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CERC issues paper on utility-scale energy storage systems

Awell-defined policy and regulatory framework to support energy storage is so far absent in India. However, a handful of grid-connected energy storage projects (other than pumped hydropower storage) have been awarded over the past year or so or are being bid out (see box). The first step to put in place a regulatory framework for energy storage systmes (ESS) has been taken by the Central Electricity Regulatory Commission (CERC) issuing a staff paper, “Introduction of Electricity Storage System in India”, in January 2017. The paper covers the probable grid-level applications of ESS, operational framework and recovery of electricity storage services in detail, and is open for stakeholder comments until March 6, 2017.

Renewable Watch presents some of the key features of the staff paper…

  • Applications: Broadly, ESS can address issues with the shifting of generation, regulating electricity despatch, maintaining flow control in the transmission system and strengthening the reliability of the power system without adding capacity from traditional and variable sources of power. Some of the possible applications are as follows:
  • ESS can enhance the reliability of power generated from wind and solar technologies by controlling the intermittent nature of generation.
  • It can be deployed to address the issues of peak demand by shifting delivery of economical generation output during peak periods.
  • Storage could address power system reliability for ensuring frequency at 50 Hz. It could also be an alternative method of providing spinning reserves or ancillary support services.
  • It could be used to improve power system efficiency through the storage of excess generation and reduce greenhouse gas emissions caused by wasteful excess capacity.
  • ESS can reduce the need for major augmentation of the new transmission grid and extend the life of existing infrastructure. The latter is possible as distributed storage can reduce the overloading of transmission lines during peak times by moving electricity at off-peak times. This will also reduce line congestion and line losses.
  • Storage can play a vital role in black- start operation to improve emergency preparedness.
  • Types: The paper recognises that while only pumped storage hydropower has been adopted traditionally, storage facilities can also be designed with non-traditional technologies such as electrochemical battery cells, flywheels and compressed air energy storage (CAES). Superconducting magnetic energy storage (SMES) is useful for low discharge capacity. Each technology has its own performance characteristics, which makes it optimally suitable for certain types of grid services.
  • While pilots of ESS based on these technologies have been set up in developed countries, there is no project based on non-traditional storage technologies in India. However, its role is expected to increase with the development of the electricity market and renewable generation and increasing regulatory interventions.
  • Ownership: The potential owners of storage facilities could be transmission licensees, generating companies, distribution licensees or discoms, merchant power plants including captive plants, and bulk consumers.
  • Operational framework: It is recognised that the business model for storage services will be complex, given its multiple uses. Storage can act as both generation and load. While transmission licensees may operate the ESS as per the directions of the system operator, generators will operate the ESS to optimise profit margins. It will be more challenging when such facilities are used in part by the generator and the transmission owners. Therefore, an appropriate cost-sharing mechanism among users has to be devised.
  • An ESS owned by generators (conventional generator or single/group of renewable generators) may be used to enhance their power supply to the discom (contractual tariff), ancillary market (regulated rate) or open market (negotiated rate) by shifting generation when demand is higher. This is the dedicated-use model. However, to optimise the ESS’s services, the application may be kept non-dedicated so that such services can also be used for system reliability by the system operator or any other grid-connected entities. Given the high capital costs, storage capacity to the extent of 10-15 per cent may be considered as dedicated to the generating station to enhance availability during peak hours.
  • An ESS owned by a transmission licensee may provide its services to generators, discoms or other grid-connected entities. It may also absorb excess generation in the system to despatch it when required on the system operator’s direction.
  • Cost recovery: In the case of dedicated use of storage services, separate charges for such services may not be required and may be considered as part of the generation or transmission business. Hence, the associated costs may be considered in the tariff determination of the licensee. The recovery may be through Rs per unit charges in case the ESS is part of generation and Rs per MW in the case of transmission. In fact, the bids invited by the Ministry of New and Renewable Energy (see Box) will fall in this category. Under this model, although there is no need for a separate contract for storage services, the operational modalities of the ESS may be agreed upon with the users as part of the power purchase agreement or transmission service agreement.

