Project Update - Phase 1

ESCRI-SA Energy Storage for Commercial Renewable Integration

South Australia

by

Bruce Bennett, AGL

Hugo Klingenberg, ElectraNet

Paul Ebert, WorleyParsons

ESCRI-SA

Background to Project

A reasonable business case for the use of large scale storage (100s of MWs) such as pumped hydro, potentially compressed air and other concepts including gas line-capacity

A potential business case around smaller (<30 MW peak) storage where both a renewable energy generation time shift (“arbitrage”) value could be combined with a network service value

► A study was undertaken in 2011 examining the

role of energy storage for renewable energy

integration in South Australia, which found;

ESCRI-SA

What is ESCRI-SA?

Started as a conversation around the smaller energy storage concept (<30MW peak) between WorleyParsons and AGL

Grew to include ElectraNet and the potential to assist renewable energy integration in South Australia

Evolved as a project to demonstrate the business case around such storage, including;

- The value proposition to renewable generation

- The commerciality of the concept if combined with transmission network value

- The ability of storage technology to meet utility and market standards

- The commercial framework under which such an asset could be owned and operated

- How such an asset would fit into the Regulatory framework

► Energy Storage for Commercial Renewable

Integration – South Australia (ESCRI-SA)

ESCRI-SA

What is ESCRI-SA?

Phase 1 – Business Case

• Regulatory environment

• Initial siting

• Functional specification

• Capital estimating

• Technology selection

• Commercial framework

• Market impact & value

Phase 2 – Project Delivery

• Statutory approvals

• Formal procurement

• Finance raising

• Detailed design

• Construction

• Commercial contracts

• Operation of asset

?

ESCRI-SA

Phase 1 – Basics

► Targeting revenue from three services;

The trading of energy into the NEM, and specifically the

time shifting and trading of wind energy within the South

Australian NEM Region

The provision of ancillary services into the NEM

The provision of network services at Transmission level

► Is technology neutral, but;

Looking for commercial solutions that can meet utility

standards and expectations, under a LSTK EPC supply

Not pursuing pumped hydro or large scale CAES

ESCRI-SA

ESCRI Phase 1 – Fundamental Questions?

► What technology and what would it do?

► Can the device meet typical utility standards?

► What price? How procured? What contract form?

► The commercial framework for the device – and

what would it be selling?

► Are there particular Safety and operational issues?

► Where would it be sited – what value could it bring?

► How does this leverage renewable energy?

► Is it possible to operate an energy storage asset

within the Regulations that realises the Market,

Network and Ancillary Service value?

ESCRI-SA

Building the bona-fides of the technology

Kahuku Wind Farm, Hawaii, energy storage system fire, 2012

Photo source; YouTube

ESCRI-SA

Energy Storage in Context

► World installed generation capacity is ≈ 5,500 GW1

► World installed energy storage capacity is ≈ 150 GW

Storage type Technology Installed Capacity (aprox.)

Mechanical Pumped hydro

Compressed air (CAES)

Flywheel

142,000 MW

435 MW

972 MW

Chemical and

electrochemical

Batteries

Flow batteries

Hydrogen

477 MW

19 MW

3 MW

Electrical Super-capacitors 12 MW

Thermal Molten Salt

Other (chilled water etc)

1237 MW

130 MW

1 All data grid connected, from the US Dept. of Energy Global Energy Storage Database, at:

http://www.energystorageexchange.org/ as at 5 February 2015. This Exchange is hosted by the Sandia National

Laboratories.

ESCRI-SA

History of development

► Global installed energy storage (excl pumped

hydro) – last 40 years

Source: DOE Global Energy Storage Database, Sandia National Laboratories. Images courtesy of Sandia National Laboratories

and Strategen Consulting, LLC . Images have bee rearranged to fit medium.

ESCRI-SA

Storage is not all equal

► Choice depends on; Peak output capacity

Energy stored

Depth of discharge

Response time

Cycle efficiency

Discharge efficiency

Number of cycles/lifetime

Self discharge

Power/energy density

Contracting terms

Price and return

ESCRI-SA

ESCRI-SA

What some of these look like

Technology: Isothermal Compressed Air Energy

Storage (ICAES) – Pilot Project

Nameplate power output: 1.5 MW

Energy capacity: 1.5 MWh

Technology Supplier: SustainX

Asset Owner: SustainX

Location: USA

Uses: Renewable output time shifting and

integration, transmission line congestion relief

Technology: Flywheel energy storage (FES)

Nameplate power output: 20 MW

Energy capacity: 5 MWh

Technology Supplier: Beacon Power

Asset Owner: Spindle Grid Regulation, LLC

Location: USA

Uses: Grid frequency regulation

Source: DOE Global Energy Storage Database, Sandia National Laboratories and formal web sites for either the

project or the technology supplier. Note that data accuracy could not be verified.

ESCRI-SA

What some of these look like

Technology: Lead Acid Battery

Nameplate power output: 4.5 MW

Energy capacity: 10.5 MWh

Technology Supplier: Shin-Kobe Electric Machinery Co.

Asset Owner: Kuroshio Power

Location: Japan

Uses: Wind farm capacity firming

Technology: Vanadium Redox Flow Battery

Nameplate power output: 600 kW

Energy capacity: 3.6 MWh

Technology Supplier: Prudent Energy Corporation

Asset Owner: Prudent Energy Services

Location: USA

Uses: Peak shaving and demand charge avoidance

Source: DOE Global Energy Storage Database, Sandia National Laboratories and formal web sites for either the

project or the technology supplier. WorleyParsons could not verify data accuracy.

