[Senate Hearing 111-335]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-335

                       GRID-SCALE ENERGY STORAGE

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

 RECEIVE TESTIMONY ON THE ROLE OF GRID-SCALE ENERGY STORAGE IN MEETING 
                      OUR ENERGY AND CLIMATE GOALS

                               __________

                           DECEMBER 10, 2009


                       Printed for the use of the
               Committee on Energy and Natural Resources



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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel







                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Huber, Kenneth, Senior Technology and Education Principal, PJM 
  Interconnection................................................    42
Koonin, Steven, Under Secretary for Science, Department of Energy     5
Mainzer, Elliot, Executive Vice President for Corporate Strategy, 
  Bonneville Power Administration................................    49
Masiello, Ralph D., Senior Vice President, Energy Systems 
  Consulting, KEMA, Inc..........................................    30
McGrath, Robert, Deputy Laboratory Director, Science and 
  Technology, National Renewable Energy Laboratory, Golden, CO...    37
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     2
Udall, Hon. Mark, U.S. Senator From Colorado.....................     4
Wellinghoff, Jon, Chairman, Federal Energy Regulatory Commission.    13
Wyden, Hon. Ron, U.S. Senator From Oregon........................     3

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    63

                              Appendix II

Additional material submitted for the record.....................    91

 
                       GRID-SCALE ENERGY STORAGE

                              ----------                              


                      THURSDAY, DECEMBER 10, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:01 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. OK. Why don't we go ahead and get started?
    Thank you all for being here. We have had several hearings 
in this committee on the topic of energy storage, but those 
hearings were primarily focused on energy storage technologies 
for the transportation sector.
    This morning, we are turning our attention to the role of 
energy storage for the grid. Let me just initially indicate 
there has been a lot of interest here in the committee on it. 
Senator Wyden has urged that we have this hearing. Senator 
Udall has urged that we have this hearing. I appreciate them 
and Senator Corker all being here. I know Senator Murkowski is 
on her way as well and will be here shortly.
    We are told that grid-scale energy storage technologies 
have the potential to transform our grid, enabling energy to be 
delivered exactly when it is needed, regardless of when it was 
produced, and providing a new toolbox of capabilities for 
managing the grid. These capabilities will allow us to run our 
grid more efficiently and reliably and provide better power to 
customers.
    They will allow us to maximize the capacity of our existing 
generation and transmission and distribution assets, reducing 
the need to build more, and we are also learning that energy 
storage technologies will be instrumental in achieving large 
amounts of renewable generation on the grid by acting as shock 
absorber for fluctuations in power and providing firm 
dispatchable energy.
    The Recovery Act that was passed by Congress only 10 months 
ago has been instrumental in jumpstarting the development of 
these grid-scale energy storage technologies. The Department of 
Energy's Office of Electricity last week announced funding for 
16 utility-scale energy storage demonstration projects aimed at 
proving out the technical feasibility benefits and business 
case for these technologies.
    My own State is participating in two of those demonstration 
grants to demonstrate the use of flow batteries for firming up 
renewable power. I also know that the Department of Energy is 
pursuing several breakthrough grid storage projects through 
ARPA-E and through the Office of Science.
    These efforts are positioning our country as a world leader 
in grid-scale energy storage research and development, ensuring 
that the capabilities of these technologies are used to our 
best advantage and swiftly deployed on the grid where it makes 
sense to do so and where it will help us to meet our clean 
energy goals, but will also ensure that we remain leaders in 
this area.
    So I look forward to hearing from our witnesses. We have 
two distinguished panels today--first, a panel of Government 
officials who can tell us the state of policy and action in the 
executive branch and then a second panel of experts as well.
    Let me defer to Senator Murkowski for any comments she has.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    Good morning. Welcome to our witnesses, and I appreciate 
the opportunity this morning to continue our series of very 
informative discussions. The topic this morning, grid-scale 
energy storage has the potential to transform the way that we 
generate and receive electricity.
    Energy storage capability has already changed the way that 
we live. If you look at those of us around here with our 
BlackBerrys and our cell phones. I think we recognize how 
frustrating it is when we forget to charge it up, and make sure 
that we have it functioning at full capacity every day. But it 
is easy to forget that it wasn't too long ago that we actually 
had pay phones here in the Dirksen building. My kids don't even 
know what a pay phone is.
    For about a half a century now, our Nation's power delivery 
system has operated by carefully balancing in real time 
generation and load, and we have been using the just-in-time 
delivery system for immediate generation and delivery. That is 
all about to change. It has to, because we are changing the way 
that we use the grid.
    As we seek to lower our emissions, we have an ever-
increasing amount of renewables and distributed generation that 
are coming online. We are also moving toward the 
electrification of our transportation sector. Integrating 
variable resources like wind and solar has challenged our grid 
operators by often producing too much energy when it is not 
needed or not enough energy when it is needed. We need to make 
our grid smarter and change how we manage and control the 
delivery of electric power.
    Cost-effective grid-scale energy storage is part of the 
solution to these energy challenges. Energy storage can firm up 
intermittent renewable energy sources and promises to improve 
the efficiency, the reliability, as well as the security of 
delivering energy.
    Just as we need a diverse energy supply, we need a wide 
array of energy storage technologies, everything from pumped 
hydro, flywheels, and batteries to compressed air energy 
storage. Even plug-in vehicles can play an important role in 
shifting load to off-peak hours.
    Coming from Alaska, I can certainly appreciate that pumped 
hydro has been the energy storage workhorse, providing the most 
storage capacity that can deliver power during peak demands. It 
often doesn't get the credit that it deserves. Today, in 
addition to learning about the emerging technologies, I would 
like to hear a little bit more about increased opportunities 
for this effective and proven resource.
    As you note, Mr. Chairman, we have got an impressive panel 
of witnesses today. I welcome you, Chairman Wellinghoff, and 
Dr. Koonin, back to the committee and look forward to the 
testimony that we will hear. I again look forward to helping 
establish the path forward on the development of policies that 
will support the development, the deployment, and the 
regulation of grid-scale energy storage systems.
    Thank you.
    The Chairman. I know there is a lot of interest here by 
members. Let me just allow each member to make any statement 
they would like to at this point.
    Senator Wyden, did you want to make a statement?

           STATEMENT OF HON. RON WYDEN, U.S. SENATOR 
                          FROM OREGON

    Senator Wyden. I did, Mr. Chairman. Thank you for your 
thoughtfulness. I know we have got witnesses we want to go on 
to.
    I think this is an extraordinarily important topic because 
I don't think the people of this country, nor those of us in 
public office recognize that we are wasting so much of our 
treasure trove, this extraordinary array of renewable energy 
resources. We want to have carbon-free wind turbines and solar 
cells and, in my part of the country, wave and tidal energy. 
Yet we fritter away so much of this extraordinary resource 
because we have not set in place, as Senator Murkowski notes, 
the full array of storage technologies that would allow us to 
capture the full potential of these renewable resources.
    There is something pretty bizarre, even by the standards of 
the Beltway, of throwing away the economic value, for example, 
of renewable energy because the wind is blowing or the tide is 
changing at 3 in the morning when demand is low.
    So what we have got to do is figure out a way to not 
devalue, for example, the full potential of renewable energy, 
which is what you do because we can't sell it when prices are 
highest. We shouldn't end up spending more integrating it with 
nonstorage technologies, which is what Senator Murkowski talked 
about, and I think we can do this in a bipartisan way.
    Earlier this year, Senator Menendez, Senator Collins, and I 
introduced legislation--S. 1091, the Storage Act--to provide 
tax incentives to deploy storage energy technologies. I note we 
have got a number of colleagues from both the Energy and 
Finance Committees. Senator Shaheen, Senator Dorgan, Senator 
Kerry, recently Congressman Thompson from California recently 
introduced the legislation. I think we can move forward in the 
storage area in a bipartisan way.
    Our bill provides a 20 percent investment tax credit for 
grid-connected energy storage systems. It is technology neutral 
so that all of the various technologies--pumped hydro, 
compressed air, batteries, flywheels, and new technologies--all 
of them would have a chance to compete in an open marketplace. 
The bill provides incentives for businesses and homeowners to 
install their own energy storage systems to store renewable or 
off-peak energy, including plug-in vehicles.
    So I think the point is, as we move forward, and I believe 
this can be done in a bipartisan way to build a clean energy 
economy, let us make sure we do it in a way that is smart and 
not wasteful.
    A key part of that equation is what you and Senator 
Murkowski are examining today, and I very much appreciate your 
holding the hearing.
    The Chairman. Very good.
    Senator Corker, did you have any comments you would like to 
make?
    Senator Corker. I think you know the answer to that. I look 
forward to hearing from the witnesses.
    Thank you.
    The Chairman. All right. Senator Udall, how about you?

          STATEMENT OF HON. MARK UDALL, U.S. SENATOR 
                         FROM COLORADO

    Senator Udall. Thank you, Mr. Chairman.
    If I might, I have a longer statement I would like to ask 
unanimous consent to include in the record.
    The Chairman. We will do that.
    Senator Udall. Let me make a few brief comments. I want to 
thank you and the ranking member for holding this hearing.
    I would like to associate myself with Senator Wyden's 
remarks. I know that these topics can seem dry. But to use a 
phrase that has been in the parlance this year, this could very 
well be a game-changer.
    In the 2009 National Electricity Delivery Forum here in DC, 
participants were asked what will be the most transformative 
technology for the electricity industry. The answer, the most 
frequent answer was energy storage technologies, including 
plug-in hybrids. It wasn't an integrated smart grid, as 
important as that is, or transmission superhighways.
    I am glad that the chairman of the FERC is here because I 
want to hear his thoughts on regulatory issues. I have come to 
understand that the technologies are almost more advanced than 
the regulatory questions that we have to answer, that there are 
a lot of disincentives in the systems right now to using 
storage technologies.
    Then I am also pleased to see the Under Secretary here, and 
I am keen to hear about the Recovery Act storage projects and 
where we stand with those.
    But again, Mr. Chairman and Ranking Member Murkowski, thank 
you for holding this important hearing.
    [The prepared statement of Senator Mark Udall follows:]

   Prepared Statement of Hon. Mark Udall, U.S. Senator From Colorado
    Thank you Mr. Chairman. I appreciate your agreeing to hold this 
hearing and of course all the hard work of your staff. I requested it 
to draw attention to what the federal government is doing to advance 
storage technologies as well as what regulatory changes might be 
appropriate for storage facilities on the electrical grid.
    I recognize that these topics may seem dry, but what we are talking 
about today is potentially game-changing. If we find a way to store the 
power generated from the sun and the wind, really all energy resources, 
then we can transform the energy industry forever.
    At the 2009 National Electricity Delivery Forum here in DC earlier 
this year, participants were asked, ``What will be the most 
transformative technology for the electricity industry?'' The most 
frequent response was ``Energy storage technologies, including plug-in 
hybrids.'' It scored higher than every other technology, including ``An 
integrated Smart Grid'' and ``Transmission superhighways.''
    Energy storage can address problems that are already occurring that 
impact our economy and security. Power interruptions cost the United 
States economy roughly $80 billion per year. And these power outages do 
not have to last long. Two-thirds of those losses came from 
interruptions lasting less than five minutes. Storage can help reduce 
those outages, increase our economic productivity, and save consumers 
and businesses money.
    I am glad that Chairman Wellinghoff is here to talk with us about 
regulatory issues related to energy storage. I am especially interested 
to hear his thoughts on how best to structure cost recovery for storage 
projects to account for all the benefits that storage provides to the 
electrical grid.
    I am also pleased to see Undersecretary Koonin here to talk about 
what the Department of Energy is doing to advance energy storage 
technology, including the recently announced Recovery Act funding for 
storage projects. Getting those initial projects built and operating 
will provide extremely valuable experience for future investments.
    It just seems to me that energy storage is poised to help us no 
matter what our energy supply mix is going forward--wind, solar, 
nuclear, natural gas, or coal with carbon capture and sequestration. 
Whether it is making the electrical grid more reliable, deferring new 
line construction, or reducing transmission and distribution 
congestion--energy storage has a role to play. Or maybe the goal is 
reducing carbon emissions, meeting peak demand, or integrating greater 
amounts of renewable energy--energy storage can help us face those 
challenges as well.
    I look forward to today's testimony to hear ways of partnering 
together to solve these challenges. I also look forward to hearing 
ideas of how to effectively bring energy storage technologies to the 
marketplace.
    Thank you, Mr. Chairman.

    The Chairman. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman. I will reserve my 
comments for the questioning period.
    The Chairman. Very good.
    Let me introduce the first panel. It is Dr. Steven Koonin, 
who is the Under Secretary for Science in the Department of 
Energy. Thank you for being here.
    The Honorable Jon Wellinghoff, who is chairman of the 
Federal Energy Regulatory Commission. Thank you for being here.
    Dr. Koonin, did you want to start and take 6 or 8 minutes, 
whatever time you need to make the points you think we need to 
understand? Then I am sure we will have questions.

   STATEMENT OF STEVEN KOONIN, UNDER SECRETARY FOR SCIENCE, 
                      DEPARTMENT OF ENERGY

    Mr. Koonin. Sure. Thank you.
    Chairman Bingaman, Ranking Member Murkowski, members of the 
committee, I appreciate the opportunity to discuss grid-scale 
electric storage with you this morning.
    Electricity is the cleanest and most convenient form of 
energy available for residential and commercial use. For that 
reason, it continues to grow significantly relative to other 
forms of energy in those sectors. Challenges in generating and 
using electricity stem from the great variation of demand 
during the day, which can double from early morning to late 
afternoon.
    Since flowing electricity is perishable in that unused 
current cannot easily be stored for later use, generators must 
successively be turned on during the day as demand increases 
and then idled again in the evening. Grid assets are, thus, 
idle roughly half the time, and the system must be designed for 
a rarely achieved peak demand.
    Indeed, our power system operates at only about 40 percent 
of its capacity. Yet it continues to require additional 
resources as demand grows.
    A broader deployment of energy storage technologies well 
integrated into the grid would smooth the daily load cycle and 
allow our current infrastructure to be used much more 
efficiently. Storage on shorter timescales could provide for 
frequency regulation, peak shaving, and regional balancing. 
Reduced losses, improved power quality, increased capacity 
factors, and deferred capital investment would all result.
    Grid-scale storage would enable a more complete exportation 
of the intermittent wind and solar generation that we aspire to 
increase. The optimal grid-scale energy storage technology 
would be rapidly charged and discharged with small losses of 
energy, durable over many cycles, physically compact, and 
significantly less expensive than the generation capacity that 
it supplements.
    Unfortunately, we are not yet close to that ideal in part 
because of fundamental physical obstacles. The simplest and 
most common grid-scale storage technology is to raise or lower 
water. The challenge for such pumped hydro systems is that 
gravity is pretty feeble.
    Raising 1 cubic foot of water by a typical 300 feet stores 
less than 1/100 of a kilowatt hour. So, to do this at scale, 
you need a suitable topography, and you also need a lot of 
water.
    Another possibility is underground storage of compressed 
air for which appropriate geology probably exists in much of 
the Nation. Although this technology has been demonstrated for 
decades, 1 cubic foot of air at a typical 150 atmospheres still 
stores only 2/10 of a kilowatt hour of energy. So, again, you 
need a lot of air.
    A cubic foot of batteries can store 100 times more energy 
than that in its electrons and ions, although at roughly 100 
times the cost currently.
    All of these technologies should be compared to the 1 
kilowatt hour of chemical energy contained in a cubic foot of 
natural gas, which costs just a penny and weighs essentially 
nothing. Of course, that chemical energy in the gas is 
extracted irreversibly and with a carbon footprint.
    So despite the challenges and current high cost, storage 
technologies can be of value in managing the grid. So what do 
we need to do in order to realize more effectively the 
potential for storage in managing the grid?
    First, because utilities are appropriately cautious, we 
need to better demonstrate the potential of existing 
technologies. Department of Energy demonstrations under the 
Recovery Act are boosting such activities 50-fold and 
encompassing the complete range of technologies and scales from 
a single battery project in Pennsylvania to a 300-megawatt 
compressed air project in California.
    These projects will provide much more operational 
experience and define best practices, and these will facilitate 
greater storage deployment efforts nationwide. They will also 
help us better quantify the economic dimension of the storage 
issue.
    Second, we should be pursuing basic research to enable the 
next generation of storage solutions. Material science to 
synthesize and understand novel nanoscale materials tailored to 
specific electrochemical properties is the highest priority 
here. An out-of-the-box aspiration would be the reversible 
storage of electrical energy in chemical bonds.
    You know, right now, we can use electrical energy to 
electrolyze water and produce hydrogen, compress and store that 
hydrogen, and then convert that hydrogen back into electricity 
using a fuel cell, for example. However, it is terribly 
inefficient currently and consequently uneconomic.
    Research to do that electricity to chemistry back to 
electricity transformation would be truly game-changing. Such 
work would lead to low-cost storage devices with higher energy 
densities, cycle lifetimes, and reliabilities.
    Then, finally, we need a deeper and more integrated 
systems-based understanding of grid structure and dynamics. 
Storage, demand management, peaking generation, real-time 
analytics, and real-time grid control are all tools that can be 
deployed to create a better grid. Understanding the synergies 
among them and their optimal deployment through data 
collection, analysis, and deployment is a task that we are only 
beginning to attend to through programs underway in the 
Department of Energy.
    You know, as a theoretical physicist, I have been looking 
carefully for the last months for a theory of the grid, a 
simple, synthetic framework that you can use to get your arms 
around the concept, and I am sad to say I haven't yet found it. 
So, I look forward to helping perhaps stimulate programs to 
develop that so we can better understand how to integrate 
storage peaking generation, transmission grid management, 
demand management into a much more efficient system than we 
have currently.
    With that, thanks for your attention.
    [The prepared statement of Mr. Koonin follows:]
   Prepared Statement of Steven Koonin, Under Secretary for Science, 
                          Department of Energy
    Thank you, Chairman Bingaman and members of the Committee, for this 
opportunity to testify before you on grid-scale energy storage and its 
role in achieving U.S. energy and climate goals.
    Enhancing our national energy storage capability is an important 
tool to improve electric grid reliability and resiliency. Adequate 
deployment of storage technologies can materially reduce power 
fluctuations, enhance system flexibility, and enable greater 
integration of variable generation renewable energy resources such as 
wind and solar power. Each of these is critical for achieving the 
Nation's clean energy goals. Energy storage can also help stabilize the 
price spikes that occur during times of peak demand, and can delay or 
potentially avoid the need to construct capital intensive facilities 
and infrastructure that use conventional fuels and produce greenhouse 
gases.
    The core function of energy storage is to bridge the gap that 
exists between the characteristics of the generation and load 
technologies within our electrical system. While some have identified 
this gap as a challenge inherent only to variable generation renewable 
energy technologies such as wind and solar, gaps and mismatches in 
characteristics exist throughout the grid that stress our 
infrastructure; these areas would benefit from the system flexibility 
that could be introduced with deployment of grid scale energy storage 
technologies. Power quality disturbances resulting from voltage and 
frequency fluctuation are but one indication of the stresses that exist 
in today's grid that could be ameliorated by increased energy storage. 
However, the functional requirements of energy storage for power 
conditioning are necessarily different than the functional requirements 
of energy storage for load shifting or variable generation firming, and 
it is therefore no surprise that different applications require 
different storage technologies.
    It is important to recognize that despite the large number of 
existing energy storage technologies, there are only a limited number 
of known fundamental phenomena that can be exploited to store energy; 
currently these phenomena include gravity, electron movement and 
storage, mechanical conversion, chemical manipulation of materials, and 
thermal storage. The conversion process between energy states that 
enables storage also defines the characteristics of each storage 
technology, as well as the applications for which the technology is 
best suited. Gravity storage via pumped water, where each acre foot of 
water pumped contains more than 1 kilowatt-hour of potential energy for 
each foot of elevation increase\1\, has the potential to store great 
amounts of energy and is well suited for large energy applications such 
as load leveling. Yet the requirement that water be moved limits the 
short time response capability of the technology. Conversely, 
mechanical kinetic energy storage via flywheels is particularly well 
suited to the short term requirements of power conditioning; and while 
flywheel systems can achieve very high energy densities\2\, the 
physical constraints on flywheel size limit energy storage for extended 
activities such as peak shifting. Given the variety of conversion 
processes involved, it is critical that energy storage technologies be 
matched to potential applications.
---------------------------------------------------------------------------
    \1\ Potential energy is calculated to the theoretical limit and 
does not include efficiency losses from conversion between energy 
states. The theoretical potential energy for an acre foot of water is 
1.02 kilowatt-hours per foot of elevation increase.
    \2\ Castelvecchi, D. (2007). Spinning into control. Science News, 
vol. 171, pp. 312-313.
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    The power requirements for energy storage range from of a few watts 
for personal electronics, up to 100 kilowatts for hybrid vehicles, tens 
of megawatts for ships, and hundreds of megawatts for electric utility 
applications. The duration requirements for these same applications 
covers a similarly broad range, from sub-second for power quality and 
voltage regulation to hours or even a day when peak shaving and load 
leveling. Among the most important requirements for stationary utility 
storage, which ranges from half a megawatt to hundreds of megawatts, 
are storage technologies that are low-cost and have a high cycle life, 
meaning a large number of charge and discharge cycles. High 
reliability, efficiency, environmental acceptability, and safety are 
also important. Unlike requirements for electric vehicles where energy 
density for conventional fuels is held as the benchmark against which 
storage technologies are compared, energy density and footprint are 
less important for utility storage.
    Grid-scale energy storage received a significant boost through the 
American Recovery and Reinvestment Act. On Nov. 24, 2009, the 
Department announced it would award grants totaling $185 million to 16 
energy storage demonstration projects\3\. This investment will 
substantially accelerate the development and deployment of utility-
scale storage technologies, enhancing their market readiness in the 
U.S.
---------------------------------------------------------------------------
    \3\ Project list available at http://www.energy.gov/news2009/
documents2009/SG_Demo_Project_List_11.24.09.pdf.
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    The Department of Energy's Office of Electricity Delivery and 
Energy Reliability has the lead within the Department for energy 
storage research, development, analysis, and demonstrations associated 
with the electric grid. The program works with numerous utilities to 
ensure that projects reflect the industry's needs, and close 
collaboration with the states has resulted in many jointly funded 
demonstration projects. In addition, the Office of Science selected six 
Energy Frontier Research Centers in the area of energy storage\4\ to 
perform fundamental research relevant to battery technology. The 
Advanced Research Projects Agency-Energy (ARPA-E) has also selected six 
energy storage projects\5\ as part of its first solicitation for 
breakthrough technologies. In fact, one project in the first ARPA-E 
tranche that has captured people's imagination is a storage technology, 
the liquid metal battery, so it is possible that storage is an area 
where truly creative thinking is possible.
---------------------------------------------------------------------------
    \4\ Center for Electrical Energy Storage Center for 
Electrocatalysis, Transport Phenomena and Materials for Innovative 
Energy Storage Energy Materials Center at Cornell Northeastern Chemical 
Energy Storage Center Center for Science of Precision Multifunctional 
Nanostructures for Electrical Energy Storage Heterogeneous Functional 
Materials Center
    \5\ High-Amperage Energy Storage Device-Energy Storage for the 
Neighborhood Planar Na-beta Batteries for Renewable Integration and 
Grid Applications Low Cost, High Energy and Power Density, Nanotube-
Enhanced Ultracapacitors Metal-Air Ionic Liquid (MAIL) Batteries 
Silicone Coated Nanofiber Paper as a Lithium-Ion Anode High Energy 
Density Lithium Batteries
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               grid reliability and frequency regulation
    Reliability and power quality have become a necessity for the 
modern digital society because digital equipment is extremely 
vulnerable to short outages and even small voltage fluctuations. 
Studies have shown that momentary outages, lasting less than 5 minutes, 
cost the U.S. some $52 billion annually\6\. Energy storage with high 
frequency characteristics and response rate enables seamless continuity 
of power supply for a range of customers. One system of valve regulated 
lead-acid batteries, that was developed with Department of Energy 
funding, can protect energy intensive and highly sensitive facilities 
like microchip plants with 10 megawatts or more for 30 seconds, after 
which a back-up diesel generator can provide the necessary power. 
Similar systems are widely used for high tech manufacturing, financial 
institutions, and server farms. On a larger scale, a single 27 megawatt 
nickel cadmium battery safeguards the transmission line from Anchorage 
to Fairbanks by giving voltage support, preventing outages, and 
providing reactive power locally.
---------------------------------------------------------------------------
    \6\ Hamachi-LaCommare, Eto. Understanding the Cost of Power 
Interruptions to U.S. Electricity Customers. Lawrence Berkeley National 
Laboratory (2004).
---------------------------------------------------------------------------
    The need for frequency regulation arises because generation and 
demand are almost always out of synch. The resultant grid system is one 
which regional operators are required to balance by adjusting the 
frequency. Current management involves sending periodic signals that 
allow participating fossil fuel generators to increase or decrease 
production and reset the frequency. Fast storage performs this function 
considerably better. Studies have shown that regulating frequency by 
battery or flywheel storage is at least twice as effective and has a 70 
percent reduced carbon footprint compared to use of fossil fuel 
generation\7\. Technical feasibility was shown by flywheel 
demonstrations funded by the Department jointly with state agencies in 
California and New York. Currently there are six 1 megawatt 
demonstration units operating on the grid, and through the Loan 
Guarantee Program the Department has entered into a conditional 
commitment for the development and deployment of a twenty megawatt 
flywheel energy storage facility in New York\8\. Meanwhile, under the 
guidance of the Federal Energy Regulatory Commission grid operators are 
developing new control signals, tariffs, and market rules to allow 
frequency regulation by fast storage to be deployed in a cost effective 
manner. With increased deployment of variable generation renewable 
energy assets, the need for frequency regulation on the grid will 
increase considerably.
---------------------------------------------------------------------------
    \7\ Makarov, Ma, Lu, and Nguyen. PNNL Report #17632: Assessing the 
Value of Regulation Resources Based on Their Time Response 
Characteristics, Pacific Northwest National Laboratory (June 2008) 
Fioravanti and Enslin. KEMA Report #BPCC.0003.001: Emissions Comparison 
for a 20MW Flywheel-based Frequency Regulation Plant (2007)
    \8\ $43 million conditional commitment for a loan guarantee to 
Beacon Power (http://www.lgprogram.energy.gov/press/070209.pdf)
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              asset utilization and renewable integration
    It is well known that generation, transmission, and distribution 
are not efficiently utilized. Assets such as substations and 
transmission lines have to be sized for peak demand with ample capacity 
to spare for a hot day. One quarter of a facility's capacity is devoted 
to maintaining service during a 5 percent peak period. The goal of 
energy storage is to supply this peak load from energy stored during 
periods of least demand, thereby allowing for more complete and cost 
effective utilization of grid assets.
    In particular, substation load can easily outgrow the original unit 
target size. Instead of an immediate and costly upgrade, installation 
of energy storage can be more economical and flexible, and is therefore 
finding favor with utilities. The first application in the U.S. was 
sponsored by the Department of Energy and American Electric Power in 
2006 at a substation in West Virginia. The substation had been reaching 
its capacity limit and an upgrade was needed quickly to handle the 
overload during peak periods. Instead, energy storage was installed, so 
that energy is stored at night when the substation is not stressed and 
electricity is less expensive, and then released over a 6-hour period 
during peak load times. The system, using a sodium sulfur battery, has 
performed well and installation of storage will defer substation 
upgrades by 5 to 6 years. Seven more megawatts have since been deployed 
in similar installations at several utilities. Other utilities are 
planning to test flow batteries or lead-carbon batteries in efforts to 
defer substation upgrades.
    While energy storage is important for reliability and efficiency of 
the grid, it is expected to become increasingly important for 
complementing and buffering increasing amounts of variable generation. 
Variability of wind and solar generation comes in three different time 
scales. Short term fluctuations of seconds or minutes are similar to 
the fluctuations created by load variability, and these fluctuations 
can be handled effectively by fast storage facilities placed on the 
grid for frequency regulation. Ramping over the course of hours--as 
sometimes occurs with wind generation--is an important issue for 
utilities, and energy storage can be used to address this challenge. 
With energy storage equivalent to a one hour reserve, the number of gas 
turbines required for ramp control could be reduced, thereby improving 
the economics of wind energy generation.
    Another challenge results from the wind patterns that occur in 
areas where strong nighttime winds are common. Because night load is 
small when compared to daytime load, in such a scenario renewable 
resources can have a larger share of the generation mix during the 
night than during the day, resulting in periods when the value of 
continued generation of wind energy is challenged. In West Texas, for 
example, over nine hundred 15 minute intervals of negative pricing 
occurred during one month in 2008, and a number of wind developers in 
the area are beginning to realize that energy storage might lead to 
economic advantages and better utilization of wind energy.
    Although interest is increasing, the United States has only a few 
megawatt-sized demonstrations of storage for the integration of 
renewable resources. In Japan, by contrast, a 34 megawatt/7 hour 
sodium-sulfur storage facility has been constructed in conjunction with 
a 51 megawatt wind farm. All excess night time generation is absorbed 
by the battery, resulting in completely dispatchable wind power during 
the day. While Japan encourages construction of energy storage 
associated directly with wind development, storage in the United States 
is viewed as a grid requirement which might be placed anywhere within a 
region. One hundred megawatt battery farms have been proposed 
domestically, but none has yet been constructed. An alternative 
approach which has been suggested is the introduction of community 
energy storage. Relatively small storage units of some 25 kilowatts 
would serve a cluster of 4-to-5 residences to provide emergency backup 
or to serve as a platform for installed photovoltaics. Individual units 
would also be aggregated into a centrally dispatchable fleet. This 
would provide the utility with a sizable resource for ramping, spinning 
or stand-by reserve, or other ancillary services.
    For yet larger amounts of energy, compressed air energy storage 
(CAES) can be used. For this technology, air is compressed off peak and 
stored in salt domes, man made caverns, or deep aquifers. When extra 
energy is required during peak periods, air is released and fed 
directly into natural gas combustion turbines, eliminating the need for 
a compressor. While the current technology does not eliminate the need 
for fuel, it increases the efficiency of the turbines substantially, 
thereby reducing the carbon intensity of the generated electricity. 
There is also ongoing research into the use of adiabatic CAES 
technology, which does not require combustion of fossil fuels as the 
stored energy is converted back into electricity\9\. There are two CAES 
units in existence--one in Germany (290 megawatts) and one in Alabama 
(110 megawatts), and both facilities use salt domes formed by solution 
mining. CAES units could be used to take advantage of day-night power 
pricing arbitrage or as spinning reserve. Most proposed new plants 
intend to charge entirely with available wind energy, resulting in a 
very favorable carbon footprint. Besides producing electricity during 
peak periods, the plants can also provide system flexibility by 
absorbing excess energy whenever a wind increase occurs. This would 
eliminate the need for fossil fuel standby peaking plants.
---------------------------------------------------------------------------
    \9\ Bullough, Gatzen, Jakiel, Koller, Nowi, and Zunft. Advanced 
Adiabatic Compressed Air Energy Storage for the Integration of Wind 
Energy. EWEC 2004, London UK.
---------------------------------------------------------------------------
    Currently the best form of energy storage to handle really large 
quantities of energy is pumped hydro. Using reversible turbines, water 
is pumped into an upper reservoir during periods of inexpensive night 
power and released during periods of peak load to generate electricity. 
Some 20 gigawatts of pumped storage hydro plants are in use by 
utilities in the United States, which amounts to about 2.5 percent of 
the total U.S. electrical capacity. Europe has about 32 gigawatts of 
pumped hydro, or 10 percent of capacity, and Japan has as much as 15 
percent which results in a very resilient grid capable of absorbing 
substantial amounts of renewable energy\10\.
---------------------------------------------------------------------------
    \10\ 22% of generation capacity in Japan was attributed to 
renewable energy technologies during 2007, including hydropower 
(source: World Energy Outlook 2009, IEA).
---------------------------------------------------------------------------
    An impressive 440 megawatt pumped storage hydro plant in Missouri 
is scheduled for completion in 2010, and an additional 15 gigawatts of 
pumped hydro are either planned or in the permitting stage in the 
United States. Further new construction is hampered, however, by 
environmental concerns, the current price of cement and steel, and a 
very lengthy permitting process extending over many years.
 grid-scale energy storage demonstrations under the american recovery 
                          and reinvestment act
    The American Recovery and Reinvestment Act of 2009 provided 
unprecedented opportunity to accelerate the deployment of grid scale 
energy storage. On November 24, 2009, Secretary Chu announced the 
selection of 16 energy storage demonstration projects in conjunction 
with selection of Smart Grid demonstration projects\11\. The selected 
energy storage projects ranged over the entire spectrum of grid 
applications and will enhance grid reliability and efficiency, enable 
community energy storage options, and allow for greater use of 
renewable energy resources. Technologies include advanced batteries, 
flywheels, and compressed air energy storage. The selected awards total 
$185 million in Recovery Act funding but represent a total project 
value of $770 million based on substantial recipient cost sharing of 
between 50 to 80 percent of total project cost. The awards fall into 
five areas:
---------------------------------------------------------------------------
    \11\ Project list available at http://www.energy.gov/news2009/
documents2009/SG_Demo_Project_List_11.24.09.pdf

