Transcript: The Power of Storage: A 21st Century Energy Revolution

CEBROWSKI INSTITUTE

ENERGY CONVERSATION:
THE POWER OF STORAGE – A 21ST CENTURY ENERGY REVOLUTION

INTRODUCTION/MODERATOR:
NORA MACCOBY,
AUTHOR AND EDITOR,
“THE ENERGY CONVERSATION: THE FIRST THREE YEARS”

AWARD PRESENTER:
MITZI WERTHEIM
DIRECTOR, THE ENERGY CONVERSATION

AWARD WINNERS:
BRIAN LALLY (DOD)
CAROLYN COLE (USPS)

MODERATOR:
ADAM SIEGEL
THE ENERGY CONSENSUS

SPEAKERS:
DR. IMRE GYUK,
DIRECTOR, ENERGY STORAGE RESEARCH PROGRAM
U.S. DEPARTMENT OF ENERGY

ARNOLD QUINN,
DIRECTOR, OFFICE OF ENERGY POLICY AND INNOVATION,
FEDERAL ENERGY REGULATORY COMMISSION

KENNETH LUTZ,
IEEE/AAAS CONGRESSIONAL FELLOW,
OFFICE OF U.S. SENATOR RON WYDEN (D-OR)

TUESDAY, SEPTEMBER 15, 2009



Transcript by
Federal News Service
Washington, D.C.





NORA MACCOBY:  We’d like to welcome you tonight to the Energy Conversation on energy storage – very exciting panel on energy storage.

First of all, though, all of you have envelopes on your tables and signup sheets.  Please, it’s very important – we’re doing a study – if you could write your information down and – everybody at the table – and put it in the envelope, we can pick it up.

MITZI WERTHEIM:  Along with your business cards.

MS. MACCOBY:  Along with your business cards.

MS. WERTHEIM:  And leave it on the table.

MS. MACCOBY:  And leave it on the table.

All right, well, I’m very happy to introduce Mitzi Wertheim.  She’s the director of the Energy Conversation.  We’re going to start with two awards and then go into the program.

(Applause.)

MS. WERTHEIM:  By the way, that was Nora Maccoby.  She didn’t introduce herself. Nora wrote the book that’s on the table, and it’s out there for you to look at.  And if one of you wants to take it home, that’s okay, but we didn’t have enough copies for all of you to have a copy.

MS. MACCOBY:  Plus it’s online.

MS. WERTHEIM:  It’s online if you want to download it.

Okay, what a great turnout.  Anyway, welcome, all of you.  One of the things we’re now doing is we’re giving awards to people who are really making a difference in the energy domain.  And this is for people who have been breaking out and being leaders.  And our mantra is, “listen, learn, connect, share, collaborate.”  That’s our sign up there.  It’s also on our nametags. 

One of the reasons we want to know who is at the tables is we want to know what social networks are getting started and how you’re starting to either help one another or learn from one another.

We have two awardees this evening.  We have Brian Lally, who actually is the director of Facility Engineering and Utilities Privatization for the deputy undersecretary of Defense in Installation and Environment.

Brian started coming to our programs, and one of the things he said to me last year was, Mitzi, if I hadn’t been attending the Energy Conversation I couldn’t have written the Air Force strategy.  And the whole point is to make this available so people can look at problems horizontally, not through a stovepipe.

Brian was out there early on in the Air Force, recognizing that it’s all about changing culture and human behavior.  The technology turns out to be kind of the easy part, not that it’s easy; it’s just that getting people to change their behavior is really hard.

So, Brian, please come up.  (Applause.)  And what we have is a crystal globe – whoops –

BRIAN LALLY:  I love crystal.

MS. WERTHEIM:  And it says, “The Energy Conversation.”  So I’m hoping to see these in various spots around the government for people who are really providing leadership and having to sort of go around some of the rules because a lot – if all you do is follow the rules – if you do what you’ve always done, you get what you’ve always got, and we can’t do that anymore.

(Whispers.)  Say thank you.

MR. LALLY:  Thank you, Mitzi.  (Laughter.) 

This lady is a real dear.  I must tell you, she did quote what I said to her.  I started coming to these at the urging of another fellow who came a lot.  His name was Mike Aimone.  Some of you may know him.  He was in the Air Force for quite a few years.  But Mike said, Brian, you need to go to one of these because we talk about good things.

Well, to make a long story short, I got here, and the first one that we had, the first Energy Conversation, was the one with Brian Appel, who was talking about using Turkey guts and stuff and making fuel out of that.  And I thought, hey, this is really cool.  And then the next one comes up and who’s up but Amory Lovins?  Well, you know, even cooler. 

So I’m in the midst of building a strategy for the Air Force, and the next one that comes along, I think we had Jon Welling –

MS. WERTHEIM:  Wellinghoff.

MR. LALLY:  – Wellinghoff from FERC, and I thought, now here is a real good one.  So I started taking a lot of notes.  And believe it or not – and then around the room, talking with people at the table, I will tell you that half of the strategy that we build in the Air Force that – and no strategy is worth any salt or any good unless you can get resources, but the strategy we wrote in the Air Force for installation energy also came with about $2.8 billion worth of investment over the next five years, and in 2009, almost $1 billion worth of investment.

But it was because I listened to what was going on here – one of the operative words up here – and I learned a lot from the conversations that take place at the table and what I heard from subject matter experts who are like here tonight. 

But I absolutely was able to write that strategy because I had this interaction and it was a huge part of it, and it delivered on the dollars because your expertise I listened to, and I read things that you wrote and I got into your web pages, the people in industry, and I looked at your products and I looked what was the art of the possible, and I said this is the time to make stuff happen.

And one of the things that I want to leave you with is that in the Department of Defense, we want to be the test bed for all new technology.  We want to build it on our bases.  We want to build it in the cities and towns that are near our installations, and we want to exploit, demonstrate, test and evaluate all this good technology that’s out there to make it happen again.

We have always used technology to gain a strategic advantage in the battlespace to create a tactical advantage on the battlefield.  Let’s use this to gain a tactical global advantage and make this country even better and bigger than it is today with the way we will lead in the energy arena.

And I am here to tell you that in the Department of Defense, I may shake up some people and some of the way they do business up there –

MS. WERTHEIM:  Yes!

MR. LALLY:  – but we are going to lead.  It may not be tomorrow but it will be in the very near future.  We’re going to do very, very exciting and technology-edge things to make things happen in this country and lead this country to the next energy future.  So thank you, Mitzi, for recognizing that.

(Applause.)

MS. WERTHEIM:  Our second award goes to the U.S. Postal Service.  And what really impressed me about the Postal Service was their commitment to leadership on sustainability and energy. 

And they actually now have a vice president for sustainability, and they have made a commitment that it’s not only a good vision, but they want everyone who works for the Post Office to understand the energy and environmental issues, not only on their job but also at home.  And the ripple effect is incredibly important. 

Carolyn Cole, who is the acting director of the Energy Initiatives, is here to accept the award, and I’m going to let her tell you just a few things about the wonderful things the Post Office is doing.  And keep in mind, they’re doing this at a time when they’re really struggling because all this information technology is making it hard for the Post Office today.

So be grateful that we have one.  Support it.  And, Carol (sic), come up and speak to the group.

(Applause.)

CAROLYN COLE:  Well, good evening.  On behalf of the United States Postal Service, I would like to thank you for this recognition.  Our vision at the Postal Service is simple:  Be a sustainability leader.

This is not our energy, our environmental vision, but it’s our corporate vision, to maintain a viable universal postal service at an affordable price for current and future generations.  Because of our size and our impact, we believe this vision will only be realized by leading by example and building a conservation culture.  Thank you.

(Applause.)

MS. WERTHEIM:  Here is Adam Siegel.  Adam is a member of the board of the Energy Consensus.  He’s been one of the great supports from the very beginning of this program.  And he’s going to now introduce our panel and be the moderator.  And he’s terrific.

ADAM SIEGEL:  All right, Mitzi, you’ll have your $20 afterwards.  (Laughter.) 

Actually, I want to do something which is just – everyone’s title and background is sitting on the tables and we’re really privileged to have them here this evening.  And so rather than spend a lot of valuable time to go through and read through long résumés – and all three of these gentlemen have very long résumés and very impressive ones – we prefer to hear their words, though I’m going to take a minute or two beforehand.

You’ve got a flavor – most of you have been here before.  What are we seeking to do through the Energy Conversation?  We’re trying to broaden the conversation to foster connections at your tables, across the tables, across all of us to create new links and to help break the stovepipes that all too often rein in Washington and within policymaking and within the very complicated arenas of energy not least.

We’re trying to improve understanding of the complexities and the interactions of the problems and challenges of energy, but actually most importantly, of the opportunities that we have by addressing energy in a different way.

And, turning to this evening, what are we going to talk about?  We’re going to talk about storage.  For many people in this room maybe this isn’t an afterthought, but for the vast public understanding of energy, storage really is a secondary, a tertiary, or maybe not even a thought, when it truly is core to human existence.

Most of you I’m sure there’s some nibbling, but most of us have just gone through storage called food, putting it into our bodies.  That is energy storage from a variety of paths.  So oil and coal are not a fuel; they’re stored energy from solar power and otherwise.  We don’t think of our lives around energy, of storage, when storage of energy truly is core to our existence in so many different ways. 

And if we look at the 21st century and the changes that we’re going through that we need to go through, storage and changing our interaction of stored power really creates the opportunities for a 21st century energy revolution.

And some of it – I mean, everything from intermittent power – how do we make intermittent power work better through storage and storage management, through smart grid?  What’s an example of how the smart grid and storage can work? 

The one that I really like is if we put refrigerators – if we could put ice storage in every refrigerator and running it via smart grid, to be able to then use that – use off-peak power to store build-up ice, to have our refrigerators not making demands when it’s 100 degrees outside in Washington and people are putting on their air conditioning.

As an example, people are already doing that to a certain extent on large-scale refrigerators.  People are doing that with larger-scale air conditioning – very similar ice creation.  So they’re ways of storage.

