The Cost of Wind Energy: Tradeoffs between Energy Storage and Transmission

Anyone who has ever lived in Chicago knows how powerful the wind can be, and when generating electricity, it surely can be both powerful and useful. The electricity produced by wind has grown rapidly in the US from 6 billion kWh in 2000 to about 140 billion kWh in 2012. Although wind energy can help to reduce carbon emissions and is safer than nuclear energy, it faces its own obstacles. Wind power is highly volatile with high transmission costs. Many propose that we should store wind energy to solve those problems. In “The role of energy storage in accessing remote wind resources in the Midwest,” Lamy et al. propose the use of energy storage in wind energy production and study the break-even cost of energy storage to transmission.

The trade-off between energy storage and transmission lies in the fact that wind energy output is highly volatile and energy storage can reduce the necessary transmission investment. Nevertheless, storing energy is also quite expensive. In their research, Lamy et al. focus on a wind farm in North Dakota that is built to deliver power to Illinois, and they study the break-even cost of energy storage to transmission for this particular farm. North Dakota is chosen because it has abundant wind resources. Illinois has an ambitious goal of achieving 25 percent renewable generation by 2025, and, as a result, the state imports renewable energy from other states.

Lamy et al. use scenario analysis to estimate the break-even point. First, they estimate transmission and storage sizes over wide ranges. Transmission costs range from $100 to $2000/MW-km and storage costs from $25 to $1000/kWh. Then, they vary those two parameters to capture their effect on the average cost of electricity under different scenarios. Meanwhile, an optimization model is used to maximize the total power delivered from the project. The optimization model assumes that we can accurately predict the wind power in the next 72 hours. Also, the model is able to choose the optimal time to store, transmit, and curtail wind energy.

The scenario analysis shows that as transmission becomes more costly, energy storage starts to replace transmission at a lower cost. However, this only occurs when storage costs are relatively low, less than $100/kWh. When the storage costs are $25/kWh, storage starts to replace transmission when costs are greater than $600/MW-km. For energy storage costs at $100/kWh, storage replaces transmission when costs are greater than $1700/MW-km, which is to say that storage costs beyond $100/kWh are uneconomical. The paper also shows that there is a lower bound to the amount of transmission capacity that must be built. In the scenario analysis, transmission size never drops below 72 percent of the installed wind capacity. There is also an upper bound. Optimal transmission capacity never reaches a level higher than 95 percent, since wind farm capacity factors are always below that limit.

Energy storage does not replace transmission completely, though. Marginal gains in power delivered from one more unit of storage are much lower than those gained from one more unit of transmission. With all sensitivities included, the break-even capital cost of storage to incent storage investment ranges from $25/kWh to $225/kWh, with a best estimate of $100/kWh. Similarly, the break-even capital cost of transmission ranges from $200/MW-km to $1800/MW-km, with a best estimate of $600/MW-km.

As more and more people begin to suffer the consequences of climate change, more effort has been devoted to finding green and renewable energy. Though wind energy faces the problem of volatile output and high transmission cost, it still has a very promising future. With the advancement of technology, the break-even point of energy storage and transmission could change dramatically in the future. In the meantime, government entities should provide proper financial incentives and research funding to make wind energy more stable and affordable.

Article Source: Julian Lamy, Inês L. Azevedo, and Paulina Jaramillo, “The role of energy storage in accessing remote wind resources in the Midwest,” Energy Policy 68 (May 2014): 123-131.

Feature Photo: cc/(lamoix)