   Peak Reduction and Wind Farm Integration--three projects 
        were selected with a federal cost of $61 million. The selected 
        projects are intended to demonstrate the potential for battery 
        storage to improve asset utilization, allowing better use of 
        night time wind energy and grid integration of intermittent 
        resources, thus increasing their share of the generation mix. 
        These demonstrations in California and Texas will fund battery 
        facilities in the 8 to 25 megawatt scale, a magnitude larger 
        than current installations.
   Frequency Regulation Services for Stabilization of the Power 
        Load--one project was selected for an award of $24 million. 
        Electricity generation and load are never exactly synchronized. 
        To balance them, regional system operators slightly shift the 
        load frequency, by either increasing or decreasing power 
        production. Using fast storage devices for these adjustments is 
        twice as effective as using fossil fuel plants. A 20 megawatt 
        flywheel system to be located in Illinois is ten times larger 
        than existing demonstration units.
   Distributed Energy/Community Storage--five projects were 
        selected totaling $20 million, which will allow utilities to 
        experiment with smaller scale storage. Distributed energy 
        storage strengthens and buffers the grid and allows utilities 
        to deal effectively with load fluctuations or renewable 
        generation. Utilities can use storage to provide peaking power 
        during periods of high demand. The selected projects include a 
        3 megawatt installation in Pennsylvania to provide up to four 
        hours of peak shaving, backup storage for a photovoltaic system 
        in New Mexico, and aggregation of smaller systems into a 
        community energy storage effort in Michigan.
   Compressed Air Energy Storage (CAES)--two projects for 
        grants totaling $54 million have been selected. A 150 megawatt 
        CAES facility will be constructed in New York State using an 
        existing salt cavern. The plant will have sufficient storage to 
        allow full operation in support of the transmission system and 
        market needs and support some 3,800 megawatts of wind planned 
        in the area. A second CAES project will be sited in California. 
        The 300 megawatt plant, using a saline porous rock formation, 
        is situated next to a transmission line receiving power from an 
        expected 4,000 megawatts of new wind. Together, the two new 
        plants will double the world's CAES capacity and provide 
        invaluable experience for developing a fleet of such plants 
        throughout the U.S.
   Promising, emerging technologies--five projects were 
        selected for grants totaling $25 million. These new storage 
        technologies are in their initial stage of development. Funding 
        is intended to bring them to the prototype stage and ready for 
        the market place. Among the projects are a Lithium-Ion battery 
        with nanostructured polymer electrolyte, an iron-chromium based 
        flow battery, and an isothermal compressed air technology that 
        needs no extra fuel.

    Successful implementation of these Recovery Act projects will 
depend not only on the diligence of the utilities and entrepreneurs 
involved, but also on the readiness of public utility commissions and 
regional system operators to accept the new technologies. As the new 
projects develop, they will be carefully monitored and fully integrated 
into the existing energy storage program at the Department of Energy. 
Results will provide a basis for analytical studies and economic 
modeling on the role of storage in a more sustainable electric grid.
                         barriers to deployment
    Technological barriers to improved energy storage systems range 
from gaps in fundamental knowledge to operational limitations in 
current technology. The Department of Energy's Office of Science has 
the lead for fundamental research to develop new concepts and 
approaches for energy storage necessary to meet the long-term needs of 
our nation. Significant advances in our understanding of basic physical 
and chemical properties of electrical energy storage are needed, and 
recent developments in nanoscience are opening promising scientific 
avenues that require further exploration. Fundamental research provides 
continually developing insights which enable the pursuit of new energy 
storage technologies to address the operational weaknesses of today's 
technologies, including: rate of system charge and discharge, safety 
hazards from over-charging or discharging, environmental hazards from 
toxic materials, and short lifetimes.
    Widespread deployment of energy storage systems is impeded by the 
lack of uniform standards identifying operational parameters across 
applications. These and other issues, including additional regulatory 
and market barriers, have been identified previously\12\.
---------------------------------------------------------------------------
    \12\ Electric Advisory Committee report--Bottling Electricity: 
Storage as a Strategic Tool for Managing Variability and Capacity 
Concerns in the Modern Grid--December 2008. (http://www.oe.energy.gov/
DocumentsandMedia/final-energy-storage_12-16-08.pdf)
---------------------------------------------------------------------------
    The final barrier to deployment is economics. Current costs are too 
high to allow reasonable rates of return for investors in most 
applications, which can range from $1500/kW to $4500/kW depending on 
the technology. Although systems are beginning to enter the market at 
$2200-$2500/kW for high value applications, additional cost reduction 
is necessary to increase penetration; cost targets are application 
specific. Some cost reduction will be achieved through economies of 
scale as production numbers increase, but much will have to come from 
improved systems. Novel materials and components for energy storage 
applications, from batteries to flywheels, must be developed to enable 
long system lifetimes while using low cost base materials and 
inexpensive manufacturing processes.
                              conclusions
    Energy storage offers a diverse portfolio of technologies for a 
wide spectrum of applications. It allows us to optimize operation of 
the grid to make the most of our resources. Energy storage can:

   Provide power quality and reliability;
   Provide voltage and frequency regulation;
   Smooth integration of variable generation renewable energy 
        technologies into the grid;
   Allow better asset utilization for generation and 
        transmission;
   Provide relief to customers and utilities during peak load 
        periods; and
   Provide spinning reserve and energy management to make 
        renewable energy technologies more dispatchable.

    Our basic research is leading fundamental scientific advances 
needed for leadership in developing the next generation energy storage 
technologies, and advances in energy storage are an international 
interest. Besides the U.S., the European Union, Canada, Australia, and 
Japan have sizable storage efforts. China recently initiated a 
substantial storage program focused on flow batteries.
    Other emerging technologies have the potential of enhancing or 
augmenting storage. Smart grid concepts, for example, could link 
storage to demand response and enable aggregation of distributed 
storage. Plug-in hybrids and, perhaps eventuallybattery electric 
vehicles, add a whole new dimension by linking transportation to energy 
management. Utilities are increasingly becoming involved in energy 
storage, and states like California and New York continue to work with 
the Department in funding new projects. Recovery Act funding is 
supporting frequency regulation and wind integration projects on a 
commercial scale. The investment community is becoming interested in 
providing venture capital for companies developing new technologies and 
in funding ambitious large scale projects. Industry appears poised to 
move from single megawatt scale applications to utility grade projects 
in the hundreds of megawatts. The eventual goal is to make energy 
storage ubiquitous and thus to contribute to the development of a 
greener and more resilient grid.
    This concludes my statement. Thank you for the opportunity to 
testify, and I look forward to answering any questions you and your 
colleagues may have.

    The Chairman. Thank you very much.
    Chairman Wellinghoff, go right ahead.

    STATEMENT OF JON WELLINGHOFF, CHAIRMAN, FEDERAL ENERGY 
                     REGULATORY COMMISSION

    Mr. Wellinghoff. Thank you, Chairman Bingaman, Ranking 
Member Murkowski, and members of the committee. I appreciate 
the opportunity to speak here today.
    My testimony addresses regulatory and technical issues 
related to the integration of energy storage into the 
electricity grid. Mr. Chairman, I would request that my full 
testimony be entered into the record, and I will summarize it 
here.
    The Chairman. It will, and the full testimony of all 
witnesses will be included in the record.
    Mr. Wellinghoff. Thank you.
    The proliferation and adoption of renewable energy 
standards promise the Nation greater fuel diversity and lower 
emissions. But those goals cannot be achieved unless we also 
can ensure that new energy resources are integrated into the 
transmission system in a manner consistent with the reliable 
operation of the grid.
    Integrating large amounts of new locationally dispersed 
energy resources will require system operators to alter 
traditional assumptions and balance load and resources in a way 
that accounts for the variable nature for renewable energy 
resources such as wind and solar. Storage can provide energy 
when these renewable resources cannot do so directly. Storage 
can do this by providing what is called regulation service, 
which is an essential service that supports the reliable 
operation of the grid.
    The need for regulation service can dramatically increase 
the amount of variable renewable resources, and relevant to our 
discussion here today, it has been demonstrated that 
distributed resources, such as storage, providing regulation 
services are faster, generally cheaper, and have lower carbon 
footprint than the traditional power plant provided ancillary 
regulation services.
    To date, the most used bulk electricity storage technology 
has been pumped hydro electric technology. But other storage 
technologies, such as the closed-loop pumped storage, 
flywheels, and grid-scale batteries, could provide substantial 
value to the electric grid. Even the batteries onboard electric 
vehicles or hybrid plug-in electric vehicles can provide 
regulation service to the grid and serve as mobile distributed 
storage.
    With storage technologies at various stages of development, 
the commission already has had several opportunities to address 
grid-scale storage. For example, the commission recently 
accepted a proposal by the New York Independent System 
Operator, NYISO, to integrate energy storage devices into its 
day-ahead and real-time regulation services markets.
    In the Midwest ISO market, FERC currently is considering 
the proposal to better accommodate stored energy resources.
    In New England, in the New England ISO, they have recently 
sought to extend a pilot project that pays new storage 
technologies for regulation service based upon the speed of its 
response.
    In the mid-Atlantic ISO, PJM, it has allowed a storage 
device, which includes battery power from three electric cars, 
to enter into the frequency regulation market with no tariff or 
technical manual revisions.
    In California, the California Independent System Operator 
has identified storage as one technology solution to facilitate 
renewable integration.
    But I don't think we should stop there. We at FERC should 
look at industry-wide methods to remove regulatory barriers to 
the adoption of storage technology. In October, I provided 
Congress with the commission's strategic plan for fiscal years 
2009 through 2014, which it reflects my intention to pursue 
market reforms that will allow renewable resources to compete 
in jurisdictional markets.
    There are two main elements of this effort. First, the 
unique characteristics of storage technologies could require 
different market bidding parameters and telemetry requirements 
for providing energy and ancillary services than those 
established based on characteristics of traditional generators. 
Furthermore, the potential integration and synergies of 
renewable resources, storage, and demand response resources 
call for new ways to operate the electric system to take 
advantage of these resources for cost-effective, reliable, 
cleaner, and more efficiently produced electricity.
    But some transmission tariffs may not yet allow storage 
technologies to either enter wholesale markets in a manner 
comparable to generation or be used as a substitute or 
complement to transmission investment.
    Second, a key element of comparable tariff treatment is 
compensation. Some storage technologies appear to be able to 
provide near instantaneous response to regulation signals in a 
manner that is also more accurate than conventional resources, 
such as combustion turbine generators.
    Most existing tariffs or markets do not compensate 
resources for superior speed or accuracy of regulation 
response. But such payments may be appropriate as system 
operators gain experience with the capabilities of storage 
technologies.
    In conclusion, at FERC, our challenge as regulators is to 
remove barriers that impede the vast potential of energy 
storage to support our national energy goals. FERC can strive 
to ensure that regulatory barriers are removed, and 
compensation and tariff treatment are appropriately gauged to 
match the value of the services the storage can provide.
    Thank you. I would be happy to answer any questions.
    [The prepared statement of Mr. Wellinghoff follows:]

    Prepared Statement of Jon Wellinghoff, Chairman, Federal Energy 
                         Regulatory Commission
                            i. introduction
    Chairman Bingaman, Ranking Member Murkowski, and members of the 
Committee, thank you for the opportunity to speak here today. My name 
is Jon Wellinghoff, and I am the Chairman of the Federal Energy 
Regulatory Commission (FERC or Commission). My testimony addresses 
regulatory and technical issues related to the integration of energy 
storage into the electricity grid. I will begin my testimony by briefly 
describing the need for energy storage technology and then discuss some 
of the technical and regulatory issues that arise when integrating 
storage into the grid. I will conclude by discussing FERC's role in 
removing barriers to the development of grid-scale storage.
    With the proliferation and adoption of renewable energy standards, 
the nation is showing itself increasingly committed to achieving 
climate change goals and a future in which clean, affordable, 
sustainable, and reliable energy is the everyday norm. Thirty states 
have adopted policies requiring fuel diversity and encouraging a move 
to lower-emissions energy sources, and Congress is considering a 
national renewable energy portfolio standard.
    But greater fuel diversity and lower emissions cannot be achieved 
unless we ensure that the new energy resources are integrated into the 
transmission system in a manner consistent with reliable operation of 
the grid. With these concerns in mind, we at the Federal Energy 
Regulatory Commission are exploring our statutory authority to find 
ways to ensure that the reliable integration of these new energy 
resources reflects consumer decisions in the marketplace for 
electricity and meets policy goals.
    One critical strategy for integrating new energy resources involves 
matching load and resource variations through the intelligent 
deployment of demand response and other distributed resources such as 
energy storage.
                           ii. use of storage
    For the most part, electricity must be produced just in time to be 
consumed. Energy storage offers the ability to ``warehouse'' electrons 
for consumption later or to balance the variability of some renewable 
resources. It alters the traditional assumption of a linear electrical 
network, which assumes that centralized generators send electrons 
through transmission and distribution systems to instantaneously match 
need.
    Integrating large amounts of new, locationally-dispersed energy 
resources into the grid will require system operators to alter 
traditional assumptions and balance load and resources in a way that 
accounts for the variable nature of renewable energy resources such as 
wind and solar power. Storage of renewable power can provide energy 
when these renewable resources cannot do so directly. For example, 
storage can be charged or filled off-peak by renewable energy and later 
provide a source of power during peak demand periods or periods when 
the sun or wind is not available, either through direct injection of 
energy into the grid or by enabling demand response.
    And storage can do more than just balance the variable nature of 
solar and wind resources. The Energy Advisory Committee on Storage, 
convened by the Energy Policy Act of 2005, found that storage can: 
improve grid optimization for bulk power production via energy 
arbitrage; defer the need for investments in transmission and 
distribution infrastructure to meet peak loads; provide backup power to 
buildings; and provide ancillary services directly to the grid or 
market operators. My testimony will focus on the ability of storage to 
provide ancillary services, since that is the function most frequently 
addressed by FERC, and the function that may be of the most value to 
the integration of variable resources such as wind and solar.
    Ancillary services help support the reliable operation of the grid. 
One such ancillary service is regulation service, which resources like 
storage can efficiently provide. Regulation service is the micro load-
following service that increases generation supply when demand or load 
increases, and decreases supply when demand decreases. Regulation must 
be provided constantly, and it is one of the most expensive services on 
the grid.
    Ancillary services like regulation service are essential to keep 
the system balanced and prevent it from cascading into a blackout. The 
need for regulation services can dramatically increase as the amount of 
variable renewable resources is increased. And it turns out that local 
storage is among the best means to ensure we can reliably integrate 
renewable energy resources into the grid.
    Regulation service is usually provided by combustion turbine gas-
fired generators. But while such generators can generally follow the 
minute-by-minute variations in load to keep the system in overall 
balance, the frequency excursions that are the subject of Regulation 
service actually occur on even shorter time intervals. Indeed, it has 
been demonstrated that distributed resources such as storage are more 
efficient than central station fast response natural gas fired 
generators at matching load variations and providing ancillary services 
needed to ensure grid reliability.\1\ They are faster, generally 
cheaper, and have a lower carbon footprint than the traditional power-
plant-provided ancillary service.
---------------------------------------------------------------------------
    \1\ See, e.g., http://www.beaconpower.com/files/PNNL--Report--
Assessing--Value--Regulation--Resources--June%202008.pdf at 26 
(``Experiments also showed that an average 1 MW of flywheel regulation 
capacity can substitute for about 2 MW of the traditional regulation 
mix . . .'').
---------------------------------------------------------------------------
                       iii. storage technologies
    To date, the most used bulk electricity storage technology has been 
pumped storage hydroelectric technology. Presently, there are 24 pumped 
storage projects around the nation with an installed capacity of over 
19,500 MW. But new storage technologies are under development, and in 
some cases being deployed, that could provide substantial value to the 
electric grid. Building on experience with existing technology, closed-
loop pumped storage uses two reservoirs that are ``closed'' to natural 
aquatic ecosystems. Other than initial filling and occasional topping 
off to offset evaporation or leakage losses, no natural river or stream 
would be used. This allows operational flexibility not available with a 
traditional pumped storage hydropower system, which uses natural rivers 
and reservoirs and must regulate flow to avoid harming local 
ecosystems. Currently, the Commission has issued preliminary permits 
for pumped storage--both traditional and closed-loop--totaling over 
27,000 MW of capacity. Over one-quarter of this capacity is closed-
loop.
    A newer technology for providing storage for the electric grid is 
the flywheel, which works by accelerating a cylindrical assembly called 
a rotor (or flywheel) to a very high speed with low friction 
components, and maintaining the energy in the system as rotational 
energy. The energy is converted back by slowing down the flywheel. 
Flywheels have been successfully piloted in the U.S., and their speed 
is particularly useful for regulation service. For example, for the 
past year, ISO-NE has been conducting a pilot program to test how 
alternative technologies such as flywheels are able to provide 
regulation service.
    Another promising storage technology is the grid-scale battery, 
which works like a giant consumer electronics battery. The battery 
takes energy in, and then with some small conversion losses, releases 
it later. Batteries for MW-scale storage have had successful pilots 
domestically for several applications. Like flywheels, batteries can 
respond more quickly and accurately than traditional generators to 
signals to increase or decrease the injection of energy into the grid 
when load changes. They can respond for short or long (multi-hour) 
periods of time, depending on the size and the controls of the battery. 
They can thus provide a variety of ancillary services or serve to defer 
the need for alternative transmission or distribution line investments.
    The batteries onboard electric vehicles likewise can provide 
services to the grid. For purposes of this discussion, an electric 
vehicle is one that requires periodic re-charging of its propulsion 
battery from the electric grid. It may or may not also be a ``hybrid,'' 
additionally capable of re-charging with a fuel-driven generator or by 
other mechanical means.
    In the future, electric vehicles can provide ancillary services, 
like regulation service, to the grid and serve as mobile distributed 
storage. The evolving nature of electric vehicles' role and their 
market penetration curve create a unique set of challenges for 
integrating electric vehicles into electric markets as a grid service 
provider.
    Although you may not think that a single electric vehicle could be 
providing an important ancillary service to the grid, researchers at 
the University of Delaware proved just that with a car that they parked 
outside of FERC headquarters that was providing regulation service to 
the PJM grid. More to the point here, the same researchers believe 
that, using this technology, parked electric cars connected and 
aggregated in large numbers in places like parking garages could be 
made available as energy storage to support grid operations, including 
balancing the variability of renewable resources such as wind and 
solar.
    Each of these storage technologies--closed-loop pump storage, 
flywheels, batteries, and electric vehicles--are at various stages of 
development. Flywheels and chemical batteries have recently achieved 
technology maturity, and are well on the road to full scale 
implementation both here and abroad. Unlike flywheels and batteries, 
electric vehicles will not be commercially available for another year 
or two. Though there are several thousand electric vehicles on the road 
in the U.S. and abroad today, mass commercialization is expected to 
begin in 2010, and the U.S. has set a goal of having at least 1 million 
on the road by 2015.
                 iv. tariff activities already underway
    With storage technologies at various stages of deployment, the 
Commission already has had several opportunities to address grid-scale 
storage in regions operated by regional transmission organization or 
independent system operators, or RTOs and ISOs.
    The Commission recently accepted a proposal by the New York 
Independent System Operator (NYISO) to integrate energy storage devices 
into its day-ahead and real-time regulation service markets. (127 FERC 
Sec.  61,135). There we recognized that energy storage devices can help 
integrate wind resources, and that their integration in the regulation 
service market should help NYISO meet or exceed NERC control 
performance criteria. The Commission specifically pointed to the very 
fast response times of storage resources as a benefit to NYISO.
    FERC currently is considering a proposal to better accommodate 
stored energy resources in the Midwest ISO markets. The Midwest ISO 
tariff revisions would allow short-term energy storage devices to 
enter, in a limited fashion, the frequency regulation market.
    In the Northeast, ISO New England (ISO-NE) has recently sought to 
extend a pilot project for testing the ability of different storage 
technologies to participate in the regulation market. The pilot pays 
storage based on the speed of its response.
    In the Mid-Atlantic, PJM Interconnection (PJM) has allowed a 
storage device to enter into the frequency regulation market with no 
tariff or technical manual revisions. AES installed a 1 MW battery at 
PJM headquarters to provide frequency regulation. PJM bundles that 
battery with the batteries of three electric cars, each of which 
purchase electricity at retail rates. The batteries then sell into the 
frequency regulation market. PJM has stated that it expects larger 
batteries to be able to enter other ancillary service markets or energy 
markets without significant tariff revisions.
    Other areas of the country are examining the potential of demand 
response and other distributed resources to reliably integrate 
renewable energy resources into the grid. For example, this summer, the 
CAISO issued a white paper that identified storage as one technology 
solution to facilitate renewable integration.
                            v. ferc efforts
    Beyond the case-specific applications just described, we at FERC 
are already looking at methods to remove regulatory barriers to the 
adoption of storage technology. In October, I provided Congress with 
the Commission's Strategic Plan for FY2009-2014 and committed to take 
additional steps to address possible barriers to development of 
renewable resources, including the implementation of tools like storage 
to support reliable integration of renewable resources. And earlier 
this year, the Commission adopted a policy statement on the smart grid, 
which included storage as a key functionality of the smart grid. It is 
the Commission's expectation that this policy statement, which seeks 
greater interoperability and functionality of smart grid technologies 
through the adoption of standards, will help accelerate the development 
and promulgation of newer storage technologies.
    And FERC will continue to monitor the development of storage 
technologies to ensure that they receive tariff treatment comparable to 
other resources and receive compensation commensurate with the value of 
the services they provide to wholesale markets and the grid.
    Regarding compensation, some storage technologies appear able to 
provide a nearly instantaneous response to regulation signals, in a 
manner that is also more accurate than conventional resources. These 
two characteristics can reduce the size, and hence overall expense, of 
the regulation market. Most existing tariffs or markets do not 
compensate resources for superior speed or accuracy of regulation 
response, but such payment may be appropriate in the future as system 
operators gain experience with the capabilities of storage 
technologies. In the meantime however, the unique characteristics of 
storage technologies could require different market bidding parameters 
and telemetry requirements for providing energy and ancillary services 
than those established based on the characteristics of traditional 
generators. Furthermore, the potential interaction and synergies of 
renewable resources, storage and demand response resources call for new 
ways to operate the electric system to take advantage of these 
resources for cost-effective, reliable, cleaner and more efficiently 
produced electricity. This would ensure that consumers have access to 
the lowest cost resources needed to provide electricity service.
    As for transmission tariffs, some tariffs may not yet allow storage 
technologies to enter wholesale markets in a manner comparable to 
generation or to use storage as a substitute, or complement, to 
transmission investment. FERC will monitor these developments and, when 
appropriate, ensure best practices for development and use of storage 
for all of its various purposes.
                             vi. conclusion
    In conclusion, at FERC, our challenge as regulators is to remove 
barriers that impede the vast potential of energy storage to support 
our national energy goals. With the appropriate compensation and tariff 
treatment, storage resources will have the opportunity to proliferate. 
While energy storage offers ample benefits just in improving grid 
operation and efficiency, it can also make integration of renewable 
energy resources not only reliable, but efficient and cost-effective as 
well. Fully opening wholesale electric markets to resources like 
storage will make it easier to meet renewable energy standards by 
efficiently matching renewable energy resources and demand resources 
with distributed storage resources to smooth variations in resource 
output. In this way, these resources can complement each other to 
ensure a stable and reliable grid. FERC can strive to ensure that 
regulatory barriers are removed and compensation and tariff treatment 
are appropriately gauged to match the value of the services that 
storage provides.