There’s also some very old technologies.  There’s a stove system, basically mainly in Europe and the United Kingdom, called AGA, which is heat-powered storage.  And they basically – the corporation was about to get rid of one of their lines and they realized that what they can do is hook up wind power to do electrical resistance into the stove, create in the middle of the winter heat storage, and heat the house with intermittent wind power, and all of sudden they’re creating a new marketing line to help the United Kingdom on its carbon targets.

Storage really is exciting, and I’m looking forward to hearing from the three here this evening.  And Imre is going to start with the large talk, which will show how poor my comments were of trying to give the broad stroke of energy, and we’ll follow with comments and thoughts from the other two gentlemen. 

(Applause.)

IMRE GYUK:  Can we put the lapel on?  There.  And the presentation?

MR. SIEGEL:  You want them both?

MR. GYUK:  Yeah, I know.  (Laughter.)  Well, there it is.

I am very pleased to be here and to have been asked here to talk about one of my favorite topics.  And I know a few of you.  There’s a lot more that I don’t know, and hopefully I will know more of you.

So, I’m going to talk about energy storage, specifically electrical energy storage.  But let’s step back a little bit and see how the whole notion of energy storage is part of the human experience.

Let me take you back some 10,000 years ago.  Something interesting happened.  Humans changed from nomadic hunter-gatherers to settled agriculturalists.  This was called the Neolithic Revolution.  Talking about revolutions, this was one of the biggest ones that we’ve had in human history.

So what was perhaps the biggest thing that enabled this Neolithic Revolution?  It’s the pot.  A pot you can put things into.  Before that you had to live hand to mouth.  Once you invented pottery, and baskets of course, you had a way of storing things.  So the pot is durable energy storage – food – and it enabled the domestication of plants, permanent settlements, social diversification.  In short, we had invented civilization.

Energy storage, the pot, if you will, is there at the very beginning of human civilization, shortly to be followed by writing, which is stored thought, by money, which is stored wealth.  So storage is really fundamental at every one of these transition points in human civilization. 

So let’s go 2,000 years fast-forward, the age of enlightenment, intellectual foment.  Newton had discovered gravity and explained it very nicely.  And the next thing people got excited about was electricity.

And right there at the beginning of electricity we find storage.  Somebody generated static electricity by turning a glass ball and then connected it and had a chain hanging into a jar of water, and was really amazed when he took the water out and got a spark out of the glass.  And eventually that developed into the Leyden jar, which is the first capacitor.

And then soon after, we have Alessandro Volta inventing the battery.  He thought actually he was exploring electric eels, but what he came up with is the battery, and this has been the basis of all future energy storage of this type.

Well, the battery developed eventually into the lead acid battery, and this lead acid battery has been with us for, oh, 150 years, basically in unchanged form.  And it’s accompanied the development of the car, for which it is of course a fundamental component.

Meanwhile, the electric grid burgeoned around us – the electric grid, consisting of generation, transmission and a load which has been growing and growing.  Now, notice there is no storage in there.  There is a little bit of storage in the load – I mean, your laptops, your refrigerator, whatnot; there is storage in there, but it’s generation, transmission and load, no storage.

No doubt the electric – the U.S. electric grid – well, just as the European electric grid – is a technological marvel, but it’s also an increasing reliability threat.  Do you see that black little hole up there?  That was the famous blackout of 2003.  The problem is that if you have a complex system and it’s stressed and it’s unbuffered, it’s inherently unstable and inherently vulnerable to collapse. 

So, what can we do about this?  Well, the thing is, generation and load have to be balanced at all times.  What you put in is what you get out.  But if you have no buffering between them, then you get instability.  And energy storage is precisely what can match variable generation to variable load. 

Actually, the idea of storage is very analogous to the idea of transmission.  Transmission links generation and consumer in space; storage links generation and consumer in time.  Space and time; they are completely analogous to each other.  So, energy storage provides energy when it’s needed; basic transmission provides energy where it is needed. 

Now, we have a lot of transmission on the grid, obviously, but we have very little of storage.  We do indeed have some storage.  In the U.S. we have about 2.5 percent, and this is all pumped hydro.  In Europe it’s 10 percent.  In Japan it’s 15 percent of stored energy.  Well, guess which country has the most outages?  No buffering, more outages. 

Let me step back a moment and talk about drivers of the modern grid.  One of them is digitization of society.  We have become an increasingly digital society and we rely on this – you know, think of high-tech manufacturing, banking, traffic lights, what have you.  What we need for that with respect to the grid is increased power quality.  It’s not just quantity; it’s power quality that’s important. 

The second driver is ecological concern.  Ecological concern has become, well, almost universal.  We are worried about the side effects of our energy consumption.  And what we would like to have for that is dispatchable renewables, but the key word is dispatchable.  We don’t just want renewables.  We need renewables which we can tap into when we need it.

And, finally, we have the growth in energy consumption, which has been, well, exponential, even in the United States, but if you add the rest of the world, it’s horrendous.  And it’s not only because of our increasing numbers but also our increasing standard of living.  And everybody else of course wants to live just as nicely as we, and we can’t possibly blame them.

But one of the things that follows from that, it really behooves us to increase our asset utilization to use everything to the maximum of its availability and not squander our resources.  Energy storage can help with all of those.  Energy storage can be a key ingredient to the concerns of the modern grid.  And these concerns translate over into a storage requirement. 

We have uninterrupted power sources and power quality.  The time scale there is a second to 15 minutes.  We have bridging power – minutes to an hour.  And finally we have true energy management, which is two to eight hours diurnal and so on.  These are three different realms of storage that we have to consider. 

Now, what do we have available in the way of technologies?  The two axes are power and, well, discharge time if you want power and energy.  And it’s an exponential scale, by the way.

In the upper right-hand corner we have what is called mature technologies:  pumped hydro and compressed air energy storage.  A little bit more about that later.  These are large, relatively inexpensive, but the capital investment is huge. 

Then somewhere in the middle we have our old standby, the lead acid battery and similar batteries like nickel-cadmium and what have you.

Further up we have flow batteries, we have metal air batteries, we have things like the sodium sulfur battery, we have high-power supercaps, and we have super-connecting energy storage.

Now, each of those have their own domain of applicability.  They are not to be used universally.  You know, a supercap has its own area of applicability which is totally different from compressed air energy storage.

And to underscore that, here is a diagram of the scales of power.  Again, it’s an exponential scale of voltage and current.  If you multiply them together you get power.  And you start at the bottom left-hand corner, consumer products, okay?  Batteries everywhere – your iPod, your laptop, your Blackberry, your hearing aid if you happen to need one – but they have very small power and they’re also very expensive.

As you go up on the scale, you get into vehicular applications – hybrid vehicles, aerospace, several orders of magnitude higher, military applications, traction, like trains.  Then you get into the all-electric Navy, and finally you end up in the right-hand corner with the utilities scale.

The point is each one of those goes up by a factor of a hundred.  It’s an exponential scale.  You know, it’s a scale of 10 on the scale of 10, so diagonally it’s a scale of a hundred every time.  No wonder that batteries that have been developed for consumer products like iPods don’t necessarily provide the perfect solution when you get to utility scale applications. 

I get this frequently at the Department of Energy.  They say, well, we put all this money into vehicular batteries; well, why don’t they just use those?  Well, yeah, perhaps, but the point is the requirements are quite different and the batteries that we need may conceivably be quite different also.

So I’m going to take these application areas one by one – first of all reliability and power quality.  Reliability and power quality have become an absolute necessity for the digital society, and you will see in a moment why.  And because this field is so important, it is already commercially viable.  Storage devices are all over uninterrupted power sources and what have you. 

We commissioned a study at Lawrence Berkeley Laboratory to find out what do outages actually cost U.S. industry?  And we found something very interesting.  The cost of outages to U.S. industry is about $79 billion annually.  That’s approximately one-third of the total cost of U.S. electricity.

As a joke, I like to say that utilities are giving us 66 cents on the dollar because the other 33 cents is an outage cost.  Well, if somebody is here from the utilities they needn’t protest because I know very well what the problem is.

The interesting thing is it’s not the long interruptions like the Eastern Seaboard power outages for several days; it’s the short ones, less than five minutes.  It’s those little glitches.  And why are those so expensive to us?

Well, the point is it’s not how long the power is out; it’s the downtime.  If you have a plastics extrusion plant, for example, which is totally controlled digitally, and there is an outage of only a few cycles or a decrease of 30 percent in the voltage, everything stops and it will take you eight hours to get it back to work again because all the junk congeals in the molds. 

You’ve got to clean everything out.  You’ve got eight hours of outage even though you had only three seconds – eight hours of downtime even though you had only three seconds of outage.  That’s why it’s so expensive. 

Now, we can handle that.  We have batteries, such as this one that you see here, which is – well, it’s huge, 10 megawatts, and it can provide 30 seconds of throughput.  And after that, diesel generators can take over.  But you can’t do a diesel generator faster than that.  They just don’t work. 

But the combination of a 30-second battery and diesel generator can handle this.  And moreover, the storage device, which in this case is just a regular stack of batteries – the storage device can make the transition with no discernable glitch whatsoever.  It’s a smooth transition.  You can’t really do that with a diesel generator.

People who worry about outages like to talk in terms of nines – (inaudible) – percent, and industry would really like to have nine nines of reliability.  That would mean one outage a year.  Anything else is really not tolerable if they can help it.

Well, the point is a utility can only provide about three nines, and every other nine would double the cost.  As I said, there is a limit to the amount of reliability that a utility can provide, and from then on it’s the job of storage and other technologies.  But it’s only energy storage that can really provide the seamless continuity of power supply.

And here’s an example:  the world’s most powerful battery, 40 megawatts up in Fairbanks, Alaska.  It’s a nickel-cadmium battery.  And the point was – Alaska is a very funny state, from the technology point of view.  (Laughter.)  It’s got – no, I don’t make political jokes. 

It has a single railroad, it has a single transmission line and a single road, basically, from Anchorage to Alaska (sic).  Everything else is sporadic.  Okay, there is no grid there; there is just one line.  And all the generation is in Anchorage and all the – well, not all but some of the load is in Fairbanks.  And because this is a long, long line, it gets weak, okay?

