Profiles and Projects: Graduate Yearbook 2009 Department of Mechanical Engineering Monash University

OPTIMUM ENERGY STORAGE FOR PORTLAND WIND FARMS WITH A FOCUS ON ECONOMIC FEASIBILITY
DAVID BOWLY SUPERVISED BY: DR. M. A. HESSAMI
ABSTRACT
This report presents a study into the economic advantages of using large scale energy storage to complement a wind farm in a large, base load dominated electricity grid. A computer model is developed which simulates the operation of each energy storage system. A variety of operation strategies are compared with the results of a dynamic programming model which finds the maximum possible revenue a given system can generate. Three energy storage systems are modelled and costed: Pumped Seawater Hydro, Compressed Air Energy Storage (CAES), and Thermal Energy Storage. It is found that CAES is the most profitable storage medium, requiring a capital expenditure of $140M and generating a rate of return of 15.4%. PHS generates a ROR of 9.6%, and TES 8.0%. A significant investment opportunity exists; it is highly recommended that CAES is investigated in more depth with the aim of introducing large scale energy storage to Portland Wind Farms.

INTRODUCTION
Like all renewable energy sources, wind power has strengths and weaknesses. One of its biggest drawbacks is that wind is inherently variable, being classified as non dispatchable by electricity regulators. Energy storage ameliorates wind farms inherent variability, providing the ability to store power generated by wind turbines at times of low demand, and release that energy at times of high demand. Wind power operators receive higher revenues by providing power to the grid when the electricity spot price is high. This study investigates the economic viability of using an energy storage system with Portland Wind Farms (PWF) in Victoria, Australia. This will be Victorias largest wind farm by nameplate capacity (194.4MW) when completed in 2010 (Pacic Hydro, 2006). Three methods of energy storage will be investigated and compared Pumped Seawater Hydro (PHS), Compressed Air Energy Storage (CAES), and Sensible Thermal Energy Storage (TES). All are commercially proven, although not all have previously been used on this scale. A large body of research into the use of energy storage to complement wind power exists. Many studies investigate technical and power control aspects, and a variety of papers present cases for using energy storage to complement wind power in island locations with isolated grids. Of the large-grid studies, Swider (2007) concludes that the CAES can be economic in the case of large-scale wind power deployment in the German electricity grid. Ummels et al. (2008) concludes that cost savings from energy storage increase with the amount of wind power installed in the Dutch grid. However, Lund et al. (2009) find that CAES is not economic for the grid of Denmark. The findings throughout literature, in conclusion, are that economic feasibility of energy storage is highly grid-dependent. In contrast to the above, this paper investigates the economics of various energy storage systems to enhance wind power in a low penetration, base load dominated, large capacity electricity grid. This project is an extension of the work by Hessami and Yeoh (2008) and Hessami and Rocha (2008), incorporating more sophisticated optimisation, further costing work, an investigation of TES, and a method which allows for reliable comparison between the different technologies. This research incorporates technical feasibility, operation optimisation, costing, and financial analysis elements, as shown in Figure 1 on the following page.

Profiles and Projects: Graduate Yearbook 2009 Department of Mechanical Engineering Monash University

Figure 1 Key information collected and work completed over the course of this research to model the system and thus evaluate the economics of large scale energy storage