    The Chairman. Thank you both very much.
    Let me start with a few questions. Dr. Koonin, I should 
understand this subject better to be asking questions about it. 
But at any rate, I remember a couple of years ago getting a 
briefing at Los Alamos National Laboratory on the issue of the 
research, basic research they were doing on the subject of 
capacitors and the belief that at least the folks briefing me 
had that capacitors have substantial capability to help us with 
storage issues in the future.
    I don't know if you have a view on that subject, if that is 
something you are trying to support, that type of research in 
the department?
    Mr. Koonin. We are supporting work on super and ultra 
capacitors. Capacitors are, in many ways, complementary to 
batteries. Like batteries, you can move the energy in and out 
very quickly, capacitors even more quickly than batteries. So, 
they are useful for delivering energy in a short time, a surge, 
if you like.
    Their drawback is that we currently can't store very much 
energy in them. So, in vehicles, for example, they are fine for 
boosting power when you need it, but not for long-term power 
storage and quite complementary to batteries.
    The Chairman. OK. Let me ask an obvious question. You 
indicated that by virtue of the funding that you have in the 
Recovery Act, you have been able to increase the expenditures 
of the Department of Energy on storage by 50 times. What 
happens now that the Recovery Act is going to be over with?
    I mean, is this something that we can maintain a focus on 
and maintain funding for, this kind of research and development 
in this area, or does this fall back to a second-tier pursuit?
    Mr. Koonin. You know, the array of projects that we have 
lined up right now, and hopefully will begin delivering on 
soon, I think nicely spans an array of technologies and 
applications, and we need to get experience in operating these, 
deploying them, understanding how to use them. They need to be 
well instrumented so that we collect appropriate data to inform 
our path going forward.
    Then it really becomes a question of can we have gotten far 
enough down the road so that it becomes attractive for a 
utility to pick it up, and we move toward full-scale commercial 
deployment? So I am a bit agnostic at the moment as to how much 
more demonstration we need to do. I would like to see how this 
first round goes.
    The Chairman. OK. I know the subject of our hearing is 
grid-scale energy storage, but one of the issues that we have 
dealt with now for many years is the whole issue of centralized 
generation versus distributed generation. It would seem to me 
that there is an obvious analogy between centralized storage 
and distributed storage. I don't know either you, Chairman 
Wellinghoff, or Dr. Koonin, if you have thought through which 
of these focuses makes the most sense?
    Mr. Wellinghoff. Mr. Chairman, if I may? I think we 
certainly need to look at the economics of both. When you teed 
up this hearing as grid-scale storage, I tell you that I gave 
it a very broad definition. I believe that distributed storage 
can be grid-scale in the sense that things like plug-in hybrid 
and plug-in electric vehicles I think can significantly 
contribute to storage on the grid, as well as other 
technologies.
    There are companies out there, for example, right now that 
are doing significant ice storage that can be used to shave 
peaks and effectively store energy from off-peak times and use 
that cooling to cool our homes and businesses in the Southwest 
and other areas of the country.
    But that doesn't mean that we should ignore in any way 
larger centralized storage. Like pumped hydro, as Senator 
Murkowski indicated, is a very not only viable, but very proven 
storage technology that is here today. Although we need to 
understand, again, relative economics and look at relative 
costs and benefits.
    For example, one statistic I heard the other day is that 
there is more storage available in all the electric hot water 
heaters in the United States than there is pumped hydro storage 
currently. So I thought that was a pretty interesting 
statistic.
    So, again, it is a matter of looking at cost benefits and 
relative economics and determining what are the most viable 
things to start with.
    The Chairman. Dr. Koonin, did you have a comment on that?
    Mr. Koonin. Yes, I do. You know, there are sometimes 
unanticipated systems issues that are well worth being aware 
of, and let me just take the plug-in hybrid example that looks 
so attractive as we try to merge transportation and power.
    I would just add a couple of cautions that we probably need 
to think through as we go down that road. One is what is the 
impact of the grid ebb and flow into the battery in terms of 
its battery performance and lifetime beyond what you would get 
in an ordinary drive cycle?
    The second is if we are talking battery vehicles, we 
shouldn't leave the battery vehicles high and dry. If you drain 
my battery during the afternoon to manage the peak, I may have 
a hard time getting home late in the afternoon.
    Then, finally, if the net effect of integration of PHEVs 
into the grid is to turn liquid fuel into electricity for the 
grid, that would be, I think, quite foolish because we have, in 
fact, worked very hard to get oil out of the power sector over 
the last 30 years.
    So, these are all interesting systems management issues 
that we need to be thinking about as we look to distributed 
storage, for example, and PHEVs.
    The Chairman. Thank you very much.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Dr. Koonin, I have been expressing concern about our 
reliance as a Nation on other countries, particularly China, 
with regards to the rare earth minerals and recognizing that it 
is these rare earth minerals that we need for purposes of our 
battery technologies, for the magnets that are used in the 
electric motors.
    Are there alternatives that currently exist to utilizing 
the rare earth minerals for batteries and for the permanent 
magnets?
    Mr. Koonin. Yes. So the rare earths--I agree that we don't 
want to become addicted to imported rare earths in the same way 
that we have for oil. For the batteries, the rare earths are 
not an issue. Some of the precious metals or transition metals 
are an issue, but not for the rare earths. The rare earths----
    Senator Murkowski. An issue for the batteries is----
    Mr. Koonin. The transition metals are. But the rare earths 
are not. The rare earths are an issue for electric motor 
technologies. There, you know, I have a great faith both in 
supply curves and in technology to help us around that problem. 
There are resources for rare earths in the U.S. They are not 
quite as economically attractive as what we have in China, but 
with sufficient impetus, we could be tapping into those 
resources.
    Second, the technology may be able to come into help with 
the rare earths. We don't need necessarily, for example, bulk 
rare earth materials, but we might be able to get by with just 
surface coatings on our----
    Senator Murkowski. So we are looking to these alternatives 
to----
    Mr. Koonin. We are starting to look very seriously at 
those.
    Senator Murkowski. Let me ask you, Commissioner 
Wellinghoff, you have mentioned that it is important to remove 
the regulatory barriers. Whether it is regulatory barriers or 
just regulatory uncertainty, how much does this hinder the 
development of energy storage technologies? How big of a 
contributing factor is that to what we are dealing with right 
now?
    Mr. Wellinghoff. Certainly to the extent that these 
technologies want to scale and start into commercial operation, 
they are going to want to know that there is a revenue stream 
to support them. So, for example, flywheel storage technology 
is currently being paid under a tariff in New York, which is a 
good thing.
    Ultimately, they have some certainty that they know they 
can provide regulation service into the New York grid and get a 
sufficient revenue stream to support a business model. In the 
PJM area, right now battery technology is getting paid to 
support the grid, and again, they know under a tariff they have 
a revenue stream to do that.
    So what we are trying to do is encourage the ISOs and RTOs 
that are under our jurisdiction to formulate these tariffs that 
will compensate storage technologies in a way that they can 
develop a business model that can be sustainable that 
ultimately can grow that business. I think it is very important 
to have that regulatory certainty to make sure that those 
industries will grow.
    Senator Murkowski. When we were having the discussion here 
in the committee with our energy bill and the discussion about 
renewable electricity standard, you came before us and 
testified in support of a 25 percent RES. I understand that the 
FERC is underway with a study that looks to determine exactly 
how effective the grid is in its ability to integrate renewable 
resources. Can you give me any update or status on that study 
and what we might expect?
    You have spoken to this in the past, but do we know at this 
point in time what percentage of renewables we believe that the 
grid, as it exists today, can reasonably accommodate?
    Mr. Wellinghoff. I don't think we have that number. I can't 
give you an update, per se, from our study. I hope that our 
results will be out in March or April.
    I will tell you that I got a briefing yesterday, however, 
on a very interesting study that is funded by DOE through NREL 
called EWITS that did look at a 20 percent renewable level in 
the grid and looked at how that would be accommodated. They 
seemed to believe that it could be accommodated.
    We would like to validate that with the study that we are 
doing at FERC looking at regulation and frequency response in 
the grid and how that may be balanced. But these are things 
that I think we need to look at.
    I had an opportunity to speak to a number of European 
legislators this last weekend, and they are looking at levels 
of renewables in their grid of 15 to 20 percent or more and are 
managing it currently in places like Spain, where they 
actually--at times of the day actually have over 50 percent of 
their total load supplied by wind energy.
    So we need to learn from these examples. But storage is 
going to play a very critical role there because, ultimately, 
the storage will be necessary to balance out the variations 
that we see if we are going to be meeting these higher levels 
of 20, 25 percent and more.
    The Chairman. Senator Wyden.
    Senator Wyden. Thank you, Mr. Chairman.
    Thank you both.
    Dr. Koonin, I want to make sure I understand what you were 
saying to Chairman Bingaman because your answer, I will tell 
you, troubles me. He asked you what is going to happen next, 
and you essentially said our position is wait and see.
    I mean, wait and see is not the kind of activist strategy 
that I think this country needs to tap the full potential for 
these energy storage technologies. I don't see this as 
primarily a question of just spending money. I am certainly not 
advocating going out and spending money on dubious ideas. But I 
do want to see a game plan for tapping the full potential.
    If what happens now is your agency, in effect, waits to see 
what happens, as I think you were saying to Chairman Bingaman, 
we could be waiting around for years and years and have a lot 
of foot-dragging when we really want a research game plan and 
activist strategy for tapping the full potential.
    I don't think you would do that in the physics area, which 
I know you know lots about as well. So let me give you a chance 
to go at this area once again in terms of how we are actually 
going to get the kind of activist research plan that the 
country needs.
    Mr. Koonin. So what I have come to understand about energy 
after 5 or 6 years' worth of experience is that what we really 
need are well-chosen, consistent policies that move 
aggressively toward the goals that we are after. In science, 
you always look to assess what you have learned in order to let 
you move confidently and quickly to the next steps.
    So I think we need to balance. I agree that there is an 
urgency, but we also need to make sure that we are making the 
right steps, the right technology choices, making the 
technology accessible for the utilities in the sense of giving 
them confidence to deploy.
    I would hope that the round that we have got underway will 
do that and let us see what happens. I understand the urgency, 
but at the same time, we must learn from what we are doing.
    Senator Wyden. I am all for learning. It is just I see a 
lot of ``wait and see'' here, and what I want is something that 
is much more aggressive because I think waiting and seeing is a 
prescription in this town for a lot more delay, and I don't 
think the country can afford it.
    Can you get us a document that describes what your research 
blueprint is and incorporates your ideas about trying to 
evaluate these projects? When could we see that?
    Mr. Koonin. I would be happy to get that for you. We can 
certainly do that as quickly as we can. I would be happy to 
get----
    Senator Wyden. Months? Is that in 60 days?
    Mr. Koonin. Yes. We can do that.
    Senator Wyden. Great. OK. Your research blueprint for 
tapping the full potential of storage technology, and that is 
very helpful.
    Mr. Koonin. Very good.
    Senator Wyden. One question for you, Mr. Wellinghoff. You 
essentially described the agency getting into it, in effect, 
when others bring it to you, these independent--the ISOs. We 
looked at the strategic plan, which essentially describes 
FERC's priorities, and energy storage is not mentioned in the 
strategic plan. Can you all go back and amend the strategic 
plan and lay out for us what the priorities would be for the 
agency?
    Mr. Wellinghoff. We would be happy to go through the 
strategic plan and probably point out for you aspects of it 
that relate to storage that may not specifically say the word 
``storage.'' But certainly to the extent that we are, in that 
strategic plan, I think very clear about trying to integrate 
resources on the demand side into markets, storage is a big 
part of that, in my mind.
    So it wasn't any intent to leave out storage from that 
strategic plan. It was subsumed by things like demand-side 
resources, which would include storage, energy efficiency, 
demand response, photovoltaics, distributed generation. All 
those things we need to figure out how to better integrate into 
the grid, how to make sure that they are paid their economic 
value for being integrated in the grid, and it was all intended 
as part of our strategic plan.
    Senator Wyden. Then have staff fill us in on the parts of 
the document that show us that this is going to be a major 
priority for the agency because that is what I----
    Mr. Wellinghoff. We will do that. We will give you a 
response that shows that.
    Senator Wyden. We will look forward to working with both of 
you.
    Thank you, Mr. Chairman.
    Mr. Wellinghoff. Be happy to do that, Senator.
    The Chairman. Thank you.
    Senator Corker.
    Senator Corker. Mr. Chairman, thank you. Thank you for this 
hearing and the testimony of our witnesses.
    My hometown community benefits right now from hydro 
storage, and I look forward to the day in the future when the 
batteries that are inside vehicles, which also are being 
produced in Tennessee, I might add, are used as storage at 
night. Base load power being used at night, lesser expensive, 
whether it is nuclear or other, nuclear power ultimately 
powering vehicles and, at the same time, during the day using 
that storage to lessen the load on the grid. That is an 
exciting development that I hope happens, and I appreciate my 
colleagues pursuing that.
    I do want to ask Chairman Wellinghoff about a related grid 
issue. I offered an amendment during our energy debate that 
wanted to make sure that when we make these allocations of the 
cost of the grid, that people that are actually having to pay 
for that receive a benefit, and it did not go beyond that.
    The original bill did not define benefits from the 
standpoint of allocation. I offered an amendment that passed--
Senator Wyden and others supported it, it was bipartisan--that 
made sure we were talking about reliability and economic 
benefits, which doesn't really move beyond existing policy as 
it relates to the grid.
    In the event we do want to shift costs for the grid to 
people who are not receiving a benefit, it seems to me that 
those of us in Congress should decide that and not FERC. I know 
there has been comments about the fact that, well, something 
happening some other place because it is environmentally good 
benefits mankind. So everybody should pay for it. But I think 
all of us are wanting to make sure that our constituents are 
paying for the power that they are receiving.
    I am not anti-renewable and very excited about many of the 
developments that are taking place in our country. I know 
Governors from Senator Shaheen's area and Governors from 
Senator Wyden's area were very concerned that the bill that was 
before us didn't have those defined elements, and therefore, I 
added it in, which, again, is just current practice.
    I wanted to ask the chairman, since you have had some 
choice comments about that in other settings, I wondered if you 
had some concern about your ability to implement current policy 
as it relates to that?
    Mr. Wellinghoff. We have concern about the issue of 
precisely quantifying benefits because we have to be sure 
that--and I certainly agree with you that with respect to 
allocation of costs and transmission that we should, in fact, 
do that in a way that somehow fairly spreads the benefits and 
costs.
    Senator Corker. You mean fairly allocate when you say 
``spread?''
    Mr. Wellinghoff. Yes.
    Senator Corker. That word concerns me. I assume you mean 
making sure that those who are receiving benefit pay for it. Is 
that what you are saying?
    Mr. Wellinghoff. Yes, I am.
    Senator Corker. OK.
    Mr. Wellinghoff. However, my concern, I guess, is precisely 
quantifying it, in that your problem is you can have benefits 
today for one set of customers or one set of transmission 
customers or rate payers and those benefits will change next 
year because the nature of the grid will change. So the problem 
is it is a moving target. If we are required to precisely 
quantify it, at one point in time, we are going to be wrong.
    So that is my main concern, I think, Senator, with your----
    Senator Corker. I thought you would say that, and I wanted 
you to know my amendment did not require you to be precise. As 
a matter of fact, it was current--the 7th Circuit had a ruling 
recently----
    Mr. Wellinghoff. Right.
    Senator Corker [continuing]. That said you had, and they 
said we do not suggest the commission has to calculate benefits 
to the last penny. You seemed to like that because your 
response was that it leaves the door open for you to be able to 
analyze who benefits from that. Nothing about our amendment 
said it had to be precise.
    As a matter of fact, I would say it is very much in keeping 
with the 7th Circuit ruling that you seem to support. So I just 
want to say that your responses to the 7th Circuit seemed to 
indicate you felt like you could, to a reasonable degree, 
determine whether people were benefiting from certain grid 
expenditures or not. Is that true?
    Mr. Wellinghoff. Yes. That is correct. I did not read your 
amendment to be necessarily consistent with the 7th Circuit, 
and if you are indicating that it is, that is, I think, 
something that the 7th Circuit decision does provide us that 
flexibility, I think, because it does very specifically say 
that quantification of benefits does not have to be precise. It 
gives quite a range in that 7th Circuit decision.
    Senator Corker. I think what we would like to do, and the 
reason I am bringing this up--I know it is something that 
Senator Bingaman and I and others will be working on at some 
point before it goes to the floor. I think our concern is that 
having some grid going to some remote area in North Dakota, 
which is going to have no benefit for anybody up here, that we 
end up, our constituents end up paying for that. I think that 
is what we are trying to keep from happening.
    Mr. Wellinghoff. Certainly.
    Senator Corker. What I would love to do is work with you to 
see if there is a way that we might end up with some language 
that would keep it that way. I don't want folks in Tennessee 
paying for some transmission grid to some mesa someplace that 
has no benefit.
    I will say in closing. I know my time is up, and the 
chairman is always generous. There have been comments made by 
associates and folks who have been concerned about this 
amendment that we should know that, look, this benefits all of 
mankind, and everybody should pay for this.
    I don't think that is an appropriate way of looking at 
reliability and economic benefit, and I just hope that you can 
work with us to form more closely if our amendment is not--if 
you can't work with that, I don't know why you couldn't because 
the 7th Circuit ruling that you applauded just said the same 
thing.
    But I would love to work with you and Chairman Bingaman and 
others who might want to work on this to ensure that we don't 
spread these costs around to mankind, but that people actually 
are receiving a benefit pay for it.
    Mr. Wellinghoff. Senator, I would be happy to do that. 
Thank you very much.
    Senator Corker. Great. Thank you.
    The Chairman. Senator Udall.
    Senator Udall. Thank you, Mr. Chairman.
    Welcome again. Let me start, Chairman Wellinghoff, with you 
and build some specificity into the line of questioning that 
Senator Corker just directed your way.
    Cost structures for storage activities--are there any other 
cost structures that you think should be considered that would 
provide storage facilities with compensation for all or at 
least several of the different values they add to the grid?
    Mr. Wellinghoff. Senator Udall, primarily in my testimony, 
I was referring to cost compensation in organized wholesale 
markets. There certainly needs to be some type of cost 
structures that would primarily be in the purview of State 
regulatory commissions in those areas where we don't have 
organized wholesale markets with respect to those utilities in 
those jurisdictions incorporating storage into their 
operations.
    So that would be something that individual utilities and 
State commissions would have to work through as to how to 
recover costs for those storage investments, whether it be 
through expensing or rate basing those costs. But it would, 
again, primarily be within the purview of the State 
jurisdictions.
    Senator Udall. Thank you for that insight.
    I wanted to pursue this line of questioning. As I 
understand, interruptions to our power systems cost us about 
$80 billion annually. They don't have to last for a very long 
time. Two-thirds of the losses come from interruptions that are 
less than 5 minutes. That is astounding to me, and this seems 
to be a real opportunity for storage because storage can help 
reduce those outages, increases productivity, and saves 
consumers money because those replacement electrons are very, 
very expensive.
    Could each of you talk about the source of those outages 
and to what extent storage could help alleviate them? Let me 
start with you, Chairman.
    Mr. Wellinghoff. My understanding is that the large 
majority of those outages--and I don't have a specific 
percentage figure, but it is probably much higher than 50 
percent. It may be as high as 80 percent of those outages are 
at the distribution level.
    So to the extent that we can incorporate in storage and 
other distributed resources at the distribution level--
distributed generation, photovoltaics, et cetera--and certainly 
storage, we can probably reduce substantially the amount of 
those outages. But again, those are going to be primarily 
within the purview of State commissions to work with State 
utilities at the distribution level to build up those systems, 
make those grids at the distribution level smarter and also 
more responsive with incorporating storage.
    Mr. Koonin. I am not enough of an expert to comment on the 
source of the grid outages, but I can just note that extreme 
distributed storage at the household level, for example, at 
current battery costs seems quite feasible. At $500 a kilowatt 
hour for batteries, as we have with lithium ion batteries, for 
example, you could easily store 10 kilowatt hours in a house 
and use that to handle outages as long as 10 or 20 hours.
    So I think uninterruptible power supply seems perfectively 
feasible if outages became a significant problem.
    Senator Udall. Would you foresee a future where utilities, 
other power providers would help consumers actually put those 
batteries onsite because of the advantage you just referred to?
    Mr. Koonin. I think if outages became a significant 
problem, you could imagine broad programs to do that. Again, 
the plug-in hybrid battery, say, of order of 17 kilowatt hours 
or so, 10 kilowatt hours, would be such a device that you could 
use in an emergency when the outage occurred.
    Senator Udall. Chairman Wellinghoff, let me turn back to 
you in the remaining time I have. In my initial remarks, I 
mentioned I had been surprised in some of the briefings that I 
have held to find that although that--and I should clarify what 
I said earlier, technology still has a long ways to go, that 
some of the challenges in the regulatory space are almost equal 
to those in the technological space.
    Is there anything else FERC can do? More hearings or 
reports to help us identify these regulatory barriers and 
identify solutions along with them?
    Mr. Wellinghoff. We do have the opportunity to hold 
technical conferences, which we do periodically. We have had a 
number of them and would continue to do so. We are continually 
looking at what we need to do in these organized wholesale 
markets to change tariffs and to change rules, market rules in 
ways that will provide a level playing field for these kinds of 
technologies because, traditionally, these markets have been 
set up for central generation.
    What we want to do is ensure that those markets give equal 
consideration to and, in fact, higher consideration to more 
valuable services like storage. So one thing is certainly 
holding the technical conference, which we have done in the 
past, with respect to storage specifically. But we want to 
continue to do this and want to continue to do everything we 
can to help integrate storage into the grid.
    Senator Udall. I would urge you to do so. I wonder if there 
wouldn't be a day where we, as we now today talk about 
generation, transmission, and distribution, GTD, that ``S'' for 
``storage'' would not be on a level playing field as we 
consider the opportunity there. Or whether it would be 
generation-storage, distribution-storage, transmission-storage 
as how we think about them and then how we manage and how we--
--
    Mr. Wellinghoff. The storage does have a role to play in 
all of those aspects.
    Senator Udall. In all of those.
    Mr. Wellinghoff. That is true.
    Senator Udall. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman. Thank you for 
holding this hearing.
    My view is that as we think about our energy future, one of 
the areas that has not gotten as much attention as it should is 
the area of energy efficiency, and obviously, storage is a big 
part of that. If we look at what is the fastest, cheapest way 
to deal with our energy future, it is obviously energy 
efficiency and conservation and energy storage, as you all 
point out.
    I think this is a question for you, Mr. Koonin. Can you 
tell us how--what other countries are doing in the development 
of energy storage technologies and how we currently rank 
compared to other countries in this area?
    Mr. Koonin. We are, I think, certainly the leader in 
storage concepts among the nations. You see a large deployment 
in other countries of pumped hydro, but if you look at some of 
the more advanced concepts, this country is significantly 
ahead. The Recovery Act, which I referred to before, the 
funding has helped significantly in mounting those 
demonstrations. For example, in compressed air storage, the 
projects that we have defined will double the world's capacity 
and experience in compressed air storage.
    China, one naturally looks to these days as a sense of what 
the rest of the world is doing. They have a $100 million 
storage effort that is focused on both research and deployment, 
largely on flow batteries, and there is a potential there, I 
think, for an interesting collaboration with the Chinese on 
that technology.
    Other countries not so active in the advanced concepts. So 
we are, with the stimulus money, significantly ahead of other 
folks.
    Senator Shaheen. What about Europe? You didn't mention 
Europe.
    Mr. Koonin. A lot of pumped hydro in Europe right now. Some 
experience with flow batteries and other technologies, but I 
think we are pushing harder than the Europeans.
    Senator Shaheen. You talked about the jumpstart that the 
Recovery Act has given to some of those initiatives. Is there 
more that we ought to be doing? I appreciated the exchange with 
Senator Wyden because I think having a plan is always the 
beginning of anything that we ought to be doing.
    But are there other things that we should do as a Congress 
and as an administration to incentivize these new technologies 
and encourage their development?
    Mr. Koonin. Again, I would distinguish between research and 
deployment. I think deployment is, in the end, where it 
happens, and that very much depends upon how Congress sets the 
playing field or the incentives that we were talking about.
    You could imagine--I will invent. I know little about 
regulation. But you could imagine an extra credit for putting 
energy that has been stored for some period of time into the 
grid rather than simply giving tax credits for the capital. 
Again, you would have to define that carefully to make sure you 
got the results you wanted. But you could imagine something 
like that.
    On the research side, I would like to see more invested in 
the basic material science. So much of what we need to do in 
energy not only for electrical storage, but many other things 
has got to do with materials, our ability to characterize, 
synthesize, predict the properties of materials has grown 
greatly. There are so many materials to explore out there. I 
would like to see us doing more of that as well.
    Senator Shaheen. Thank you.
    Apropos your mentioning regulations, Chairman Wellinghoff, 
as we are thinking about a new grid and upgrading the Nation's 
grid, one of the concerns that I have had, and I think many of 
us in the Northeast have had, is that we are looking at the 
potential for building a new grid or upgrading our current grid 
in a way that could bring us solar and wind energy from the 
West and that that will have a negative impact on the potential 
perhaps to develop some of those resources, new energy 
resources in the Northeast--offshore wind, other issues.
    What should we be thinking about as we are thinking about 
upgrading our grid? Also, how do we look at the potential for 
distributed energy, and does it make sense, if that is our 
future, to develop a whole new transmission grid that is not 
going to address that?
    Mr. Wellinghoff. Senator, I think we ultimately need to 
look again at sort of like what I was talking to Senator Corker 
about costs and benefits. Certainly, there may be substantial 
benefits to the local economy by developing distributed 
resources and developing local renewable resources, and I think 
the States and the regions certainly should take that as a 
priority.
    But ultimately, what is going to get developed is where the 
capital flows. So I think the markets are ultimately going to 
decide between and among the various resource options. So what 
we need to do is make sure that we get the markets right, that 
we incorporate into the markets things like the price of carbon 
and other things that will ensure that, as those markets are 
structured, they can produce the policies, both the State and 
the national policies that we need to achieve our goals.
    Senator Shaheen. Could I follow up on this, Mr. Chairman?
    I appreciate that. On the other hand, the fact that the 
Government invested significantly in the Tennessee Valley 
Authority probably has a lot to do with the fact that Senator 
Corker is concerned about maintaining their low energy prices. 
The fact that we don't have a similar project in the Northeast 
means that we have some of the highest energy prices in the 
country.
    So, Government regulatory policy is obviously going to have 
a major impact on what happens in those markets.
    Mr. Wellinghoff. Right.
    Senator Shaheen [continuing]. If what we do is to have a 
Government policy that says we are going to build a new 
transmission grid that is going to ignore storage or ignore 
distributed generation or ignore where those potential 
renewable energy sources are coming from, doesn't that put in 
place the potential to create a market that is going to have a 
different impact than if we did something different with our 
Government policy?
    Mr. Wellinghoff. That is why I think we need to look at it 
from an analysis of cost and benefits. I saw a study yesterday 
from the National Renewable Energy Lab called EWITS that was an 
eastern interconnect-wide study looking at 20 percent wind, 
four different scenarios.
    One scenario was to take most of the wind out of the 
Midwest and deliver it to the Northeast. The other scenario was 
to take a lot of offshore wind and deliver it to the Northeast. 
The cheapest scenario was to take the Midwest wind and deliver 
it to the Northeast.
    So, again, I mean, people in the States need to decide do 
they want lower rates for their consumers, or do they want more 
local development of renewable resources? I don't think these 
decisions will be ones that will be made by the Federal 
Government because, right now, ultimately investments in 
transmission are made by the private sector.
    So the private sector is the one who, through the markets, 
is going to decide what are the most appropriate investments to 
make. I don't know of anyone right now who is suggesting that 
there should be massive amounts of Federal money going into 
build transmission lines throughout the country. The money, as 
I understand it, will be coming from the private sector, and 
the markets will drive where that money goes.
    Senator Shaheen. Thank you. My time is up.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    We have a second panel of expert witnesses which I would go 
ahead to unless--Senator Udall, did you have another question?
    Senator Udall. Mr. Chairman, if I might? No, I would like 
to get to the second panel, but I would like to submit a 
question for the record to Chairman Wellinghoff that focuses on 
independent system operators and regional transmission 
organizations. If I could do that?
    The Chairman. That would be fine. Sure.
    Senator Udall. Thank you.
    The Chairman. Thank you both very much for your testimony. 
It has been very informative, and we appreciate it.
    Let me call the second panel forward. The second panel, let 
me introduce three of the members, and then Senator Udall 
wanted to make one of the introductions on this panel.
    Dr. Ralph Masiello, who is senior vice president for energy 
systems consulting with KEMA, Inc., in Chalfont, Pennsylvania.
    Mr. Kenneth Huber, who is senior technology and education 
principal with PJM Interconnection in Valley Forge, 
Pennsylvania.
    Mr. Elliot Mainzer, who is executive vice president with 
corporate strategy in Bonneville Power Administration in 
Portland, Oregon.
    Thank you all for being here. Dr. McGrath--I believe, 
Senator Udall, you wish to make an introduction of Dr. McGrath?
    Senator Udall. I do. Thank you, Mr. Chairman.
    I am pleased to introduce Dr. McGrath of the National 
Renewable Energy Laboratory in my home State, located in 
Golden, Colorado. It is NREL. That is a real treasure, and I 
have always appreciated both the hard work they do and the 
Department of Energy's support of their work.
    My understanding is that Dr. McGrath, here under the 
auspices of NREL, will expand upon an intriguing aspect of 
energy storage technologies, the role that they can play in 
facilitating the integration of renewable energy into the 
electric grid.
    Thank you, Dr. McGrath, for making the long trip here to 
Washington, DC.
    Thank you, Mr. Chairman, for bringing everybody on this 
panel here.
    The Chairman. Thank you all for being here, and why don't 
we just start with you, Dr. Masiello? Is that the right 
pronunciation?
    Mr. Masiello. That is fine. Yes, sir.
    The Chairman. Go ahead and tell me the right--why don't you 
tell us the right pronunciation, and we will try to----
    Mr. Masiello. Masiello is exactly correct.
    The Chairman. Masiello.
    Mr. Masiello. Yes, thank you.
    The Chairman. Masiello. OK, thank you for being here, and 
please go right ahead. If each of you could take 5 or 6 minutes 
and give us the main points we need to understand, we will 
include your full statements in the record.