So the voltage support at the end is kind of limp and they had, you know, tremendous outages all the time.  So, instead of building generation there, they took a cheaper solution, which was to build a big battery.  I mean, this is truly a humongous establishment.  I was there for the opening, which, you know, was really splendid.  In 2006 it responded to 82 events, preventing 311,000 member outages.  Basically it paid for itself in three years. 

Now I’m going to go to a different area, a little bit more arcane.  It’s voltage and frequency regulation.  And whereas the uninterrupted power source market was fairly mature and commercial, this one is only market ready.  The market doesn’t really exist but we can see that the technology is ready for a market.

So what is frequency regulation?  You have the load; you have generation.  And the load goes up and down during the day, roughly sinusoidal.  I mean, it responds to us.  We are humans.  We’ve got biological rhythms and the load follows that sort of rhythm.

The generation has to follow that too, and the way they do it essentially is by bringing on more and more power plants and then taking them off again.  Well, the point is the load doesn’t just rise smoothly; it has flutter on it.  You know, every time somebody plugs something in, there is a minute flutter of demand, and theses flutters have to be taken care of.

Now, the way this is usually taken care of is there is an independent system operator who is sort of the concert master of this whole thing.  You know, he brings on the generators and so on.  And what the independent system operator does when these flutters occur is he changes the frequency.  If you change the frequency you satisfy everything voltage-wise and so on, but the frequency starts drifting up and down.  So every now and then of course you have to bring this frequency back to the standard 60 hertz.  

And when that happened, traditionally, the independent system operated, the ISO. Contacts participating fossil fuel generators and says generate a little bit more; generate a little bit less.  And then it takes the independent – it takes the generator about five minutes or so to slowly rev up or slow down their production.  Not very efficient.

And some of us got together basically and we said, you know, there is a better way of doing that.  Why not do it with fast-acting storage?  And as a result of this we had two contracts, one with the California Energy Commission and one with New York State Energy Research a and Development Authority, NYSERDA for short, and we have MOUs with both of those.

And we started two projects using flywheels as the storage medium.  And this was a small one, a hundred of them, as you can see.  A flywheel is being loaded on the left there, hands-on management, the trailer, and then finally the – and it worked splendidly.  It was able to follow the signals from the independent system operator and inject energy or take energy out of the grid instantaneously.  Now, that instantaneity is precisely what makes it so much more efficient. 

The thing is, because regulation by fossil fuel takes some five minutes or so, the actual requirement may already be in the opposite direction by the time the fossil fuel plant manages to go into full power.  And so there is an overlap and a resultant inefficiency.  If you can do it instantaneously you can be two or more times as effective as doing it by fossil fuel.

At the same time, it’s not only more effective but you’re also getting a 70- to 80-percent reduction in carbon footprint, so you win all ways.  And apparently you can do this thing economically.

Well, flywheel isn’t the only technology that you can do.  You can do the same thing with batteries.  And at the moment AES has a number of batteries which are being tested.  They were two one-megawatt units by ultra-nano, which were put online in the PGM territory – one of the ISO’s – and two A123 batteries, which are running in California now, and these are test cases for a full-fledged application.

At the same time, the flywheels, there are two megawatt systems in Massachusetts and one megawatt is ready to be installed either at AEP, American Electric Power, or New York State.

Okay, so where is the problem?  Well, first of all, yes, we have technologies that can do that and can do it with technical efficiency and probably with economic efficiency as well.  But that doesn’t necessarily mean that you have a market because now comes the point of creating the market, and that’s FERC.  And you will hear from FERC immediately after my talk.

FERC urged the independent system operators to prepare a market to generate tariffs, market rules, control algorithms and signals to open the market to technologies other than fossil fuel generation. 

So those are the steps that are necessary, and at the moment the ISOs are slowly working their way towards actually creating that market, and I hope by the middle of next year most of the ISOs will indeed be able to use fast energy storage for their frequency regulation.  This is just as well because California, for example, is going to be phasing out 40 fossil fuel plants, which are being used for providing frequency regulation at this time. 

Here is one of the flywheel – one megawatt of flywheels. 

Okay, next subject:  peak-shaving energy management and upgrade deferral.  This area I would call near commercial.  I don’t think, by and large, it’s commercial as yet.  One of the things, for example, that could help tremendously is if there were an investment tax credit. 

Renewables have investment tax credits; why not the storage that would enable renewables towards further penetration?  And, indeed, we’re going to hear from congressional efforts to do just that, as the talk after the talk that comes after my talk.  (Laughter.) 

So, peak-shaving energy management upgrade deferral.  So what are we talking about?  There is something called the load duration curve.  It’s sort of a lying down “S,” and what it tells us is that there is a small number of hours where we are using near-peak generation or near-peak transmission.  Then at the other end there is a number of hours where we are underutilizing our generation and transmission systems. 

Now, if we could put the low end into storage – in other words, there are times when generation is vastly underutilized – if we could run the generation at a slightly higher level, put it into storage and then use that storage during peak periods, we could level out this load duration curve and increase the acid utilization appreciably. 

And because it’s a steep curve up there, if you only do 5 percent of the hours in terms of storage, you can lower your peak by 25 percent, which is a good influence.  In other words, you don’t have to store everything; you just apply storage at crucial times, and that gives you a result that’s out of proportion to what you need to do.

Well, here is an example.  This one is on the customer side of the meter.  It’s a one-megawatt battery.  This is a sodium sulfur battery, an interesting technology that was invented originally in the United States, was then abandoned and picked up by the Japanese, who beavered away for, oh, 15 years or so and converted it into an extremely effective energy storage technology.

So here then is an example of a sodium sulfur battery.  And one megawatt, by the way – depends on who you are – it may sound like a lot or not like a lot.  But I have to remind you that when I started this business of running the energy storage program some years ago, there wasn’t a single example of any sizable storage.  Now there are any number of them and even more are growing every day.  So this one-megawatt limit was really quite remarkable, and now we have a number of them.  But a megawatt is already respectable. 

So what this does is it’s a bus station in Long Island, and it’s therefore refueling 220 buses with natural gas, and this needs to be compressed.  And what they can do is they can store electricity all night and then they can use – can run the compressor in the daytime only out of stored energy, and that takes some of the pressure off Long Island Power, and it also, by the way, eliminates the night shift.

And I’m particularly proud of this because I have a lot of partners in this.  It was done jointly with NYSERDA, but there are cost shares from TVA, EPRI, Southern, PSE&G, Hydro-Quebec – Hyrdo-Quebec (uses French pronunciation) – San Diego Gas & Electric and others.  So there is a lot of visibility among the utilities because, remember, we are not just trying to build a storage unit.  We are trying to wage a war.  We are trying to get energy storage everywhere.

Another example – this one by the American Electric Power Company, AEP, one of the most forward-looking utilities in the country – it’s again, a one-megawatt battery.  And the point with the sodium sulfur batteries, they can keep four to six hours of storage easily.  You know, you can’t do that with a lead acid battery in general, if you run it at full power. 

But these things can produce a megawatt for six hours.  And what they are doing is – I hope you can see this – well, not as well, but the red line represents what would be the throughput in a substation.  At peak it’s too much for the substation to handle, okay?

So the point was either you have brownouts for some of the users, or blackouts, or you build a new station.  A new station takes three years.  The other thing is you have to build this station considerably bigger than – you know, you can’t just add 10 percent; you know, you double the capacity or something like this, and it will take a long time for that capacity to actually be met.

So instead the solution was put a mobile storage unit – like here, the battery – and provide an extra megawatt.  And so at peak, the substation is fed out of the storage and the corresponding energy goes into storage during the nighttime. 

And this thing has been running for the last four years now.  They were actually going to use it only for three years and then transfer it to another station and do the same thing all over again, but they found out that the substation didn’t need to be increased as much as they thought it would be, so they just left the storage there and it’s now running into the fourth and eventually the fifth year and doing its job.

This worked so well that AEP decided they were going to do storage in a serious way.  In fact, they have committed themselves to about a thousand megawatts of storage by the end of the next decade.

And these are their next three projects.  They are two-megawatt projects, built this year in fact, and more are coming up.  Other utilities, like Duke, for example, First Energy, Xcel are following the lead and they’re putting in their own storage units for similar reasons.

Now, it’s not just substation upgrade.  Some of these stations, for example, are there for reliability.  There are regions that suffer from frequent blackouts due to, well, lightening, for example. 

And by having a battery and by using smart grid technology, they can reconfigure the local grid and island the whole grid and run the entire local area on battery power for four hours.  Meanwhile the grid will be fixed and everything will be as normal.  So there are many applications that you can – that are beginning to come forth.

Next area – and that’s really what we are after, seriously  – it’s renewable dispatch, smoothing, ramping and peak-shifting.  That is certainly not commercial but it’s increasingly being considered.

One of the drivers for this is of course aggressive renewable standards – California, 20 – well, they’re all 20 percent or 25 percent and they’re growing.  And more states are signing on.  And we have these really very considerable renewable portfolio standards and we really don’t know how well this is going to work because, face it, renewable sources are, by and large, intermittent. 

You may use different words like “variable” or whatever it is, but it’s still basically intermittent, which means sometimes they are there, sometimes they are not there, and you can help it by forecasting.  And there is other things, but the intermittency is there.

In fact, the intermittency is there on three different levels.  First of all there is the fast flutter.  This looks very much like what we have already seen when we were looking at frequency regulation, but this is an actual measured voltage outside a wind farm, okay?  This is not nice to have on your grid.

Nonetheless, we can take care of that, and we can take care of it in exactly the same way that we took care of frequency regulation, because as far as frequency regulation is concerned, it doesn’t matter whether the flutter comes from the load or from the generation.  It looks the same way and you can fix it by fast storage.

The next thing is wind ramps.  Wind ramps are nasty because the wind either picks up very fast or it does down very fast, okay?  The wind doesn’t always blow in an even sort of way.  And, unfortunately, even though geographic diversity helps, geographic diversity does not solve it entirely.  Here, for example, are some wind ramps in the Bonneville Power, and as you can see, the same ramp occurs in various different locations. 