DETAILS OF ENERGY STORAGE DEVICES

Pumped Seawater Hydro Storage In the context of the current drought in Australia, a pumped seawater hydro plant was chosen. This technology is already in operation in Okinawa, Japan, with a 30MW high-head storage dam. An ideal topography exists for the placement of a storage pond directly adjacent to the Cape Bridgewater wind farm, providing an elevation of 135m within 250m of the shoreline. Compressed Air Energy Storage A CAES system separates the two components of a normal gas turbine. Air is compressed and stored underground to charge the system, and fed directly into the combustion chamber to discharge. The CAES turbine thus produces around three times as much specific power as a standard turbine when operating. CAES is a commercially proven technology: a 290MW plant was commissioned in Huntorf, Germany, in 1978, and a 110 MW plant in Alabama, US, in 1991. Underground caverns are the cheapest solution for storing significant quantities of air at high pressures. Hessami and Rocha (2008) identified a depleted gas field in the Waare formation of the Otway basin for this system. It is an economical and practical alternative to the more common solution mining method. Thermal Energy Storage This research will use sensible heat storage with turbine, as the technology is very simple, and thus reliable (Ibrahim et al., 2008). Electric resistance is used to heat carbon blocks, and to discharge, a working fluid extracts the energy as steam and feeds a steam turbine. The system designed stores heat in the blocks at 750C; heat is extracted by a steam turbine operating at inlet conditions of 140 bar gauge and 700C. Other storage devices considered A wide variety of other energy storage systems are also available, however none were suitable for this application. Most current battery technologies suffer from deep-cycle problems, have too short a service life to be practical for this application, and significant technical challenges exist in upscaling the technology. Hydrogen fuel cells were considered, however capital costs are currently prohibitively expensive (Ibrahim et al., 2008). Other technologies, such as superconducting magnetic energy storage, flywheels and super capacitors, are not capable of energy storage on the scale required.

Profiles and Projects: Graduate Yearbook 2009 Department of Mechanical Engineering Monash University Table 1 Energy storage system parameters and capital costs. Costings and plant specifications obtained from confidential industry quotations. Leakage losses are negligible for CAES and TES over the timescales of interest.
PHS n 31.4MW pump/turbines Seawater at elevation Pump 2.0% Turbine 12.7% Line loss 1.9% Transmission 0.3% 84.3% $45,150,000 $17,300 $973,400 0.2% of CapEx $400,000 pa CAES 4 20-80MW gas turbines Compressed air in cavern Compressor Diabatic expansion Transmission (64.0%) $15,500,000 $4,900 $1,009,000 $2/kW-yr $400,000 pa $3.75/GJ 30.9% 20% 1.0% TES 150-300MW steam turbines Heat in carbon blocks Heating Discharging Transmission 28.7% $15,500,000 $5,970 $750,000 0.2% of CapEx $400,000 pa 1% 71% 0.3%

Plant Storage media Key losses

Round trip Fixed Cost Cost/MWh Cost/MW Maintenance cost Running costs Fuel cost

THE COMPUTER SIMULATION

The operation of the energy storage system is modelled using historical operational data to determine the extra revenue generated using storage. Three years worth of Victorian electricity spot prices, in half hourly intervals, were obtained. Three years of five minute instantaneous power readings from Yambuk wind farm (one of the four wind farms marking up PWF) were converted to half-hourly averages and scaled up to the output of PWF. Both the data and the scaling process were shown to be reliable by independent verification with wind speed data from Port Fairy and Portland from the Bureau of Meteorology over the same period. The computer model is programmed in Matlab. The model calculates the return on investment for any system configuration. By choosing a range of possible values for storage and plant size (exhaustive search), the parameters can be found which maximise the rate of return on capital investment in a storage system.

OPERATING STRATEGY
To compare the different energy storage systems, each must be operated to obtain maximum revenue. For simplicity, it will be assumed that the plant operates at the same conditions for the whole of each half-hourly period. If the storage is not close to being full or empty, the following operations are possible: 1. Storage is charged using power from PWF, selling no power (or reduced power) to the grid 2. Storage is discharged, selling power from storage and wind farm to the grid 3. Storage is bypassed, selling only power from the wind farm to the grid. There are many strategies available to operate the device to generate extra revenue. Some of these were tested using the model, and are explained briefly below. The revenues generated are compared in Figure 2. A simple technique is to charge the system whenever the spot price is below a charge (C) price, and discharge when above a discharge (D) price. An optimum C and D can be found by exhaustive search. This technique is effective during normal operation, but does not do well during periods of high or low spot price. This strategy can be improved by modifying the C and D values, Cm and Dm, to encourage the system to charge and discourage it from discharging when the storage level is low, for example:

Dm = D 1 + W (1 S )

15

(1)

W is a weighting factor which determines how much of an effect the storage level is allowed to have on the operation. The optimum modification function (1-S)15, W, C and D were determined by exhaustive search.

