VALUE OF PUMPED STORAGE SYSTEMS IN BRITISH COLUMBIA by Jonathan van Groll B.A.Sc., The University of British Columbia (Vancouver), 2016 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF APPLIED SCIENCE in THE FACULTY OF GRADUATE AND POSTDOCTORAL STUDIES (Civil Engineering) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) June 2018 © Jonathan van Groll, 2018 The following individuals certify that they have read, and recommend to the Faculty of Graduate and Postdoctoral Studies for acceptance, the thesis entitled: Value of Pumped Storage Systems in British Columbia submitted by Jonathan van Groll in partial fulfillment of the requirements for the degree of Master of Applied Science in Civil Engineering Examining Committee: Ziad Shawwash, Civil Engineering Supervisor Vladan Prodanovic, Chemical and Biological Engineering Additional Examiner ii Abstract The need to establish electricity storage in British Columbia is brought by a regional and global shift towards the development of renewable electricity generation. The integration of renewable sources of power is challenging for system operators due to their inability to be dispatched. Energy storage enables a time lag between generation, transmission, and consumption. The unique characteristics of British Columbia, namely abundance of water and mountainous terrain, are well suited for the development of Pumped Hydro Storage (PHS). The goal of this thesis is to investigate the value of the integration of a PHS plant in the BC Hydro system at a high level of planning. BC Hydro’s Generalized Optimization Model, used for medium to long term planning, was modified to include PHS plants. The benefits of the PHS plant were considered as the incremental increase of the objective function of this optimization model compared to a base case. A method was developed to value PHS plants based on projected benefits and costs. A case study was performed using various configurations of PHS plants; including closed loop plants and one extension of an existing hydropower plant. Sensitivity analysis was performed to test the response of NPV over a number of inputs. As the capacity and storage of the closed loop plants increased, the usage also increased. Benefits were not uniform across the set of water years reflecting the characteristics of each year’s conditions and configuration of the BC Hydro system. The yearly benefit is highest for the extension of the existing hydropower plant. For the closed loop projects, the NPV is highest for the least amount of storage for each capacity. The NPV of all projects was most sensitive to the iii variation of construction costs. Complete cost recovery of these plants using revenues consisting of trade revenues and increased overall system is unlikely. Additional sources of benefits and revenue streams should be identified and included in future studies of PHS projects. This research can be extended to projects with more certain estimates of characteristics and costs. iv Lay Summary The goal of this research is to investigate the value of electricity storage systems in British Columbia. The researcher enhanced an existing computer program at BC Hydro to model Pumped Hydro Storage plants. A method was developed to value these plants based on projected benefits and costs. The benefits were based on the results of the computer program with and without the Pumped Hydro Storage plant. They included additional electricity trade opportunities with Alberta and the United States, and increased resource efficiency of the BC hydro system. This method was applied to a case study of the BC Hydro system with various configurations of Pumped Hydro Storage plants. v Preface The work presented in this research is carried out by the author Jonathan van Groll under the supervision of Dr. Ziad Shawwash in collaboration with the Planning and Licensing team within BC Hydro’s Generation Systems Operations department. The research project was fully funded by BC Hydro and by a CRD NSERC Grant to Dr. Shawwash. The GOM model, discussed in Chapter 3 and 4, is an internal model used by BC Hydro engineers. Doug Robinson from BC Hydro’s Planning and Licensing team explained the workings of the GOM model and BC Hydro’s planning process, and was instrumental in this research. The enhancements of GOM were done in collaboration with Doug Robinson and Dr. Shawwash. The development of ancillary services in GOM was done in collaboration with Mr. Mehretab Tadesse. The author would like to acknowledge the Planning and Licensing team for access to data, modelling and IT support, and administration. vi Table of Contents Abstract ......................................................................................................................................... iii Lay Summary .................................................................................................................................v Preface ........................................................................................................................................... vi Table of Contents ........................................................................................................................ vii List of Tables ................................................................................................................................ xi List of Figures .............................................................................................................................. xii List of Abbreviations ...................................................................................................................xv Acknowledgements ................................................................................................................... xvii Dedication ................................................................................................................................... xix Chapter 1: Introduction ................................................................................................................1 1.1 Overview ......................................................................................................................... 1 1.2 Goals and Objectives ...................................................................................................... 6 1.3 Organization of Thesis .................................................................................................... 6 Chapter 2: Literature Review .......................................................................................................8 2.1 Energy Storage Technologies ......................................................................................... 8 2.1.1 Lithium-ion batteries ................................................................................................. 11 2.1.2 Flywheels .................................................................................................................. 13 2.1.3 Compressed Air Energy Storage ............................................................................... 14 2.1.4 Pumped Hydroelectric Storage ................................................................................. 17 2.1.4.1 Introduction ....................................................................................................... 17 vii 2.1.4.2 Typical Pumped Storage Configurations .......................................................... 21 2.1.4.3 Current Development and Market Trends ........................................................ 26 2.2 Energy Markets ............................................................................................................. 29 2.2.1 Overview of Markets ................................................................................................ 29 2.2.1.1 Alberta............................................................................................................... 31 2.2.1.2 California .......................................................................................................... 33 2.3 Valuation Methods ........................................................................................................ 36 2.3.1 Cost Based ................................................................................................................ 36 2.3.2 Market Based Methods ............................................................................................. 37 2.3.3 Cash Flow Analysis .................................................................................................. 38 2.4 Optimization Methods .................................................................................................. 41 2.4.1 Linear Programming ................................................................................................. 42 2.4.2 Applications to Pumped Storage ............................................................................... 45 2.5 Summary ....................................................................................................................... 50 Chapter 3: Methodology..............................................................................................................51 3.1 Optimization Method .................................................................................................... 51 3.1.1 BC Hydro System ..................................................................................................... 51 3.1.2 Generalized Optimization Model .............................................................................