And then finally on this is the worst of all, is in many places like California and Texas, the wind is anti-correlated.  It blows at night and doesn’t blow during the daytime, which is exactly the opposite to the load, okay?  So we need to do as much as we can about these problems. 

But it gets worse.  First of all, I’ll give you an example – it’s a famous example – of a wind ramp in Texas.  The wind dropped about 1,400 megawatts in – people either say 10 minutes or a half an hour, depending on how you count it.  But the point is it was fast and it was relatively unforeseen, even though people didn’t pay enough attention to the forecast and what have you, and there were other reasons.

But the point is it did occur, and the only way they could keep the whole ERCOT system from collapsing is by massive load-shedding – by massive voluntary load-shedding by industrial customers.

Okay, that’s an episodic thing but it did happen; it can happen again.  But now look at this graph.  The graph shows minimum and maximum prices.  And of course minimum and maximum prices, if you wish – daytime peak and nighttime low – you know, are always a little bit different.  Some go up, some – you know, it goes up and it goes down.

But notice what happens toward the right hand here.  Suddenly the whole thing becomes haywire.  The low prices become lower and the high prices becomes higher.  So in the daytime, the electricity is unexpectedly high, and at night it doesn’t just go down; it becomes negative.

In Texas and in quite a number of other places as well, there is negative pricing in the off-peak periods.  And, as an example, in March of ’08 there were 933 negative pricing intervals during – these intervals are 15 minutes and the price was below zero.  In other words, you have to pay to put your energy on the grid, okay?  This is not a good situation for fossil fuel plants and is not a good situation for wind developers either.  You know, that’s 38 percent of the intervals. 

So when it came to the point of actually facing negative pricing, wind developers started pricking up their ears and admitting that in fact there might be something to storage if only you could get it at a somewhat reasonable price.

So these negative prices occur all over.  Even Denmark, the vaunted example of wind power, is seeing negative prices on occasion.  And even in places like Chicago – I have a colleague who lives in Chicago and he is on time-of-day pricing.  And he found out that in fact at night he can have electricity – they will pay him to take electricity off the grid, and so he runs his air conditioner all night and then shuts it off in the morning and closes the windows and cools his house down – not a healthy situation from any point of view.

So we looked at the fast flutter.  With variable renewable generation, the need for grid regulation will go up by about doubling.  If we have 20 percent renewables in California, the need for regulation will double, okay?  So there is an increasing market there.  And, as we have seen, extra regulation can and should be handled by fast storage, and also by demand response.  I have to mention that. 

Now, what about ramping and diurnal anti-correlation?  Well, there is a good technology for that.  It’s called pumped hydro.  Basically it’s a hydroelectric plant, and you pump energy uphill when you have extra energy, and then when you need it you just let it run downhill and run your turbines.

We have about 20 gigawatt in the United States.  That’s our 2.5 percent energy storage.  The European Union has about 32 gigawatt.  And I should mention that about 15 to 30 gigawatt of new pumped hydro is being proposed in the United States.  So we could easily double our amount of pumped hydro, probably at some loss of environmental values though.

Well, we obviously need big power, and unfortunately I can’t offer you any really big projects at the Department of Energy but I can show you a little one, which, if you multiplied it many times could amount to quite a bit of energy.

This one is a NYSERDA/DOE project.  It’s at one of the City University of New York campuses up in Queens, and they’re going to put solar panels on the roof and they will provide about 100 kilowatt PV.  But then they’re going to hook this up with 150 kilowatt of 200 storage.

Now, why would they want to do this?  The point is New York City doesn’t really need energy; New York City needs peak energy.  It needs energy during the peak hours, okay?  And so, what this setup will do is it’s going to store everything in the – it’s going to put all the solar power into storage, and then during the two peak hours you have potentially 100-kilowatt plus 150 kilowatt of power to pump into New York City.  And if enough people do that, well, then you start having real power.   

Of course there are bigger ones too.  Here is a sodium sulfa facility of one megawatt up in Minnesota where there is plenty of wind.  Wind is growing – 1,000 megawatt in 2009, 3,000 megawatt in 2020.  Obviously they could use a lot of storage.

The Japanese can do this even better.  They have a facility of 34 megawatts with seven hours of storage.  And what they are going to do is they’re going to put everything at night into storage and then in the daytime they have fully dispatchable storage – no more intermittency.  They can guarantee this much storage during the daytime.  And of course they can hook this into both the price structure and the forecasts and what have you.

Now, you might think that in order to accommodate intermittent renewables you’ll have to go to bigger and bigger storage.  There are, however, other ways too, one of which is called community energy storage, and it’s a proposal by AEP and First Energy and a few others.  And the idea is the following: 

You know for every four or five houses you have a transformer.  You know, it may not be very pretty but we accept it.  Well, you could put another box just like it next to it except that’s going to be storage, about 25 kilowatt.  And you can store about two hours’ worth of – sorry, that should be kilowatt – you can store about two hours of storage in that.

The point would be that this local storage, a community storage, would service the four houses or five houses that are connected to it.  It could guarantee two hours of running during outages.  But at the same time, by being under the control of the utility, it would also provide a tremendous resource to the utilities for regulation, for wind ramping or whatever they need it for, okay?  And all of these would be centrally dispatched but locally available. 

And then of course there are also bigger options like compressed air energy storage.  Essentially with compressed air energy storage you have a big cavity, and when you have extra power – at night, say, or when the wind blows – you compress air.  And I’m talking big cavities, okay? 

And during the daytime you let the – or during peak times you let the air out under pressure and it goes – it replaces the compressor in a turbine.  So it’s got a turbine.  The pre-compressed air replaces the compressor and you end up with a much more efficient compressor during peak periods.

Of course you use up some – you need to use gas because it’s, after all, a gas turbine, but overall you are able to use wind when it would otherwise be not particularly useful to the grid.

You can do this in salt domes.  What you do is you solution-mine those.  You put water in.  The water dissolves things.  You pump it out.  Eventually you grow a huge cavern.  You could do it in natural caverns, you could do it in abandoned mines, you can do it in abandoned gas or oil wells.  All of these are options for doing compressed air.

The trouble is it’s a reasonably well understood technology but we have only two of them in the world.  One of them is in Germany and one is in Alabama.  They’ve been running between 50 and 30 years very well – they run wonderfully – but nobody has gotten around to building another one.

Well, I’m willing to lay money on it that in the next five years we’re going to see at least three new compressed air energy storage units being built, and this is because of our drivers and because the economics is beginning to be advantageous again.

Okay, now we come to something that’s new.  And what’s new is the ARRA, or stimulus funding.  And there is a demonstration – there is $200 million of funding for storage demonstration projects, which means we are going to be able to fund a fair number of much bigger facilities.

We are expecting to fund two new battery developments in the 10- to 20-metawatt range.  We are expecting two compressed air facilities, which may be as high as 150 or 300 megawatts.  We are going to do one or two frequency regulation projects in the 10-, 20-, perhaps even 30-megawatt range.  We’re going to do a bunch of distributed projects, and we are going to put some money into technology development.

A year from now the whole storage scene is going to be a magnitude bigger than what it is now.  These will be bridgeheads that will show industry what you can do and what hopefully will become economically effective as well.

And this is the world as we see it.  It’s got storage everywhere.  You put it with your buildings, you put it on transmission lines, you put it with factories.  You have, of course, your hydro vehicle car which has storage too.  You put it in with wind.  Storage should become ubiquitous.  And of course it will go along with distributed generation and with distributed intelligence for an effective grid of the future.

One word of warning:  Energy storage is a disruptive technology – what is called a disruptive technology.  If it’s adopted it will induce a paradigm shift and the utility – the energy business will never be the same again, and I rather hope it won’t. 

Thank you.  (Applause.)

And, hey, I was pretty much on time.  And so we are ready for the next speaker, Arnie Quinn.

ARNOLD QUINN:  All right.  Well, thank you for the invitation to speak today.  I’ll give my standard disclaimer, being from the federal government, that the opinions expressed are my own, do not represent the opinions of the Federal Energy Regulatory Commission, its chairman or any individual commissioner.

I think Dr. Gyuk was right; storage has the potential to be – I’m saying a softer term – a transformative technology.  And from a regulatory standpoint there is at least two elements of storage that have the potential to transform the way we regulate electric markets.

That first feature s something that Dr. Gyuk touched on from a physical perspective, that energy has to be produced and consumed at the same instant.  That has a physical component to it in that it ensures electric reliability.

From a market perspective, though, the fact that electricity has to be consumed at the same moment that it’s produced makes it very unlike any other commodity.  And so the more storage we have, the more we’ll make electricity like other commodities and the more we’ll be able to regulate electricity like we regulate other commodities.

The thing that we do now is have to deal with the fact that that instantaneous supply and demand equation can lead to very high prices for electricity at instants and times, and as a result, for wholesale markets we have to regulate market participants to limit their ability to manipulate or exercise market power at those instances when there is a deficit of supply.

The second element is that much of the storage that we’re talking about will be placed closer to where load is.  And our current model for the electric industry is one where we have central power stations that send electrons over transmission systems, distribution systems, that create large network externalities that, as a result, have to be regulated and rules have to be regulated.

On a federal level we have unbundled the electric market, electric system to kind of make components and then require open access for different elements like the transmission system.

The less we have of kind of a central station network model and the more we move to a model where we have energy sources as close to where load is, the more we’ll mitigate those network externalities and the more we’ll simplify the regulation of those markets.

And Dr. Gyuk mentioned, it’s now at the point that many storage technologies are becoming commercially viable.  So, from the commission’s perspective, one of the things that we need to do is make sure that there aren’t any regulatory barriers in place that will stop these commercially viable technologies from participating, from our perspective, in wholesale electric markets.

So, for about the last six months, commission staff has been engaged in an outreach process where we’ve talked to academics, we’ve talked to developers, we’ve talked to the ISOs, the RTOs, we’ve talked to utilities, and we’ve been attempting to identify regulatory barriers that would prevent storage technologies from participating in wholesale electric markets and also, at the same time, prevent consumers from taking advantage of the unique benefits that those storage technologies offer.