 STATEMENT OF RALPH D. MASIELLO, SENIOR VICE PRESIDENT, ENERGY 
                 SYSTEMS CONSULTING, KEMA, INC

    Dr. Masiello. Good. Mr. Chairman, Senator Murkowski, 
Senator Udall, thanks very much for the opportunity to 
contribute today. I hope I can shed some light.
    Rather than repeat the comments of the commissioner and the 
Under Secretary, let me offer a few data points and then some 
thoughts on policy.
    We are concluding a study for the California Energy 
Commission and the California ISO on the question of what 
happens at 20 and 30 percent renewables and how can storage be 
used? Confirming comments we heard earlier, 20 percent is 
manageable with today's engineering apparently, although the 
amount of ancillary services, meaning regulation, reserves, and 
so on, that would have to be procured by the market operator 
could double or triple with attendant impact, of course, on 
costs and emissions.
    Thirty percent becomes much less manageable due to the 
characteristics of when the solar energy disappears in the late 
afternoon and when the wind energy picks up. Storage is maybe 
twice as effective as conventional generation at mitigating 
this. In fact, we concluded that a fast battery is two to three 
times as effective as a combustion turbine for purposes of 
regulation and ramping.
    A second kind of highly technical point about a high 
renewable penetration that is, I think, just on the radar 
screen, most renewables are inverter based, meaning the power 
is produced by the wind mill. It goes through power electronics 
and an AC-to-DC-to-AC conversion as opposed to conventional 
generation that has a rotating AC generator.
    At high renewables, 30 percent annual target could mean 50 
percent at a given moment. The amount of rotating inertia in 
the system and the Governor response, the autonomous response 
of the generators to system frequency is down by half. If that 
statement held true, we lost half the inertia, it would mean 
that the transient stability planning that is done for the 
transmission grid in the interconnection has to be done over, 
and the stability is decreased.
    I bring it up because fast storage offers the potential to 
use power electronics to perform a synthetic form of inertia 
and Governor response and neatly avoid this problem. Of course, 
if the storage is used in conjunction with renewables, it is 
almost a free benefit from an infrastructure standpoint.
    An alternative to managing renewables' variability and 
ramping, of course, is demand response. Smart grid certainly 
offers us the opportunity for increased demand response, 
consumer price response. I would like to suggest, however, that 
30 percent demand response at 6 p.m. will not prove popular, 
and storage is a good way to avoid this.
    Coming to the subject of distribution reliability, American 
Electric Power Corporation has a brilliant concept and, in 
fact, will be doing a DOE demonstration project called 
Community Storage. The really clever thing in their concept is 
to take used batteries out of electric vehicles as these become 
available, reconfigure them, and deploy them at distribution 
transformers, protecting the reliability of a small cluster of 
homes. They believe that with this, they can dramatically 
improve distribution reliability.
    Finally, storage offers the opportunity to reduce emissions 
and provide benefits instead of backup power generation. Brad 
Roberts, the chairman of the Energy Storage Association, who is 
here today, would tell you that in their data center business, 
they are starting to deploy large batteries as backup power for 
50-and 90-megawatt data centers. This avoids the need to store 
diesel, to run generation, avoids the emissions, and the 
batteries can be used for peak shaving.
    If I might, I would like to throw out a couple of 
additional policy points for consideration. The efficiency of 
the storage system, how much energy is lost charging the 
battery and discharging, or whatever other storage medium is 
there, is very important, especially when you look at daily use 
with renewables or ancillary services. Efficiency of 70 percent 
in a storage system sounds good, but that means 30 percent of 
the renewables are lost and end up as heat in the storage 
system.
    So if incentives over time or DOE research could be 
directed to improve the efficiency, this could be something to 
think about.
    Second, we frequently get asked by manufacturers and 
developers to test storage technologies in our labs. There are 
IEC and IEEE standards for batteries, for instance, but these 
are aimed at laptop computers, power electronics, power tools. 
Standards don't exist yet for the physical performance of grid-
scale connected storage. This will become important down the 
road if utilities are to procure it, to be able to specify it 
and know that their specifications have been complied with.
    Another policy issue that will be in the way of deployment 
of storage, there are not accepted planning methodologies that 
utilities can use to determine how much to put where. Absent 
that, regulators can't approve the investments as being 
prudent, whether it is transmission or distribution.
    If we had a date, say, by 2011, where we could say new 
transmissions proposed should demonstrate that the use of 
storage was considered in the design and the economics of the 
transmission, this would stimulate awareness, interest. It 
would stimulate the small software companies that support that 
capability for utilities to develop the capability.
    So those are my comments. Thank you again for the 
opportunity.
    [The prepared statement of Mr. Masiello follows:]
Prepared Statement of Ralph D. Masiello, Senior Vice President, Energy 
                     Systems Consulting, KEMA, Inc.
    Chairman Bingaman, Senator Murkowski, and members of the Committee, 
thank you for the opportunity to participate in today's hearing on the 
role of grid-scale energy storage in meeting energy and climate goals. 
My name is Ralph Masiello. I am senior vice president of energy systems 
consulting at KEMA and I am responsible for innovation management 
within the company. I have been engaged in a number of energy storage 
related activities while at KEMA including serving on the U.S. 
Department of Energy ``Energy Advisory Committee'' and the Smart Grid 
and Storage subcommittees.
    KEMA is an independent, global provider of business and technical 
consulting, operational support, measurement and inspection, and 
testing and certification for the energy and utility industry. We have 
over 1,400 professionals worldwide with 600 in the United States. KEMA, 
Inc. serves energy clients throughout the Americas and Caribbean. We 
have offices in 13 states, including Arizona, Michigan, North Carolina, 
and Oregon, and operate the only independent high voltage power 
apparatus testing lab in the United States.
    KEMA has been actively engaged in projects across the energy 
storage value chain, ranging from technology development and evaluation 
to the advancement of large-scale storage applications. KEMA has worked 
to expand understanding of energy storage capabilities by developing 
analytic tools needed to plan for its use. We have been performing 
storage consulting and testing activities for manufacturers, 
developers, utilities, and the U.S. Army and the U.S. Navy via NATO for 
some time. While we are generally true believers in the many benefits 
that storage can bring to the electric power industry, we have no 
vested interest in any particular technologies or solutions.
    Today, I will provide a brief overview of what storage is and how 
it relates to the electricity industry, including potential benefits of 
storage and current barriers. First, I will discuss storage's role in 
the electricity system. Then, I will provide an overview of storage 
technologies and applications. Finally, I will briefly discuss policy 
issues to consider regarding storage.
            energy and storage--what it is and where we are
    At the turn of the 20th century, early electric power developers 
used batteries as part of the electricity generation and delivery 
infrastructure. However, batteries were quickly surpassed by other 
generation, transmission, and distribution technologies. For the past 
100 years, electricity has been the only major commodity that is not 
stored anywhere in the value chain. As such, the electricity industry 
has been operating under a just-in-time delivery system, where power is 
produced on demand as energy consumers need it and where all that is 
produced is delivered. To maintain operations, grid operators must 
balance generation to match load in real-time.
    The lack of storage in the electricity industry has led to 
relatively low capacity utilization throughout the production and 
delivery of electricity--capacity is built and maintained to support 
peak needs with adequate reserves against contingencies. Overall 
utilization may be as low as 30% for some parts of the system. In the 
case of production, peaking resources are often the most expensive and 
their use just a few hours a year leads to very high spot prices of 
electric power in the wholesale markets. Were we able to store 
electricity effectively, this expensive model of planning and operation 
could be much more efficient.
    In addition to improving system efficiency, storage could help 
address grid management challenges stemming from the integration of 
variable resources. Unlike traditional fuelbased generation, many 
renewable resources are variable over time and are not easily 
controlled. With relatively small amounts of variable generation, load 
has been the main source of variability. However, as renewable 
penetration increases, grid operators will need to account for larger 
variability in supply. The current system has a certain degree of 
flexibility which it uses to balance demand and supply in real-time. 
Additional sources would help the system absorb increasing amounts of 
renewables. Storage, in particular, is one potential source of 
flexibility that acts as a bridge, buffer, and reliability component.
                   storage future: changing the game
Renewables Resources
    The industry is beginning to conclude that some increase in the use 
of ancillary services will be necessary to integrate renewable 
resources. Pacific Northwest National Labs, KEMA, and others have 
conducted studies on the impact of high levels of renewables on system 
operations and the results more or less agree on this point. While 
ancillary services traditionally have been provided by fossil-based 
generation, new sources are beginning to contribute. According to the 
results of a recent KEMA study with the California Independent System 
Operator (CAISO), a fast battery is two to three times as effective as 
a combustion turbine at providing regulation and ramping services. In 
addition, even where traditional generation sources are used for 
ancillary services, storage appears to be beneficial. Virtual power 
plants which integrate storage and production could supply ancillary 
services more efficiently. This enables a plant to supply regulation or 
reserves even while running near peak output.
    Smart grid also offers ways to manage the demand side of the 
equation--whether by demand response programs controlled by the grid 
operator or via dynamic pricing schemes that induce consumer behavioral 
change or both. Though they are valuable resources, it is likely that 
demand response and dynamic pricing will not suffice at certain 
renewable penetration levels.
    Storage can offer additional benefits for renewable generation 
beyond integration. With storage, producers of renewable energy could 
time-shift production from periods of low demand to higher demand when 
it is more valuable to the producer. Also, storage allows remote (and 
often renewable) resources to escape curtailments due to transmission 
congestion with the attendant cost exposure. Financially, the benefits 
of storage may be considerable in such applications. Today, storage is 
already proving itself economical for some of these applications in 
market environments, to the extent that the markets are correctly 
valuing the services. It is therefore likely to be economic in 
regulated environments as well. Nevertheless, due to high upfront 
costs, the challenge of investing in storage can compound existing 
challenges for renewable investment.
Storage and Emissions
    Overall, the potential of storage to improve system efficiency and 
to facilitate renewables integration means that it can significantly 
reduce emissions as compared to ancillary provision from fossil 
generation. As noted earlier, storage's ability to quickly absorb the 
variable output of renewable generation makes it a strong integration 
tool for renewables. By any means, storage is able to provide a 
service--storing and dispatching energy--with fewer emissions than any 
comparable generation device. Examples of these savings are seen in the 
one of the more prominent applications of storage today, frequency 
regulation. A study by KEMA has shown that when replacing traditional 
fossil-fuel generation, storage technologies such as flywheels and 
fast-response storage systems can greatly reduce carbon dioxide 
emissions compared to the incumbent technologies.
    Storage could feasibly reduce emissions associated with backup 
generation as well. KEMA recently performed a study for the California 
Energy Commission in which it was determined that 3,800 MW of backup 
generation, if replaced by battery storage, would result in reduction 
of the annual emissions attributable to backup generation of as much as 
40%. Here, emissions associated with the backup generation of non-
residential customers outweigh those associated with the grid-based 
portfolio powering replacement batteries.
    While it is becoming clear that storage can offer reductions in 
emissions associated with the electricity system, further research is 
needed to better define potential reductions across the host of storage 
applications. Such reductions are likely to be specific to the region 
and the storage technology, as emissions associated with storage depend 
on the portfolio of generation used to power it and on the efficiency 
of the technology.
                 storage technologies and applications
Storage Characteristics
    Many electric storage technologies are available today and more are 
forthcoming. Advanced lead-acid batteries, large format Lithium Ion, 
and grid-scale Sodium Sulfur batteries are all commercially available. 
There are many more emerging battery technologies from numerous 
established and start-up manufacturers around the country. DOE has 
awarded R&D Energy Frontier Research Centers funding and smart grid 
demonstration funding to a number of these.
    No single storage technology fits every application and 
technologies have varying capabilities. However, advancements in 
storage technology are resulting in characteristics that increase the 
applicability of storage as a whole. These include:

   Fast Response: For regulation and some other ancillary 
        services as well as transmission reliability applications, the 
        storage device must be able to respond to control signals and 
        change its charge / discharge power level near instantaneously; 
        some technologies easily support this.
   Cycle durability: Some technologies can provide multi-
        thousand range cycles, allowing them to be used for longer 
        periods of time in applications that require frequent use.
   Duration: In some applications, storage devices must be able 
        to sustain full charging or discharging power levels for 2 to 6 
        hours. Shifting the diurnal production cycles of wind 
        production typically requires durations in this range, for 
        instance.
   Transportability: Where devices are somewhat mobile, the 
        range of possible applications increases and re-use becomes 
        more feasible. Substation batteries used for reliability and 
        peak load management can be moved once station capacity 
        expansion is justified and re-used at another substation, for 
        instance.
   Scalability: The ability of a technology to maintain its 
        characteristics regardless of size makes designing its use more 
        flexible.

    As storage technology evolves, storage will likely have many 
applications. Each technology will likely have its own niche depending 
on which combination of the above characteristics define the device. 
Performance and cost ultimately determine which type of storage is 
right for which applications.
Application Areas for Advanced Electricity Storage
    In addition to the generation-related applications of storage noted 
above, electricity storage can provide value at the transmission, 
distribution, and end-use levels of the electricity system. Currently, 
developers and utilities are aggressively pursuing storage for 
ancillary services provision, localized transmission reliability, and 
community or utility-side backup reliability as well as more 
traditional backup power applications.
            Distribution
    In many parts of the United States, distribution reliability is 
such that consumers can expect to be without power an hour or more each 
year--this significantly lags behind other countries, including Japan 
and most of Europe. It is more than an inconvenience for someone 
working at home and leads to consumers acquiring backup generators. 
Storage, however, is a tool that could help improve reliability. In 
particular, at the substation, storage can provide local ride-through 
if sub-transmission failures limit service to the station. Substation-
based storage could also provide contingency coverage in the event of 
transformer failures at peak load. This allows deferral of transformer 
upgrade or replacement and avoids load curtailment.
    On the feeder, storage can provide the same benefit at either 
primary or secondary voltage--providing power to customers that would 
be without service as a result of a feeder outage. This can be a 
tremendous benefit, given that distribution feeder outages are the 
greatest source of power outages. System average interruption duration 
index (SAIDI) can be reduced dramatically by community energy storage 
system. Storage out on the feeder can also be a way to temporally 
provide extra capacity during load roll-over to alternate feeder 
configurations--a way of enhancing reliability or deferring expansion.
    The Community Storage concept as envisioned by AEP, a national 
electricity generator and transmission system owner, would re-use 
electric vehicle batteries (or other technologies) to provide one or 
two hours of service to homes clustered around each distribution 
transformer. This potentially has favorable impacts on the cost of 
ownership of electric vehicles and is of interest to the automotive 
community as well.
            Transmission
    Congestion relief, stability enhancement and capital deferral are 
some of the benefits storage can offer the transmission system. Storage 
can relieve congestion by timeshifting the energy in location as well--
taking production off peak and storing it near the load center--
downstream of the congestion point instead of at the generator. In 
market environments, congestion costs are applied in principle to the 
entire load in the congested zones or nodes. In this case, the benefit 
of storage can be leveraged several times the value of the direct 
megawatt shifted.
    When the peak load in the congested area exceeds the production 
available plus the production transmitted in, storage can serve as a 
way to meet peak load and thus can be a means to defer transmission 
expansion. (Generation expansion in many congested areas is impractical 
for siting reasons as congestion points typically occur in dense, urban 
areas).
    The congestion problem will usually show up first as a contingency 
limit, not a direct lack of transmission capacity. Storage is a way to 
mitigate these contingency limits, with the fast storage picking up the 
load before the generation can be started. Furthermore, it is 
especially cost effective, as it avoids having to build transmission to 
provide redundancy, and it provides emission benefits, as it allows the 
use of downstream, uneconomic resources only after a contingency has 
occurred.
    Finally, in some specialized problem areas, where stability 
concerns impose transfer limits that are more restrictive than the 
inherent transmission capacity limits, fast storage can be used as a 
stability enhancement device to relieve these stability constraints. 
The value of this in a particular instance is potentially very great 
and this application is worthy of serious engineering analysis and 
study.
            End User
    When storage is a more economical way to provide ancillaries, it 
reduces costs for everyone in the market. If enough storage is present 
to affect the clearing price, it reduces the price for all suppliers of 
the particular product. Similarly, by time-shifting lower cost 
generation to peak periods, it reduces the need for expensive peaking 
generation and reduces peak power prices. When storage reduces 
congestion this is inherently a market benefit.
    The ability of storage to perform in certain applications is not 
limited to utility-scale devices. Generally, electricity storage is 
unique in the ease with which the technologies can be scaled. Whether 
the device is packaged as a kilowatt-scale application or a megawatt-
scale application, the performance characteristics of the device can 
stay the same. For example, the same batteries that are being used in 
utility-scale megawatt devices are being used in today's electric 
vehicles.
              policy issues and actions for consideration
    Beyond the technical and economic hurdles that a new technology in 
a new application has to overcome, there are a number of storage-
specific policy issues worth considering. As storage becomes more 
versatile and commercially available, fitting storage into the existing 
policy framework becomes more challenging. For example, how best to 
classify storage, as a regulated or unregulated asset, is a primary 
concern as the classification can determine how to allocate costs and 
benefits. In addition, state utility commissions have to determine 
appropriate depreciation schedules and prudent expenditures for 
regulated distribution assets. The difficulty lies in the fact that a 
single device can serve multiple functions, and may at times play the 
roles of a regulated asset and an unregulated one.
Classifying the Type of Application
    As noted above, storage can be used for many applications 
throughout the value chain--from generation to transmission and 
distribution to end-use. As such, a single storage asset can play the 
roles of what are currently distinct regulated and unregulated assets. 
Specifying the rules of engagement, in part to allocate costs and 
revenues, must therefore account for function as well as ownership. The 
example below discusses a case where transmission-based storage can 
serve multiple purposes.
            Example: Transmission Storage--Multiple Services
    When storage is used for transmission congestion relief by shifting 
energy in both time (off peak to peak) and location (remote to 
congested zone near the load), the storage increases the energy's value 
by both displacements. In essence, storage sets the marginal energy 
clearing price. If the storage is financed and operated as a purely 
merchant asset then the pricing, revenue sources, and cost allocations 
are clear. In this case, the primary regulatory concern would be 
whether the storage has undue pricing power or market concentration and 
must be subject to the same treatment as a ``reliability must run'' 
(RMR) unit.
    If the storage asset is proposed as a transmission asset with a 
regulatory rate of return to the transmission owner then the question 
of the allocation of the profits from time and location shifting are 
very real. In effect it is allowing the transmission owner a share of 
the congestion rents that the storage device can garner. This is 
familiar ground to the industry; the new wrinkle here is that the 
storage device could also easily access ancillary markets as well as 
congestion. Storage deployed to relieve congestion is almost a perfect 
merchant transmission asset. There are no questions of loop flows or 
free rider usage. If the congestion relief economically justifies 
storage then the best regulatory role might be to provide some level of 
incentives or guarantees rather than to construct it as a regulatory 
asset.
    However, the conundrum is that the most advantageous solution 
overall may be a level of storage deployment that reduces congestion 
costs to the level needed to justify the storage investment and no 
more. Whether market entrants will deploy the last increments of 
storage against diminishing returns is always unclear. If storage 
capital costs are on a decreasing curve it could be expected that new 
entrants might drive out existing facilities as is normal with high 
technology assets. That argues that merchant investors will want faster 
economic depreciation recovery rather than standards imposed by 
regulators. What is clear is that large-scale storage offers the first 
real opportunity for a kind of merchant transmission in a way that is 
environmentally and economically benign--and that we need the right 
regulatory and market solutions to facilitate it and not create a new 
form of regulated monopoly.
    Some have argued that time shifting or locational storage uses more 
environmentally unfriendly resources; it is also as likely that storage 
fills in for intermittent renewable supplies. An interesting study 
would examine these empirical trade-offs. Because gridscale storage 
will involve utility interconnection requests and technical 
requirements, these aspects have to be monitored carefully--and may 
prohibit the co-existence of regulatory and merchant assets in the same 
congestion zone. Another interesting corollary is the value of 
additional transmission when new renewable generation resources in 
addition to storage are sited. Does storage compete directly with 
transmission or is it the combination of renewables and storage that 
may obviate transmission benefits? Have we skirted the issue of 
benefits allocations through transmission upgrades or merely postponed 
it?
            Is there an Industry Precedent?
    The gas transmission industry offers one precedent which would not 
necessarily be attractive to today's merchant storage entrepreneurs. 
The storage asset is a regulated asset which earns a regulated rate of 
return based on a tariff for gas stored. The energy shipper/trader that 
contracts to use the storage pays a reservation fee and a storage fee 
based on usage with penalties for over or under scheduling; the time 
arbitrage gains on the stored gas are the profit or loss for the 
shipper/trader. This model neatly separates the questions raised by 
asset classification raised above. However, in this model it is not 
clear what the electricity industry economics would be for the storage 
investor. And as noted, the merchant electric storage operators today 
would find this discouraging.
    One aspect of the natural gas industry which bears examination 
relative to electricity storage is the use of storage as part of 
transportation to meet just in time delivery needs. Independent 
marketers have more efficiently used both storage and pipeline capacity 
to deliver fuel to generators. Storage operators and transmission 
purchases can be bundled with energy to provide load. For the gas 
industry, this has contributed to price volatility as weather or 
outages have put pressure on local gas prices.
Other Barriers
    The biggest challenge that faces adoption and deployment of storage 
is lack of routine methodologies about how to incorporate storage into 
system planning and operations. At the transmission level, this is 
largely within FERC's purview. At the distribution level, it is a 
matter for the states, of course.
    NIST is developing standards for the interconnection of storage 
with the grid and its smart grid interoperability. KEMA assisted the 
ISO RTO Council in preparing the draft wholesale standards for storage 
this fall. Beyond these standards, we need standards developed for the 
description of storage in terms of efficiency, performance, life 
cycles, and the like. Manufacturers are asking us to test their new 
products in our laboratories in Pennsylvania and in Europe; most 
storage testing standards have been developed for electronic devices, 
back up power, and the like--and not for grid connected storage.
    Tools to incentivize storage devices must be considered carefully. 
An Investment Tax Credit for storage, for example, likely has limited 
incentive for merchant developers and start ups as they cannot exploit 
these themselves because they have little or no income to offset. 
Rather, they arrange sale-leaseback with financial institutions that 
can utilize the tax credits. The number of financial institutions 
interested in these arrangements, however, is somewhat reduced right 
now. Loan guarantees might be a more effective tool for such markets.
    Careful consideration of how to allocate the emissions benefits of 
storage is also important. Right now, when a regulated utility's 
storage investment leads to emission improvements, the credit will flow 
to the power production sector. Attribution of reliability improvements 
is also complicated, but would serve to help spur reliabilityrelated 
storage investments.
                               conclusion
    The electricity grid is in the midst of historic transformation--
modernizing its technologies and changing its generation mix to include 
a larger percentage of renewable resources. In the meantime, KEMA has 
observed that advanced electricity storage technologies have drawn 
attention from utilities, developers, governmental agencies, and 
consumers across the globe. Additional factors, such as the rapid 
growth in renewable generation investments and the increasing 
penetration of electric vehicles and plug-in hybrid electric vehicles, 
have increased the need for information that can help individuals 
navigate the wave of attention being placed on storage to address grid-
related changes.
    In the long-term, the implications of widespread, mass deployment 
of electricity storage across the power system are profound. It holds 
promise of dramatically increasing capacity utilizations of the 
generation and transmission and distribution system--essentially 
enabling a deferral of capital spending. Storage also can help 
significantly improve reliability, especially at the distribution 
level.
    KEMA is heavily involved in expanding the understanding and 
capabilities of storage technologies by grid simulation. Through our 
studies on the business of storage and electrical vehicle integration 
in the grid, our knowledge of storage technology and its potential, our 
testing facilities for small-scale storage systems like batteries, our 
Flexible Power Grid Laboratory for grid integration of storage systems, 
and our knowledge of safety, environmental and customer aspects--we 
have been involved in formulating the key questions around the economy 
and efficacy of storage, and in developing the analytical and economic 
tools necessary to plan for its use. The level of industry interest in 
electricity storage is increasing very rapidly, and the policy sector 
is taking up the need for and design of incentive and regulatory 
structures for storage development.
    Thank you for the opportunity to present electricity storage. I 
appreciate the Committee's interest in this topic and I look forward to 
answering your questions.

    The Chairman. Thank you very much for your testimony.
    Mr. McGrath.

   STATEMENT OF ROBERT MCGRATH, DEPUTY LABORATORY DIRECTOR, 
 SCIENCE AND TECHNOLOGY, NATIONAL RENEWABLE ENERGY LABORATORY, 
                           GOLDEN, CO

    Mr. McGrath. Senator Bingaman, Senator Murkowski, Senator 
Udall, thank you for the opportunity to discuss how grid-scale 
energy storage can help achieve U.S. energy and climate goals 
by enabling extensive and cost-effective deployment of large 
amounts of renewable electricity generation.
    I am fortunate to serve as the Deputy Laboratory Director 
for the National Renewable Energy Laboratory, the Department of 
Energy's primary laboratory for research and development on 
renewable energy and energy efficiency technologies. Addressing 
today's topic, earlier this year, the IEEE, in its national 
energy policy recommendations, emphatically stated that if wind 
and solar are to reach their full potential to contribute to 
the Nation's power requirements, the technology for large-scale 
energy storage must be developed and deployed.
    For our electric grid, utility-scale storage not only can 
help increase penetration of renewable energy from variable 
sources, such as wind and solar, it can also enable renewable 
technologies to replace fossil-fueled base power loads, enhance 
the stability, reliability, and power quality of the electric 
grid, and optimize the performance of an electric modernized 
infrastructure.
    At my laboratory, NREL, our researchers led for the 
Department of Energy a definitive examination of the potential 
for wind generation. Entitled ``Twenty Percent Wind Energy by 
2030,'' that study showed that with ample grid capacity, wind 
penetration to 20 percent of U.S. electrical generation is 
feasible even without additional large-scale storage.
    This study was addressing I think Senator Wyden's concern 
around a wait and see attitude. The study was aimed 
specifically at trying to understand what can we do immediately 
to advance wind energy penetration into the grid?
    NREL analysts have also examined the impact of solar 
photovoltaics at high penetration. Those studies found that 
photovoltaic-generated electricity become increasingly 
difficult to manage beyond 20 percent penetration without 
substantial changes in the grid, including storage. 
Consequently, as higher penetrations of wind and solar find 
their way onto the grid, the availability of cost-effective 
energy storage systems become more and more important.
    From a grid planning and operational perspective, renewable 
generation, transmission, and storage are inextricably 
intertwined. Given that complex coupling, as Dr. Koonin 
mentioned, we need improved analysis tools and forward-thinking 
policies to optimize investments needed to modernize and expand 
the electric grid. These tools would serve as assets for 
utilities, energy planners, and policymakers, helping them with 
decisions on how much, when, and in what mix grid-scale energy 
storage technologies should be deployed.
    As wind power becomes more ubiquitous, it is likely, as we 
have heard earlier this morning, that the first storage 
technologies to be expanded will be compressed air and pumped 
hydro. Nonetheless, continued research and development efforts 
to improve flow batteries, superconductors, thermal storage, 
and hydrogen storage will make those options more cost 
competitive as well.
    There are opportunities for improved science in 
nanostructured materials, proton exchange membranes, and 
chemistries to develop longer lived, higher capacity, and lower 
cost electrochemical batteries.
    NREL and others are also looking at harnessing renewable 
electricity generation to meet the Nation's massive 
transportation needs. By combining an electric vehicle fleet 
with storage-backed renewable electricity, we can potentially 
tap the vast resources of wind and solar to support low-carbon, 
if not carbon-free, transportation.
    Today, R&D efforts around energy storage are limited. 
Pacific Northwest Laboratories, Sandia National Laboratories, 
Oak Ridge Laboratories, and others are supporting DOE's current 
storage program. At my laboratory, NREL, our new Energy Systems 
Integration Facility, scheduled for completion in 2012, will be 
dedicated exclusively to addressing the integration of 
renewable energy sources with distribution, storage, energy 
efficiency, and transportation.
    In summary, starting from a very modest space of only 4 
percent renewable generation, the current electricity system 
can absorb much greater quantities of renewable power without 
large new energy storage. However, research and development is 
needed now if we are to have cost-effective storage solutions 
that aid at optimizing deployment of renewable sources required 
for a clean and secure energy future.
    Thank you for this opportunity to address the committee 
this morning.
    [The prepared statement of Mr. McGrath follows:]
   Prepared Statement of Robert McGrath, Deputy Laboratory Director, 
 Science and Technology, National Renewable Energy Laboratory, Golden, 
                                   CO
    Mr. Chairman, members of the Committee, thank you for this 
opportunity to discuss the role that energy storage can play in meeting 
our nation's future energy needs, and in reducing carbon emissions 
through greatly expanded use of clean, domestic renewable energy 
resources. I am Robert McGrath, deputy director of the National 
Renewable Energy Laboratory (NREL), the Department of Energy's primary 
laboratory for research and development of renewable energy and energy 
efficiency technologies.
    At NREL, our mission is clear. We provide research, development and 
support deployment to enhance our nation's energy security and reduce 
greenhouse gas emissions, through large-scale production of electrical 
power from renewable sources, through utilization of biofuels to 
replace fossil-based transportation fuels, and through improved energy 
efficiency in building, transportation and industrial processes.
    Currently, electricity generation accounts for approximately 40% of 
U.S. primary energy resource consumption. According to the U.S. 
Environmental Protection Agency, electrical generation also produces 
about one-third (34.2%) of our nation's CO2 emissions, roughly 2.5 
billion metric tons per year (2,445 MMTons/yr)\1\.
---------------------------------------------------------------------------
    \1\ U.S. Environmental Protection Agency (2009) http://www.epa.gov/
climatechange/emissions/downloads09/GHG2007entire_report-508.pdf
---------------------------------------------------------------------------
    Consequently, increasing generation from renewable sources is 
essential if we are to effectively mitigate climate change. Importantly 
too, the innovation and job creation associated with development, 
manufacturing, installation and operation of advanced solar, wind and 
other renewable energy sources are vital to our nation's global 
competitiveness and continued economic vitality.
    My testimony today will focus on how grid-scale energy storage can 
help achieve U.S. energy and climate goals by enabling extensive and 
cost-effective deployment of large amounts of renewable electricity 
generation.
    Within our present grid, electricity is for the most part generated 
and then instantly consumed. This has been a result of the economies of 
scale for coal and nuclear central power stations. But as we move 
toward a clean, low-carbon energy future, that will change. The 
National Energy Policy Recommendations published by IEEE earlier this 
year state that if distributed and variable ``sources of electrical 
power, such as wind and solar, are to reach their full potential to 
contribute to the nation's power requirements, technologies for large 
scale energy storage must be developed and deployed.''\2\
---------------------------------------------------------------------------
    \2\ IEEE-USA Policy Statement, Jan, 2009 www.IEEEUSA.ORG/POLICY/
ENERGYPLAN
---------------------------------------------------------------------------
    The theoretical potential of renewable power from wind and solar 
resources is vast--estimated to be more than 600 terrawatts of power 
available from wind and solar alone, worldwide. That compares with 
today's maximum worldwide estimated demand of about 12.5 terrawatts. 
While plentiful, renewable resources vary by time and by region. Fully 
accessing those resources will require a more adaptive, flexible 
distribution system. A more adaptive grid will in turn require improved 
transmission and storage systems.
             storage technologies can provide many benefits
    Large-scale energy storage technologies will have many benefits, 
including:

   Facilitating large scale penetration of renewable energy 
        from variable sources such as wind or solar;
   Enabling renewable energy technologies to replace fossil 
        fueled base-load power sources;
   Enhancing the stability, reliability and power quality of 
        the electric grid;
   Optimizing the performance of a modernized electric 
        infrastructure.

