April 24, 2013

T&D Upgrade Deferral

Executive Summary

Two especially compelling and closely related value propositions for electricity storage include use to: 1) defer or avoid the need to upgrade electrical transmission and distribution (T&D) equipment or 2) extend the life of existing T&D equipment. Depending on the circumstances, the value is high and the same storage used for those value propositions can be used for numerous other benefits.

A key premise for these two value propositions is that a relatively modest amount of storage can be used to serve a small portion of peak demand that is served by the T&D equipment whose capacity must be increased due to growing peak demand (demand growth) or whose life is to be extended. For example, storage whose rated power output is 4% to 5% of the T&D equipment’s “load carrying capacity” could be used to defer an upgrade by one to two years. Similarly, to extend the life of aging T&D equipment a small amount of storage is used to reduce the peak demand served by the equipment.

Discussion

This value proposition involves use of storage to either: a) defer or avoid the need for a T&D equipment upgrade that is needed due to demand growth (deferral) or b) to extend the life of existing T&D equipment (life extension). A key premise for this value proposition is that a small amount of storage can: a) allow the utility to delay the need for expensive, demand-growth-related T&D equipment upgrades or b) reduce demand served by existing T&D equipment such that the equipment’s life is extended. 

Importantly, to be used for the deferral and life extension value propositions the storage must be located electrically “downstream” from the affected equipment. So the storage would qualify as a “distributed energy resource” (DER). 

The benefit is compelling because it can be quite significant, especially if the upgrade that is deferred is expensive and/or if the amount of storage needed – relative to the power rating of the T&D equipment involved – is modest. 

In most situations, storage for this application is only used for a very small portion of the year, if at all because demand only exceeds the T&D equipment’s “load carrying capacity” during the most extreme peaks (usually the hottest days). So, the storage may not have to be used at all if a) demand does not grow as expected and/or b) demand does not exceed the T&D equipment’s rating due to mild weather leading to low air conditioning use. 

Typically, after one to three years it is less expensive to do the upgrades, especially if peak demand is growing quickly because as demand grows so does the amount of storage needed to continue to defer the upgrade. So the benefit diminishes rapidly after just a few years. 

However, the same storage can deliver other benefits after T&D upgrades are made. And, transportable storage could be moved so it can be used for deferral or life extension – and/or for other uses – elsewhere. If the storage is stationary then it can be used for numerous benefits.

T&D Upgrade Deferral

Consider the T&D upgrade deferral example shown graphically in Figure 1. Storage whose rated power output is 4% of the T&D equipment’s power rating will defer an upgrade of T&D equipment for two years.

In the example:

  • Demand is growing at 2% per year and is expected to exceed the existing T&D equipment’s load carrying capacity in the next year.
  • The existing T&D equipment’s load carrying capacity is 12,000 kiloWatts (12 MegaWatts). After the upgrade the T&D capacity will be rated at 16,000 kiloWatts (16 MegaWatts), for a 33.3% increase.
  • Peak demand served by the equipment is growing at a rate of 2% per year. The hourly demand profile is determined by the utility based on historical demand data. (Some utilities may use standard or design load profiles).
  • In the first year, excess demand is expected to be about 77 kW (0.7% of the existing T&D equipment’s load carrying capacity). And, during the day 112 kiloWatt-hours (kWh) of energy will be needed to serve end-users’ demand while the T&D equipment is overloaded (“excess energy” in Figure 1.). During the second year of deferral, excess demand is forecast to be 318 kW (about 2.7% of T&D rated capacity) and excess energy is about 757 kWh.
  • The storage used for the two year deferral is “oversized” to address uncertainty with 1) power output of 4% of the existing T&D equipment’s capacity, or 480 kW and 1) enough stored energy to discharge for 3.5 hours (requiring 1,680 kWh of stored energy, more than double the excess energy in the second year.

Continuing with the example, assume that the cost for the upgrade is $2 Million. So the installed cost per kiloWatt (kW) of upgraded equipment is $2 Million/16,000 kW = $125 per kW. $125 per kW for T&D equipment is somewhat high though not unusual. (And, this value can be much higher.) 

Given the assumptions that storage whose power output is equal to 4% of the load carrying capacity of the T&D equipment being deferred, and assuming that the installed cost for the T&D equipment is $125/kW of load carrying capacity then, as shown in Figure 2, the benefit for a one year deferral is about $460/kW of storage and for two years the value is $920/kW of storage (without regard to time-value of money). 