From a federal perspective, though, there are a couple of issues that complicate that sort of regulatory review.  The first is that storage technologies are often interconnected on a distribution system.  FERC does not have a lot of jurisdiction on the distribution system, and as a result we quickly get into issues of state versus federal jurisdiction as we address getting storage into wholesale markets.

The second issue is that storage technologies can offer benefits, a lot of small benefits, over the entire breadth of the electric system, so at the distribution level, at the transmission level, potentially as a substitute for generation, and we need to find a way to bundle up all of that value to justify some storage investments. 

But we have unbundled the electric industry into component parts of generation, transmission and distribution, and so rebundling the value can sometimes be difficult, and as a result sometimes prevent storage technologies that would be cumulatively beneficial from getting to market.

The combination of these two barriers seem to have driven some business models so that certain storage developers seem to be focused on finding solutions for vertically integrated utilities that are primarily regulated by the state because it’s easier to bundle up all of that value and capture it rather than trying to maybe put the components together both in the state-regulated areas and in the federally regulated wholesale markets.

Another issue that we face – and this is something that Dr. Gyuk mentioned as well – is that as renewable energy becomes a bigger component of the electric market, there is going to be an increasing call for very high-quality ancillary services, these frequency regulation services.

This, I think, provides a very nice case study for things that we need to be careful of at the federal level because, as we’ve engaged in our outreach we’ve heard competing views for at what level one would want to engage that frequency regulation, whether on a, say, windfarm-by-windfarm basis you would want to have a storage facility kind of processing the wind before it hits the electric grid, or whether you would want to allow kind of that integration of those wind farms on a more regional basis.

We’ve got to be careful, at a regulatory level, to not pick a winner or buy a – (unintelligible) – before it’s had a chance to play itself out.

So, as I’ve mentioned, we’ve engaged in this outreach process, and I thought what I would do with the remainder of my time is just kind of talk about the sort of regulatory barriers that have been identified during that process.  The caveat I’ll provide is that what I’m really doing is kind of sharing what we’ve heard. 

This is a pretty preliminary project for us. We haven’t made a lot of decisions, so something that I’m mentioning doesn’t necessarily mean it’s something that the commission is ready to act on, but nonetheless is something that has risen to the level that at least staff is starting to get a handle on some of these issues.

The barriers seem to fall into three general categories.  I’ll kind of describe what those categories are and then I’ll try to go into a little bit more depth on what each one is.

The first category I kind of think of is storage getting through the door.  There seems to be some difficulty developing transmission planning and market models that can capture the full value of storage.  And so, as a result, when a region is doing, say, transmission planning, they don’t see the value of storage, and as a result storage doesn’t kind of get through the door and become a solution in that regional transmission plan.

A second category of barriers is that even in those situations where we can measure or estimate the value of storage, storage developers are having a difficult time capturing the full value of a storage investment, and, again, because those investments can have small, little benefits all along the chain of the industry, inability to kind of collect those all up prevents some investments from being made.

And finally, we’ve heard outreach that suggests that storage developers feel like they’re facing costs that aren’t comparable to what a central station generation developer would face.

So to go into a little bit more detail, on the transmission planning and software tool side, one of the things that we’re hearing is that, especially as we’re talking about regional transmission plans – and that’s something that FERC has been working on for several years – we had our kind of landmark transmission reform process that culminated in Order 890 that mandated regional planning.

Unfortunately, regional planning tends to take place at relatively high voltages and storage technologies tend to be interconnected at relatively low voltages.  So, in the middle of a large regional transmission plan, the level of granularity tends not to be small enough to see where storage would be valuable.  And as a result, as the region puts together its transmission plan, storage isn’t part of that plan.

The other issues seems to be as much kind of a data-driven process as it is a model-driven process.  These transmission plans tend to require very good data on exactly what the structure – the composition of the electric network is.  The more granularity, the better the data, the better the transmission plan tends to be.

But getting data down to very low voltages, like 34 KV, which is typically thought of as a distribution level, it’s difficult basically to get all the people in the room, all the utilities in the room to share their transmission models and their distribution models to the point that they can actually put a model together and then do a planning process.

We heard a very intriguing story during our outreach process.  The story actually is more about distributed generation, but I think it’s illustrative of the issues that distributed storage faces.

There was an effort in the state of Minnesota driven by the state Public Service Commission and the state, I think, Office of Electric Security, or Energy Security, to identify interconnection spots where distributed generation could interconnect at a fairly low interconnection cost.

And they went through a process.  It wasn’t regional; it was state-based planning, but they got all the utilities together, they got good data on what the transmission distribution systems looked like, and when they did that they identified tens of millions of dollars of distributed generation that could be placed on mostly the distribution system at essentially no additional interconnection costs.

So you wouldn’t have to build anymore transmission.  You wouldn’t have to build anymore distribution.  You could place the generation where it belonged, get it to market.  But it took a concerted effort to get everyone in the same room to get the data shared and to look for these spots to identify basically sweet spots where these technologies could be useful and be interconnected.

The second category, which is the inability to kind of capture the full value of these technologies have, again, a couple of components.  We, at the federal level, again, have broken up the electric industry into bundles, and on top of that we’ve placed an accounting construct on top of it.

So, for instance, if you’re a transmission facility, we will allow you to collect your cost of service and a reasonable return on top of that, but we won’t allow you to do anything else.  So if you’re a transmission line, that works perfectly fine.  You build a transmission line.  You determine how much it will cost.  We, the Federal Energy Regulatory Commission, decide what rate of return you’ll earn, and then you just charge a rate.

For storage, it’s possible that you will be valuable as a storage facility to defer some transmission, but to fully be kind of a cost-benefit winner, you would have to defer that transmission and provide some service, for instance provide some of the fast regulation services to the wholesale market.

At the federal level, we don’t allow a facility to be both transmission facility and a facility that can enter into the wholesale markets to provide ancillary services.  And so the way we have unbundled and done accounting prevents the accumulation of these benefits.

The other issue – and Dr. Gyuk touched on this as well – storage can arguable provide some of these ancillary services, these frequency regulation services, better than the thermal generators that are currently providing these services. 

But we don’t pay for extra-fast response.  We don’t pay for extra-fast accuracy.  At least the current structure for those products don’t have a fast-response regulation service.  So storage can’t collect the money that would go along with providing a higher-value service. 

On top of that, the way we typically think of a thermal plant providing those services is we think about the opportunity costs of what they’re losing by not providing energy.  So it’s a fairly natural regulatory framework.  If you’re not going to provide energy so you’re losing out on the opportunity to make, say, $30 in the energy market, it makes sense to pay $30 to provide this regulation service.

For storage, oftentimes there is opportunity cost.  They’re not there to provide energy.  They really are just there to provide that regulation service.  So conceptualizing what we would pay storage for that extra-fast regulation service is a different paradigm than what we’re used to experiencing.

Finally, on the issue of whether storage faces comparable costs, there is, again, a couple of components to this.  Partly, this seems to have to do with the fact that we’re talking about fairly small investments, so costs that a central station generator would have to face, and spread over a fairly large project, just look disproportionate when faced by a small project.

This seems to be particularly the case with interconnection costs.  Anytime a project wants to interconnect with the transmission grid, there’s a requirement that they determine whether there are investments needed on that grid to facilitate that interconnection.  That’s a lengthy process.  It takes a lot of patience.  Lawyers are typically involved. 

For a big 300-megawatt natural gas plant, that cost is spread across what will be a fairly large revenue stream.  For a small investment, that cost is being spread over a relatively small revenue stream. 

We have, at FERC, a small interconnection standard and process, and we’ve heard that that works okay.  Part of the issue is that states don’t have a similar process, and so one of the things we could do is potentially encourage states to follow the FERC’s process.  We’ve also heard, to be honest, that our process for small generators isn’t working as well as we’d hoped.

Another issue is that as these innovative products are coming to market and requiring changes to the way certainly the centralized or organized markets operate, there is a fairly lengthy process that has to take place for any change to market rules to be enacted.

They’re fairly involved stakeholder processes.  They take hours upon hours.  Many people that are engaged in this process call themselves professional meeting-goers.  For a large utility it’s probably more possible and more cost-effective to dedicate a couple of people to staying engaged in the stakeholder process to work a rule change through the process and then up through FERC.  For a small developer, that cost can be burdensome.

And then, finally, because of all the other barriers I’ve talked about, the difficulty in catching revenue streams and being identified as a useful project means that storage has tended to have a harder time just getting financing because they can’t show a consistent revenue stream that would justify a bank investing.  And so, to some extent, if we can address many of the other regulatory barriers we could potentially address the issue of kind of unfavorable financing terms.

That completes my presentation.  Again, I thank you for the invitation.

(Applause.)

KENNETH LUTZ:  Okay, moving from the executive branch to the legislative branch, I can say not only am I glad to be here but I’m from the government and I’m here to help you.  (Laughter.) 

In the last few years, storage has been mentioned in at least five pieces of legislation.  Two have become laws.  There is the Energy Bill of 2007; the American Recovery and Reinvestment Act of 2009, otherwise known as the stimulus bill.  These two have been enacted. 

And then there are three pieces of pending legislation.  One is the Waxman-Markey bill that just came out of the House of Representatives.  The other is the Senate’s American Clean Energy Leadership Act of 2009, which just came out of the Senate Energy Committee, and the third one is a bill by Senator Wyden, which was introduced in May to provide investment tax credits for storage systems.

Now, this is sort of like “Sesame Street” in that one of these bills is not like the other.  I’ll talk about all five pieces of legislation but I’m going to focus most of my attention on Senator Wyden’s bill.  And can we have the slides, please?

Okay, the first one is the Storage Technology of Renewable and Green Energy Act of 2009.  And I must say my proudest achievement was coming up with a name that fits the acronym STRGE.  (Applause, laughter.)

