Category Renewable Energy Technology Characterizations

System Description

Battery energy storage can be integrated with renewable energy generation systems in either grid-connected or stand – alone applications. For stand-alone systems, batteries are essential to store electricity for use when the sun is no t shining or when the wind is not blowing. For grid-connected systems, batteries add value to intermittent renewabl e resources by facilitating a better match between the demand and supply.

The system characterized in this appendix consists of a 30 kWh battery energy storage system operating with a 30 kW PV array to shave peak load on the utility side of the meter...

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Research & Development

The Electric Power Research Institute, since its inception in 1972, has pioneered development of energy storage. Current programs are focusing on deployment of SMES, CAES, and batteries; and further assessments of the flywheels and super capacitors. The U. S. Department of Energy, through its Energy Storage Systems (ESS) Program, has focused almo st exclusively on battery systems for the last decade for a variety of reasons, including technology versatility, applicability to customer needs, modular construction, and limited funds. Recently, the program has been expande d to include SMES, flywheels and advanced electrochemical capacitors...

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The U. S. electric utility industry is in the process of revolutionary change, from impending restructuring an d competition, to limitations on installing new conventional generation and transmission and distribution equipment. The current situation in the electricity market may offer unique opportunities for energy storage technologies, particularly in combination with renewable energy generation, in which a few seconds to a few hours of electricity can be held for use at a later time [1,2]. These systems can be located near the generator, transmission line, distributio n substation, or the consumer, depending on the application they are addressing.

Storage can play a flexible, multi-function role in the electricity supply network to manage resources effectively...

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Payback Period

For co-fired biomass a simple payback period was calculated instead of a levelized COE. As a retrofit opportunity, co-firing will be pursued by plant owners only if paybacks of a few years can be achieved. Simple Payback is define d as total capital investment divided by annual energy savings, to obtain years until payback. In simple payback, n o consideration is given to the time value of money and no discount rates are applied to dollar values in future years. I n the co-fire analyses, the simple payback is defined by comparing capital expenditures required for the retrofit with fuel cost and other savings. As an example, the technology described in the biomass co-fire technology characterizatio n yields a 4.1-year payback in 2000.

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Financial Model and Results

The FATE2-P (Financial Analysis Tool for Electric Energy Projects) financial analysis model was used to analyze th e data provided in the Technology Characterizations. This spreadsheet model was developed by Princeton Economi c Research, Inc. and the National Renewable Energy Laboratory for the U. S. Department of Energy. FATE2-P can be used for either the revenue requirements or the discounted rate of return approach. It is used by the DOE renewable energy R&D programs for its planning activities. The model is publicly available, and has been used by a number o f non-DOE analysts in recent studies. Other models will produce the same results given the same inputs.

The COEs in Table 1 were prepared using the FATE2-P model, assuming GenCo ownership...

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Techniques for Calculating Levelized COE

The technique to be used for calculating levelized COE varies with ownership perspective. Two of the four ownership perspectives (IOU and Muni) employ a cost-based revenue requirements approach, while the other two use a market-based rate of return approach. The revenue requirements approach assumes a utility has a franchised servic e territory and, its rate of return is set by the state regulatory agency. The plant’s annual expenses and cash charges ar e added to the allowed rate of return on the capital investment to determine revenues.

By contrast, the market-based approach (GenCo and IPP) either estimates a stream of project revenues from projections about electricity sales prices or proposes a stream as part of a competitive bid...

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Financial Structures

Four distinct ownership perspectives were identified for this analysis. Each reflects a different financial structure, financing costs, taxes, and desired rates of return. Briefly, the four ownership scenarios are:

Generating Company (GenCo): The GenCo takes a market-based rate of return approach to building, owning, and operating a power plant. The company uses balance-sheet or corporate finance, where debt and equity investor s hold claim to a diversified pool of corporate assets. For this reason, GenCo debt and equity are less risky than for an IPP (see below) and therefore GenCos pay lower returns. A typical GenCo capital structure consists of 35 % debt at a 7.5% annual return (with no debt service reserve or letter of credit required) and 65% equity at 13% return...

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Introduction to Financial Figures of Merit

An investor, energy policy analyst, or developer may use a variety of figures of merit to evaluate the financia l attractiveness of a power project. The choice often depends on the purpose of the analysis. However, most begin with estimates of the project’s capital cost, projected power output, and annual revenues, expenses, and deductions. A pro forma earnings statement, debt redemption schedule, and statement of after-tax cash flows are typically also prepared. Annual after-tax cash flows are then compared to initial equity investment to determine available return. For anothe r perspective, before-tax, no-debt cash flows may also be calculated and compared to the project’s total cost. The four primary figures of merit are:

Net Present Value: Net Present Value (NPV) is the sum of all ye...

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