Consider this important note: The assessment described above must occur each year for a given deferral because, in most cases, the amount of demand served by T&D equipment is growing. So, in each year of a deferral, utility engineers must reassess the merits of using storage for another year of deferral. As shown in Figure 1, demand grows such that for each subsequent year the amount of storage needed to keep pace with the growth increases, sometimes more than doubling. So the amount of storage power and energy needed to defer an upgrade for another year may be too expensive, relative to the cost to do the upgrade or replacement.

T&D Equipment Deferral for T&D Investment Risk Management

Another possible benefit from deferrals is reduced T&D investment risk involving uncertainty about the timing and amount of demand that may be added, requiring a T&D upgrade. That uncertainty could be about the amount and timing of a) increased business activity and b) new construction. Consider an example: the utility determines that a T&D upgrade will be needed to serve new demand that will be added when a planned housing development is completed. But, there is some uncertainty about when or if the development will be completed. One solution is to make the upgrade, despite the uncertainty. Or, the utility could avoid making a potentially unneeded investment in more T&D capacity by using transportable, modular storage to serve peak demand for one or two years until there is more certainty.

T&D Equipment Life Extension

The benefit for T&D equipment life extension is similar: the need to replace aging equipment is deferred. The key difference is that for life extension the demand served by the T&D equipment must be reduced so it remains somewhat below the load carrying capacity of the T&D equipment. By reducing the amount of power that the T&D equipment must serve the equipment operates at lower temperature, which reduces wear on the equipment. That may also reduce occurrence of a phenomenon called “ground faults” which can reduce T&D equipment’s life significantly, especially underground power cables. In fact, storage could be used to extend the life of utilities aging fleet of underground cables which are quite expensive to replace compared to “overhead” wires.

Key Indicators

Criteria that indicate whether storage might be viable for deferral or life extension include: a) high T&D cost, b) high peak-to-average demand ratio, c) modest projected 

overload, d) slow peak demand growth (rate), e) uncertainty about the timing and/or likelihood of block load additions, f) T&D construction delays or construction resource constraints, g) the T&D upgrade project competes with other important projects for capital, and h) the same storage provides additional benefits – revenue or avoided cost – that can be stacked ort aggregated into an attractive value proposition, such as energy time-shift and providing electric supply capacity (power). 

Regarding life extension: The equipment’s age and operational history are important indicators. Older equipment and heavily loaded equipment are most likely to be good candidates for life extension – especially if replacing that equipment will be expensive. 

Storage is especially well-suited to circumstances involving: a) strict air emissions regulations, b) noise related constraints and c) fuel storage or other safety-related challenges that restrict use of combustion-based distributed generation. Storage may be especially attractive if the energy price differential is large between times when storage is charged and when it is discharged. 

Conclusions and Observations 

T&D deferrals and life extensions can provide important “anchor” benefits for a broad spectrum of potential value propositions, for a variety of reasons, key among them are the following. First, the value can be hundreds of dollars per kW of storage installed, for one, two or even several years. Second, because the storage for deferral or life extension is only needed for a small number of hours each year – to serve peak demand – so it can be used for many other benefits during more than more than 90% of the year. 

Depending on the circumstances,storage deployed for deferral or life extension can also provide most of the other benefits that storage can deliver. And, given the prospects for using transportable storage for deferral and life extension are especially interesting given that they can be used for so many benefits, some that are location-specific. 

If the storage is owned by the utility it may also be well-suited to use for electric energy time-shift and to reduce the need for generation capacity and for electric supply reserve capacity. Depending on location and circumstances, the same utility-owned storage could also be used for transmission congestion relief, to improve electric service reliability and power quality and to enable renewable energy generation into the grid. 

If the storage is owned by end-users, it may be especially compatible with electricity bill management, improving on-site electric service reliability and electric service power quality and the storage could also be an important element of an overall approach to integrating distributed photovoltaics into the grid. Despite the fact that it is not utility standard practice to use modular storage or other modular resources for deferral and life extension, the practice offers significant advantages in particular circumstances. If nothing else it gives utility capacity planners another alternative to either a) do nothing or b) add larger conventional equipment, primarily generation, transformers and wires. 

Given the richness of the deferral and life extension value propositions it seems likely that they will become standard practice over time as they are demonstrated and standardized.


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