The other pieces of legislation, as you’ll see in contrast, talk about energy storage as a technology that go along with transmission generation and distribution, but this is the only bill that really recognizes storage for the benefits it provides.  And I’ll review the benefits quickly because you’ve heard it from Imre earlier.

But the first is really for the efficient use of intermittent renewables, and that’s really what prompted the bill in the first place.  As you heard, wind in many areas blows at night, not during the day.  And in fact, in some areas windmills are actually shut down at night because nobody knows what to do with the electricity.  And solar power too is not quite aligned with the demand and so some time-shifting is needed to make most use of solar power.

The second benefit is for the efficient use of the electric grid to handle the impacts of peak loads.  So, as you heard, again, rather than trying to build a generation capability and a transmission capability to handle those 80 hours per year for peak load, why not store the energy when there isn’t so much demand for it and use that stored energy to meet those peaks?  This will save having to build new generation plants and new transmission capabilities.

One example of peak shifting that’s a little different from some of the energy applications you’ve heard before is the second-tallest building in New York, the Bank of America Tower, which was completed last year, across from Bryant Park, if you’re familiar with it, has an ice storage system.

They make ice at night when electricity costs are low and then use that ice to run the water through it and cool the building during the day.  They paid for it because they saved the cost of an air conditioner compressor and their operations costs are a lot lower.

And now there is another benefit.  If you can envision Imre’s last chart, the Electric Grid of the Future, full of storage systems along with the transmission, distribution and generation, it doesn’t take long to realize how much more reliable this grid is, with sources of power in many places instead of just a few.

So for all these reasons, Senator Wyden introduced a bill in May to provide an investment tax credit for storage projects.  The bill addresses two major energy management applications of storage systems.  So we don’t try to cover all applications of storage but focus mostly on the energy management.

So first you have the large storage systems that are grid-connected like the pumped hydro or compressed air.  And these may be connected to the transmission grid and smaller systems may be connected to the distribution grid, so you might have batteries and flywheels and fuel cells and so on.

And the second application is for storage systems not connected to the grid at all but are sitting on customers’ premises in homes and buildings and factories and businesses.  And these storage systems, while smaller in capacity, could still be in the form of batteries, fuel cells and flywheels, for example, or our thermal storage systems, like this ice storage system.

So the major feature of the bill is that it provides an investment tax credit for the deployment of energy storage systems, and there’s a 20-percent investment tax credit for systems connected to the nation’s electric grid.  The credit will be given to the entity that provides the system.  So it could be the utility itself or possibly a third party that just specializes in energy storage systems. 

Now, the advantage, we think, of having an investment tax credit is that it forces businesses to put up money and assume part of the risk.  And we think this works better than just giving outright grants.

The problem with an investment tax credit is there are many utilities that don’t pay taxes – you know, the public utilities and co-ops.  So what we do in the bill is actually make available what are called clean renewable energy bonds, or CREBs, which allow them to finance projects through this mechanism.

Then there is 30-percent energy tax credit for storage systems that are used on site, so individual homeowners could apply the credit to a storage system they might use with solar panels or microturbines that they might have.

And homeowners can also apply the credit to smart grid equipment that might be used for the charging and discharging of electric vehicles.  However, we don’t give a tax credit for the vehicle itself.  That’s available through other bills.

And then commercial and industrial establishments can use the 30-percent tax credit to help finance other energy storage projects they might have, either provided by themselves or maybe provided by a third party.

So you can imagine a business with a large, flat roof, a mall or just a large building might have the roof covered with solar panels and might want to use that electricity that’s generated to light the building at night.

They could also use thermal storage systems for making ice at night, as in my example, or a factory could have a thermal storage system to capture excess heat and then heat a building throughout the day.

Now, the important point about the storage bill is that it’s technology-neutral.  It allows the storage of all forms of energy, from electricity and chemical to kinetic and mechanical.

The energy taken from the storage system does not have to be in the form of electricity – although, of course if it’s grid-connected it would be – but it could also be heat, cold or mechanical energy as well.  And we insist on the bill being technology neutral because we want the marketplace, not Congress, to pick the winners and losers. 

Right now the bill is currently in the Finance Committee, and it will take some pressure on the senators to move it forward and get it on the agenda.  Right now they’re all tied up with health care.

Okay, let me talk briefly about the other pieces of legislation.  The first one has been signed into law.  This is the Energy Act of 2007.  It has a few provisions of energy storage.  For example, it provides clean air credits for rechargeable batteries in electric vehicles. 

And it also created a title called the United States Energy Storage Competitiveness Act of 2007, which authorized $300 million each year in funding for research and development and demonstration projects through 2018. 

And these projects included specifically compressed air, electric vehicles, flywheels, batteries, thermal management systems, hydrogen and ultracapacitors.  Sounds like it pretty much covered the spectrum.  But, again, this is only authorization; it’s not appropriations. 

The second piece of legislation was the stimulus package that was passed earlier this year, and it provides funding for two types of energy storage projects.  One Imre talked about, the 200 million (dollars) demonstration projects for storage. 

And there are other activities in which storage could play a role, which fall under the $4.5 billion that the stimulus package has, and those are demand-response equipment, enhanced security and reliability of the energy infrastructure, facilitating recovery from disruptions to the energy supply and, finally, implementing some of the programs under the 2007 act for smart grid.  And storage can play a role on all of these. 

The other thing the stimulus bill provides is a 30-percent investment tax credit for what they call advanced energy facilities, but in terms of storage, these are limited to fuel cells or energy storage systems that are used in electric vehicles.

Now, as I said, there are two other bills still pending in Congress.  The first came out of the House, known as the Waxman-Markey bill.  If you actually look in the bill for storage you’ll find a lot of discussion on carbon sequestration and storage, which of course is not energy storage, but there are five aspects of energy storage in the bill.

First, it allows some of the funding that’s given to the states for renewable energy and energy efficiency to be used for – and I’ll quote – electricity storage.  It doesn’t say energy storage.  So I hope it’s not limited to ultracapacitors.

Second, the bill allows for reducing peak electricity demand through the use of a smart grid, including energy storage devices. 

Third, storage is mentioned as an option to be used in transmission planning under the Federal Power Act, but it’s to be used as part of the demand side management of electricity,

Fourth, it funds research into clean energy technology, and storage is included in the definition of clean energy technology.

And, finally, it establishes a revolving loan program for clean energy manufacturing, which includes storage.

And, lastly, coming out of the Senate Energy and Natural Resources Committee is the ACELA bill, so called.  It has a few provisions for energy storage.  It gives consideration, like the Waxman-Markey bill, to energy storage on demand-side management and distributed generation and so on for transmission siting.

In addition, under the transmission siting provision, it directs the secretary of Energy to report to Congress in two years with some recommendations to ensure the effective and timely development of energy storage and demand response and distributed generation and energy efficiency.  And as I said, storage can be used on all of those topics.

There are a few other provisions in the bill that mentioned pumped hydro and water storage in vehicle storage systems to improve the efficiency of the electric grid.  So there’s a lot of acknowledgment of grid-to-vehicle applications.

And also, this bill, as well as the 2007 bill, acknowledge that when a battery in a vehicle reaches the end of useful life, it doesn’t die completely and can be used for stationary storage applications.

So I want to mention again that among these bills we have – the four bills on the bottom treat storage as just yet another technology and doesn’t really emphasize storage for the benefits it provides.  Only the Wyden bill really focuses on storage and only on storage.

And we feel that storage is really a key technology.  You’ve heard it from the other speakers.  And it’s a key technology for ensuring the integration of intermittent renewable technologies, which is really important to our energy future and to meet the needs of peak energy demand, which is growing every year.

But the key difference in the Wyden bill is that it provides incentives for the deployment of storage, not for research and development, not for studies, not for demonstrations, as in all the other legislation.

We really think it’s time to get storage out there and this bill really tries to help those who deploy it.  So we’re really serious about getting energy storage systems into the network as quickly as possible, and we’re looking forward and hoping that this thing will be signed into law.

So thanks for your attention and I guess now we’ll take questions.

(Applause.)

MR. SIEGEL:  May I ask whoever wants to – the mikes are very far up this time as opposed to being able to hide.  I’m hoping we do have questions.  If I can do one quick administrative – a form of storage:  Please make sure to return your nametags so they are stored for the next use so we don’t have to generate more power to use them – create them.

I’m not seeing people lining up.  It’s unusually surprising.  (Off mike) – come up?

MR. LUTZ:  You’d think they’d have some questions stored up.

MR. SIEGEL:  Name – introduce yourself.

Q:  I’m Bob Hershey (sp).  I’m a consulting engineer.

MS. WERTHEIM:  Your mike’s not on.

Q:  Okay.  What are the performance of some of these storage facilities that have been running for a while?

MR. GYUK:  What would you like to know?  About 80 percent efficiency, yeah.

MR. LUTZ:  I would think that pumped hydro is less, and that’s been running for a while.

MR. GYUK:  Yeah, I would agree.

MR. SIEGEL:  Introduction.

Q:  My name is Greg Davis.  I work for the Institute for Defense Analyses.  I’m curious; with a lot of energy all in one place, are there any safety concerns of some of these exploding and making a mess of some sort or another?  It sounds like compressed air, for example, if you had a leak, could be awful.

MR. GYUK:  Okay, compressed air I think was a bad example because that’s going to be a mile down or so, so it’s not likely to do anything serious.

Pumped hydro is a different story.  There was a famous case, the Taum Sauk storage unit, which is sort of a – it looks like a circular containment on top of a mountain, and it collapsed, and all that water went down into the valley. 

Luckily this was in the middle of a forest area – national forest area and nobody was hurt.  Dams do collapse.  I mean, most recently there was one in Russia that killed 110 people in Khakazya (ph), and it was probably one of the biggest dam collapses. 

With batteries and so on, well, they are chemicals, but in general the containment is pretty good.  So I would think that a battery storage unit would be no more dangerous than that furious chemical reactor that you have inside your car.

Q:  Okay, I’m Jud Shilling (sp) with the Millennium Institute and I have a question about the storage technologies.

In Denmark, related to their wind power, they have developed a device that uses the electrolysis when they’re producing energy they can’t sell to split water into hydrogen and oxygen, save the hydrogen and then use it to be a fuel cell to regenerate electricity when they need it.