    While the promise of energy storage is well recognized, there are 
many technology and policy challenges which must be solved. 
Technologies, such as zinc-bromine, lead-sulfide, sodium-sulfide, 
lithium-ion, nickel-cadmium batteries and high-energy-density super 
capacitors, are being developed for grid-scale storage. Additional 
research and development is essential, however, to lower costs and to 
increase their durability, power density and energy efficiency. 
Detailed technology assessments and associated system integration 
analysis tools are needed to assist utilities, energy planners and 
policy makers as they decide how much, when, and in what mix, grid-
scale energy storage technologies will be deployed.
    Even when the advantages of storage technology are clearly evident, 
utilities may not be willing to make needed investments in energy 
storage systems unless the complex economic and operational 
interrelationships between new renewable energy generation, grid 
improvement, and an array of other considerations, are understood as 
well. The 2008 Electricity Advisory Committee (EAC) report on energy 
storage called for a robust national program for research, development 
of cost-effective, efficient, large-scale energy storage technologies, 
along with greatly improved analysis for optimizing generation, 
storage, transmission and grid management.
    At my laboratory, NREL, researchers are supporting the Department 
of Energy's Offices of Energy Efficiency and Renewable Energy, and 
Electricity Delivery and Energy Reliability in assessing the potential 
for, and projected costs of a broad spectrum of renewable energy 
electricity generation options. Recently, our specialists led for the 
Department of Energy one of the most definitive examinations of the 
potential for wind power generation ever produced for the United 
States. This report, entitled 20% Wind Energy by 2030\3\, showed that 
with ample grid capacity for transmitting power from regions of high 
quality wind to load centers on the coasts, wind penetration to 20% of 
U.S. electrical capacity is possible within the next two decades 
without the necessity of large-scale storage.
---------------------------------------------------------------------------
    \3\ 20% Wind Energy by 2030, Increasing Wind Energy's Contribution 
to U.S. Electricity Supply, DOE/GO-102008-2578, Dec 2008
---------------------------------------------------------------------------
    The new transmission lines that are needed to take advantage of 
available wind resources can be cost effective when considered purely 
from the standpoint of construction and operation. Siting, regulatory 
and legal issues, however, can pose costly delays and uncertainty for 
even the most well planned new transmission projects. The lesson is 
that new renewable generation, transmission and storage are 
inextricably intertwined, and we will require clear analysis and 
forward-thinking policies to ensure we reap the full benefits of our 
abundant renewable resources.
    Wind is the largest and fastest growing sector of the U.S. 
renewable energy generation market. Nonetheless, non-hydro renewable 
generation represents less than 4 percent of the total U.S. generation 
capacity, or just over 31 GW. To achieve 20 percent wind penetration by 
2030 consequently requires more than a ten-fold increase in wind 
production, to more than 300 GW. (Studies suggest wind development to 
that level will require an investment approximately 2 percent higher 
than would occur without the wind power build out.) This will require 
annual installation of 16 GW of new wind turbines each year for the 
next two decades. By comparison, new wind turbine installations reached 
a record level during 2008 of 8 GW.
    NREL researchers find that additional deployment of wind generation 
can be aggressively pursued in the near-term even without accompanying 
deployment of energy storage. However, as higher and higher 
penetrations of wind and solar find their way onto the grid, cost-
effective energy storage systems may become more and more imperative.
    NREL analysts have also examined the impact of solar photovoltaics 
(PV) at high penetration.\4\ These studies found that photovoltaic-
generated electricity becomes increasingly difficult to utilize beyond 
20% penetration without substantial changes to the grid, such as 
incorporation of storage to enable temporal shifts in utilization of PV 
produced energy during periods of lower solar output. It should be 
noted, too, that the thermal working fluid inherent within 
concentrating solar power (CSP) can effectively facilitate thermal 
storage, which can add four to six hours of sustained generation 
capacity\5\, and thus make CSP a more cost-effective technology.
---------------------------------------------------------------------------
    \4\ Denholm, P., and R. M. Margolis. (2007) ``Evaluating the Limits 
of Solar Photovoltaics (PV) in Electric Power Systems Utilizing Energy 
Storage and Other Enabling Technologies''. Energy Policy. 35, 4424-4433
    \5\ Sioshansi, R. and P. Denholm (2009) ``The Value of 
Concentrating Solar Power and Thermal Energy Storage.'' NREL/TP-6A2-
45833
---------------------------------------------------------------------------
    Taken together, the emerging analytical consensus provides 
confidence that renewable energy can expand well beyond the niche role 
it has played to date, and is capable of providing at least 20 percent, 
and perhaps much more, of nation's electricity needs.
    As wind and solar capacities continue to expand, the periods of 
time during which renewable generation exceeds the instantaneous 
consumption will become more prevalent--especially within regional and 
localized markets. At that point, the value of storage rises, because 
storage allows renewable resources to be captured when they are 
available, and shifted temporally to meet peak demands.
     energy storage technologies are varied, solutions are complex
    Additional, detailed studies, conducted using sophisticated 
analytical models, are needed to address the question of how our nation 
can best develop the full benefits of renewable energy, and in 
particular, how energy storage can support that development. For 
example, at present, the U.S. electrical system operates with about 21 
GW of energy storage, provided almost exclusively via pumped hydro. 
This represents only about 2 percent of the total 1,000 GW U.S. 
electricity generation capacity.
    As wind and solar power become more ubiquitous, it is likely that 
the first storage technologies to be expanded will be compressed air 
energy storage, since this technology may be geographically 
distributed, and where regionally feasible, some expansion of pumped 
hydro storage.
    Continued research and development efforts to improve flow 
batteries, super capacitors, thermal storage and hydrogen storage, will 
make these options more cost competitive, and thereby give utilities 
greater flexibility to improve the stability, reliability, flexibility 
and power quality of the electrical grid. Although it may be some time 
before renewable energy options are deployed to the extent where 
utility-scale energy storage is unavoidable, a significant research and 
development program must be ongoing if we are to have cost-effective 
storage solutions when they are truly needed.
    Given the broad array of storage technology options available, it 
is difficult to briefly summarize the development state and potential 
of each. It is clear, however, that additional research and development 
is needed to yield storage technologies with the improved performance 
and lower costs we will require. For example, new sciences for nano-
structured materials, membranes and chemistries are needed for 
development of longer-lived, higher capacity, and lower cost 
electrochemical batteries, for new electrolytes and electrodes for 
higher voltage, greater capacity and lower cost capacitors, and for new 
power electronic devices supporting effective integration of storage 
devices into the electric grid. Even more mature technologies will 
benefit substantially from additional R&D. For example, advanced 
engineering on water and air turbines may improve efficiencies in 
pumped hydro and compressed air storage systems, and stronger materials 
and reduced friction in bearings will result in longer life and lower 
cost flywheels.
    Another promising area of research and development at the utility 
scale uses hydrogen as an energy storage medium. At NREL's National 
Wind Technology Center, we have teamed with Xcel Energy, the nation's 
largest wind power utility, in a wind-to-hydrogen demonstration 
project, in which wind turbines are used to power hydrogen producing 
electrolyzers. The hydrogen can then be stored for later use in 
electricity generation, or as energy for hydrogen powered vehicles.
    This brings us to another area of tremendous challenge and 
opportunity: harnessing renewable electricity generation, transmission 
and storage to meet the nation's massive transportation needs. 
Electrically powered vehicles have great potential to reduce our 
dependence on imported fossil fuels. By combining an electrical vehicle 
fleet with storage-backed renewable electricity, we can potentially tap 
the vast resources of wind and solar to support low-carbon, or carbon-
free, transportation. Studies at NREL confirm that integration of plug-
in hybrid electric vehicles (PHEVs) into the grid can not only reduce 
dependence on petroleum and stabilize carbon emissions 6 7, 
but can also be used to provide grid services\8\, while further 
enabling renewable technologies.\9\
---------------------------------------------------------------------------
    \6\ Denholm, P., and W. Short. (2006) ``An Evaluation of Utility 
System Impacts and Benefits of Optimally Dispatched Plug-In Hybrid 
Electric Vehicles'' NREL/TP-620-40293.
    \7\ Parks, K, P. Denholm, and T. Markel (2007) ``Costs and 
Emissions Associated with Plug-In Hybrid Electric Vehicle Charging in 
the Xcel Energy Colorado Service Territory'' NREL/TP-640-41410.
    \8\ Letendre, Steven, P. Denholm, and P. Lilienthal. (2006) 
``Electric and Plug-In Hybrid Cars'' New Load, or New Resource?'' 
Public Utilities Fortnightly. 28-37.
    \9\ Short, Walter, and P. Denholm. (2006) ``A Preliminary 
Assessment of Plug-In Hybrid Electric Vehicles on Wind Energy Markets'' 
NREL/TP-620-39729.
---------------------------------------------------------------------------
    Advanced battery technology is paving the way for gas-saving 
hybrids and the next generation of plug-in hybrid cars and trucks. As 
Dr. Koonin has mentioned, DOE is wisely investing in advanced 
technology development and manufacturing of batteries for 
transportation as well as for grid-level storage, exploring a broad 
array of promising options. Continued investments in development and 
demonstration projects for grid-scale energy storage, and for 
integration of the nation's vehicles, buildings, and electricity grid 
are important for achieving our national goals for a clean and secure 
energy future.
                           current r&d status
    With very limited resources, DOE is doing a good job of leveraging 
efforts of state, federal and international organizations in order to 
keep storage development moving forward. Several national laboratories 
are investing internal R&D funds in forward-looking energy storage 
solutions such as nanomaterials for batteries. Partnerships among the 
national labs are leveraging capabilities and resources to accelerate 
the development of energy storage solutions. For example, Pacific 
Northwest National Lab (PNNL) and Sandia National Labs (SNL) are 
combining grid operations and controls expertise with materials and 
systems integration talents in support of DOE's energy storage program, 
and NREL and SNL have a newly established partnership in high 
performance computing that will be applied to energy storage technology 
development and system integration analysis.
    While significant work is underway, NREL will be able more 
aggressively and comprehensively address storage research and 
development through the new capabilities of its Energy Systems 
Integration Facility (ESIF). The ESIF will be a 180,000-square-foot 
laboratory dedicated to solving issues related to the integration of 
renewable energy and energy efficiency technologies deployed at scale. 
Anchored by a 400 teraflop high-performance computer, the ESIF will 
enable complex systems R&D that fully integrates the most advanced 
simulation, data analysis, engineering, and evaluation techniques to 
accelerate the integration of new energy technologies generally, and 
the broad deployment of storage technologies specifically. Using the 
ESIF's modeling and simulation capacity, new materials will be explored 
more rapidly, and existing materials can be improved for performance 
and cost. The high performance computer will also enable highly focused 
simulations of complex electric systems to optimize the deployment of 
new generation technologies that are coupled with storage to ensure the 
most cost-effective approach and to determine approaches that will 
maintain and even enhance the reliability of the electricity system. 
Having these fully interactive simulation, testing, and evaluation 
facilities in one laboratory will move grid integration and storage 
forward on the fastest path possible.
    From the national perspective, ongoing research is critically 
needed in two broad areas. First, research and development is needed 
for storage materials and techniques, including: new storage materials 
for electrochemical storage; new mechanical energy storage techniques; 
increased energy densities in storage media; increased cycling/
lifetimes; all to greatly reduce costs. Second, research is needed on 
the integration of storage into the grid: grid simulations and 
optimizations to explore what types of storage are needed, where they 
should interconnect in the system, and how to operate storage assets; 
development of new power electronics for integrating storage; and, 
development of new communications and control technologies for charging 
and discharging storage in an optimal fashion (smart grid technologies 
for storage).
                               conclusion
    The current electricity system can absorb much greater quantities 
of renewable generation than are currently deployed without significant 
increases in the deployment of storage technologies. As penetration 
levels increase in the future, storage will play a key enabling role 
for penetrations of variable generation in excess of 30 percent. 
Currently, storage technologies do not exist that can be cost-
effectively deployed in the diversity of applications that are 
anticipated. To prepare for the time when is needed at scale, we must 
increase our research and development efforts in the near term.
    Our nation will be served if recommendations from this year's IEEE-
USA Policy Position Statement are implemented. According to IEEE, the 
U.S. will need significant and sustained research to develop affordable 
energy storage technologies to effectively move renewable energy onto 
the electric system. The IEEE statement urged Congress to fully fund 
the energy storage R&D program authorized in the Energy Independence 
and Security Act of 2007.
    Thank you for the opportunity to address the Committee on this 
important topic.

    The Chairman. Thank you very much.
    Mr. Huber, please go ahead.

  STATEMENT OF KENNETH HUBER, SENIOR TECHNOLOGY AND EDUCATION 
                 PRINCIPAL, PJM INTERCONNECTION

    Mr. Huber. Good morning. Thank you, Chairman Bingaman and 
Ranking Member Murkowski.
    PJM is honored to be invited to this important hearing on 
energy storage this morning. Thank you.
    We certainly have been pursuing--PJM, that is--the 
opportunities on everything from pumped storage, compressed 
air, battery systems, flywheels, ice making, even use of 
refrigeration systems in homes as opportunities for storage. 
All these are viable opportunities that we are pursuing and 
attempting to demo.
    But I am going to take my time this morning and hone in on 
the opportunities of plug-in vehicles and how it pertains to 
grid storage capabilities that really look exciting to us.
    When 1 million vehicles are deployed in the United States, 
hopefully, in 5 years or less, 18 percent of those, if we do it 
by population, will end up in the PJM territory. That means a 
distribution of storage capabilities extending from Illinois to 
New Jersey, down into Tennessee and North Carolina, including 
District of Columbia. The PJM territory will have 180,000 
vehicles that are distributed energy sources for us to tap 
into.
    The ability to aggregate those resources and have them act 
the same as stationary battery systems is underway already. 
Aggregators like General Motors, OnStar, regular aggregators, 
convergers, et cetera, are all pursuing how to do this. In 
fact, I will talk a little bit of an example where we are doing 
that today.
    Almost more interesting than residential use of plug-in 
vehicles is fleet use. If you think about a local delivery 
vehicle and what it is doing today and its runs of stop/start, 
very low mileage per gallon usage, idling constantly. If you 
were to electrify those local delivery fleets, and we are 
pursuing opportunities and discussions with several of those, 
what you are talking about is a fleet with pretty regular 
routes that run the system the same way every day, return 
almost always to the same location, that allows the 
infrastructure for those fleets to be put in place and allows a 
capability for two-way communications and control back into the 
grid that really provides a reliable capability for storage 
when it is needed.
    Now I will talk about smart charging incentive, both for 
the residential and for the fleet vehicles. The ability to 
deliver price signals, to deliver information about renewables, 
to deliver information about reliability of the grid to 
aggregators and then on to vehicles is really where we are 
working hard to obtain.
    I was just with General Motors yesterday in Detroit talking 
about this smart charging capability. We really do believe that 
if you give the right information to the individual, they will 
be incented to respond to those. You know, people respond to 
the incentives they are given. The charging will happen at the 
times that is needed, and it will result in good usage of the 
automobile and good usage for the grid.
    Let me flip over and talk about one other area of storage 
that is very important to us, which is frequency regulation. 
The ability to keep the frequency at 60 hertz at all times is 
an important operation within the PJM facility.
    In 2007, PJM joined a consortium--the University of 
Delaware; Pepco Holdings, Pepco Electricity here in Washington; 
California converter company AC Propulsion; and a couple 
others--and produced a vehicle that has been operating to the 
PJM regulation signal since October 2007. For 2 years, we have 
experienced what it means for a vehicle to not only charge and 
discharge on a 4-second signal sent to it, and we are seeing 
and gathering that data.
    That vehicle has been operating to the market, but not in 
the market. It is too small. It is only 18 kilowatts. A very 
good occurrence happened over the course of 2008. AES, the 
generation company, brought into the PJM territory 1 megawatt 
of batteries, very, very similar to automotive batteries in 
their structure, and it entered the market in November 2008 and 
has been continuously in the PJM market since May 2009.
    So 24 hours a day, 7 days a week, we are getting 1 megawatt 
of battery power responding to our 4-second regulation signal. 
The celebration that we are sort of having right now is that we 
have taken that vehicle, that MAGICC--Mid-Atlantic Grid 
Interactive Car Consortium--vehicle and its two sister vehicles 
and have now integrated them and aggregated with the batteries 
of the AES stationary system. So we now have 1.054 megawatts of 
energy in the regulation system.
    So the batteries in the stationary system are being paid 
somewhere between $700 to $900 a day for just responding to our 
signal, and each of the three vehicles is now getting paid 
about $10 a day for doing the exact same thing. Just 
demonstrating the fact that the batteries can be distributed. 
They happen to be in Delaware, and the stationary battery 
system happens to be in Pennsylvania.
    So a really exciting experiment of what we can do as we 
start seeing these vehicles become prevalent throughout our 
system. I will just end and talk about the one policy area. 
Certainly--I will talk about two.
    The ability to standardize the communications, the two-way 
communications and the control from the RTO/ISO through the 
utility or the aggregator into the consumer is certainly 
important. There is very good activities being directed by DOE 
and done by NIST, National Institute of Standards and 
Technology, today that are addressing that.
    The automotive companies are there. The utilities are 
there. It is a very good forum. We need to make that all happen 
so that we have the communications and the robustness that we 
need.
    We need to work together, the automotive companies and the 
utilities, to develop the smart charging capability that--I 
mean, everyone talks about everyone is going to go home at 5 
and plug their vehicles in. The automobiles are smart. The 
system is smart. There is no reason for that to happen with the 
right incentives in place.
    Thank you very much for your time.
    [The prepared statement of Mr. Huber follows:]
 Prepared Statement of Kenneth Huber, Senior Technology and Education 
                     Principal, PJM Interconnection
                           executive summary
    In the attached testimony, Kenneth Huber, Senior Technology and 
Education Principal at PJM Interconnection (PJM) details the activities 
presently underway within PJM's 13-state footprint regarding the 
potential of plug-in hybrid electric vehicles (PHEVs) serving as an 
energy storage resource. PJM is the Federal Energy Regulatory 
Commission (FERC) approved Regional Transmission Organization (RTO) 
serving all or parts of the states of Illinois, Michigan, Indiana, 
Ohio, Kentucky, Tennessee, West Virginia, North Carolina, Virginia, 
Maryland, Delaware, Pennsylvania and New Jersey as well as the District 
of Columbia. PJM operates the bulk power grid in this region, plans 
transmission expansion and operates the largest competitive wholesale 
electricity market in the world.
    The batteries within PHEVs carry with them the promise of serving 
as a new and highly effective, distributed energy storage resource. If 
done right, plug-in hybrid vehicles can enhance the efficiency of the 
grid by shifting load to off-peak nighttime hours -- the very time when 
certain renewable resources, such as wind power, are most available. On 
the other hand, if customers plug in their cars at 6 p.m. and there are 
no economic incentives or communication and control technology to drive 
different customer behavior, then the nation could be worse off both in 
terms of efficient grid operation and in controlling emissions from 
fossil generation.
    Mr. Huber details PJM's participation in three projects 
demonstrating and evaluating use of PHEVs for grid storage-- the 
University of Delaware's Mid-Atlantic Grid Interactive Car Consortium 
(MAGICC), The Ohio State University's SMART@CAR initiative and the 
North Carolina State Freedom Engineering Research Center. The first 
MAGICC plug-in electric vehicle has been responding in real-time to the 
PJM regulation signal since October 2007 and has provided a wealth of 
data on the use and value of vehicle-to-grid operation. This month, 
AES, PJM and the University of Delaware will be aggregating three 18 KW 
vehicles with a 1 MW stationary battery trailer. This is the first 
demonstration of vehicleto-grid plug-in electric vehicles actively 
participating in any regulation market and providing a cash return to 
the vehicle owners. The three vehicles will be earning between $7-10 
each for the 18-20 hours they are plugged in and contributing to the 
regulation storage needs of the grid. The batteries in plug-in electric 
vehicles become a source of regulation service that is more distributed 
and therefore provide the same, and in some cases, superior regulation 
service to what is today provide by central station generation.
    Mr. Huber concludes his testimony by outlining some of the policy 
challenges associated with wide scale deployment of PHEVs. These 
include: (1) ensuring coordination between the transportation and 
electric industries on vehicle design and development; (2) addressing 
ownership rights associated with infrastructure and the sale of 
electricity to PHEVs; (3) ensuring seamless ``roaming'' and ability of 
back-office billing and settlement systems to match cars with electric 
customers; and (4) the role of enforcement of interoperability 
protocols being developed through the National Institute of Standards 
and Technology (NIST) process. Mr. Huber suggests that continued 
Committee oversight and focus on these issues will help to underscore 
the national and international policy benefits of ``smart'' plug-in 
hybrid electric vehicle technology.
 testimony of kenneth huber, senior technology and education principal
    On behalf of PJM Interconnection, L.L.C. (PJM), I want to thank the 
Committee for the opportunity to participate in this important 
discussion of the role of grid-scale energy storage in meeting the 
energy and climate goals of the United States. My name is Kenneth Huber 
and I am Senior Technology & Education Principal at PJM. My goal today 
is to discuss the reliability and economic value of grid-scale storage 
both for today's grid operation and for forecasting future grid 
operations. I will also discuss the value of storage as it relates to 
the anticipated emergence of renewable energy resources.
    PJM is a Regional Transmission Organization (RTO) and one of the 
seven Independent System Operators (ISOs) and RTOs located throughout 
the country. PJM is responsible for the reliability of the bulk power 
grid in a 13-state region which encompasses over 51 million Americans. 
PJM operates the bulk power grid in this region, plans transmission 
expansion and operates the largest competitive wholesale electricity 
market in the world. Over two thirds of the nation is served by RTOs 
and ISOs. As an independent entity, we are dedicated to ensuring open 
access to the grid and embracing many new and sometimes competing 
technologies. PJM was privileged recently to be a recipient of one of 
the Department of Energy's Smart Grid grants -- a grant for the 
installation of phasor measurement units to enhance the overall 
visibility of grid conditions on a minute-byminute basis and to improve 
the overall efficiency of the grid operations.
    To keep the lights on, PJM must perform the real-time balancing of 
the electrical grid -- every second of every minute of every day, PJM 
matches electricity demand with the `least-cost group' of electricity 
generation and demand response resources. The dispatch of over 1,200 
generators on our system must be undertaken with recognition of the 
physical constraints of the electric transmission system and the need 
to ensure adequate reserves available to keep the lights on in the 
event of a sudden loss of generation or transmission. This challenging 
balancing of the grid is complicated by the unique physics of 
electricity. Electricity is not like oil which can be refined and 
stored easily for long periods until the time it is needed. Electricity 
must be generated at the near moment that it is required. I will 
discuss how grid storage, with a particular focus on plug-in electric 
vehicles, can and is being used to assist in this system balancing 
requirement. I will also highlight the specific activities PJM is 
undertaking to jump start the deployment of ``smart'' plug-in hybrid 
vehicles in our footprint, as well as, briefly address some of the 
policy challenges that will affect further deployment of plug in hybrid 
electric vehicles.
                      the state of the grid today
    Contrary to the beliefs of some, the bulk power grid already is 
very interactive and ``smart''. Today, we have more sophisticated 
operations and market-based tools to manage flows on the grid than ever 
before. These tools include our state estimator which monitors and 
reports on the state of the system every two minutes. They include our 
ability to redispatch generation to proactively clear congestion before 
reliability is threatened by overloads on a given transmission line or 
set of lines. In short, we have been able to utilize technology to help 
manage power flow more efficiently than in years past.
                   new opportunities--a smarter grid
    Although the bulk power grid can be considered ``smart'' today, 
emerging technologies and enhanced communication will put in place an 
even more robust grid. Advanced technology will open a new frontier for 
the grid in many ways. A grid that is based on smart grid technology, 
when coupled with electrification of transportation and the delivery of 
more real-time information, will provide new opportunities to better 
manage the grid and control both for price and environmental 
externalities. PJM is actively working on the agreement of and the 
eventual creation of the capabilities and role of the RTO/ISOs that 
will deliver that smarter grid. We are accomplishing this goal through 
active participation in the National Institute of Standards and 
Technology (NIST) Smart Grid Interoperability Panel, the North American 
Electric Reliability Council (NERC) Smart Grid Standards Task Force and 
the North American Energy Standards Board (NAESB) Smart Grid Standards 
Task Force. I have been focusing my participation in the NIST Priority 
Action Plans for Storage and Electric Transportation and am a voting 
member of the Society of Automotive Engineers (SAE) standards process.
             grid storage--a key element of a smarter grid
    PJM Interconnection supports projects of all types to expand the 
electricity storage capability of the electric grid. More storage 
capacity will be needed to deal with the forecasted major expansion of 
intermittent renewable energy sources and their potential impact on 
system reliability.
    One of the challenges facing grid operators like PJM is the 
inability to ``store'' electricity for use at times of high demand or 
when certain generation may be operationally or environmentally 
constrained. However, new technologies are being developed and tested 
that offer the promise of more widespread storage options for grid 
operators and utilities. These technologies will become even more 
important as intermittent renewable energy sources play a greater role 
in the nation's electricity supply.
    Today, additional options for storing electricity are emerging and 
are being tested. These technologies--such things as battery arrays, 
flywheels, compressed air energy storage and even PHEVs\1\--may give 
grid operators additional flexibility in their efforts to ensure the 
reliability of the electric system. After outlining the general storage 
needs of the grid, I will be concentrating the bulk of my testimony on 
the grid storage applications afforded by PHEVs.
---------------------------------------------------------------------------
    \1\ The term PHEV used in this testimony refers to different types 
of plug in electric vehicles including plug-in hybrid vehicles, 
extended range electric vehicles and battery extended vehicles.
---------------------------------------------------------------------------
    There are a number of reasons why additional storage capacity is 
needed on the grid. The dramatic expected increase in the penetration 
of renewable generation resources is the primary driver. These sources 
typically are intermittent--their production isn't available all the 
time, for example, when the wind isn't blowing or the sun isn't 
shining--and their output may not be available at times of peak demand 
when it is needed most.
    In recent years, the nameplate capacity value of wind generation 
projects entering the PJM interconnection queues has steeply increased. 
There are currently 3,300 MW of nameplate wind capacity in operation, 
1,500 MW under construction and approximately 42,000 MW nameplate 
capacity of wind generation in the interconnection queue in PJM.
    Taking full advantage of renewable sources while dealing with the 
reliability challenges of the sources' power fluctuations will require 
a significant increase in storage on the grid.
    Although the PJM system is one of the nation's largest and thus 
able to absorb a greater degree of intermittency than smaller systems, 
the lack of sufficient storage already is causing issues for PJM. In 
some areas, abundant wind production in the off-peak (night-time) hours 
has forced electricity prices into the negative range. During low load 
periods, storage will become critical to prevent curtailment of this 
wind generation. Figure 5 is illustrative of a common occurrence in PJM 
in which the wind output is rapidly declining just at the time (5:00 
a.m. in this example) when the grid load is beginning its morning 
period of rapid load increase. Negative prices for wholesale 
electricity frequently result from these conditions. In this example 
the Locational Marginal Price of electricity in Chicago fell to minus 
$8. On this day at this hour, in order to maintain the system's load to 
generation balance, a storage facility would have been paid to store 
energy. From a PHEV perspective, the vehicle owner would be paid to 
charge their car during that hour.
    Given the states' requirements for renewable energy and economic 
incentives for the development of renewable projects, the expected 
expansion of renewable power will magnify this situation, along with 
the challenges for grid operators to maintain reliability during such 
periods of fluctuations in the output of these power sources.
           new battery and vehicle grid storage technologies
    Battery storage.--A one-megawatt (MW) array of lithium-ion 
batteries began offering regulation service in the PJM market in May of 
this year. The batteries, housed in a trailer on the PJM campus, are 
owned by AES Energy Services LLC, a subsidiary of The AES Corp., a PJM 
member. The facility can help PJM quickly balance variations in load to 
regulate frequency as an alternative to adjusting the output of fossil-
fuel generators; it is capable of changing its output in less than one 
second. In response to PJM requests to balance the grid, the battery 
unit can supply power into the grid by discharging its batteries or 
store excess electricity from the grid to charge its batteries. Thirty 
four MWs of battery storage have been put in the PJM generation queues 
for 2010.
    PHEVs.--The dual use of PHEV batteries to support both 
transportation (when the vehicle is being driven) and the grid (when 
the vehicle is parked and plugged in) is particularly attractive. Most 
vehicles are driven only several hours per day and are plugged in and 
available to provide grid support for the remaining time in the day. 
Fleet vehicles, while driven 8-12 hours per day, are typically returned 
to the same location and available for grid services the remaining 12-
16 hours of the day.
    Off-peak electricity from the grid could charge PHEVs, shifting 
load to the night-time hours. In addition, PHEVs also could provide 
regulation services to the grid whenever parked.
    Regulation service, provided today principally by central station 
generators, matches generation and load and adjusts generation output 
to maintain the desired 60 Hz frequency. Regulation service corrects 
for short-term changes in electricity use that might affect the 
stability of the power system. Regulation is needed throughout the day 
and night to ensure system frequency despite constant fluctuation in 
demand and generation. Grid operators must continuously match the 
generation of power to the consumption. Regulation requires a 
generating facility that can ramp power up or down under real time 
control of the grid operator.
    PJM is part of three initiatives -- the University of Delaware's 
Mid-Atlantic Grid Interactive Car Consortium (MAGICC), The Ohio State 
University's SMART@CAR initiative and the North Carolina State Freedom 
Engineering Research Center--each of which is analyzing, demonstrating 
and evaluating use of PHEVs for grid storage. The MAGICC vehicle has 
been responding to the PJM regulation signal since October 2007 and has 
been evaluating the vehicle-to-grid (V2G) approach, which enables PHEVs 
to discharge their stored power to the grid based on regulation signals 
from PJM. This month AES, PJM and the University of Delaware will be 
aggregating three 18 KW vehicles with the 1 MW stationary battery 
trailer (Figure 6). This is the first realization of the `cash-back' 
vehicle\2\ as the three vehicles will be actively participating in the 
PJM regulation market and earning between $7--$10 each for the 18-20 
hours they are plugged in and contributing to the regulation storage 
needs of the grid. The annual payment for each of these vehicles will 
be in the order of $2,500 to $3,500.
---------------------------------------------------------------------------
    \2\ ``How To Improve The Efficiency Of The World's Biggest 
Machine--While Solving A Few Other Problems Along The Way,'' Jon 
Wellinghoff, Commissioner, Federal Energy Regulatory Commission, May 7, 
2007.
---------------------------------------------------------------------------
    Of particular interest is the opportunity for automotive fleets to 
become an early adopter of PHEVs and showcase the direct economic and 
environmental value for both transportation and grid support. Local 
delivery fleets suffer from low fuel mileage, idle a large percentage 
of their time and are economically impacted by any increase in price of 
gasoline. As PHEVs, these fleet vehicles would charge at night with 
inexpensive electric, be available for regulation services and market 
revenues and would deliver green transportation while serving our 
neighborhoods.
    Plug-in hybrid vehicles represent an exciting new opportunity to 
provide both ancillary services to the grid and utilize the power 
system assets more efficiently. If done right, plug-in hybrid vehicles 
can enhance the efficiency of the grid by shifting load to off-peak 
nighttime hours. On the other hand, if everyone plugs in their car at 5 
p.m. and there are no economic incentives or communication and control 
technology to drive different customer behavior, a much higher peak 
load would have to be supported by high cost generation.
    Figure 9 shows the minimal impact of 180,000 PHEVs (1,000,000 
vehicles times the 18% of the nation's population that resides in the 
PJM territory). It also illustrates the potential for supporting 25 
million PHEVs if the charging is done at off peak times.
    The auto industry and the electric industry also must work together 
to make the future PHEVs deliver on their potential to reduce oil 
imports, to reduce carbon dioxide and to reduce the cost of 
transportation. The automobile manufactures, the local utilities, the 
RTO/ISOs and the Electric Power Research Institute (EPRI) are meeting 
regularly to discuss and work through the needs of our industries and 
of the end-use consumer to provide reliable, clean and economic 
transportation and electricity use.
    A mixture of all of these storage technologies will help grid 
operators and utilities address the impact of a large-scale addition of 
renewable energy sources to the electricity system, including the 
intermittent nature of renewables, the off-peak timing of much wind 
energy output and the potential impact on the loading levels of 
baseload coal and nuclear plants.
                           policy challenges
    While today we are seeing aftermarket conversions of plug-in hybrid 
electric vehicles (e.g. the BMW Mini) production vehicles from original 
equipment manufacturers will begin with the deployment of plug in 
hybrid electric vehicles in 2010, such as the Chevrolet Volt. As I 
mentioned previously, to truly realize the full benefit of PHEVs rather 
than simply swapping one set of increased emissions for another, we 
will need to ensure that there is smart charging of the vehicle with 
two way communications available between the vehicle and the grid. The 
customer remains in control. However, through appropriate price and 
control signals, parked plug-in hybrid electric vehicle, can provide a 
source of distributed generation that can better help us to manage the 
grid than we can today with large central station generators distant 
from the loads. And by using price signals to incent vehicle owners to 
charge their cars in off-peak times, we can avoid creating a whole new 
set of system peaks at the very time we are seeking to reduce carbon 
emissions and otherwise smooth out fluctuations in peak demand.
    To achieve this vision, we will need to address a number of policy 
issues, some of which are well on their way to resolution and others 
which are only first being identified. Let me outline a few for the 
Committee's consideration:

