Tapping into new revenue streams for energy storage is key to its economics, multiple studies and consultants have said. For one utility, a simple software upgrade could prove key to finding those streams.
American Electric Power (AEP) recently upgraded the software to allow one of its energy storage facilities to tap a new source of revenue. In the upgrade, Greensmith Energy layered battery management software on top of its existing inverter control software to allow a West Virginia battery installation to be used for frequency regulation.
For AEP that upgrade represents something of a sea change in how the utility, one of the biggest in the country, treats energy storage. The Balls Gap installation is a 2 MW, 14 MWh sodium-sulfur (NaS) system in Milton, W.V., originally installed in 2009 to provide backup power and defer investment in a new substation.
“When we put in the battery, we didn’t think we’d get as much deferral as we did,” Thomas Weaver, manager of distribution system planning for AEP, said.
The project helped AEP defer an approximately $15 million investment in a new substation from 2008 until 2017. The battery system also has the ability to provide power for 700 customers for up to seven hours so that AEP does not have to cut service to customers when it works on distribution lines. On one occasion, the system was able to provide electrical service to 25 customers for 24 hours.
That has been the main driver for the battery systems AEP has deployed to date. In 2002, AEP ran the first demonstration project of a NaS battery system in the U.S. That system was designed to test batteries for peak shaving. Since then, the utility in 2006 installed a 1 MW, 7.2 MWh NaS system in Charleston, W.V., to defer capital investment in a distribution system and in 2009, in addition to the Milton project, it installed similar systems in Churubusco, Indiana, and Bluffton, Ohio. And in 2010, AEP installed a 4 MW, 24 MWh NaS battery system in Presidio, Texas, that provides capital deferment, reliability support and islanding capability for a remote town close to the Mexican border.
When AEP eventually began to move forward with the deferred substation in Milton, it realized that battery, which is within the PJM Interconnection territory, could serve another purpose. Working with Greensmith, a company AEP invested $5 million in back in 2015, the utility layered on another level of software and is now selling frequency regulation service to PJM from the batteries in Milton.
AEP is also investigating if it should adopt a similar strategy with its battery facilities in Indiana and Ohio, said Weaver.
The utility is also exploring opportunities for its battery facility in Presidio, but because the regulatory regime is different in Texas, Weaver said further public discussion would be “premature.”
“We are looking at opportunities to use what we have learned,” said Weaver. One of the lessons, he said, is that one value stream is not enough to justify an investment in a battery system. “You have to pancake value streams.” Weaver said due diligence is currently under way to look at how energy storage can fit in with other AEP projects.
“When you can do one application today and switch in the future to another, that is incredibly powerful in a very capital intensive industry,” Ram Sastry, vice president of infrastructure and business continuity at AEP, said in a recent webinar hosted by GTM Research.
“We as a utility have never seen this happen before: You take an asset, provision it for one purpose and then use software to reconfigure it and re-provision it for a completely different purpose.”
AEP is also shifting away from NaS technology. To date, all of the utility’s storage projects used NaS batteries. In those projects, AEP chose NaS because it wanted batteries with durations up to seven or eight hours that also had deep discharge capability. At the time, there was also an expectation that NaS prices were going to come down. Instead, they went in the other direction, especially compared with lithium-ion technology.
“NaS is a fairly mature technology with very little technological improvements over the years,” said Ravi Manghani, director, energy storage, at GTM Research. It is also a technology that was exclusively developed by NGK Insulators.
“As a result of the technology maturity and quasi-monopoly, it hasn't seen significant cost improvements over the years compared to lithium-ion, which is still benefiting from cost declines due to technological advancements and scaling across multiple vendors,” Manghani said in response to an email.
Around 2010, AEP decided to look li-ion batteries a try and signed on for a community energy storage project funded by the American Recovery and Reinvestment Act. The project was never finished—the economics didn’t work out—but the project did provide the impetus for AEP in 2012 to decide to switch to li-ion technology.
Sastry said that as li-ion costs come down, energy storage is going to become an increasingly viable solution. He noted that a joint study that AEP’s Texas operating company did with Greensmith found that energy storage is a more economical solution, “by an order of magnitude, five times less expensive than the alternative.”
Until now, however, energy storage has not been part of AEP’s resource planning process, but the company is going to “re-ignite that process,” said Sastry, and look at storage as a solution “not just for future projects but projects that are currently planned.”
Sastry also added that AEP’s CEO, Nick Akins, is “very involved and very bullish the deployment and use of storage” as another tool in the utility’s tool kit.
Historically energy storage was not part of AEP’s distribution and transmission planning process, but that is changing. “We are in the process of doing that and, once we do, the floodgates will open and we’ll start deploy lots more systems.”