And the solar collector energy generation technology allows you to store the heated chemical that they use for the generators for long periods of time – well, relatively long periods of time – so that they can phase the generation over a longer period of time.

Can you comment on the applicability of those technologies and whether there is any support for extending them, particularly the solar collectors, which have been used for some time in a couple of cases in the Southwest and in Spain and I’m told are relatively efficient energy generators as well.

MR. GYUK:  Yeah, I just came back from a conference specifically on concentrated solar collectors.  And, indeed, thermal storage is an important technology, both at the high end of molten salts or hot oil, or at the low end in terms of heat storage and brick or ice storage. 

And in many ways it performs exactly like electrical storage.  I just happen to have talked mostly about electrical storage because that’s the program I’m managing.    Some years ago, before it was killed, I used to manage the thermal storage program, so I’m personally very fond of thermal storage. 

Talking about hydrolysis, producing hydrogen, that is certainly technically feasible.  Whether it’s economically as feasible, I don’t know. 

Q:  Hi.  I’m not tall enough for this microphone.  Here we go.

MR. GYUK:  How about some question for those other guys?

(Laughter.) 

Q:  Well, my question is general.

MR. GYUK:  Okay.

Q:  Anyone can answer it.

MR. SIEGEL:  An introduction.

Q:  Oh, my name is Angeline Cinone (sp).  I’m an environmental engineer.  My question is kind of long, but I guess I’m concerned listening to all of you guys speak.  One thing that concerns me is – I guess the amount of energy we use now, we know that most of the ways we get it is destructive in the big picture since – of how we get our energy, it has a lot of negative impacts.

And I get the feeling that right now if we have – if we use storage to help us have uninterruptible energy, then we’re just giving the signal that there’s plenty of energy out there and we have plenty of energy to use.

So if we apply it in this way, will that not just increase our demands for energy, and in that sense are we really not helping solve one of the problems that we have?

MR. LUTZ:  What I didn’t talk about in the two bills pending before Congress, other than the Wyden bill, the Waxman-Markey and the Senate’s ACELA bill, they have long provisions for energy efficiency, and there’s a lot of focus on energy efficiency.

Of course the cheapest way to save energy is by not using it.  And what we’re trying to do is to provide you engineers – and I’m one too – with technologies that you put in your toolkit and then you decide how to engineer the nation’s grid and the energy usage and so on to provide the best bang for the buck.

And certainly we would like to see the total amount of energy being decreased, especially in fossil fuels, and that means more renewables.  And if we’re going to use intermittent renewables we need storage.  So it’s just one of the tools in the toolkit to help solve our energy issues.

MR. QUINN:  I actually think it’s – it is a fair point that you’re making.  One of the points of storage, and also probably one of the points of demand response, is to shave off the peak of the – the peak prices.  And as we flatten peak prices, energy costs should probably go down.  I mean, that is part of the regulatory regime that we’re trying to achieve is certainly less spiky on peak prices.

My sense is probably that you’ll get to a place where there will be some sort of stable equilibrium that on-peak and off-peak prices will still be at a place that would bring on a kind of sustainable level of demand response and storage, that you wouldn’t get kind of a collapse to the point that all these investments that made.

All these kind of arbitrage investments that made sense, the storage investments and even the demand response investments that made sense with really spiky on-peak prices would stop making sense once you’ve shaved the peaks. 

I’ve heard that as a concern and so I don’t – I think what you’re saying is legitimate, but my sense is you’ll probably get something closer to kind of an equilibrium amount where you’ll get some storage, some demand response, shave those peaks off and then that will likely be a sustainable level over time.  But I don’t have a crystal ball.

Q:  Hi.  Joe Browder from Dunlap & Browder.  This is a question for FERC and for the senator – or for the senator’s good staff.

What are we going to do about the sort of FERC dilemma, because people who want federal intervention to make things better in the electricity business depend on FERC to do it.  FERC only reaches into supply, transmission.  They only handle.

And so, even the NGOs who are interested in bringing more renewables onto the system have to cooperate with FERC to try to use transmission as a handle for doing that, even if it brings more coal-fired power on to systems.

I mean, how can we look at the federal regulatory interests here so that if we’re going to use FERC as a tool to help get these better technologies into the market, that we don’t have to do it only through the one process that FERC has now that really is a supply-driven process.

It’s an absolute conflict – very, very difficult to reconcile the supply-driven nature of transmission and everything else that you’re talking about trying to accomplish.

MR. QUINN:  I think that we’ve at least – well, Order 890, which is what is the commission order that puts in place our regional planning process, is actually fairly clear that the regional planning process will consider all energy sources, so will consider demand response, will consider storage, will consider distributed generation.

I think the key for us is to make sure that those words actually become implemented.  And so the commission is holding a series of regional meetings on their – have already held two in Atlanta and Phoenix – there will be one more in Philadelphia – to get response for how the regional planning process is working.

We’re engaged in this outreach process to hear how the regional planning process is working.  So I think it’s kind of on FERC’s staff and on the commission to ensure that when we say we really want alternative energy to be considered in the transmission planning process, that that’s actually happening.

And that’s why we engaged in the process of doing this outreach, to determine that there are some glitches in that process.  And if the hope is if we identify those glitches early enough in the process, we can fix them to the point that at least the regional planning process will work better.

MR. LUTZ:  And I am not on the staff of the Senate Energy Committee, but I can tell you what I have observed, and that is there seems to be a much closer working relationship with Chairman Wellinghoff and the committee now.  He’s testified many times.

And recently Nominee Norris came up and was thrown many, many questions for the record about his stance on energy, and I expect the same thing will happen with Commissioner Kelly because she has been re-nominated. 

And these things go on the record, and then they’re called back and say, okay, you said this; what are you going to do about it?  And I think that’s the way the Senate Energy Committee is going to work with FERC.

Q:  Hi, Dr. Gyuk.  My name is Craig Saperstein from Pillsbury Winthrop Shaw Pittman.  I was wondering – you ran through several technologies that are being contemplated and being developed for energy storage, and I was wondering if you had any thoughts on metal air technology, which you mentioned briefly as a nascent technology.

MR. GYUK:  Yes, one of the problems with metal air, at least in some of its aspects, is that it works very nice but then you end up with oxidized metal.  And, you know, the reverse processing is a problem.

However, there is interesting research going on, or beginning, at Sandia National Laboratory, of developing a truly reversible and much cheaper metal air technology.  So it’s in there.  At the moment there are no major metal air contenders for big battery applications, but there’s no reason why there shouldn’t be in the future. 

MR. LUTZ:  In today’s New York Times there was an article about IBM looking at a lithium air battery.

MR. GYUK:  I ought to read the newspapers more often.

(Laughter.) 

Q:  John Peterson (sp), DOE.  I’m wondering if – having enjoyed seeing some of these examples of large batteries in production, I’m wondering if there is any price information or cost information that you could share with us, and also whether you could offer an opinion on how much further the price has to go down before really large-scale installations start.

MR. GYUK:  That’s an interesting question.  First of all, when you’re dealing with an industry where you don’t really have that much off-the-shelf marketing – even sodium sulfur, which has a production capacity of I think now about 150 megawatts per year, mostly in Japan. 

But in general, prices tend to be somewhat secretive.  There are prices that are made up between the vendor and the consumer, and various aspects, like for example the visibility of the project, go into it too.  So there is no specific price that one can put down saying this technology cost that much.

Q:  Maybe a range?

MR. GYUK:  A range, I don’t know.  My rule of thumb was sort of a million megawatt, roughly, but it could be 2 million, you know.  And some of the technologies like sodium sulfur and lithium ion tend to be much more expensive.  Flow batteries are considerably cheaper.  The new lead carbon batteries may be even cheaper. 

So you have a range, but then again, they have different lifetimes and different footprints and different applicability, so at the moment there is a lot of diversity and there is no clear winner, and it’s certainly not a winner on price only.

Q:  Okay, thanks.

Q:  Hi, I’m Steve Bruckner with Sierra Club.  This is a question for Arnie Quinn having to do with FERC.

We’re particularly interested in the issue that you raised earlier about creating – splitting the solution between transmission and generation and storage and so on, that what we see is we’re up against a hierarchy where regional planning and transmission is at the top of the pyramid.

And they get to put in their transmission line regardless whether cheaper, better, more reliable even solutions for distributed generation, distributed storage, distributed demand side management would achieve the same result and better because FERC has told the regional transmission organizations that they are constrained to only come up with transmission solutions. 

That’s the only thing that they – they can look at other solutions if they are already committed.  But if not already committed, they ignore them even though they might be superior. 

Ands so there is no countervailing regional organization that’s looking at that level, and so we’re seeing some really sub-optimal solutions coming on board and FERC seems to be a real player in facilitating that.  And so I’m curious about this Rule 890, and are there things in place today that can be used to counter this?

MR. QUINN:  I think that our rule says that that regional planning process is supposed to consider distributed generation, distributed storage and demand response.  The question is whether the processes that have been put in place are actually doing that.

And we’ve heard that if you’re only looking at the transmission at 100 KV and above, you’re not going to find a good place for storage or a good place for distributed generation because those are things that are taking place closer to what a distribution level voltage is.

So there is a need to get that process to – and I really do think that part of it is a data issue.  You’ve got to have enough information about the lower-voltage part of the system to model it correctly to start identifying sweet spots for storage, for distributed generation and for demand response.  So, one, there’s a process issue.  Two, there is a data issue. 

Part of it also is – I think you’ve touched on something.  We know what to do with large-scale generation and large-scale transmission projects.  We have a process for that.  There’s an interconnection queue.  You say that you want to build a project.  You tend to have to put money up.  You get in line.  You apply. 

And so it’s very formalized.  We know exactly that that’s the set of things – that that set of things should be in the transmission plan.  The question then is, could there be a parallel process to identify smaller projects that would also be considered in the transmission planning process?