Profiles and Projects: Graduate Yearbook 2009 Department of Mechanical Engineering Monash University

Optimisation can be further improved based on the fact that the distribution of the spot price varies throughout the year. To take this into account, an optimum C and D are determined using future prices for a given period, on the basis that wind farm outputs and spot prices can be reliably forecast under most conditions several days in advance. D is based on a top percentile of prices, and C on a bottom percentile. Dynamic programming Figure 2 shows that increasingly sophisticated techniques can indeed generate extra revenue. However, to reliably compare between different storage systems, the best possible revenue should be found. Consider the path created by a given combination of charge and discharge cycles. If the revenue from the paths could be compared, the best possible path could be selected. With three possible actions at each time step n, the number of possible paths is 3n, which quickly becomes too large to handle. However, using a method of dynamic programming adapted from Lund et al. (2009), it is possible to reduce the number of outcomes. The only items of interest at the end of each time period are the revenue generated up to that point, and the storage level corresponding to this. If two paths ending at a given time have the same storage level, only the path corresponding to the highest storage level needs to be recorded the other path is sub-optimal. By discretising the number of possible storage levels, it is possible to make the storage levels overlap. This method clearly introduces some rounding error. A subroutine was written to predict the rounding error introduced by a given choice of discretisation in order to choose a number of discretisations to minimise the error introduced. This subroutine was found to predict the error with a high degree of accuracy.
140 130 120 110 100 90 80 No storage Vary sell, fixed Vary sell, buy buy Account for storage level Predictive c/d price Improved predictive Combination Optimum solution

Revenue ($M over 3 years)

Optimisation method

Figure 2 The revenue generated using each operation strategy, compared with the revenue generated by the wind farm without storage. With increasing sophistication, the techniques approach the optimum solution.

RESULTS
The model was run to determine the revenue which could be generated for a range of storage sizes and output ratings for each storage device. The extra revenue gained by the ability to store more of the wind farms output, or to provide more power to the grid during high demand periods, must be balanced against the increased capital cost. Each energy storage device has a set of characteristics resulting in the best rate of return, shown in Figure 3. A summary of the results for each storage device is shown in Table 2. The CAES system appears to be by far the most profitable energy storage device for PWF. The profitability of the CAES system can be attributed to its storage medium, which is relatively cheap to store in large quantities. This allows the system to supply power continuously during long high-demand periods. Furthermore, the CAES system provides extra power to the grid on top of the output of PWF.

Profiles and Projects: Graduate Yearbook 2009 Department of Mechanical Engineering Monash University

ROR for these plant sizings

10 8 6 4 2 0 800 600 400 200 Output rating (MW) 0 0

X: 1800 Y: 188.4 Z: 9.622

1000

2000

3000

4000

5000

6000

Storage size (MWh)

Figure 3 Optimisation run for the PHS system. The point indicated has the highest rate of return. Table 2 Summary of optimum specifications for each plant, the capital expenditure required, and the revenues generated by each. All costs are quoted in 2007 Australian dollars, $M.
Storage size (MWh) Storage size (physical) Output rating (MW) Output plant Capital Expenditure Extra revenue (2007) Fuel cost (2007) Maint cost (2007) Running cost (2007) Prot (2007) ROR on CapEx PHS 1800 7 3 4.89 x 10 m @ 135m 188.4 6 x 31.4MW turbines (31.8MW pumping) $260 $20.06 $0.00 $0.52 $0.40 $19.14 9.62% CAES 1887 7 3.5 x 10 kg @ 19.6MPa 110 4 x 27.5MW turbines (16.5MW compression) $136 $23.50 $5.35 $0.22 $0.40 $17.53 15.43% TES 5500 18330 tonnes @ 750C 240 1 steam turbine $229 $16.20 $0.00 $0.47 $0.40 $15.33 8.03%

Analysis of operation The following two figures show the operation of the CAES system under different conditions. During periods of normal spot prices, the system charges and discharges on a daily basis, with the change in level over a day a function of the wind farm output and the spot price. In anticipation of a high spot price on the right, the system is fully charged, and a large proportion of the system is discharged over the following 12 hour period.
x 10 1
50
4

0.5

Storage level (MWh)

Storage level (MWh)

Spot price ($)

2000
0

2000

1000

0 23/03/2006

25/03/2006

27/03/2006 29/03/2006 Date (ticks at midnight)

31/03/2006

15/01/2007

16/01/2007 16/01/2007 17/01/2007 Date (ticks at midnight and midday)

Figure 4 the operation of the CAES system under periods of normal spot prices (left) and very high spot prices. The system is able to operate as a peaking plant for long periods, providing power when demand is high.