          Cooperation and coordination between the electric and 
        transportation industries--These industries have traditionally 
        not had to adjust their product to meet the needs of the other. 
        However, both industries have now recognized the need to 
        collaborate on infrastructure requirements, data exchange and 
        ensuring a positive, holistic experience for the PHEV customer. 
        The industries are working together in many forums, including 
        the Society of Automotive Engineers standards activities, the 
        EPRI PHEV collaboration programs and many local deployment 
        projects. To truly realize the benefits of PHEVs, these 
        collaborations will need to result in agreements on the minimal 
        information that must be exchanged, the ownership of the data 
        and how usage and revenue will be measured and verified.
          Infrastructure Deployment--As part of the deployment of the 
        smart grid, we will need to tackle issues such as who owns the 
        infrastructure down to the outlet and what constitutes a 
        permissible vs. impermissible sale for resale of electricity. 
        For example, would the outlets deployed at a Walmart 
        sm \3\ parking lot be owned by Walmart, a separate 
        aggregator or the local utility? Would Walmart serve as the 
        intermediary between the utility and the customer and aggregate 
        the purchase of electricity to vehicles on its lots during the 
        day. For residential uses, can a landlord of an apartment 
        building insist that he or she own the infrastructure? Does a 
        customer have a ``right'' to connect in order to charge their 
        battery (so long as they are financially in good standing with 
        the electric company) just as customers have a right to 
        electric service under state law today? The industry is 
        beginning to consider these regulatory and policy issues. Let 
        me give an example of a working system today; AES has 
        aggregated its 1 MW stationary battery system with the three 18 
        KW plug-in electric vehicles in the University of Delaware. The 
        total energy of 1.054 MW participates in the PJM Regulation 
        Market. AES allocates approximately 5% of the PJM market 
        payment to the University of Delaware and AES is allocated 95%. 
        The University vehicles are plugged in at home and at the 
        university and the net usage of the vehicle is measured on 
        standard utility meters and usage payments are made to the 
        local utility (Delmarva Power and Light). A retail net metering 
        tariff completes the picture allowing the customer to 
        participate in the service he or she is providing to the grid.
---------------------------------------------------------------------------
    \3\ Walmart is a service mark of Wal-Mart Stores, Inc
---------------------------------------------------------------------------
          To tackle these questions more broadly, we will all need to 
        look at the typical utility tariff in a new light and determine 
        what is the best legal relationship that is fair to the 
        utility, the vehicle owner and the owner of the garage or 
        parking lot itself.
          Roaming--Although the plethora of different electricity rates 
        by geography is often cited as an impediment to properly 
        linking mobile cars to customer accounts, I do believe that 
        technology development from the transportation and 
        telecommunication industries has provided us clear guidance in 
        this area. Today, states still have a variety of different toll 
        rates on their highways just as different cellular companies 
        have different rates and plans. The advent of the E-Z Pass 
        demonstrates that these different state and utility 
        requirements can be harmonized and a system of billing and 
        collection can be managed for vehicles. We will need the 
        ``smart'' grid to be able to identify vehicles and their 
        location and match them to utility customers. We will further 
        need to develop new inter-utility billing and settlement 
        systems to manage this mobile fleet. But, at least from a 
        technology viewpoint, the path forward on this issue has 
        already been demonstrated.
          Need for Comprehensive Interoperability Standards -- The 
        Smart Grid Interoperability Panel work of the NIST with 
        cooperation of the automotive companies, utilities and the RTO/
        ISO is actively addressing and coordinating this need in the 
        NIST Electric Transportation Priority Action Plan. Of critical 
        importance is the need for deployment that conforms to the NIST 
        interoperability agreements and for appropriate enforcement at 
        the state and federal level.
          Need to Retain Policy Focus -- The future of PHEVs as an 
        energy storage resource is highly dependent on close 
        coordination between the electricity and transportation 
        industries -- two industries that have had limited interaction 
        in the past. Moreover, the infrastructure needed to be deployed 
        potentially spans the traditional jurisdictional reach of both 
        federal and state regulators and policymakers. As a result, 
        continued Congressional oversight on this issue and the 
        progress being made would be helpful to underscore the 
        importance of PHEV deployment to meet national (and even 
        international) policy goals We at PJM look forward to working 
        with this Committee and the Congress as a whole as we move 
        forward in this important area.

    [All figures have been retained in committee files.]

    The Chairman. Thank you very much.
    Mr. Mainzer.

   STATEMENT OF ELLIOT MAINZER, EXECUTIVE VICE PRESIDENT FOR 
      CORPORATE STRATEGY, BONNEVILLE POWER ADMINISTRATION

    Mr. Mainzer. Thank you, Chairman Bingaman, Ranking Member 
Murkowski. I really appreciate the opportunity to be here this 
morning.
    My comments today are focused on the role that storage 
technologies could play in the context of a set of initiatives 
we are undertaking to improve our ability to integrate variable 
renewable generation into the Federal Columbia River Power 
System.
    As of this morning, we now have 2,500 megawatts of wind 
energy connected to our system, having seen another 200 
megawatts come online just this past week. We are planning for 
3,000 megawatts by the end of 2010 and as much as 6,000 
megawatts by 2013. Figure 2 of my written testimony portrays 
this rapid pace of growth.
    Like our colleagues at PJM, as we integrate this variable 
supply of renewable energy, we must maintain system 
reliability. When actual wind generation varies from scheduled 
generation, we must dispatch or curtail other generation in 
very short time to maintain system balance.
    With 2,500 megawatts of wind, we have seen swings of more 
than 1,000 megawatts in less than an hour on our system, and 
there is limited correlation between wind generation and system 
demand, often leading to surpluses of wind generation during 
off-peak periods. Figure 3 in my written testimony illustrates 
the type of variability we are seeing on our system.
    To date, we have been able to use our existing hydro assets 
to manage the variable output of the wind on our system, but we 
do not expect to be able to integrate all of the expected wind 
generation without making some infrastructure investments as 
well as commercial and operational changes.
    As a result, we are working on three categories of actions 
to increase the amount of wind that could be interconnected to 
the BPA system. These include, first of all, constructing 
additional transmission capacity; second, developing mechanisms 
to stretch the balancing capacity of our existing hydro assets 
as far as possible; and third, exploring the development of new 
resources to provide generating capacity and flexibility.
    With respect to transmission, BPA has proposed three new 
transmission projects that will facilitate collectively 1,800 
megawatts of new wind generation. We have begun the 
environmental review process for those three projects. With 
additional borrowing authority provided by the American 
Recovery and Reinvestment Act, we are ahead of schedule on the 
construction of a fourth line that will support 575 megawatts 
of additional wind generation.
    These transmission projects resulted from the completion of 
our 2008 network open season process. The network open season 
allowed us to efficiently process our queue of transmission 
service requests and set priorities for financing and building 
transmission projects. This was a significant development 
because it addressed planning and financing barriers that 
impede transmission construction for renewable energy 
development across the Nation.
    It also allowed us to confirm the most efficient use of our 
existing transmission system before proposing new construction. 
On the reliability and operations front, BPA has established a 
wind integration team that is working with the wind community 
on a set of initiatives designed to increase the amount of wind 
generation that can be supported from the existing capacity of 
the Federal hydro system.
    These initiatives include developing new operating 
protocols to manage extreme wind variability, investing in new 
wind forecasting applications, developing new scheduling 
practices to manage generation imbalances, and enabling 
customers to seek sources of wind integration services from 
other suppliers besides BPA.
    More broadly, we are collaborating with other balancing 
authorities in the western interconnection to pool resources 
and increase the availability of cost effective balancing 
services. These types of collaborative activities are an 
essential part of an effective renewable integration strategy 
for the Western United States.
    Ultimately, although we do intend to wring all of the 
efficiencies that can be wrung from the existing system, it is 
likely that the region will need to add additional capacity and 
flexibility resources to assist with the management of variable 
generation. To prepare for that day, we have begun to explore 
storage options. We are working with the Pacific Northwest 
National Laboratory on their study of various storage 
technologies, including pumped storage, compressed air, 
batteries, and flywheels.
    We are looking forward to seeing the results of this 
analysis and giving further consideration to such variables as 
cost, sustained capacity, location, and lead times that will 
impact the economic viability of these technologies in the 
Pacific Northwest. Given the hydroelectric profile of our 
generating resources, we are placing particular emphasis on 
pumped storage. Pumped storage has potential to provide a 
variety of grid support services and to shape the variable 
output of wind and other renewable resources into firm blocks 
of power with energy and capacity value.
    BPA is working with our partners at the Bureau of 
Reclamation and Army Corps of Engineers to explore the 
potential for additional pumped storage in the Pacific 
Northwest. We expect to have an initial evaluation complete in 
mid 2010.
    Mr. Chairman and Ranking Member Murkowski, I appreciate the 
opportunity to be here with you today and relate our experience 
in leveraging the capabilities of the Federal Columbia River 
Power System in support of new renewable electric generation. I 
am happy to respond to any questions.
    Thank you.
    [The prepared statement of Mr. Mainzer follows:]
  Prepared Statement of Elliot Mainzer, Executive Vice President for 
          Corporate Strategy, Bonneville Power Administration
    Thank you, Mr. Chairman. My name is Elliot Mainzer and I am the 
Executive Vice President for Corporate Strategy for the Bonneville 
Power Administration (BPA). I am pleased to be here today to describe 
the significance of BPA's efforts to facilitate wind energy into the 
Western transmission system and the role storage technologies could 
play as one tool in the suite of initiatives we are developing to 
improve our ability to integrate variable renewable generation into our 
grid.
                               background
    BPA, established in 1937 by an Act of Congress, is a power 
marketing agency within the Department of Energy. Our headquarters are 
in the Pacific Northwest, where we operate about three-quarters of the 
high voltage transmission system and market the power from 31 federal 
dams in the Columbia River Basin as well as the output of one nuclear 
plant. We supply about 40 percent of the Northwest's electricity, 
selling at wholesale and at cost.
    Our service area covers Washington, Oregon, Idaho, western Montana, 
and small parts of eastern Montana, California, Nevada, Utah, and 
Wyoming. BPA is a self-financed agency that recovers its full costs and 
repayment obligations from power and transmission rates. Our power 
customers include Northwest cooperatives, municipalities, public 
utility districts, federal agencies, investor-owned utilities, direct-
service industries, port districts, irrigation districts, and tribal 
utilities.
    We sell transmission and related services to more than 200 
utilities, power generators (including wind generators), and power 
marketers. Pursuant to our open access tariff, BPA provides 
transmission services to all customer utilities, power generators and 
marketers under the same rates, terms, and conditions that it applies 
to its own Power Services business line for use of transmission 
services.
            renewables development in the pacific northwest
    BPA is maintaining a remarkable pace of connecting new renewable 
wind generation to its transmission system. All but one of the states 
in our service territory have enacted renewable electric generation 
standards for their retail utilities. These requirements, coupled with 
those of other Western states, have brought developers to our area 
looking for opportunities to develop and sell new renewable generation. 
They come to us for transmission services because of the capacity of 
our existing transmission system and the proximity of reasonably good 
sites for wind generation. To date we have almost 2,300 megawatts of 
wind generation connected to our system.
    Figure 1* shows the three categories of actions we are working on 
to expand wind power interconnection to the BPA system: 1) constructing 
additional transmission capacity; 2) developing the means to provide 
additional balancing services for reliability from existing system 
assets, and; 3) exploring the development of new resources that provide 
capacity and flexibility.
---------------------------------------------------------------------------
    * Figures 1-3 have been retained in committee files.
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                              transmission
    The large amount of new wind generation in our region, combined 
with increases in electricity demand due to a growing population and 
changing patterns of seasonal energy use, has led BPA to propose three 
new transmission projects that will collectively facilitate about 1,800 
megawatts of new wind generation. We have begun the environmental 
review process for those projects. With additional borrowing authority 
provided by the American Recovery and Reinvestment Act of 2009 (ARRA), 
we are ahead of schedule on the construction of a fourth line--the 
McNary to John Day 500-kilovolt transmission line that will support 575 
megawatts of additional wind generation.
    Our proposals for these projects, and the decision to begin 
construction on the McNary to John Day project, resulted from the 
completion of our first-in-the-nation 2008 Network Open Season. The 
Network Open Season is a new commercial approach to manage transmission 
requests and set priorities for financing and building transmission 
projects. BPA's first Network Open Season resulted in 6,410 megawatts 
of transmission service requests with financial commitments by the 
customers who asked for the service. Three-quarters of the requested 
service capacity were for wind generation. Because we were able to 
clarify commitments to take transmission service, we were able to 
accommodate more than 20 percent of the requests with existing 
capacity. We were also able to offer a new Conditional Firm service to 
provide still more transmission service from the existing capacity of 
the system. These approaches are significant because they resolved 
planning and financing barriers that impeded transmission planning for 
renewable energy development across the Nation. They also allowed us to 
confirm the most efficient use of our existing system to serve new 
renewable generation before proposing new construction. We are 
completing our second Network Open Season and will continue to conduct 
the process annually.
                              reliability
    The pace of wind development and its concentration in our balancing 
authority, as shown in Figure 2, was initially surprising to us. Only 
five years ago, the Northwest Power and Conservation Council (Council), 
the four-state entity responsible for long-range energy resource 
planning in our region, projected that the region could support 6,000 
megawatts of wind development by 2025. In response, BPA and the Council 
convened the Northwest Wind Integration Forum, a regional steering 
committee and technical work group, to evaluate wind integration issues 
and develop a Wind Integration Action Plan. The Plan emphasized that 
wind energy is a renewable resource that can lower the fuel consumption 
and environmental emissions of other resources, but that wind energy 
cannot provide reliable electric service on its own. The Plan said that 
wind generation, with its natural variability and uncertainty, 
increases the need for flexible resources or dispatchable loads to 
maintain utility system reliability.
    Almost five years after the Council's projection, we now expect we 
could be asked to connect 6,000 megawatts to our system alone and as 
soon as within the next four years. Much of that development remains 
concentrated in areas of Washington and Oregon east of the Columbia 
River Gorge. We have among the highest penetration in the country of 
wind generation relative to peak load on our system.
    The substantial amount of wind on our system has given us 
significant insight into the challenges of maintaining reliability with 
a large amount of variable generating resource. The nature of wind 
generation is, of course, that it increases and decreases depending on 
the weather. On our system that can mean swings of more than 1,000 
megawatts in less than an hour. We have also found that there is 
limited correlation between wind generation and system demand, often 
leading to surpluses of wind generation during off-peak periods. When 
the wind generation is concentrated as geographically as it is in the 
Pacific Northwest, it intensifies the magnitudes of its peaks, valleys 
and ramps, as Figure 3 illustrates. Electric power systems must 
perfectly balance generation and load in real time. We must dispatch or 
curtail other generation in very short time frames when actual wind 
generation varies from scheduled generation. This type of balancing is 
necessary to maintain electric system reliability.
    Balancing variable generation using the flexibility of the existing 
hydro system has been a major focus for us. To date, we have been able 
to use our existing hydro assets to manage the variable output of the 
wind on our system. In essence, we are able to operate the 
hydroelectric system as a giant storage battery for the variable output 
of the wind while simultaneously meeting regional power demands 
consistent with our obligations to protect, mitigate, and enhance fish 
and wildlife. However, the system has its limits if reliability is to 
be maintained.
    The greater the amount of hydro capacity we must maintain to 
support the growing wind resource, the more significant are the cost 
implications for our public power customers, and the greater are the 
reliability implications for the transmission system. The cost issues 
stem from the changes in system operations we must make in order to 
ensure we have sufficient reserve capacity to meet demand if the wind 
generation forecasted by the wind operators does not closely match 
actual generation. Until last year, the costs of carrying such reserves 
were paid by our public power customers. Because the amount of reserve 
capacity needed to support the burgeoning wind resource also grew, the 
cost to our public power customers also increased. This concern was 
exacerbated by the fact that approximately 80 percent of the wind 
interconnected to our system is sold for delivery to utilities outside 
of our balancing authority. Consequently, the cost of balancing wind 
generation is a concern for our public power customers who do not use 
the resource, yet were covering the cost of integrating it. In 2008, 
BPA began to charge the wind generators a portion of the cost of 
holding the reserves needed to manage the variability of the wind 
generation. When a revised wind integration rate was first proposed for 
2009, it represented a significant increase in the cost of integrating 
wind for the wind developers. This was primarily due to the fact that 
we now had more wind on the system and it was creating additional 
costs. In response, BPA and the wind developers held many discussions 
that resulted in several new initiatives designed to maintain the 
reliability of the transmission system, yet at a lower cost to the wind 
generators and their customers.
    Establishing a rate for wind integration also sent a price signal 
for the cost of wind integration services that is encouraging wind 
operators to more efficiently use those services. This stretches the 
capability of the existing system, allowing more wind to interconnect 
to our system.
    The decisions in this last rate case have already bought us time 
relative to the need to secure new generating resources for balancing 
services. In addition, we are exploring additional strategies to 
increase the amount of wind we can reliably integrate into the system. 
We have agreed with the wind community on a set of initiatives we 
expect will allow still more wind to connect to our system without 
building new balancing resources. The initiatives we agreed to pursue 
hold promise to secure additional breathing room by allowing us to 
wring more efficiencies from operational improvements, and from 
collaboration with the wind generators and our neighboring transmission 
systems.
    These initiatives encompass developing new operating protocols for 
our system, working with our partners in the Western Interconnection to 
pool resources and increase the availability of balancing services, and 
working with our customers to improve the accuracy of wind forecasting 
to allow a larger amount of wind generation to be supported from the 
existing reserve capacity of the hydrosystem. We think these 
initiatives can make a significant dent in the amount of balancing 
reserves needed to support a tripling of the wind generation supported 
by our system, allowing more wind to be connected to our system, and 
limiting the costs to the wind generators and their utility customers.
        operating protocols and improved forecasting initiatives
    BPA has established an internal Wind Integration Team (WIT) to 
implement new operational and forecasting tools. Earlier this year, BPA 
met with its stakeholders, including wind developers, to determine 
which of the WIT initiatives are of the highest priority to the region. 
BPA reached agreement on pursuing several high-value initiatives with 
an estimated cost for completion of up to $15 million over two years. 
The accelerated initiatives include:

          Wind Forecasting: In October 2009, BPA completed installing 
        14 new wind measurement sites. We will share the new wind 
        measurement data in real-time with all interested parties. We 
        expect to develop a complete wind forecasting system by March 
        2010. By September 2010, we will give BPA dispatchers displays 
        of real-time wind generation and next-hour wind forecasts so 
        dispatchers can better anticipate changes in wind output and 
        adjust generation to make more efficient use of combined wind, 
        hydro, and other available resources.
          Dynamic Transfer Limits Study and Pilot Project: We are 
        working with our neighboring transmission systems to develop 
        new methods to determine the transmission available to allow 
        one of our utilities to remotely control and manage a power 
        plant in another utility's transmission system. This is known 
        as dynamic transfer, and such capability would allow us to 
        serve more variable generation than the hydro system could 
        otherwise support. We expect this study to be completed by mid-
        February 2010. Shortly thereafter, we will launch a test of 
        such capability on a set of Pacific Northwest transmission 
        interconnections to gain experience in the operational 
        technology.
          Wind Generators' Self-Supply of Reserves: BPA is also 
        planning to use the results of the Dynamic Transfer Limits 
        Study to allow wind projects to purchase balancing reserves 
        from suppliers other than BPA. This enables wind projects to 
        manage their own costs in acquiring balancing services. BPA, 
        the receiving utility and the appropriate wind project all must 
        install significant control and communications equipment to 
        make this work. By October 2010, BPA will launch the first 
        pilot project for self-supply of generation imbalance reserves.
          Intra-Hour Scheduling: Our current transmission scheduling is 
        based on 60 minute delivery schedules. We are developing tools 
        to allow power schedules to change at the half-hour as well as 
        the hour to let customers sell power from fast changes in wind 
        output. This would help reduce reserve requirements and 
        maintain the transmission system's reliability. Last week, we 
        initiated a pilot project to test such practices.
                          operating protocols
    In the power and transmission rate cases for Fiscal Years 2010 and 
2011, we worked with wind developers on an operating protocol that 
allows us to maintain lower levels of reserves while at the same time 
protecting system reliability. This protocol defines procedures that go 
into place when we are close to depleting our reserves because of the 
gap between actual wind generation and what was scheduled. We began 
implementing the protocol this fall and, in return, the customers' rate 
for balancing services is lower by nearly a half than we originally 
proposed. Essentially, the wind customers accepted more risk in return 
for a lower rate. They have also responded by investing in improving 
the accuracy of their scheduling. We appreciate the effort they made to 
help us reach these outcomes.
                               smart grid
    We are also a partner in two significant regional smart grid 
efforts that have recently won funding from the Department of Energy. 
The first is the $53 million Western Electricity Coordinating Council 
(WECC) project that will test a large-scale synchrophasor measurement 
system with smart grid functions. The benefits would include increased 
transfer capability, better congestion management, and improved 
efficiency and lower costs for supporting variable renewable 
generation. The second is the Pacific Northwest Smart Grid 
Demonstration Project led by the Battelle Memorial Institute. That 
project received $89 million in ARRA funds from the Department of 
Energy. It spans five states and includes 12 utilities. The objectives 
of this demonstration project include validation of new smart grid 
technologies and businesses, quantifying smart grid costs and benefits, 
improving transmission system resiliency, and advancing 
interoperability standards and cyber security requirements for smart 
grid devices and systems. Both initiatives have the potential to 
significantly improve the regional transmission system's ability to 
facilitate variable renewable energy generation.
                          adding new capacity
    Ultimately, though we will wring all the efficiencies that can be 
wrung from the existing system, it is quite likely that the region will 
need to add additional resources to provide balancing services for 
variable renewable resources. To prepare for that day, we have begun to 
explore storage options. From a broad perspective, we are working with 
the Pacific Northwest National Laboratory on their study of various 
storage options including pumped storage, compressed air storage, 
batteries, and flywheels.
    At the same time, we are placing a particular emphasis on 
evaluating pumped storage. Given the hydroelectric profile of our 
generating resources, pumped storage appears to be particularly 
attractive to our region. Secretary of Energy Steven Chu emphasized 
this in his response to a letter written earlier this year by the four 
Pacific Northwest Governors, saying, ``Pumped storage has unique 
potential in the Pacific Northwest where a higher percentage of wind 
generation has already been integrated into the region's transmission 
system than anywhere else in the Nation.''
    Pumped storage facilities have been in commercial operation for 
decades. The technology was originally conceived as a means of using 
low value surplus energy generated during nighttime hours to store 
water that could then be used to generate more valuable energy during 
heavy load hours. Systems that rely on large centralized coal and 
nuclear generation anticipated the need for pumped storage much earlier 
than hydro-oriented systems. This was because thermal generation was 
difficult to reduce during periods of low demand and to ramp up quickly 
to meet the next peak demand. In the WECC area--encompassing 14 Western 
states plus Alberta and British Columbia, Canada--the thermal dominated 
systems are located primarily in California and the inland Southwest. 
That's why the large, existing pumped storage plants in WECC are 
located in those regions.
    The only existing pumped storage facility in the Pacific Northwest 
is in the state of Washington at Banks Lake, which is part of the 
Federal Columbia River Power System's (FCRPS) Grand Coulee complex. Its 
operation is largely dedicated to pumping water from Lake Roosevelt 
into Banks Lake to meet Bureau of Reclamation irrigation obligations. 
With the large recent penetration of variable renewable resources such 
as wind in the WECC area, pumped storage has the potential to be an 
additional resource that could be used to manage the variable output of 
wind projects and other renewable resources. BPA is currently exploring 
the potential for pumped storage in the Pacific Northwest, and expects 
to have its initial evaluation completed in mid-2010.
                               conclusion
    Mr. Chairman, I appreciate the opportunity to be here with you 
today and relate our experience in leveraging the reserve capabilities 
of the Columbia River power system in support of new renewable electric 
generation. We, our customers, wind developers, and our partner systems 
in the Western Interconnection have been on a steep learning curve. We 
will stay focused on the suite of measures I have described and 
continue our role in meeting the region's demand for new carbon-free 
resources. I am happy to respond to any questions from the Committee.