So one of the ideas we’ve heard is a load reduction queue.  Again, a process that would be put in place to say, I’m a developer; I want to build five megawatts of storage; I am going to show the process that I’m serious enough by doing something, and what that something is isn’t clear yet but maybe it’s putting money up, like a deposit.

But if we had another process for smaller projects that could also kind of use – we could find a threshold to prove that they’re serious so that we could get a serious set of projects in place to also consider.  That might be one solution.

Q:  But I would also ask – you know, the RTO has proactively been searching for these transmission solutions, and yet you say, oh, well, it comes to local generation; somebody else has to come forward. 

The action belongs to the person who identifies the problem, the RTO who has come up with saying, oh, we’re going to have these overload conditions on these situations.

MR. QUINN:  Right.

Q:  And then, shouldn’t there be an RFP that comes out that says, we will entertain transmission solutions, generation solutions.

MR. QUINN:  That is the intent of the rule is that those things will happen.  Whether that’s happening now – and we’re fairly early in that process.

Q:  It’s not.

MR. QUINN:  But I think we’re fairly early in the regional planning process, at least as it’s dictated by Order 890.  But there is no question that we have a responsibility to make sure that what’s being implemented is consistent with the rule.

MR. GYUK:  The whole thing is very much a bootstrap process.  Without enough demand – you know, it’s very much of an uphill struggle to get researchers interested in providing better batteries, to get manufacturers to improve their batteries because, you know, they have a nice market; why should they make better batteries – to get investors to invest in bigger battery facilities, but it’s happening.

The investors are beginning to flock around conferences having to do with storage.  ISOs are becoming aware of the possibilities.  Utilities are becoming more used to it.  And, you know, with storage moving into the megawatt and soon into the tens of megawatt range, the familiarity will be there and the tendency to actually utilize these the way you suggest I think is going to grow, particularly if FERC helps along the process.

And we are thinking about things like 100-megawatt battery farms, which could very well be capable of solving a transmission bottleneck.

Q:  Hi, I’m William Clark from Booz Allen Hamilton.  First off, this has been a very stimulating lecture tonight from all three of you, so I thank you for that.  I’ve been coming here for three-and-a-half years and I think this is probably one of the top three or four that I’ve been to.

My question is really – I guess, Arnie, it’s sort of directed to you based on what Imre said.  He talked about – it seems like some of the problem here, economically speaking, is from a performance perspective we’re delivering, or the utility is delivering, three nines of reliability and nine nines is sort of the ideal. 

And it’s costing us $79 billion, approximately, because of this delta between the dirty energy that we’re getting and the clean energy that we would like.

So, going to an earlier question about FERC’s role – this is a hypothetical question – so what would happen if FERC were to say, in order to stimulate storage and get, let’s say, to four nines or five nines reliability, saying we will help you structure the rate – or we will incentivize you for performance-based metrics if you deliver cleaner energy than what you’re delivering now at the distribution level.

So instead of 99.999, if you can achieve 99.99999, ergo some sort of rapid frequency modulation and battery storage, et cetera, and be required to achieve that performance metric, that there would be an incentive or some sort of rate structure to incentivize down at the distribution level, that performance level, which would therefore stimulate, I would presume, the entire energy storage industry.

So what would be the hypothetical response if FERC were to come out with a performance-based requirement for clean energy at the distribution level?

MR. QUINN:  So I’ll go back to one of the challenges we have doing kind of a federal policy on something like storage.  Many of the things you’ve talked about, especially at the distribution level, really do come up against our kind of state versus federal jurisdiction.

And so I think there generally would be – it’s an area that we are sensitive to that there would be potentially a push-back from states if it looked like what we were doing is mandating building of something that is going to end up in the utilities rate base and going to have to be paid for by the state jurisdictional retail customers. 

So, you know, at FERC we are conscious of the fact that we can’t mandate building of transmission or generation, but one of the things that we can do, or at least can consider, is whether something like a fast response regulation service is a higher-quality service that provides enough benefit to the market that it makes sense to separate it out as a separate service, and that would then – would be a wholly wholesale market reform that could potentially bring that additional reliability through the wholesale markets.

But, again, the sensitivity really is that we’re not mandating building of anything.  All we can do is change the market rules that we have jurisdiction over.

Q:  Hello, my name is Les Pastor.  I’m a private research analyst.  My question is, why do we not have, in this country, a research and development foundation open to novelty-of-fact inventors? 

The two individuals that come to my mind are Michael McKubre of SRI International, who independently verified cold fusion as fact.  He was presented on “60 Minutes” recently.  And the other individual is Randall Lee Mills of Blacklight Power. 

(Scattered applause.)

MR. GYUK:  I’m not sure I completely understand the question.

Q:  In other words, if you had an R&D foundation funded by the federal government where independent researchers could come where they would be free from fear, where they could independently provide significant research pertaining to novelty-of-fact inventions that would increase our energy output and sustain us – let’s say the oil evaporates, the coal evaporates. 

Now you have no possibility for energy generation and wind and solar are not sufficient to provide our needs.  If you have private individuals who are willing to provide the time to do the research that’s necessary, like these two gentlemen did – Michael McKubre of SRI International – he had to do it on his own time using government equipment – and Randall Lee Mills, who is the inventor of his Blacklight Power system in New Jersey.

He was the one who discovered how to lower the ground state of the hydrogen atom, which has only one electron.  In doing that he did two things:  He created a tremendous amount of energy in the form of plasma and he created a new type of matter.

He had to fight every step of the way to get recognition.  He had a patent; they took it away from him because they said it was a derivative of cold fusion.  He had to fight every step of the way to prove that it was valid and real.  He went to – it’s validated by 600 universities. 

Why can’t we fund these inventors so that they have all the funds that they need?  When Bell Labs was around, they had all the money they needed from AT&T because they controlled it all.  What we need in this country is funding for novelty-of-fact private energy researchers who will give us an alternative system in the event that we no longer have oil or coal to generate power, or nuclear power.

MR. GYUK:  We certainly need new inventions, and lots of them.  I quite agree with that.

(Scattered applause.)

Q:  John Read with Near Futures Energy. 

MS. WERTHEIM:  Can you speak up, please?

Q:  My name is John Read.  I’m with Near Futures Energy Corporation.  This is for Imre.

Do you see a possibility for a technology that – or technologies that would be sufficiently granular and sufficiently energy-dense for storage that could essentially make storage so local that it would eliminate the need for a grid entirely?

MR. GYUK:  Yeah, that idea is being considered every now and then, and it’s rather futuristic but it certainly would be a nice thing. 

If we can have distributed energy that is sufficiently environmentally benign, coupled with energy storage that is of course also benign and has enough energy density so that essentially everybody could have their own power plant and their distribution system, i.e. storage, because you don’t have to move energy in space, so you just move energy in time, that would certainly be an intriguing possibility.  Whether it’s a totally feasible scenario, I wouldn’t know.

Q:  Okay, Dan Yee (sp).  I’m with an ultracapacitor startup company, and this question is for the gentlemen from FERC.

I believe right now the way we reimburse providers of ancillary power is that you get to sell the service and then the provider gets reimbursed for their opportunity costs.

So, in this structure, if you use energy storage to store the energy, basically energy storage is competing at a tremendous disadvantage.  Like the service that provides it has to be at least half the price in order to compete with what essentially is like a double-paying structure.

So, you know, under this environment I want to know whether there is any considerations from FERC to change the rules in which storage can compete, at least on an equal level if not, you know, we should give it advantageous consideration.

MR. QUINN:  I think you’re making a very fair point.  If right now the way people compete to provide operating reserves is by bidding in, and what they’re basically bidding in is their opportunity costs, and everyone that’s bidding is essentially a thermal unit, you’re going to get something that looks probably reasonable as an outcome.

If, on the other hand, you’re moving to a system where more of the people bidding in have essentially a very low opportunity cost and they’re competing with the price down to zero, the only way you’re going to incent that sort of technology to be there is with some other sort of payment.

Again, through our outreach process, things that we’ve heard – suggestions were maybe a forward-capacity market for ancillary services.  So you could imagine paying someone to – a capacity payment to be required to bid in ancillary services, operating reserves every hour.

And if that capacity payment was large enough, you could incent that entry and you wouldn’t have to worry about the hour-by-hour payment.  But that would be a different regulatory structure.  That’s not something we’ve got right now, but that would be one potential way to do it.

MR. GYUK:  Perhaps ancillary services should be more performance based?

MR. QUINN:  Yeah.  I mean, there are some markets that simply contract out for their operating reserves and don’t expect to have it work through the hourly markets.  The one disadvantage is it’s nice when you can kind of co-optimize the procurement of ancillary services and energy.

Q:  So, like the rule is changing in the future or –

MR. QUINN:  Well, I can’t speak for the commission –

Q:  I mean, is there a proposed change?

MR. QUINN:  – but one thing that we’ve heard as a possible policy option would be a forward capacity market.  That doesn’t exist now and it would be – definitely that would be a rule change for the commission, but it would be an avenue, just like the avenue that we have for compensating – for inducing a generation to come on board to ensure reliability over the long run.  You would do something to ensure the reliability of the short run as well.

Q:  Okay.

MR. SIEGEL:  We’ve reached the bewitching hour.  I really want to thank Dr. Imre, Dr. Quinn and Dr. Lutz.  It’s been quite a valuable evening – (applause) – talking about the challenges, opportunities across technological, regulatory and legislative.

I want to highlight two things.  Please make sure that you filled out your name, leaving that information.  We’ve lost a lot of people; it’s a late evening.

Item number two is – Artie (sp) left – but sort of unique this evening.  At least 20 member midshipmen from the academy were brought by one of their professors to this evening.  I think they have already gone.

MS. WERTHEIM:  On a school night.

MR. SIEGEL:  On a school night.  So –

MR.    :  (Off mike.)

MR. SIEGEL:  Okay, and so thank you.

And then the third is October 19th we’re going to have some senior DOD leadership and people from all the services to talk about energy innovation and energy activities, and service policies and service developments.  The Coast Guard and the four Department of Defense services will all be represented.

Again, thank you very much, gentlemen.

(Applause.)

(END)

File Attachment: 

091509 Transcript.pdf