ESCRI-SA

Results to date?

ESCRI-SA

ESCRI Phase 1 – Regulation

► Such an asset would be subject to the National

Electricity Law and National Electricity Rules

Good news is that there appears no impediment to an

energy storage device realising multiple revenue streams

Bad news is that just how depends very much on what it

does, who owns it and how it connects – there is some

precedent (pumped hydro), but also complexity, including;

- The best registration path (market/non-market generator,

scheduled/semi-scheduled/unscheduled generator)

- Consideration of Transmission Use of System (TUOS) charges,

Marginal Loss Factors (MLFs), ability or desire to provide market

ancillary services (such as FCAS, SRAS or NSCAS)

- In realising a Network benefit value, the Regulatory Investment

Test (RIT-T) process likely applies and potentially limits trading

value, depending on ownership and function

ESCRI-SA

ESCRI Phase 1 – Initial Siting

► Siting aimed to maximise

the overall business case

for the asset

► Started with broad

selection criterion, and

slowly rationalised to

most valuable/practical

► Two layers of screening

to select target sites

► Benefit quantification to

try & rationalise selection

Benefits ultimately used in screening

Category Benefit class

Generated

Energy Value

1. Energy Trading Value

2. Marginal Loss Factor (MLF) Impact

Network

Support

(due to

reliability

constraints)

1. Network Augmentation Capital

Deferral

2. Localised Frequency Support

3. Expected Unserved Energy (USE)

reduction

Network

Support

(to increase

Market Benefit)

1. Heywood Interconnector Constraint

Reduction

2. Murraylink Interconnector Constraint

Reduction

3. Local Generator Constraint

Reduction

4. Grid Support Cost Reduction

5. System Frequency Support

6. Avoided Wind Farm Frequency and

Control Ancillary Service (FCAS)

obligation

ESCRI-SA

ESCRI Phase 1 – Initial Siting

► Initial siting suggested

three locations;

Eyre Peninsula

Riverland

Yorke Peninsula

► Of which three locations

were chosen;

1. Port Lincoln terminal Sub.

2. Dalrymple Substation

3. Monash Substation

► Ultimately very iterative

process

ESCRI-SA

ESCRI Phase 1 – Functional Specification

► A mathematical model of the asset has been built,

which allows simulation against financial metrics

► Allows functional algorithms to be tested and

trialled, across 100s of technology and size options

Storage parameters can be optimised within technology constraints

Various energy time shift algorithms can be tried

Differences between sites can be calculated

► Used to determine basic functional Specifications

ESCRI-SA

ESCRI Phase 1 – Procurement and Price

► A formal RFI was issued on 11 May to forty two

interested parties (in and outside of Australia);

Seeking information on pricing,

procurement preferences,

technology capability, warranties

etc. on LSTK EPC terms

Essentially a draft Specification was

issued, seeking a storage device

between 5-10MWpk & 20–200MWh

at typical utility standards

Concept is to short-list for potential

Phase 2 tendering and to assist in

confirming final business case

ESCRI-SA

ESCRI Phase 1 – Commercial Framework

► There is a tension

between network and

energy trading value

► Ownership is critical in

determining operation

and commercials

Could be owned by a TNSP, specialist 3rd party or

generator/gen-tailer

Functional hierarchy may influence the best owner for

such a device – who has dispatch rights and when?

Trading could be sold or leased, but if owned by a

regulated business there may be a limitation on revenue

ESCRI-SA

ESCRI Phase 1 – Knowledge Sharing

► Knowledge sharing material will likely begin appearing around August, and include; A final business case report including the regulatory,

siting, commercial framework and essential business case for the asset and how this could be used to increase renewable energy supply

A state-of-the-art report on Energy Storage use globally

A functioning version of the mathematical model for people to use for evaluations

The Functional Specification document, once feedback from the market has been received

Recommendations on road-blocks and how these might be overcome

A series of presentations at key forums

ESCRI-SA

ESCRI Phase 1 – Conclusions so far

► Basic conclusions to date include; There are few precedents in Australia – but even

internationally the market is still in its infancy

There is potential to leverage diverse value from storage within the NEM, within the current rules

The issues can be complex – especially defining role(s) and commercial arrangements, and many technology choices with different strengths/weaknesses

There is no simple optimum asset – an iterative process is required to establish the what, where and who

Yet to conclude on “storage and renewables”, with early work favouring a straight market role for initial storage assets

Storage appears a more complex asset, perhaps requiring long term a rethink of certain constraints and market concepts to be most effective for consumers

DISCLAIMER

This presentation has been prepared by representatives of AGL, ElectraNet and WorleyParsons.

The presentation contains the professional and personal opinions of the presenter, which are given in good faith. As such, opinions presented

herein may not always necessarily reflect the position of either AGL, ElectraNet or WorleyParsons, their officers or executive.

Any forward-looking statements included in this presentation will involve subjective judgment and analysis and are subject to uncertainties,

risks and contingencies—many of which are outside the control of, and may be unknown to, AGL, ElectraNet or WorleyParsons.

AGL, ElectraNet and WorleyParsons and all associated entities and representatives make no representation or warranty as to the accuracy,

reliability or completeness of information in this document and do not take responsibility for updating any information or correcting any error or

omission that may become apparent after this document has been issued.

To the extent permitted by law, AGL, ElectraNet and WorleyParsons and its officers, employees, related bodies and agents disclaim all

liability—direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of AGL, ElectraNet or

WorleyParsons and/or any of their agents)—for any loss or damage suffered by a recipient or other persons arising out of, or in connection

with, any use or reliance on this presentation or information.