    The Chairman. Thank you all very much. Thanks for the 
valuable testimony.
    Let me start. Mr. Huber, I had breakfast with some folks 
this morning who were concerned--these are folks in the 
automobile industry, and they were saying that one of the 
challenges that we face in trying to move to plug-in hybrids is 
the lack of standardization and just the physical making 
available of the power to power the vehicles, I guess.
    They were saying not only is there variation between 
communities and between States. There is also variation from 
building to building within communities. Now I don't know if 
this standardization of communications that you referred to 
with NIST doing, are they trying to address that type of a 
concrete issue as well as the other types of standards that are 
needed to get to a smart grid?
    Mr. Huber. Mr. Chairman, there are many issues on the 
standards front, and some of them are being addressed by the 
Society of Automotive Engineers. That is the actual plug that 
is acceptable such that you can have public charging types of 
things.
    The actual communications between the vehicle and its 
connection point is another standard that is being addressed by 
the Society of Automotive Engineers. NIST and EPRI and others 
are working together to do the communications capability to 
bring the information from the grid to the vehicle. So there is 
an awful lot of activity there.
    There is a lot of concerns by the automotive companies, and 
my own perspective would be that the first generation of 
vehicles are not going to be as smart as what we would really 
like. But we are working closely with them, and I believe the 
evolution of those vehicles, when they start to become 
predominant, will be there.
    The Chairman. OK. I think, Mr. Masiello, you were talking 
about the need for planning methodologies for the use of 
storage in meeting our energy needs, I guess. It would seem 
that as the demand, as the peak demand for a utility continued 
to rise, a logical thing to do to meet the additional peak 
requirement--a logical thing would be to make a judgment. 
Should we meet that additional peak requirement through 
additional generation or meet that additional peak requirement 
through storage of some kind?
    As I am understanding you, you are saying that is not 
happening now, that kind of judgment is not made, or is it just 
that the options available for storage of power are 
insufficient to make that a real question?
    Dr. Masiello. What I was trying to say is that the utility 
planning engineers who are doing the design of distribution 
circuits or new transmission lines or capacity increases in 
substations rely on well-established methodologies. They use 
software tools, proven, available from a handful of suppliers, 
and the regulatory commissions are accustomed to seeing the 
results of those studies.
    Today, innovative utilities will start to look at storage 
as a solution. For instance, in west Texas, AEP put a 6-
megawatt battery in a substation to solve a transmission 
reliability problem, and it was much more economical than 
putting in a redundant transmission line.
    So the innovators are able to do it. But it is a very 
conservative industry, and utilities that don't have the 
engineering staff to solve the problems when they can't 
purchase the tools, say, will move more slowly.
    The Chairman. So what was your suggestion as to how we get 
these planning methodologies developed?
    Mr. Masiello. My suggestion was that, for instance, FERC 
could identify a point in time and say that as of, 
hypothetically, 2011 proposed new transmission projects, the 
plans for them should demonstrate that storage was considered 
as an alternative. Not necessarily approved or justified, but 
just that it was considered. I think that alone would trigger a 
lot of awareness and learning.
    The Chairman. OK.
    Senator Murkowski.
    Senator Murkowski. To continue, Mr. Masiello, you mentioned 
the issue of efficiency within storage and that is an area that 
we can really be looking to. I think you said about 70 percent 
efficiencies, but then you are losing 30. Are there any 
emerging technologies that we have either talked about here 
today or that are available that are more promising in terms of 
their level of efficiencies than others?
    I know we don't want to be picking winners and losers, but 
I am curious to know where we might see some gains.
    Mr. Masiello. Certainly. The advanced lithium ion 
technologies are well over 90 percent. The battery that Mr. 
Huber described in the PJM parking lot is one such. For 
regulation service in particular, high efficiency is very 
desirable.
    A storage system that is purely backup power that is only 
charged and discharged once or twice a year has a completely 
different problem, which is you don't want it to lose energy 
through self-discharge the way a car battery can. So the answer 
I think is there are technologies with different 
characteristics, and we are still learning which ones are best 
suited for which application.
    Senator Murkowski. Mr. Huber, you and the chairman were 
talking about standardization. Just in terms of necessary 
infrastructure to accommodate the integration of plug-in 
vehicles, where there is the charging stations, the electric 
metering, what do we really need in terms of meeting the 
infrastructure requirements to fully integrate? I know that is 
loosely defined, but how do we integrate the plug-in vehicles 
into the system. How much do we need in terms of investment 
infusion?
    Mr. Huber. Yes. A lot of that infrastructure is in place 
today. The communications capability with the utility is in 
place. There are well-defined standards. We have to find the 
acceptance from all the players, the RTOs and ISOs, the 
utilities, and the vehicles, to actually adopt those standards.
    The wireless communications to the vehicle is there to 
allow the communications. The charging infrastructure, the 
vehicles initially and even throughout are going to be 
primarily charged at home. So one of the infrastructure issues 
is for level one charging, 120 volts, to be able to plug in is 
pretty straightforward.
    When they go to level two charging, where I need 240 volts 
in my garage or I need it where it is made available, that is 
going to be one of the early challenges from an infrastructure 
point of view.
    Senator Murkowski. You mentioned the fleet vehicles and how 
we deal with that.
    Mr. Huber. Yes, very attractive because if I am fleet 
owner, I can construct the infrastructure in my facility, have 
it optimized to my actual devices and the communications, have 
direct communications, even private communications back into 
the grid. So that is a very attractive alternative.
    Senator Murkowski. In my opening comments, I mentioned 
specifically my interest in the pumped hydro and recognized 
that it has been the workhorse for utility-scale energy 
storage. But we recognize that suitable locations for pumped 
hydro are considered limited.
    Mr. Masiello, when was the last survey that we have had 
insofar as the potential sites for locating new pumped hydro? 
Do we have anything current out there that identifies?
    Mr. Masiello. I believe so, but I think Dr. McGrath 
probably is better equipped to answer that.
    Senator Murkowski. OK. We will punt to you, Dr. McGrath.
    Mr. McGrath. Yes, our laboratory is concentrating on 
identifying the resource base. More specifically, we tend to 
concentrate on non-hydro renewables. But as we heard earlier 
this morning, what is needed is an integrated simulation and 
model that can help us assess all of these capacities that are 
out there. These----
    Senator Murkowski. Do we have that model currently?
    Mr. McGrath. I don't have the answer to your specific 
question around where are the resources for pumped hydro. In 
many respects, they are largely in place, as we heard from our 
friends at Bonneville Power. Many of the existing operations 
have some of that capacity in place. I believe the number is 21 
gigawatts total of storage that is available currently across 
the country.
    Senator Murkowski. I assume we can add pumped storage 
stations to the existing hydro facilities. Is that correct, Mr. 
Mainzer?
    Mr. Mainzer. We are certainly looking at that. We have an 
existing pumped storage facility at the Grand Coulee complex 
known as Bank's Lake. It is about 315 megawatts of capacity, 
and part of our assessment is to see if it would be possible to 
expand the capacity of that facility. So we are going to be 
getting a good look at that between now and the middle of next 
year.
    More broadly, we are looking at the broader footprint of 
the Columbia River Power System to see if there are some other 
potential sites for pumped storage.
    Senator Murkowski. A follow-up questions because you 
prompted this, Dr. McGrath. At NREL, you have indicated that 
you are not really focused on the hydro side. Does the NREL 
model include the availability to add pumped hydro or the 
advanced battery technology?
    Mr. McGrath. Absolutely, Senator. One of the things that we 
have done is to establish partnerships, very specific and 
detailed partnerships with, for example, the Idaho National 
Laboratory, that has responsibility for--specifically for 
commercial nuclear power, for the National Energy Technology 
Laboratory and their responsibility for fossil. So we are 
trying to work with our sister laboratories and with 
researchers around the country to pull together a comprehensive 
plan.
    Within our Energy Systems Integration Facility, as I 
mentioned, we have advice coming from all of those different 
groups, looking to bring forward a collective system of energy 
information. I will use the word ``Google'' because we are, in 
fact, talking with them around putting together an energy 
information system that will allow planners and policymakers 
and technologists to access what are the potentials, where are 
the resources, how do we get at them, what is the state of the 
development of technology for their utilization?
    As Dr. Koonin mentioned this morning, what would help us 
tremendously is that overarching model of this rather 
complicated system and all the variables and options that come 
forward. So, we are looking forward to developing those models 
further in cooperation with experts from all areas.
    Senator Murkowski. Thank you. My time has expired, Mr. 
Chairman.
    The Chairman. Senator Udall.
    Senator Udall. Thank you, Mr. Chairman.
    Welcome to the panel. Dr. Masiello, thank you for your 
important testimony. Thank you also for taking some time to 
further educate me. I thought in your testimony, toward the 
end, there was a nugget of insight that really presents the 
opportunity that we have in front of us where you pointed out 
that the long-term implications of widespread mass deployment 
of storage across our power systems are profound.
    It holds the promise of dramatically increasing capacity 
utilizations of the generation, transmission, and distribution 
system and essentially enabling a deferral of capital spending, 
which could go to other uses that our society identifies. It 
also, I think, would result in an ideal setting where consumer 
prices would remain steady, perhaps even you would see benefits 
there to the consumer.
    So, in that spirit, I wanted to ask you about your 
testimony. You talked about loan guarantees would be a more 
effective tool than a tax credit. Do you envision such a loan 
guarantee program as supporting all types of storage, and could 
you expand?
    Mr. Masiello. I offered that thought because merchant 
developers, whether it is wind or storage, usually can't make 
direct use of a tax credit. The practice was that they would do 
a sale leaseback or some other arrangement with, say, Citicorp 
who would then take advantage of the tax credit, and the 
developer would get that reflected somehow in the financing.
    But the number of financial institutions in a position to 
take advantage of a tax credit has decreased, and consequently, 
developers can't create the same kind of financial packages to 
finance a wind farm or concentrating solar plant. So I was 
simply saying there may be other financial mechanisms, loan 
guarantees being one.
    I am a power engineer more than a financial engineer. So I 
am not sure I can get too much beyond that.
    Senator Udall. Thank you for that thought.
    Mr. McGrath, you mentioned that for renewable energy to 
really reach its full potential you have to have technologies 
for large energy storage developed and deployed. Can you expand 
a little bit on what NREL is working on to help us understand 
what type of technologies would be necessary and then how you 
would integrate those into the grid?
    Mr. McGrath. As has been mentioned earlier, there are a 
variety of technologies ranging from flywheels to flow 
batteries and to larger systems such as pumped hydro and 
compressed air storage. We are working with a number of groups, 
the Electrical Power Research Institution among them, to look 
at these various technologies.
    On the planning and policy side, the question also does 
come up again around where is the best place to deploy such 
storage? Is it large-scale storage at the point of origin of 
the power? For example, adjacent to the large-scale wind farm. 
If you put the stored energy there, then you potentially can 
confront congestion on the distribution system.
    Alternatively, the power or energy can be distributed and 
stored at the substation level or even at the community and 
residential level. So, there are tradeoffs both with cost and 
efficiency and system integration issues that come into play in 
all of those areas. Again, we are working with experts in all 
areas, trying to coordinate that type of analysis and planning.
    Senator Udall. So, at this point, you are exploring both 
the idea of a centralized storage approach and a decentralized 
storage approach. I understand you are currently working on a 
report that would touch on these issues. Is that correct?
    Mr. McGrath. We have been tasked by the Department of 
Energy to have a look at the renewable energy futures study, 
which asks us to try to envision what large-scale deployment of 
renewable resources would look like at the scale of 50 or even 
80 percent of our electric generation capacity. The question is 
what does such a State look like? What are the key elements of 
such a State?
    Of course, storage is a high priority and necessary part of 
such a situation. But we are excited about conducting that work 
this year and next.
    Senator Udall. I am, too. I look forward to receiving a 
copy of it when you complete it.
    Mr. Huber, if I could turn to you, you say that 34 
megawatts of battery storage has been put into the PJM 
generation queue for 2010. Do you anticipate more storage after 
2010? If so, how much? What do you expect the effect of that 
would be on the price of regulation services?
    Mr. Huber. Excellent, Senator. Actually, I anticipate more 
in 2010. Those are the initial two battery organizations who 
have come to us. One is lithium ion. The other is zinc air. We 
have been talking to many battery manufacturers who are looking 
at our regulation signal. We have got a test signal for them to 
look at.
    So I believe there will be more coming in 2010. Some of the 
DOE grants actually had requested 100 megawatts of battery 
storage in the PJM territory that were not successful in the 
grant proposal. I foresee--I am not a good forecaster--hundreds 
in the next--I would say 500, 700 megawatts of battery in the 
PJM system is not unreasonable to expect. We are a huge system, 
probably at 90,000 megawatts today as our peak for a day like 
today.
    There was another part of your question, and I----
    Senator Udall. The effect on the price of regulation 
services.
    Mr. Huber. Very interesting because certainly the 
automotive companies are looking at this well. What happens 
when we exhaust this? Because it is a very lucrative market 
today, and it is a very attractive market to enter into first.
    I believe the transition will happen from that type of 
immediate regulation service to extended services, either early 
morning compensation for loss of wind or throughout the day 
compensation. Using these batteries for storage in the evening 
and discharge during the peak periods will be the evolution of 
this technology over time.
    Senator Udall. Dr. Masiello is nodding vigorously along 
with you in agreement.
    Thank you again to this panel. This has been a very 
important hearing. I want to again thank the chairman and the 
ranking member for taking the time to convene us all and 
explore this real opportunity in front of us.
    Thank you.
    The Chairman. Thank you.
    Senator Shaheen.
    Senator Shaheen. Yes, I will echo Senator Udall's comments 
and everyone's here, really, on the panel. Thank you all very 
much for being here.
    Given the interconnection between renewables that we are 
trying to incentivize and get deployed and energy storage, 
should we find a way to link promotion and deployment of energy 
storage to the incentives that we are trying to provide for 
renewables? I will just throw that out for any and all of you 
if you have a view of it?
    Mr. McGrath. I will begin. But, yes, I think they are 
linked, and I think your question was around linking the 
incentives. Correct?
    Senator Shaheen. Right.
    Mr. McGrath. So, I would have to defer to some of my more 
skilled regulatory and financial colleagues. But certainly, I 
think our studies indicate that you can only get so far. Twenty 
percent wind may be a little beyond that, and then we are going 
to need storage.
    It is a bit of a--right now, we are using natural gas and 
gas-fired generators effectively as our backup storage. That 
has some advantages and disadvantages, one of them being carbon 
footprint. The other one being, as we heard from Senator Wyden 
this morning, there is a lot of wind blowing out there. Let us 
not let it get away.
    So if we are to capture it and save it for appropriate 
peak-hour use, obviously, we are going to need storage. 
Clearly, our policies need to incentivize that and help make it 
affordable, and then issues around who pays for what portion of 
it, of course, need to be thought through carefully.
    So we need both technology development, sound and clear 
policy, and then real careful analysis tools that help us guide 
how both of those are developed.
    Senator Shaheen. I don't know if--this is a follow-up to 
you. But as we are thinking about that, particularly the cost 
piece and how that is shared, are there examples--for all of 
you who are in the market now, are there examples that you can 
look to and say this is the way it is working that we think is 
working very well?
    Mr. Masiello. There is a model to look at in the natural 
gas industry where gas storage resources, whether it is in the 
physical pipeline or in an actual cavern, say, are an asset 
that is operated by the storage owner. The merchant side--the 
gas producers, the gas traders--pay a fee for the use of the 
storage. But they retain the equity ownership of the gas.
    That model could apply, for instance, if a regulated 
transmission company had storage on the grid which was a 
regulated asset, regulated cost recovery, and the merchant side 
of the power equation, the generators and the traders, made use 
of that on a fee basis. Because right now, there is a lack of 
clarity in policy and regulatory treatment in the deregulated 
electric power markets over that problem.
    The regulated wires company is taking delivery of the 
electricity at night when it is cheap and redelivering it to 
consumers during the day when it is expensive. That arbitrage 
profit in today's world should be on the merchant side.
    That lack of clarity is another hurdle, shall we say, to 
moving forward, and I believe FERC is taking it up and plans to 
resolve it.
    Senator Shaheen. Just to be clear, the example that you are 
talking about, the cost is on the rate base for the ultimate 
end-users of the power?
    Mr. Masiello. That is really a good question. If it is a 
rate-based asset, then the transmission utility is charging a 
rate per megawatt hour on the grid, and that is ultimately 
borne by the consumer. If it is not a rate-based asset, then a 
merchant operator of storage is trying to make money on it, and 
the generator or the trader would mark up the cost of the 
wholesale energy, which is, again, passed to the consumer. So 
it is different mechanisms.
    Senator Shaheen. Thank you. My time is up.
    The Chairman. I did not have additional questions. Did you 
have anything else you wanted to ask ofthis panel?
    Senator Shaheen. Actually, if I could just follow up on one 
other issue that you raised earlier?
    The Chairman. Go ahead.
    Senator Shaheen. You talked about, Dr. Masiello again, that 
FERC--that one example you used was requiring FERC to consider 
storage before approving new generation. In that kind of a 
consideration, are there other things that ought to be looked 
at other than just the cost? So, as we are thinking about 
generation, we look at environmental impacts, lots of other 
things. What else, as we are thinking about storage----
    Mr. Masiello. Yes, I actually should have been more clear. 
I was saying in the context of transmission planning, I believe 
that the generation developers will be pretty aggressive at 
looking at it if they think they can make money. The difficulty 
is when it is a transmission or a distribution asset, and the 
regulatory approval process is today unable to make an informed 
decision. So that is what I was saying. It would be one 
mechanism to spur it along.
    Senator Shaheen. Great. Thank you for the clarification.
    Did anybody else want to add to that?
    [No response.]
    Senator Shaheen. OK, thanks very much.
    The Chairman. Thank you all very much.
    This has been useful testimony, and I think it has been a 
good hearing.
    Thank you very much. That will conclude our hearing.
    [Whereupon, at 11:57 a.m., the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

    Responses of Steven E. Koonin to Questions From Senator Bingaman
    Question 1. Under Secretary Koonin, where does the US stand 
compared to China/Japan/Korea in developing grid scale energy storage 
technologies? It is my understanding that these countries are now 
investing heavily in this area, leveraging their significant expertise 
and capacity in the vehicle battery sector.

          a. How much are we spending on grid-scale energy storage 
        research, development and demonstration compared to those 
        nations?
          b. What we need to do maintain our leadership in this area?

    Answer. (a). The Departmental approach to energy storage spans the 
full RD&D chain, from basic research through technology demonstration 
projects. The Office of Electricity Delivery and Energy Reliability 
(OE) is the focal point for development and demonstration of grid-scale 
energy storage technologies within the Department of Energy. Funding 
for OE's energy storage program was $3.5 million in Fiscal Year (FY) 
2009 and $14 million in FY 2010. In addition, under the American 
Recovery and Reinvestment (Recovery Act), the Department awarded $185 
million for grid storage demonstration projects, and $30 million to 
date for Advanced Research Projects Agency-Energy's (ARPA-E) advanced 
battery research. Further, while not specifically investing in grid-
level applications, the Office of Science is supporting basic research 
by funding a host of projects including six Energy Frontier Research 
Centers that are directly related to energy storage, and the Office of 
Energy Efficiency and Renewable Energy funded $39 million of research 
in 2009 to move the state of the art for vehicular electrochemical 
batteries.
    Private industry and several States are also actively investing in 
the development of new grid-level storage technologies; the investment 
community is becoming interested in providing venture capital for 
companies developing new technologies and in funding ambitious large 
scale projects; and utilities are increasingly considering storage 
demonstration projects.
    The Chinese government is investing approximately $100 million in 
energy storage research annually. Chinese researchers are investigating 
sodium sulfur batteries and several flow battery systems. In addition, 
the Chinese Academy of Science just announced development of a 650 amp-
hour sodium sulfur battery by the Shanghai Ceramic Institute.
    The Japanese government mandates that new wind developments can be 
built only with appropriate energy storage capability installed. 
However Japan provides one-third of the cost of a new storage facility 
to the owner. Research is carried out by Japanese industry on sodium 
sulfur batteries, flow batteries, and lead carbon batteries.
    Answer. (b). Key performance characteristics such as cost, 
durability, energy density, and power must be improved if the U.S. is 
to maintain leadership in grid energy storage technology. These 
improvements will be enabled by continued Departmental efforts ranging 
from basic research to demonstration projects for promising storage 
technologies. In addition to these technology advances, significant 
improvements are necessary in the analytic tools data and parameters 
used to characterize storage technologies in modeling the grid.
    In deregulated energy markets, where generation, transmission, and 
distribution assets can be owned and operated by different groups, the 
economic and operational value of individual storage technologies must 
be fully characterized for each application. Without such detailed 
understanding, and until these benefits can be fully modeled and 
incorporated into economic and operational planning tools for the grid, 
deployment rates for grid scale storage will not reach potential.
    Question 2. Under Secretary Koonin, concerning the DOE Energy 
Storage Demonstration Grants, how soon can we expect the Department to 
obligate funds to the award winners so that these projects can proceed?
    Answer. Selections of Recovery Act demonstration projects were 
announced by Secretary Chu on November 25, 2009. Grants are expected to 
be awarded by the second quarter of FY 2010.
    Question 3. Under Secretary Koonin, some of the commercial software 
that grid planners use today grew out of previous DOE-funded research. 
What is DOE doing to help develop grid planning software that takes 
account of energy storage and renewable energy? What are the national 
labs doing to support transmission planning models and software? How 
much funding is going towards this work now, and how does this compare 
to past funding levels?
    Answer. The Department's Energy Storage Program in the Office of 
Electricity Delivery and Energy Reliability will fund a new project 
beginning in FY 2010 to develop energy storage modules for commercial 
grid planning software. A second project will utilize existing grid 
modeling software at a national laboratory to analyze the applicability 
of storage in specific sections of the transmission grid, such as the 
Bonneville Power Authority system. These efforts are funded at a level 
of $650,000 in FY 2010; FY 2009 funding for these type of activities 
was $50,000. In addition, through Recovery Act funding the Department 
recently announced grants totaling $60 million for interconnection-
level infrastructure planning; the planning effort, which will make use 
of national laboratory support, will incorporate energy storage as one 
of a range of technological options. The Department's Office of Energy 
Efficiency and Renewable Energy has begun a study to evaluate the 
barriers and opportunities associated with significantly increasing the 
integration of multiple sources of renewable electricity into the 
electric grid. The study, planned to be completed in 2010, will 
evaluate and quantify the need for energy storage in scenarios with 
very high penetration of renewable energy generation.
    Question 4. What data does the Federal government collect on grid-
scale energy storage? Does it fit into the data collection forms used 
by the EIA and the FERC? If not, what work is underway to add energy 
storage to these data collection forms?
    Answer. The U.S. Energy Information Administration (EIA) currently 
collects some limited electricity storage data. Additional collection 
of storage data is planned for EIA's updated electricity surveys that 
are scheduled for deployment starting in January 2011.
    Electricity storage data are currently collected by EIA for pumped 
hydroelectric and compressed air energy storage (CAES). The most recent 
annual net summer capacity data (2007) show that the United States has 
21,886 megawatts (MW) of hydroelectric pumped storage capacity. 
Operational data for 2008 show pumped hydro generated 25.3 million 
megawatt-hours (MIMI) and required 29.6 million MWh for pumping.
    EIA's proposed revisions to electricity surveys were in the public-
comment phase in the fall of 2009 (see the October 15, 2009, Federal 
Register Notice at http://www.eia.doe.govicneaf/e1ectricity/page/
fednotice/elect_2011.html ); the comment period closed on January 15, 
2010. Storage-related proposals include:

   storage associated with dispersed and distributed generation 
        data (by fuel type categories); and
   capacity and generation for flywheel, thermal, and battery 
        technologies that supply electricity to the grid and have at 
        least 1 MW of capacity.

