A Unique RFP for Energy Storage
Santa Fe-based Chamisa Energy Corporation recently announced a request for proposals for up to 250MW of nameplate wind generation resources to be used to provide energy to a 135 MW or larger compressed air energy storage (CAES) facility under development in Swisher County in the Texas panhandle. The proposed CAES facility would compress air and store it in solution-mined underground caverns. To convert the stored potential energy back into electricity, the stored air would be released and mixed with a small amount of natural gas to drive a turbine. The RFP describes CAES as a "bulk electric storage technology used to complement wind energy generation so that wind energy becomes a fully dispatchable resource suitable for peaking, intermediate, baseload or tolling resource."
The energy would be provided to the facility pursuant to a power purchase agreement (PPA). Chamisa invites wind plants located either in the Southwest Power Power (SPP) or the Electric Reliability Council of Texas (ERCOT) to respond. Chamisa will consider proposals that supply wind energy for seven years, but prefers a minimum term of 15 years. The target date for delivering electricity to the Storage Facility is the second quarter of 2014.
Chamisa notes that it is not aware of completed or pending PPAs between WGR and CAES facilities, and thus anticipates that the successful proposal "will be creative in its approach to the RFP." Although the RFP isn't explicit on the point, Chamisa's plan may be to purchase energy from a wind generator or wind generators pursuant to the PPA, store the energy, and then sell the electricity and ancillary services from the facility to a third-party off-taker. If Chamisa can take the bulk of the energy into CAES primarily in off peak hours and then sell the stored energy during on-peak hours, might in theory be able to profit on the arbitrage between the two price points, although past efforts to get grid-scale storage to pencil out on that basis have had limited success. Alternatively, the facility may be able to profit by using the stored energy to provide ancillary services, grid congestion relief, grid stability and support for grid expansion.
In principle, the CAES facility could also be used in a tolling arrangement by which a utility or a seller of wind energy hires the CAES facility for storage, pays a reservation and storage charge to Chamisa, and then dispatches the stored energy at will--in other words, the third-party offtaker could be the same party as the generator delivering the wind energy to the facility (e.g., a utility that is buying wind energy that it wants to shift from off-peak hours to on-peak hours). Under this structure, the party tolling electricity would retain title to the electicity being stored and could arbitrage or otherwise deploy the stored energy into the market as it saw fit. However, a tolling transaction of that type isn't clearly called for by the RFP (although it doesn't appear to be precluded).
Regardless, Chamisa's RFP will be worth monitoring to see whether an independent storage developer can create a workable market structure for its storage assets in order to facilitate financing. The outcome of this effort will be of great interest to developers of solar and wind resources, as well as to developers of pumped storage and other grid-scale storage solutions.
The deadline for written or email questions is March 31, 2011, and proposals are due no later than 5pm Mountain Standard Time on May 16, 2011. If submitted by mail, proposal(s) must be postmarked May 16th. E-mail submission is preferred. You can access Chamisa's RFP by clicking here.
CPUC Staff Issues White Paper on Electric Energy Storage (EES)
Energy Electricty Storage (EES) is likely to become more and more important as intermittent solar and wind energy resources penetrate the grid. EES may be a very useful and perhaps essential way to manage the variability of intermittent renewable energy resources to allow developers to continue building wind and solar projects at an accelerating pace.
On July 9, 2010, the Policy and Planning Division of the California Public Utility Commission (CPUC) issued an interesting Staff White Paper entitled "Electric Energy Storage: An Assessment of Potential Barriers and Opportunities." The report is worth reading for those who are interested in the future of renewable energy and the roll that EES can play in enhancing the deployment of intermittent renewables.
The report describes "a promising new set of Electric Energy Storage ("EES") technologies [that] appear to provide an effective means for addressing the growing problems of reliance on an increasing percentage of intermittent renewable generation resources." The report observes that EES can provide several basice services, such as (1) supplying peak electricity demand by using electricity generated during periods of lower demand (e.g., storage of wind energy generated at night for use during daily peak periods), (2) balancing electricity supply and demand fluctuations over a period of minutes, and (3) deferring expansion of electric grid capacity (including generation, transmission and distribution).
Potential storage technologies include pumped hydro, compressed air energy storage ("CAES"), batteries, thermal storage (e.g., solar thermal plants), flywheels, unltracapacitors and superconducting magnetic storage--the report provides short but helpful description of each technology. Storage presents interesting legal and policy issues, because "[r]egulators are uncertain how EES technologies should fit into the electric system, in part because EES services provide multiple services such as generation, transmission and distribution." In addition, "regulators do not yet know how EES costs and benefits should be allocated among these three main elements of the electric system."
The report makes a number of recommendations, including that the CPUC should conduct a rulemaking to develop policies to remove barriers to the deployment of EES technology in California. The report also proposes that the CPUC consider placing EES within California's energy resources loading order, require utilities to incoporate EES into their integrated resource planning processes, encourage CAISO to change ancillary service market rules to allow EES systems to more easily bid into regulation markets, and integrate EES into utility transmission planning.
The report concludes that "the major barrier for deployment of new storage facilities is not necessarily the technology, but the absence of appropriate regulations and market mechanisms that properly recognize the value of the storage resource and financially comepnsate the owners/operators for the services and benefits they provide."
You can find the report here.
CPUC Staff Issues White Paper on Electric Energy Storage (EES)
Energy Electricty Storage (EES) is likely to become more and more important as intermittent solar and wind energy resources penetrate the grid. EES may be a very useful and perhaps essential way to manage the variability of intermittent renewable energy resources to allow developers to continue building wind and solar projects at an accelerating pace.
On July 9, 2010, the Policy and Planning Division of the California Public Utility Commission (CPUC) issued an interesting Staff White Paper entitled "Electric Energy Storage: An Assessment of Potential Barriers and Opportunities." The report is worth reading for those who are interested in the future of renewable energy and the roll that EES can play in enhancing the deployment of intermittent renewables.
The report describes "a promising new set of Electric Energy Storage ("EES") technologies [that] appear to provide an effective means for addressing the growing problems of reliance on an increasing percentage of intermittent renewable generation resources." The report observes that EES can provide several basice services, such as (1) supplying peak electricity demand by using electricity generated during periods of lower demand (e.g., storage of wind energy generated at night for use during daily peak periods), (2) balancing electricity supply and demand fluctuations over a period of minutes, and (3) deferring expansion of electric grid capacity (including generation, transmission and distribution).
Potential storage technologies include pumped hydro, compressed air energy storage ("CAES"), batteries, thermal storage (e.g., solar thermal plants), flywheels, unltracapacitors and superconducting magnetic storage--the report provides short but helpful description of each technology. Storage presents interesting legal and policy issues, because "[r]egulators are uncertain how EES technologies should fit into the electric system, in part because EES services provide multiple services such as generation, transmission and distribution." In addition, "regulators do not yet know how EES costs and benefits should be allocated among these three main elements of the electric system."
The report makes a number of recommendations, including that the CPUC should conduct a rulemaking to develop policies to remove barriers to the deployment of EES technology in California. The report also proposes that the CPUC consider placing EES within California's energy resources loading order, require utilities to incoporate EES into their integrated resource planning processes, encourage CAISO to change ancillary service market rules to allow EES systems to more easily bid into regulation markets, and integrate EES into utility transmission planning.
The report concludes that "the major barrier for deployment of new storage facilities is not necessarily the technology, but the absence of appropriate regulations and market mechanisms that properly recognize the value of the storage resource and financially comepnsate the owners/operators for the services and benefits they provide."
You can find the report here.
