IEEE Power & Energy Magazine - September/October 2017 - 39

Option Value of Storage
Besides the widely discussed benefits of ES in terms of en--
hancing operational flexibility, it can also play a key role in
deferring capital investments. This ability is less recognized,
although it can have strategic value when uncertainty is present. Historically, transmission and distribution planning has
involved little uncertainty regarding future system evolution;
september/october 2017

Normalized ELCC (%)

100
80
60
40
20
0

5
2 rgy (h)
e y
En acit
p
Ca

20
50
100
Normalized Power Rating (%)

figure 9. The contribution of ES to security (ELCC) for
-different ES plant sizes.

12 h

24 h

240 h

100%/2 h

100%/5 h

50%/5 h

100
60
40
20
50%/2 h

20%/5 h

0
20%/2 h

Normalized ELCC (%)

The first key finding is that the higher energy capacity
of ES increases the ability to sustain operation during outage conditions. In Figure 9, normalized ELCC values are
presented for six different ES plant sizes, characterized by
a power rating normalized over peak demand and energy
capacity expressed in hours at the maximum output. For
instance, a 50%/5-h plant refers to an ES plant with 0.5 MW
of power and 2.5 MWh of energy. Its normalized ELCC
value is 72%, meaning that upon connecting the ES asset,
0.36 MW of demand can be added to the system with no
increase to the original EENS. In this illustrative case study,
the network's reliability parameters were assumed as follows: mean time between failures (MTBF) of one year and
mean time outage duration (MTOD) of 3 h.
The second key finding is that network outage duration
(which is a function of MTOD) is one of the most important
drivers for the contribution of ES to security of supply: the
longer the outage duration, the more energy is required from
ES to supply the extra demand. This relationship is shown in
Figure 10 by plotting normalized ELCC values across four
different MTOD scenarios: 3, 12, 24, and 240 h. It is evident that the same ES plant will have a significantly reduced
security contribution as the duration of network outage
increases: for extremely long restoration times (240 h), the
ELCC drops below 5% across all plant sizes; in a fast-restoration scenario, the ELCC of ES can reach close to 100% for
a low normalized power rating.
Finally, the analysis suggests that, unlike the security contribution of conventional network and generation assets (determined based simply on the instantaneous peak demand
level), with ES the shape of demand may also have a major
impact on its security contribution. A flatter demand shape
(i.e., increased minimum demand level) means that less
energy is available for charging during single-outage events.
For example, if the normalized minimum load in the network increases from 0.4 to 0.8, the ELCC of a 100%/5-h ES
plant is reduced from about 50% to 30%.
In summary, for a full understanding of the security contribution of an ES asset, additional information regarding
the shape of the network demand profile and network outage
duration will be needed. The approach presented here has
been used to inform the fundamental review of distribution
network design standards in the United Kingdom aimed at
establishing a level playing field that will allow both conventional network technologies and non-network technologies,
such as ES, to be considered as cost-effective alternatives for
meeting security requirements in case of demand growth.

figure 10. The normalized ELCC for ES of different sizes
across four MTODs with MTBF of one year.

however, planners today often have to approve projects ahead
of need due to anticipation of rapid demand and/or generation
growth and lengthy permitting and asset delivery procedures.
ES entails lower stranding risks because, even if the envisaged
scenario that warranted its deployment does not materialize,
it can still contribute to operation by providing other support
services. In addition, the operational flexibility of ES can have
broader nonlocalized effects, providing a natural hedge when
future developments are characterized by locational uncertainty.
Furthermore, it has recently been shown that flexible assets
such as ES can grant planners the ability to react to unfolding uncertainty while deferring the commitment to investments
until they are fully justified. In other words, interim solutions
such as ES can "buy time" until uncertainty is resolved. Several
forms of ES, such as batteries, can also be rapidly redeployed if
network needs change.
The case presented here illustrates the option value of ES and
demonstrates its significance to tip the decision in favor of strategic ES investments when uncertainty is formally considered in
the planning process. Our study focuses on a transmission system comprised of two regions; the north region exports power
to the demand in the south region through two 200-MW lines.
We assume that the network is currently at its N-1 secure operating limit, i.e., facing a total group peak demand of 200 MW.
Four scenarios spanning four stages of four years each have
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