Spot price ($)

Profiles and Projects: Graduate Yearbook 2009 Department of Mechanical Engineering Monash University

Sensitivity analysis A sensitivity analysis was performed to quantify the effect of varying certain parameters on the calculated Rates of Return of each system. The CAES systems rate of return was found to be particularly sensitive to capital cost, fuel cost, and the annual increase in electricity price. Variations in maintenance and running costs, and charge and discharge efficiencies, had little effect on the profitability of the system. Of the parameters on which the model depends, it is the capital cost which is the least certain. Cost estimation is a highly specialised business; far more resources and expertise would be required to determine a very accurate capital cost. Furthermore, some technical details could not be fully investigated. For example, there is some contention in the academic world as to whether a CAES storage cavern at the depth of the Waare formation is feasible. To be completely confident would require a basic engineering package.

CONCLUSIONS AND RECOMMENDATIONS

This study can conclude that large scale energy storage would almost certainly be a useful and profitable addition to Portland Wind Farms. Compressed Air Energy Storage appears to be the most profitable storage media for this wind farm and grid, requiring a capital expenditure of $136M and generating a rate of return of 15.4%, making it a feasible option in good economic times. Pumped Seawater Hydro is predicted to generate a rate of return of 9.6%, the capital investment required being very much higher than CAES at $260M. Thermal Energy Storage generates a rate of return of only 8.0% on its capital cost, indicating that it is unlikely to be commercially feasible. Future work To determine the change in CO2 emissions from the use of these energy storage systems, the emissions from the power sources the energy storage system replace must be carefully quantified. Denholm and Kulcinski (2004) presents a study of electricity storage life cycle CO2 emissions which could be adapted to this study. Recommendations The rates of return calculated, especially for the CAES system, indicate a significant opportunity for investment. This technology has the ability to greatly improve the usefulness of wind farms, creating peaking plants in place of current non-dispatchable power sources. It is highly recommended that these technologies are investigated in more depth with the aim of introducing energy storage to Portland Wind Farms.

ACKNOWLEDGEMENTS
I would like to thank my supervisor Dr Mir-Akbar Hessami for introducing me to this very exciting topic, for his enthusiasm, and for his insights and advice on technical issues and writing.

REFERENCES
Denholm, P. and Kulcinski, G. (2004). Life cycle energy requirements and greenhouse gas emissions from large scale energy storage systems. Energy Conversion and Management, 45(13-14):21532172. Hessami, M.-A. and Rocha, K. (2008). A study of an integrated compressed air energy storage and large scale wind farm in australia. Wind Expo LAWEA 2008, Mexico, 5-7 November, 2008. Hessami, M.-A. and Yeoh, D. (2008). A feasibility study of the use of seawater pumped hydro storage on wind farms in portland, victoria, australia. Wind Expo LAWEA 2008, Mexico, 5-7 November, 2008. Ibrahim, H., Ilinca, A., and Perron, J. (2008). Energy storage systemscharacteristics and comparisons. Renewable and Sustainable Energy Reviews, 12(5):12211250. Lund, H., Salgi, G., Elmegaard, B., and Andersen, A. N. (2009). Optimal operation strategies of compressed air energy storage on electricity spot markets. Applied Thermal Engineering, 29(5-6):799806. Pacic Hydro (2006). Portland wind project. http://www.pacifichydro.com.au/Default.aspx?tabid=134. Swider, D. (2007). Compressed air energy storage in an electricity system with significant wind power generation. IEEE Transaction on Energy Conversion, 22(1):95102. Ummels, B. C., Pelgrum, E., and Kling, W. L. (2008). Integration of large-scale wind power and use of energy storage in the netherlands electricity supply. IET Renewable Power Generation, 2(1):3446.