Matching Energy Storage to Small Island Electricity Systems: A Case Study of the Azores by Daniel Frederick Cross-Call Submitted to the Technology and Policy Program, Engineering Systems Division in partial fulfillment of the requirements for the degree of Master of ScienceMastr inofSciecei Technology and Policy M~ASCHUSETTS INSTMJT9 OF TECHNOLOGY at the NOV 2 0 /2013 MASSACHUSETTS INSTITUTE OF TECHNOLOGY September 2013 L LIBRARIES @ Massachusetts Institute of Technology 2013. All rights reserved. A uthor .........................- , - - Technology and Policy Program, Engineering Systems Division August 9, 2013 Certified by.... ................ Stephen Connors Director, Analysis Group for Regional Energy Alternatives, MIT Energy Initiative Thesis Supervisor Certified by..I ... ~eIgnacio J. Perez-Arriaga Visiting Professor, Engineering Systems Division (7> Thesis Supervisor Accepted by. ((Dava Newman Professor of Aeronautics and Astronautics and Engineering Systems Director, Technology and Policy Program Matching Energy Storage to Small Island Electricity Systems: A Case Study of the Azores by Daniel Frederick Cross-Call Submitted to the Technology and Policy Program, Engineering Systems Division on August 9, 2013, in partial fulfillment of the requirements for the degree of Master of Science in Technology and Policy Abstract Island economies rely almost entirely on imported diesel and fuel oil to supply their energy needs, resulting in significant economic and environmental costs. In recogni- tion of the benefits of clean energy development, many islands are pursuing ambitious goals for renewable energy. For example, the Azores Islands of Portugal have set a goal to achieve 75% renewable energy by 2018. Despite significant environmental and economic benefits, however, the introduction of renewable energy sources introduces new operating challenges to island power systems, including intermittent and uncer- tain generation patterns. This research investigates energy storage on small island power systems under scenarios of increasing penetrations of variable-output wind. The analysis applies a least-cost unit commitment model to three Azores island net- works (Sdo Miguel, Faial and Flores), in order to determine expected cost savings from introducing energy storage onto those systems. Modeling results indicate that renewable energy coupled with energy storage can produce significant savings in oper- ating costs on island electricity systems- above those levels achieved from renewable generation alone. Furthermore, the research suggests that storage power (in terms of available megawatts for discharging energy) is more critical than storage capacity (megawatt-hours of available storage) for achieving costs savings and clean energy goals. The largest impacts from storage will come from relatively small-sized storage installations, above which there is a diminishing return from storage. Thesis Supervisor: Stephen Connors Title: Director, Analysis Group for Regional Energy Alternatives, MIT Energy Ini- tiative Thesis Supervisor: Ignacio J. Perez-Arriaga Title: Visiting Professor, Engineering Systems Division 3 4 Acknowledgments There are many people to thank for their help along the path to completing this thesis. First, I owe a debt of gratitude to my two outstanding advisors who have provided guidance at every stage of research over the last year. Steve, thank you for giving me the opportunity to work on this project in the first place, then for the enthusiastic conversations and unending wealth of knowledge on all things islands and power systems. I hope you can now enjoy a restful summer and I look forward to return visits to MIT in future years to continue these conversations. Ignacio, thank you for your committed support since the first day I approached you last spring. Despite an unbelievable travel and work schedule, you have consistently found time to meet throughout this project and have always pushed my thinking and research into new and better places. Your expertise and devotion to students is unmatched. Next, thanks go to the tremendous financial support that I have benefited from while at MIT. In particular, I greatly appreciate the support of the MIT Portugal program for the past year, and the Leading Technology & Policy (LTP) initiative during my first year at MIT. These programs have generously created opportunities that I doubt I would find in any other university, and their important work continues for many other fortunate students and beneficiaries. I only hope that my efforts have returned even a fraction of the value that you have bestowed upon me. For invaluable help obtaining data on the Azores electricity system, as well as help wrapping my American brain around European units of measurement, I