03/26/2021

[Article 6] Energy Storage Systems: Key Information Asset Managers Need to Manage this New Asset Class

Overview of the financial and technical information the asset manager has to keep an eye on to deploy energy storage systems effectively.

[Article 6] Energy Storage Systems: Key Information Asset Managers Need to Manage this New Asset Class

by Steve Hanawalt

Last week we reviewed the unique ways the storage asset class makes money for owners and summarized the role of the asset manager in the energy storage market – from maximizing the financial performance of the asset to overseeing the technical operations. This week, we’ll go into detail about the kinds of financial and technical information the asset manager needs to be successful.

Thank you to Anand Narayanan, Vice President, Asset Management at Arevon for his contributions in writing this article. Arevon is a leading provider of asset management services to owners of utility-scale, industrial, and commercial renewable energy generation assets throughout North America.

What Kinds of Information Are Needed?

To properly manage this asset class, the asset manager needs access to lots of historical, current and future asset operating data about the asset and the market it is being deployed into.

Financial Information Requirements

Because revenue markets for the asset class are just emerging and the operating duty of the battery storage system strongly impacts the useful life of the batteries, the asset manager continuously evaluates the markets to see if the operating strategy should be revised to generate better investor returns. Key information requirements include:

What-If Analysis Assumption Data

With future price strips for the energy storage product constantly changing, asset managers need to regularly evaluate how to best dispatch the unit into the market to achieve financial objectives. For merchant and ancillary service markets, what-if analyses may be run many times throughout the day. What-if tools need model assumptions updated with good operating data, including:

  • Estimated battery residual life based on actual degradation rates and cumulative cycles
  • Round-trip-efficiency (RTE)
  • Cycling vs. operating temperature
  • System operating costs

Asset managers are asking vendors to provide some flexibility on how battery cycles are used. For example, can daily or monthly cycles be relaxed if annual and cumulative cycles are still adhered to?

Back-Casting Analysis Assumption Data

Like a forward-looking what-if analysis, back-casting is a tool that allows asset managers to fine-tune operating strategies by evaluating the gains made from actual dispatch schedules with forecasted energy prices compared to “what could have been” given actual prices in the market.

To do a back-casting analysis, revenue and cost from the actual energy, capacity and ancillary services deployed need to be compared with what gains or losses would have been accrued if a different deployment strategy had been employed. If material differences are generated between “what was” and “what could have been,” revisions to the deployment strategy probably need to be considered.

Asset managers also like to compare how actual project profitability compares to development models so model assumptions can be improved and to see if the asset and the market are as strong as forecasted. Asset performance management (APM) platforms need to provide these kinds of outputs to support back-casting and what-if tools.

Commercial

For hybrid solar or wind plus storage systems in the US, tracking the percentage of facility auxiliary loads that are supplied by the hybrid system vs. the utility grid is very important. ITC project benefits can be compromised if the hybrid system itself does not supply 80 percent or more of its own load.

Project Operating Costs

Asset managers need to know if project operating costs are comparing favorably against budget. As a new asset class, the greatest unknowns are capacity fade (the rate of battery capacity degradation), unplanned maintenance costs and battery round-trip system efficiency.

Technical Information Requirements

Actual vs. Design

Since there is so little BESS operating history available, it is especially important that the asset manager knows if the asset is operating within the design parameters of the equipment and performing as expected. Is the system round-trip efficiency as high as expected? How often is the unit down for unplanned outages to repair, inspect or reset equipment? Is the rate of capacity degradation tracking with expectations? All these questions need to be answered so performance and financial models can be updated to better reflect the actual capability and cost of the asset.

Actual vs. Warranty Information Requirements

Like tracking performance against design specifications, the asset manager also needs to know that the system is being operated within the warranty envelope. As discussed in previous articles on operator’s information requirements co-authored by experts at Origis Energy and Origis Services (read Part I and Part II), it is easier to operate a battery storage system outside of warranty conditions than other energy assets because the control system allows cycling and discharge rates that can exceed these limits.

Therefore, charts and tables of cumulative actual vs. warranty parameters need to be created and closely monitored. Usage profiles such as temperature, energy throughput, cycling and state of charge need to be adhered to.

Performance Guarantee Monitoring Requirements

Performance guarantees cover the ability of the system to achieve a specified performance level for a defined usage profile over a specified duration. Performance warranties typically span the expected end of life for the battery – usually when it has reached 80% of its remaining capacity. Common performance guarantees include the energy capacity of the system using a prescribed degradation curve or minimum capacity to be maintained over the life of the project and system uptime (or availability).

Like the manufacturing defects warranty, the performance guarantee is only valid if warranty operating limits are maintained. Therefore, it is critical that these limits are tracked carefully. See this article for more detail about monitoring the manufacturing and performance warranties of a BESS.

Reliability Monitoring Requirements

Since information about actual long-term Li-on battery reliability is limited, asset managers will want to ensure that the following reliability metrics are monitored by the asset performance management (APM) platform:

  • Capacity fade – What is the rate of battery system capacity degradation and how well does it compare to bank models? This will have a big impact on battery augmentation operating costs over the life of the system.
  • Mean-time-between-failure (MTBF) – How often do the batteries, inverters and other ancillary equipment fail? What impact do actual failure rates have on repair and replacement costs?
  • Availability – Related to MTBF, how often is the battery system unable to fulfill its intended purpose and what is the financial impact of this unavailability? For systems dispatched into an ancillary services market, the timing of unavailability could wipe out months of operating revenue with one ill-timed forced outage.

Operational Monitoring

Operational monitoring requirements for the asset manager can be grouped by the frequency of the review cycle. A well-designed APM should be able to deliver this information to the asset manager, automatically.

  • Real-time: High temperature, gas detection, and thermal runaway events
  • Daily: System and equipment outages
  • Monthly
    • Planned maintenance outage schedules
    • Resting state-of-charge (rSOC)
    • Average SOC
    • SOC histogram: Actual vs. prescribed limits
    • Capacity fade trend: Actual vs. prescribed limits
    • RTE: Actual vs. prescribed limits

These are a few of the key pieces of information an energy storage asset manager will want to monitor. As we learn more about this emerging asset class, additional operating metrics surely will be developed.

Summary

The energy storage asset manager needs to keep a close eye on many financial and technical pieces of information to deploy this new asset class into the market effectively. In next week’s article, we will talk with asset managers about the kinds of monitoring tools they need to help them manage the long-term performance of energy storage systems.

As always, thanks for following along. Your feedback is appreciated.

Authors

Steve Hanawalt is EVP and founder of Power Factors. For more articles like this, follow him on LinkedIn or check out the rest of our blog.

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