t know. The transformers on wheels are ideal for emergencies, and they can beat community energy storage in their transportability, so quick transportability is one of the features of bulk that is not quite there with community energy storage.

How does compressed air storage work and what are its advantages?
AN. There are two types of compressed air. For the type that does exist today, there’s only one plant in Germany and one plant in the US. This is a gas-burning power plant that on the side takes advantage of compressing the air in a cavern. This is more than just storage. It’s a power plant. It needs fuel and it needs staff. It needs a crew to run. If you look at it on a cost per unit of stored energy overall, it’s one of the least expensive and one of the best, but the one drawback is that there’s a power plant next to it.

The other thing is you cannot just put it anywhere you want. There are quite a few sites where we could do it but it has to happen to be the place you also need it. All these things negative aside, if somebody asked me, “I have a wind farm and I need storage and I need to install it within the next six months. What should I do?” I would tell them go to compressed air. That’s the only solution. But given time, I don’t think how it can compete with batteries.

Once the batteries hit the 100-megawatt level, compressed air will be seriously challenged because batteries of 100 megawatts and above don’t have the issues that compressed air has. The largest wind farm that I’m aware of with batteries running at this point is a 52-megawatt wind farm in Japan and has about a 30 megawatt NaS battery on it. Once batteries hit 100 megawatts in one place, or more or less in one place, or controlled collectively in one place, which in my opinion is a matter of a few years, it will be difficult to justify compressed air, which is a special site that needs gas, that needs a power plant, that needs crew to run it, and the efficiency is not that exciting compared to electricity. The efficiency of an electric transportation battery today is 90 plus percent. The efficiency of compressed air is far below that. But yes, if somebody needs 100 megawatts of storage six months from now, compressed air is the solution.

The reason AEP jumped ahead and put money into storage is we see the strategic value. The number of customer-owned and operated generation connected to AEP system is doubling every year. We cannot let it go without a storage buffer and pretty soon we will lose control of our generation because these guys all of a sudden will have 20 percent or 30 percent of our generation and they generate whenever they feel like it or whenever the sun is shining. We cannot run a business like that. We have to have a buffer. That strategic value is what got AEP to get started. When it comes to economics, it’s very difficult to put a dollar figure in front of it.

Ali Nourai is Manager of Distributed Energy Resources for American Electric Power and Chairman of the Electricity Storage Association.