was in touch with a number of researchers and utility staff in Portugal and at EDA in the Azores. At risk of omitting someone, I give my express thanks to Carlos Silva, Andr6 Pina, and Miguel Moreira da Silva. Understanding the intricacies of any power system is hard enough without it being spread across nine different islands that I have never visited and with information in a language I do not speak or read. You made this task possible. On that note, any mistakes or misrepresentations contained in this thesis are wholly my own and I apologize for those. I am also the very fortunate recipient of many great professors and other men- tors during the past two years. Most recently and critically, Mort Webster taught an excellent class on power system modeling and is the model example of what a teaching and research professor should be. Likewise, Fernando de Sisternes was an extraordinary T.A. with expertise in electricity and modeling far beyond his years, not to mention simple patience and devotion to the task. I am also grateful to the many excellent researchers at Comillas University in Madrid. To name just a few, 5 Javier Garcia Gonzilez, Carlos Batlle, Luis Rouco, and Lukas Sigrist have been great resources with whom I hope to have the opportunity to work again in the future. I would be remiss not to acknowledge my early tutelage in all things energy and power systems by my former colleagues at Charles River Associates. Some of whom continued to make themselves available as valuable experts and sounding boards for this project, including Bruce Tsuchida and Pablo Ruiz. Likewise, Richard Tabors has been an unparalleled mentor and advocate since my first days at CRA-a role that he has continued to play through every step of my career and education to this day. John Goldis, first a colleague then great friend and roommate, thank you for your own part in completing this research-from helping me get through a challenging lin- ear optimization class, to frequent discussions of energy system modeling and design, to escapes to the local watering holes for a break. In that spirit, I am very thankful for the many friends I have made among classmates in the TPP program. Never before have I been among such a high concentration of extraordinarily smart people, and I suspect I may never be again. It has been a pleasure getting to know all of you, in class, around Cambridge, and occasionally in the farther reaches of New England. I am deeply grateful to my family for all of the support you have provided through the years. I could not have followed the path that I have without the many opportu- nities that my parents have provided me. Jesse and Joanna, you are a great brother and sister pair-thank you for all your support through the years, everywhere from the mean streets of Cleveland Heights to the jungles of Ecuador. Finally, Anna, you have been a most unexpected and fantastic addition to my life these last five months. Thank you for your own support and patience as I toiled away on this thesis, and for just as frequently providing a welcomed distraction. I am so excited to put this work to rest as we head into new adventures together this summer and beyond. 6 Contents 1 Introduction 13 1.1 Motivation for research . .. .. ... .. .. .. ... .. .. .. .. 13 1.2 Problem statement .. ... ... .. ... .. ... ... .. ... .. 15 1.3 Azores Islands. .. .. .. .. ... .. ... .. ... ... .. ... 15 1.4 Key findings . .... ..... ... ... .. ... .. ... .. .. 17 2 Background 19 2.1 Island concerns . ... .. ... ... ... ... ... .... ... 19 2.2 Island electricity systems .. .. ... .. .. .... .. ... .. 2 2 3 Policy context 29 3.1 Carbon lock-in on islands .. ... .. ... 29 3.2 EU climate and energy policy . ... .. .. 31 3.3 Power system reliability criteria . ... ... 32 3.3.1 Security of supply on power systems 32 3.3.2 Reserve requirements .. ... ... 34 3.4 Policy options .. ... ... .. ... .. .. 36 4 Energy storage overview 39 4.1 Performance and uses of energy storage . .. 39 4.2 Description of storage technology options 42 4.3 Market development for energy storage . 46 5 Context for study: Azores Islands 49 5.1 Islands overview . ... ... ... ... .. ... .... .... ... .. 4 9 5.2 Economy of the Azores .. .. .. ... .. ... ..... ..... .. 5 3 5.3 Political structures . .. ... .. .. ... ... .. .. ... .. .. 5 4 5.4 Azores clean energy goals .. .. ... .. ... ... ... .... 5 5 5.5 Azores electric power systems .. .. .. ... .... ... ... .. 5 6 7 5.5.1 Electricity end uses and demand profiles . .. .. .. .. 57 5.5.2 Island generation portfolios .. ... .. .. ... .. .. .. 59 5.5.3 Clean energy development . ... .. .. ... ... ... ... 6 1 5.6 Prior Azores energy planning studies . .. ... ... ... ... .. 63 5.7 Azores islands for analysis .. .... .... ... .. .. .. ..