  • In the case of a renewable generator, the tariffs of both the generator and the ESS comprise only a fixed charge component and can be clubbed. Alternatively, ESS costs may be recovered through supplemental charges based on incremental generation or generation shifted. This may be more acceptable to the beneficiaries as the costs reflect the additional value provided by the ESS. The scheduling and despatch of generation from the renewable station and the ESS may be combined, irrespective of the location. The ESS will be a reserved capacity for the renewable generator to smoothen the ramping of the output to the grid.
  • For non-dedicated use of the ESS, separate service charges are to be specified for the use of storage facilities. In this case, the developer has to enter into an agreement with multiple users, specifying the storage capacity and period. Separate scheduling, despatch and energy accounting are required during the charging, holding and discharging period (defined as the storage period). Storage service charges are to be recovered from users with a mark-up price (in terms of Rs per unit per hour for the storage period).
  • This will be applicable for generation shift services, control of renewable generation variability, voltage control, deviation control and balancing control. For controlling intermittency of renewable generation, it would be difficult to prefix the discharge period. Renewable generators may also opt to despatch their output through storage facilities, specifying the delivery point. In the case of voltage and deviation control, the beneficiaries would be the regional entities. Here, the service charges may be first met from the reactive pool account or reliability charges. There would be a saving of additional unscheduled interchange (UI) charges in the case of deviation control services. For balancing control services or storage of excess generation, the CERC has to devise a specific methodology to address the issue of difference in UI charges caused by the time difference in storage and discharge.
  • Generating stations could use only a part of the ESS capacity for dedicated use and allow the remaining capacity to be used by others. The cost recovery in this case will be bifurcated accordingly. Going forward, this is expected to be the business model most preferred by generators.
  • In case the storage facilities are located at a different location from the generation source, transmission charges and losses will be applicable for using the transmission network. This will be linked with the users of the storage facilities. Networks have to be planned by considering this aspect. Also, the scheduling and energy accounting mechanism will require specific consideration, particularly when multiple transactions for multiple uses are scheduled simultaneously at common despatch points.
  • Regulatory jurisdiction: It is recognised that the Electricity Act does not cover energy storage exclusively. However, bulk storage facilities can reasonably be considered as a form of transmission or generation for jurisdictional purposes. The CERC has control over interstate transmission and generation, thus storage meant for these applications across states will be regulated by it. The Indian Electricity Grid Code may be amended by the CERC to address issues related to planning criteria and grid connectivity for the development of bulk ESS. Other regulatory aspects, including depreciation rates, tariff structure, recovery methods and incentives, will also be addressed by the CERC for interstate storage applications. It may be noted that different types of storage facilities warrant different regulatory classifications and treatment.
  •  Challenges: Some of the challenges associated with energy storage technologies relate to high capital costs, environmental issues, safety aspects of battery storage technologies, lack of a policy framework as well as acceptance of the technology and its cost by stakeholders.

The way forward

The CERC has published the staff paper with the intention of generating discussion among the stakeholders on storage technologies and ascertaining users’ perceptions on the various issues regarding the deployment and operation of grid-level storage technologies. Specifically, stakeholder comments have been sought on the need for storage systems, criteria for development of storage facilities and the associated transmission system, the policy changes required, the commercial viability of storage systems, and the tariff model for multiple uses, among other things.

Given that energy storage is an emerging technology and is still at a nascent stage of development world over, there is a need to recognise its utility in the present context through a suitable regulatory framework. In this scenario, appropriate mechanisms have to be put in place to compensate such resources for the multiple values, including operational flexibility that they provide. Therefore, the central regulator’s initiative has come at the right time as clarity on the regulatory framework will help channelise investments into this segment. In the immediate to medium term, the demonstration projects that are under way across the globe will help storage technologies gain further maturity and become commercially viable for utility-scale applications.

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