Business Case Analysis for Energy Storage

Systems for Utilities in Asia Pacific

Is ESS at Grid Level in Asia Pacific practically viable?

Harsh Thacker, Senior Research

Analyst

September, 2014

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Today’s Presenter

Harsh has over five years of experience in the power sector with a particular

specialization in the areas of power distribution sector. Prior to joining Frost & Sullivan,

he was working with a power distribution company in Mumbai. His research

experience focuses area of Power Generation and T&D Equipment, Power Sector

Investments, Renewable Energy Development and Power Utilities Best Practices.

Harsh Thacker, Senior Research Analyst,

Frost & Sullivan

Focus Points

1. Where on grid can ESS be installed?

2. Why will Power Utilities in Asia Pacific consider Energy Storage at

Grid Level?

3. For which applications will ESS at Grid Level will be beneficial or

profitable?

4. What will be the payback time for ESS in Frequency Control Ancillary

Service Application?

Electric Energy

Time Shift

Renewable

Integration

Ancillary

services*

Voltage Support

Transmission Congestion Relief

T&D Upgrade deferral

Sub-station onsite power

Micro or Remote Grid

Time of use-Energy cost

management

Power Quality

Power Reliability

Applications

offered by

Energy

Storage

Electricity

Value chain

Generation Transmission Distribution End-Use

applications

Energy Storage Systems when applied to utility scale applications open up immense possibilities across

the electricity value chain that can lead to huge business opportunities.

For utility scale applications, use of energy storage technologies depends upon the power

charging/discharging rate and discharge duration that each of the technology can be used for.

Renewable

Integration

*Note: Ancillary Services = Load Following; Frequency Regulation; Reserve Capacity; Voltage Support

Market Overview—Applications of Energy Storage in

Electricity Value Chain

9836-27 5

Why will Power Utilities in Asia Pacific consider Energy

Storage at Grid Level?

Need for Energy Storage at Grid

Level

Microgrid

Leading Battery Manufacturing Market

Vertically Unbundled Utilities

Asia‘s Reliance on Costly Fuel Based Generation

Government Support

Energy Demand Growth

Renewable and Distributed Power

Generation

Energy Security and Resiliance

9836-27 6

Where will ESS at Grid Level will be beneficial or

profitable?

Frequency Control Ancillary Services

Hybrid Remote Grid or Micro Grid

Renewable Energy Integration

Transmission & Distribution (T&D) Upgrade Deferral

.

9836-27 7

Frequency Control Ancillary Service

Background

Electrical networks in Asia are becoming

complicated with increasing population, electricity

demand, peaky demand profiles due to increase in

use of gadgets and appliances by residential

consumers and industrial growth in many countries

in the region.

In places like Japan and South Korea, the

curtailment of nuclear power has caused demand

supply imbalances and their power generation

reserve margins have gone down drastically

(between 5% to 10%). Japan and South Korea

both had to shed the load during peak summers, by

asking consumers to voluntarily switch off air-

conditions in their offices.

Source: Frost & Sullivan analysis.

5.6

5 5.5 6

Australia

China

India

Japan

Korea

APAC Average

PPA rates for coal fired power plants (cents/kWh), 2013

9836-27 8

Frequency Control Ancillary Service: Case Study

Source: Frost & Sullivan and NEC.

Energy Storage Business Case Analysis

Example: A 12 MW, 4 MWh BESS was installed in Chile, to off-load a 277 MW thermal power plant of its

frequency response ancillary services. The ESS is in operation since 2009 and automatically responding

to the frequency fluctuations in the gird.

Whenever frequency drops by 0.3 Hz, the ESS is activated within 100 ms (milliseconds), unlike the

response time of power plant which was between 5 to 10 minutes. The system performance of before and

after implementation of ESS has been mentioned in the table below:

Average Pre-fault Generator Output (MW) Average Power Injected for Frequency Regulation

(MW)

Before ESS 253.06 6.22

After ESS 266.83 11.67

Difference 13.77 5.45

Estimations & Assumptions • Income Units: Additional Sales of Electricity after increase in output capacity of generator; Sales of power

for frequency control (battery discharging)

• Expenditure Units: Cost of generating extra electricity, Cost of charging batteries

• Battery Technology: Lithium Ion

• Fuel used for power generation: Steam coal

• Total Project Cost = 10.6 million

• Power purchase rate for power plant = 5.6 cents/ kWh (average rate considered for APAC region)

• Weighted Average Cost of Capital = 10%

9836-27 9 9

Frequency Control Ancillary Service: Case Study

0 1 2 3 4 5 6 7 8 9 10

Payback Period in Years, APAC

Initial Project Cost

$10.6 million

Years

9836-27 10

Key Findings

Source: Frost & Sullivan analysis.

2 Power utilities lack of knowledge about designing an ESS to match their requirements

is one of the biggest restraints for the growth of market in APAC.

1

Power Utilities in Asia Pacific will use energy storage systems to maintain grid

stability, integrate renewable energy and reduce the reliability of back-up and remote

grids on diesel.

3

.

Reduction in storage cost below $300/kW and increase in charging-discharging

efficiency of the system will drive the application of ESS for applications like peak

shaving and power arbitrage

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Email: asiapacific@frost.com

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Q&A Session

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Thank You

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