    The Federal Energy Regulatory Commission (FERC) also addresses 
energy storage in its data collection. The FERC ``Annual Report of 
Major Electric Utilities, Licensees and Others'' and ``Annual Report of 
Nonmajor Public Utilities and Licensees'' contain financial and 
operational data for pumped storage. This information includes plant 
identities, depreciation and amortization charges, generation data, 
construction year, operational year, and other specifics. Balance sheet 
information (i.e., electric plant in service and additions) is also 
available for ``storage battery equipment.'' EIA defers to FERC for 
additional information on its energy storage data activities.
    Question 5. How are DOE and FERC working together to develop and 
deploy grid-scale energy storage technologies?
    Answer. Department of Energy (DOE) develops energy storage 
technologies. The Federal Energy Regulatory Commission (FERC) regulates 
interstate transmission and sale of electricity. FERC has been 
proactive in evaluating the potential for energy storage, devising 
market mechanisms appropriate for energy storage technologies, and 
directing Regional Transmission Organizations to provide a level 
playing field for the application of storage technologies. In response, 
the New York Independent System Operator (NYISO) requested FERC 
approval for new storage-oriented market rules, which FERC approved in 
May 2009, and a 20 megawatt flywheel system in NYSIO has been issued a 
conditional comittrnent under DOE's Title XVII loan guarantee program. 
In addition, in FY 2010, the DOE Wind Program is supporting the FERC 
Office of Energy Policy with a full-time expert from the National 
Renewable Energy Laboratory who provides renewable grid integration and 
transmission technical and analytical expertise.
    FERC and DOE are aware of activities in each other's programs. 
Successful introduction of energy storage technologies into the grid 
depends on the success of efforts by both organizations.
   Responses of Steven E. Koonin to Questions From Senator Murkowski
    Question 1a. Many of the battery technologies and the magnets used 
in electric motors utilize rare earth minerals, much of which are 
currently imported from China.
    If so, does the government have a role in researching alternatives 
to the use of rare earth minerals in batteries and magnets?
    Answer. Rare earth materials are not a major issue for battery 
technology (although transition metal availability is important for 
batteries). However, for electric motor technologies, availability of 
rare earth materials is a significant issue. There are some options 
that can help minimize the impact of rare earth minerals' availability. 
One option is induction motor technology, which can be practical for 
certain applications but tends to be less efficient. Improving the 
efficiency of induction motor technology is one area of research 
underway in the Department's Vehicle Technologies Program.
    Even for traditional motor technology the need for rare earth 
materials can be minimized, or perhaps even eliminated, through 
research and development (R&D). Because alternative magnet compositions 
that do not have rare earth materials are typically not strong enough 
to be practical, the Department has initiated R&D to both minimize rare 
earth content and improve the performance of non-rare earth magnets 
(the subject of a recent ARPA-E project grant).
    Additional research has been initiated by the Department and 
others, including the Department of Defense, and studies have been 
conducted by the U.S. Geological Survey and the National Academies in 
this area.
    Question 1b. Given the importance of rare earth minerals for energy 
storage applications, do we have sufficient knowledge of the 
availability of rare earth mineral deposits in the U.S.?
    Answer. There is a reasonable knowledge of U.S. rare earth mineral 
resources through the U.S. Geological Survey. Undeveloped deposits in 
the U.S. and across the world have been identified (although these are 
typically not as favorable as the Chinese deposits). One excellent U.S. 
deposit is the Molycorp site in Mountain Pass, California, near the 
Nevada border. This site was active until a few years ago and is 
attempting to restart mining operations. The Department is 
collaborating with Molycorp through work at Ames National Laboratory. 
This work is aimed at improving the performance of rare earth magnets, 
as well as minimizing the processing required to produce magnets which 
is a major cost factor.
    Question 2. In your testimony, you reference a situation in West 
Texas during one month in 2008 where wind generation resulted in over 
nine hundred 15 minute intervals of negative pricing. ``Negative 
pricing'' essentially means that you have more generation than demand 
since, and is supposed to serve as a signal not to produce electricity 
at that time. However, I understand that in Texas, wind generators will 
continue to offer their energy at negative prices in order to get the 
federal Production Tax Credit and the value of a state Renewable Energy 
Credit. Additionally, due to transmission constraints, wind developers 
can be paid to remove their production from the grid. Please comment on 
this situation.
    Answer. Negative pricing in energy markets sends a variety of 
signals to market participants and is an artifact of transmission 
constraints within a system. Even during periods of negative pricing, 
positive pricing exists beyond the transmission constrained wind energy 
areas, thereby indicating a demand opportunity for energy exists. The 
transmission system operator within Texas, the Electric Reliability 
Council of Texas (ERCOT), is currently working though its Competitive 
Renewable Energy Zone process to upgrade the transmission system in 
West Texas and increase the transfer capacity for wind energy. These 
upgrades are expected to greatly reduce occurrences of negative pricing 
in the region. There is also considerable interest in energy storage in 
the area, including a 20 megawatt demonstration project recently 
selected for an American Recovery and Reinvestment Act award.
    Question 3. Compressed air energy systems are considered an energy 
storage mechanism because electrical energy is used to compress air 
that is stored in a pressurized reservoir. Given the fact that 
compressed air energy systems require some method to use the compressed 
air to make electricity, should these systems be classified as a 
generation technology or a transmission and distribution technology?
    Answer. Compressed Air Energy Storage (CABS) systems differ from 
other energy storage technologies in that many use natural gas to heat 
the compressed air prior to generating electricity. This is similar to 
a generator except that, in effect, two-thirds of the electricity 
generated by a CAES system was stored at an earlier time through 
physical compression of air. Additionally, while the most common 
current implementations of CAES systems use both compressed air and 
natural gas synergistically, the compression and storage of air is a 
significant and necessary aspect of system function while combustion is 
not. Furthermore, new forms of CABS currently under development will 
require little-to-no natural gas in order to transition the stored 
energy from compressed air back to electricity.
    Grid scale energy storage is neither a generation asset nor a 
transmission and distribution (T&D) asset, but is in a category of its 
own. Categorizing storage either as a generation or T&D asset limits 
the possible uses of energy storage. In some areas, classifying storage 
as a generation asset would prevent transmission or distribution 
utilities from owning storage and obtaining the benefits storage can 
provide.
    Question 4. You testified that several types of rechargeable 
batteries are being tested and installed in pilot projects by the 
utility industry. What is the typical useful life of rechargeable 
batteries as compared to other forms of grid-scale energy storage? How 
does the per-kilowatt cost of a battery compare to existing pumped 
storage systems and compressed air energy storage systems?
    Answer. The expected life of rechargeable batteries varies and 
depends on the type: sodium sulfur batteries have an expected lifetime 
of 20 years; lead acid battery systems typically need cell replacement 
every 4 to 6 years, depending on the application; and flow batteries 
and lithium-based batteries have minimum expected lifetimes of 10 years 
or greater. Ongoing research is exploring a new class of lead carbon 
batteries with greatly increased lifetime as well. The current cost of 
sodium sulfur systems is approximately $2500 per kilowatt (kW), Flow 
batteries (an emerging technology) range from $800 to $4,000 per kW; 
pumped hydro systems cost approximately $200 to $800 per kW depending 
on size and terrain; and CABS are estimated to cost $800 to $1000 per 
kW. However, these storage technologies have different storage periods, 
and many of these cost figures are estimates only since the 
technologies are not yet fully commercial.
     Responses of Steven E. Koonin to Questions From Senator Wyden
    Question 1. As we discussed in the hearing, energy storage 
technologies have many promising applications--from enabling deployment 
of large amounts of intermittent renewables, to helping meeting peak 
demand, to more effectively managing the electric grid, to deployment 
in hybrid and plug-in vehicles. As noted in your testimony, no less 
than four separate offices within the Department are engaged in some 
form of research and demonstration efforts involving storage 
technologies. You committed to provide a road map--an overall 
strategy--for how the Department is going to pursue the development of 
storage technologies. I expect this road map to cover research, 
development, and demonstration projects of energy storage technologies, 
including integration technologies, over the next few years. I also 
expect the road map to address the full range of potential storage 
technologies and applications, not just those technologies that are not 
currently in the DOE's portfolio. You committed to providing this plan 
within 60 days, admittedly an ambitious schedule. Please confirm your 
commitment on behalf of the Department to provide this plan.
    Answer. The Office of Electricity Delivery and Energy Reliability 
(OE) is working with the Offices of Science, Advanced Research Projects 
Agency-Energy, and Energy Efficiency and Renewable Energy to develop a 
strategy for supporting research, development, and deployment of grid 
storage technologies, in response to this request. The Department 
expects to provide the strategy to the Committee within 60 days.
    Question 2. Your written testimony of the issues surrounding energy 
storage was fairly complete, touching on the important issues. However, 
there were some noticeable gaps in some of the technologies and 
applications, particularly fuel cells, hydrogen, and on-premises 
storage.
    Answer. The Department's recent analysis concluded that additional 
research and development will be required to make hydrogen economically 
competitive as an energy storage medium. The study compared the life 
cycle costs of energy storage technologies including: pumped hydro, 
compressed air energy storage (CAES), nickel-cadmium batteries, sodium-
sulfur batteries, vanadium flow batteries, and hydrogen combustion 
turbines. The report can be found at www.osti.gov/servlets/pur1/968186-
wRSj x1/.
    Current hydrogen and fuel cell R&D efforts focus on reducing the 
cost and increasing the performance and durability of both water 
electrolyzers and fuel cells. With success in these efforts, hydrogen 
as an energy storage technology could be competitive with batteries but 
may not be competitive with the largest scale systems that use CAES or 
pumped hydro.
    Question 3. The DOE's hydrogen program was recently restored after 
originally being cut earlier this year. Please describe the 
relationship between the hydrogen program and the energy storage 
program. What will the Department be doing in the future to integrate 
them? How much emphasis will the Department be placing on fuel cell 
technology, both for generating hydrogen as stored energy and for 
generating electricity for power? Will the Department look at the 
potential for transporting hydrogen through pipelines as an alternative 
to building electric transmission lines?
    Answer. The hydrogen and energy storage programs continue to 
coordinate related activities. To evaluate the feasibility of hydrogen 
for energy storage, the Department's hydrogen program is operating a 
small scale water electrolyzer with hydrogen storage and electricity 
generation at the National Renewable Energy Laboratory in collaboration 
with Xcel Energy. The Department's Hydrogen and Fuel Cell Technologies 
Program is also identifying regions where hydrogen and fuel cells may 
be a viable option for energy storage or combined heat and power for 
distributed generation due to high electricity costs and available 
power from renewable energy sources. These activities will help guide 
research and development for hydrogen technologies while providing 
useful information on the challenges of using hydrogen as grid energy 
storage. To address hydrogen infrastructure and transmission issues the 
Department is evaluating a number of options, including hydrogen 
delivery through pipelines as a potential long-term approach.
    Question 4. Your written testimony discussed grid-connected 
distributed energy storage. However, other than a passing mention of 
electric vehicles, you did not mention any research or development 
activities related to on-premises storage; i.e., on the customer side 
of the meter. There are many opportunities for innovative solutions, 
including ice-storage systems running at night instead of air-
conditioning compressors running during peak times of the day. End-
users who install solar panels or small wind turbines may benefit from 
on-site storage for the same reasons that utilities do for intermittent 
renewables. What will be the DOE's program for extending energy-storage 
research and development into systems that might be on customers' 
premises?
    Answer. The economic cost points for on-premises energy storage of 
distributed generation would likely be significantly less than those 
for advanced electric vehicle applications. Suitable technological 
solutions could come from the current candidates for vehicle batteries, 
large scale utility battery systems, or a new breakthrough technology. 
The Department's programs are exploring options, including on-premises 
active and passive thermal energy storage systems. As these programs 
progress, the Department will use the results to develop specific 
initiatives that address the challenging requirements of distributed 
storage. Active and passive solutions such as running ice-storage 
systems at night instead of air-conditioning during the day or using a 
building's mass for thermal storage have the potential to reduce 
building energy use and result in lower peak electricity demand. 
Pacific Northwest National Laboratory's work on Efficient Low-Lift 
Baseload Cooling Equipment offers increased energy saving by cooling a 
building at night and using the building mass for theiinal storage.
    Question 5. In his testimony, the Deputy Director of NREL--Bob 
McGrath--stated that electrical energy produced by wind up ``to 20% of 
U.S. capacity'' can be integrated into the grid without the need for 
storage, which was based on an NREL study. By repeating this statement, 
which is also prominently used by the American Wind Energy Association 
(AWEA), DOE gives the impression that the grid does not yet need energy 
storage. Yet Bonneville Power Administration has already experienced 
operational problems at current levels of wind generation, and wind 
farms in Texas are paying customers to buy the electricity they produce 
at certain times during the night because there is inadequate demand at 
that time.
    Answer. DOE's 20% Wind Energy by 2030 report is based on an 
analysis scenario that assumes power system operators utilize a broad 
suite of other available, typically less capital-intensive, sources of 
system flexibility to accommodate wind energy's added variability. 
These sources of flexibility can include the use of larger balancing 
authorities, the use of sub-hourly energy scheduling, and the addition 
of new gas-fired generation. In addition, pumped hydro is used by many 
utilities, providing 2.5 percent of the Nation's generation capacity. 
There is also considerable interest in Compressed Air Energy Storage, 
including two demonstration projects totaling 450 megawatts recently 
selected for American Recovery and Reinvestment Act awards. In 
addition, a growing need for frequency regulation can be cost 
effectively met by fast storage.
    System operators, such as the Bonneville Power Administration, are 
currently evaluating how to best incorporate system flexibility options 
into their operations. As more of these operational changes are 
implemented, higher levels of wind energy and other variable energy 
sources can be integrated at lowest cost. Storage technologies are also 
under consideration as an option for augmenting integration capability 
beyond that available from operational changes. Under certain 
circumstances, the addition of storage may be required to balance the 
variability associated with wind generation.
    Question 6. Furthermore, the NREL study did not address 
combinations of inteimittent technologies; e.g., is storage needed if 
wind is 15%, but solar rises to 10%? The ``Eastern Wind Integration and 
Transmission Study'' suffers from the same lack of breadth; again, we 
do not know if there are better solutions that use storage technologies 
unless they are actually included in these sorts of Department 
sponsored studies. What steps will DOE take to ensure that storage 
technologies be considered in future work on the electrical 
infrastructure?
    Answer. The analysis tools and datasets necessary to perform 
integrated reliability studies incorporating multiple variable 
generation technologies are continually being developed and improved. 
Only recently have these tools achieved a level of maturity which 
allows for the creation of meaningful results, and studies that are 
still being completed will include evaluation of multiple variable 
generation and energy storage technology options. For example, DOE's 
Western Wind and Solar Integration Study will evaluate energy 
penetrations of up to 30 percent wind energy and five percent solar 
energy. This study will include analysis of the energy storage 
capabilities of concentrating solar power systems and existing and 
planned pumped hydroelectric storage. Another study currently underway 
is the Renewable Energy Futures Study, which will analyze the barriers 
and opportunities associated with significantly increasing the 
integration of multiple sources of renewable electricity into the 
electric grid. The study, planned to be completed in 2010, will 
evaluate and quantify the need for energy storage in scenarios with 
very high penetration of renewable energy generation. Finally, the 
Department also seeks to support interconnection-wide transmission 
planning that will include analysis of energy storage opportunities. 
Through evaluation of the energy storage deployment projects funded 
through the Recovery Act, knowledge of grid-scale storage technologies 
and associated characteristics will improve thereby enhancing the value 
of current and future integrated technology analyses.
                                 ______
                                 
    Responses of Elliot Mainzer to Questions From Senator Murkowski
    Question 1. Of the 2,300 MW of wind now connected to BPA's system, 
what is the actual percentage of electricity that is produced from that 
nameplate capacity?
    Answer. Actual generation compared to plant nameplate capacity 
averaged 28 percent in the twelve months ending November 2009. Also, as 
of January 12, 2010, with the recent addition of three more 
interconnections totaling nearly 400 megawatts, we now support a total 
of 2,680 megawatts of wind capacity.
    Question 2. In order to deal with the variable nature of wind 
energy, BPA is now using its hydroelectric system as a giant storage 
battery. Is there a limit to the amount of wind energy that you can 
accommodate given its intermittency while also maintaining the 
reliability of your electricity transmission? How can pumped storage 
assist BPA?
    Answer. There will be a limit to the amount of hydroelectric system 
flexibility BPA can use to balance variable resources. BPA has been 
able to utilize the capability of our hydroelectric system to 
accommodate wind generation increases through the implementation of the 
initiatives I described in our testimony and as the wind industry 
responds to new operating protocols and improves their scheduling 
accuracy. With all of these improvements, we estimate that using our 
hydrosystem alone we can reliably integrate approximately 4,000 
megawatts of wind generation capacity. We expect that amount to 
continue to increase as we succeed in implementing our priority wind 
integration initiatives.
    Pumped storage offers potential value when we have exhausted the 
operational protocols that we can implement and need additional storage 
capacity to support a higher level of variable generation. As I 
mentioned in my testimony, BPA is studying the feasibility of pumped 
storage in the Columbia River Power System, and we expect to have more 
information in mid-2010.
    Question 3. Of course maintaining an additional reserve capacity to 
support the wind resources now in the BPA system has resulted in 
increased costs for consumers. To address these costs, BPA has imposed 
a wind integration rate on wind generators that was not without 
controversy. I understand that BPA believes this price signal for wind 
integration costs has encouraged wind operators to operate more 
efficiently. Please elaborate on the amount of the increased costs and 
the wind generators' response.
    Answer. BPA believes that the efforts we undertook in the last rate 
case did in fact motivate wind operators to improve their scheduling 
accuracy, which resulted in lower costs to BPA and a lower rate to the 
wind generators. Our cost of providing generating reserves to support 
variable wind generation is the primary driver for the wind integration 
rate. When we conducted the rate case for fiscal years 2010 and 2011, 
we noted that those costs are significantly affected by the wind 
plants' scheduling accuracy. The closer actual generation matches 
schedules, the smaller the amount of generation reserves we need to 
maintain relative to the amount of wind generation connected to our 
system. Our initial rate case proposal for the wind rate was $2.72 per 
kilowatt/month. We worked with the wind industry on measures to improve 
scheduling accuracies, and they accepted more risk that their 
generation could be curtailed at certain times if their schedules were 
not sufficiently accurate. Our final rate of $1.29 per kilowatt/month--
less than half of our initially proposed rate--was significantly 
influenced by these agreements that allowed us to reduce the amount of 
reserves required for wind generation.
       Response of Elliot Mainzer to Question From Senator Wyden
    Question 1. BPA's Strategic Objectives include the statement, 
``Climate change concerns also are driving major new investments in 
renewables, energy efficiency, smart grid, new large-scale storage and 
the electrification of transportation.'' As noted in your testimony, 
pumped hydro storage is also being considered as part of BPA's wind 
integration efforts. However, there are many other types of storage 
technologies, such as compressed air, fly wheels, and batteries that 
are being developed to store and manage grid-connected energy systems. 
What are BPA's specific plans for examining and deploying energy 
storage technologies for both grid management and to help bring more 
renewable energy into the grid? Please provide copies of the applicable 
plans and planning documents.
    Answer. BPA is examining energy storage options through a set of 
evaluations that will be conducted through mid-2010. The Pacific 
Northwest National Laboratory (PNNL) conducted a nationwide evaluation 
of storage technologies to accommodate large amounts of variable 
renewable generation. This evaluation included a variety of storage 
technologies. BPA has asked PNNL to use this information for an 
evaluation of the application of a broad array of storage technologies, 
including pumped hydro and compressed air, to the characteristics of 
the Pacific Northwest. With this information, BPA will complete a study 
of the potential for pumped storage in the Pacific Northwest as one 
option. These studies will consider power system requirements for 
capacity and ramp rates for the various storage technologies. BPA will 
share this analysis with you upon its completion.
    BPA's draft Resource Program forecasts what resources it may need 
to meet its power supply obligations in the next ten years. The draft 
Resource Program concludes BPA should be able to meet its near term 
requirements through energy conservation and that longer term 
requirements depend on a number of uncertainties, one of which is, the 
amount of additional load its preference customers ask it to supply 
under the terms of the Regional Dialogue. The draft Resource Program 
identifies BPA's need to provide balancing services for wind and energy 
in Heavy Load Hours as being the largest and most likely power need 
after conservation.
    The draft Resource Program identifies pumped storage as a unique 
opportunity to meet those needs, and points to the evaluations 
described above as needed to assess this potential. The draft Resource 
Program also discusses how BPA's wind integration activities provide 
more efficient use of BPA's existing capacity reserves before it needs 
to develop new generating capacity resources to support variable 
renewable generation. We have attached a copy of the draft Resource 
Program. The draft BPA Resources Program Plan can be found at: http://
www.bpa.gov/power/P/ResourceProgram/documents/2009-
0930_DraftResourceProgram.pdf.
                                 ______
                                 
    Responses of Jon Wellinghoff to Questions From Senator Bingaman
    Question 1. Chairman Wellinghoff, in your testimony, you discussed 
the need for considering energy storage in transmission planning. 
S.1462 includes energy storage as an alternative that must be 
considered in transmission planning. Is this sufficient? What other 
legislative language may be necessary?
    Answer. As you note, I believe that it is appropriate to consider 
energy storage as part of the transmission planning process. The 
requirement in S.1462 that energy storage must be considered as an 
alternative in transmission planning is sufficient for this purpose and 
is an important reinforcement of the Commission's actions.
    The Commission took an important step to promote such consideration 
in February 2007, when it issued Order No. 890. In Order No. 890, the 
Commission required all transmission providers to develop a regional 
transmission planning process that satisfies nine principles, one of 
which is comparability. To reflect that principle, the Commission 
required transmission providers to outline in their tariffs how they 
will treat comparably in the transmission planning process all 
resources, including nontraditional resources that could impact the 
need for transmission expansion.
    I would also note that the Strategic Plan that I provided to 
Congress this fall states that as transmission providers refine their 
transmission planning processes, the Commission will assess best 
practices, including the potential for collaborative decision making, 
and adopt reforms as necessary to its transmission planning process 
requirements. Toward that end, Commission Staff this fall completed a 
series of conferences held around the country to review how well the 
transmission planning requirements of Order No. 890 are meeting the 
needs of our Nation, and to collect input as to how the Commission can 
improve upon the regional transmission planning processes.
    The Commission is now in the process of reviewing comments that 
were submitted in response to questions that Commission Staff posed as 
a follow-up to the conferences held this fall. Among many other issues, 
commenters discussed the relationship between the regional transmission 
planning processes that must satisfy the principles established in 
Order No. 890 and the integrated resource planning processes through 
which load-serving entities in some states, and often their retail 
regulators, identify appropriate investments to meet consumers' long-
term resource needs. That issue may be particularly relevant for energy 
storage, which has some characteristics that resemble generation and 
some characteristics that resemble transmission. In addition, because 
energy storage often interconnects at relatively low voltages, 
considering these resources in the transmission planning process often 
requires information about the portion of the electric system for which 
disputes are most likely to arise as to classification as transmission 
or distribution facilities.
    Question 2. Chairman Wellinghoff, how is energy storage currently 
addressed in transmission and generation planning processes? What 
planning, analysis, and modeling tools do we need to develop to be able 
to determine where to best site storage technologies?
    Answer. As discussed above in my response to your first question, 
the Commission in Order No. 890 required transmission providers to 
treat comparably in the transmission planning process all resources, 
including non-traditional resources that could impact the need for 
transmission expansion. More specifically, energy storage technologies 
are considered by transmission and generation planners as part of the 
portfolio of potential solutions to manage costs, assure resource 
adequacy to serve load, and maintain the reliability of the grid. 
Energy storage technologies also may be attractive to independent 
developers in light of their potential to provide profits through the 
differences in energy prices between off-peak and peak periods. In 
addition, there is a close relationship between the development and 
implementation of energy storage and our Nation's ability to harness 
the potential of our renewable energy resources.
    Planners and developers regularly use power flow studies (or load 
flow studies) to determine the limitations of the grid when 
interconnecting new customer loads and generation sources and when 
anticipating growth in demand from existing customers. For a power 
system to accept the new load and/or generation, it must be deemed 
reliable and therefore resilient enough to withstand pre-defined 
events. Power flow studies are used to determine whether transmission 
overloads would result if these events occurred and whether system 
improvements such as new transmission are needed to achieve the desired 
performance.
    Planning studies traditionally have focused on peak load conditions 
to ensure that there would be adequate generation and transmission 
capacity to meet the maximum forecasted demand. However, the 
development and deployment of significant levels of renewable energy 
resources requires a new focus on the capability of the grid to accept 
variable generation when it is being produced. For some types of 
renewable energy resources and in some areas, that production is likely 
to be greater during periods of relatively low demand; energy storage 
can play an important role in addressing that issue. In addition, the 
development and implementation of improved forecasting tools could 
assist system operators in reliably and efficiently utilizing renewable 
energy resources in conjunction with dispatching and replacing stored 
energy.
    Question 3. Chairman Wellinghoff, what kinds of system information-
sharing and collaboration must exist, to ensure that storage and 
distributed renewable generation (two sides of the same coin) can be 
effectively dispatched such that the bulk power grid is managed most 
reliably and efficiently? What role must interoperability and 
cybersecurity standards play, to ensure this becomes a reality? How do 
transmission system operators need to change their practices and 
software to accommodate efficient dispatch of energy storage?
    Answer. I agree that there is a close relationship between the 
development and implementation of energy storage and our Nation's 
ability to harness the potential of our renewable energy resources. As 
I stated in my December 10, 2009 testimony to this Committee, energy 
storage can make integration of renewable energy resources not only 
reliable, but also efficient and cost-effective.
    Illustrating this point, I noted in my December 10, 2009 testimony 
that some energy storage technologies appear able to provide a nearly 
instantaneous response to regulation signals, in a manner that is also 
more accurate than traditional resources. These characteristics could 
reduce the size and overall expense of the regulation market. Most 
existing tariffs or markets do not compensate resources for superior 
speed or accuracy of regulation response, but such payment may be 
appropriate in the future as system operators gain experience with the 
capabilities of storage technologies. In the meantime, the unique 
characteristics of energy storage technologies could warrant different 
market rules for providing energy and ancillary services than those 
established based on the characteristics of traditional resources.
    I also agree that increased information sharing and collaboration 
are important to ensuring that renewable energy and energy storage 
resources are incorporated into the electric system and dispatched in a 
reliable and efficient manner. For example, modeling for the type of 
power flow studies that I noted above in response to your second 
question will need to include these resources and will require 
information sharing. Energy management system equipment and software 
may need to be revised to properl y model energy storage facilities, 
such as to indicate time to respond to dispatch signals, time-to-
depletion, or time remaining until full storage.
    Another example of information sharing and collaboration stems from 
the distributed nature and relatively small scale of many energy 
storage resources. To ensure their reliable and efficient use, such 
resources may need to be aggregated and remotely dispatched and 
verified. These needs could be met through two-way communications 
between the energy storage resource and the local balancing authority's 
control center (where generation and load are balanced) to monitor the 
availability of the resource and to issue commands for the resource to 
generate or store electricity.
    It is noteworthy that the combination of dispersed locations and 
two-way communications presents both physical and cyber security 
issues. For example, it is essential to ensure that communications with 
the local balancing authority's control center are secured to prevent 
the use of those communications as an entry point to evade the control 
center's cyber security protection measures. The mandatory and 
enforceable cyber security standards applicable to the electric 
industry are the Critical Infrastructure Protection (CIP) reliability 
standards developed by the North American Electric Reliability 
Corporation (NERC) and eight Regional Entities, subject to the 
Commission's oversight. However, these standards apply to only the bulk 
power system, thereby excluding facilities, including some energy 
storage and distributed generation resources, which are interconnected 
to the distribution system. Moreover, the Commission has directed that 
NERC make major modifications to the CIP reliability standards, and 
until such time as those revisions are completed, the standards are 
inadequate to assure protection of the bulk power system.
    Separate from the NERC process for developing mandatory and 
enforceable reliability standards, the Energy Independence and Security 
Act of 2007 (EISA) directs the National Institute of Standards and 
Technology (Institute) to coordinate the development of a framework to 
achieve interoperability of smart grid devices and systems. The EISA 
also directs the Commission, once it is satisfied that the Institute's 
work has led to ``sufficient consensus'' on interoperability standards, 
to institute a rulemaking proceeding to adopt such standards and 
protocols as may be necessary to ensure smart grid functionality and 
interoperability in interstate transmission of electric power and 
regional and wholesale electric markets. It is unclear at this time to 
what extent the standards that result from the Institute's process will 
address the cyber security or physical security of distributed smart 
grid devices and systems.
    In July 2009, the Commission issued a Smart Grid Policy Statement 
that discussed its above-noted responsibility pursuant to EISA. Among 
other steps, the Smart Grid Policy Statement identified the development 
of cyber security standards as a key priority in protecting the grid 
and identified electric storage as a key functionality of the smart 
grid, stating that standards related to storage should be treated as a 
priority in the Institute's process. The Smart Grid Policy Statement 
also noted that EISA does not make any standards mandatory and does not 
give the Commission authority to enforce any such standards. Although 
the Commission will not itself develop or enforce these standards, the 
Commission continues to encourage the Institute and standards 
development organizations (SDOs) participating in the Institute's 
process to ensure that the reliability and security, both cyber and 
physical, of the bulk power system is a priority in their standard 
development work.
    Question 4. Chairman Wellinghoff, how are DOE and FERC working 
together to develop and deploy grid-scale energy storage technologies?
    Answer. DOE and the Commission play different but complementary 
roles on this issue. As Under Secretary Koonin described at this 
Committee's December 10, 2009 hearing, DOE is directly supporting 
research and development and pilot projects for energy storage and 
related technologies. The Commission's role, meanwhile, involves in 
part ensuring appropriate treatment of and compensation for energy 
storage resources that participate in Commission-jurisdictional 
markets.
    Such roles are among those recognized in the Memorandum of 
Understanding (MOU) that DOE and the Commission entered in December 
2009 with respect to the Resource Assessment and Interconnection 
Planning project funded by the American Recovery and Reinvestment Act 
of 2009. The MOU observes that energy storage and other non-traditional 
resources will play an increasing role in meeting the energy needs of 
consumers. The MOU also states that the long-term transmission plans to 
be developed through the Resource Assessment and Interconnection 
Planning project should achieve and balance several objectives, while 
maintaining reliability. Those objectives include considering all 
available technologies, including energy storage technologies, to the 
extent that they may become commercially viable and economic.
    Additionally, as I noted above in response to your third question, 
the Commission has identified electric storage as a key functionality 
of the smart grid. The Commission is working with DOE and other federal 
agencies, as well as state regulators and many other interested 
entities, on smart grid issues, including standards development.
    Question 5. Chairman Wellinghoff, what data does the Federal 
government collect on gridscale energy storage? Does it fit into the 
data collection forms used by the FERC? Ifnot, what work is underway to 
add energy storage to these data collection forms?
    Answer. The Energy Information Administration Form No. 860 collects 
energy storage data on pumped storage and compressed air energy systems 
for all electricity producers. In addition, the Commission collects 
pumped storage generating plant statistics for individual companies in 
the FERC Form No.1, Annual Report. This data includes certain 
statistical and historical information about the property and its 
operation during a given year. Apart from pumped storage, however, the 
FERC Form No.1 generally collects cost accounting information on a 
company-wide basis and does not break down such data by type of 
technology. Moreover, companies authorized to sell at market-based 
rates, rather than at cost-based rates, generally are not required to 
file the FERC Form No.1. The Commission does require all public utility 
sellers to file Electric Quarterly Reports including all wholesale 
power sales. While not broken out separately, this information could 
include sales from storage.
    The Commission has begun a review of barriers that may inhibit 
participation by energy storage resources in Commission-jurisdictional 
markets. As that review progresses and as the role of storage in 
wholesale electric markets expands, the Commission will also consider 
whether developing additional reporting requirements is appropriate.
    Responses of Jon Wellinghoff to Questions From Senator Murkowski
    Question 1a. In your testimony you indicated that FERC has issued 
preliminary permits for an additional 27,000 MW of pumped storage 
capacity.
    How many preliminary permits for pumped storage systems has FERC 
issued in the past year?
    Answer. During calendar year 2009, the Commission issued 17 
preliminary permits for pumped storage projects that would have a total 
installed capacity of 16,411 megawatts (MW).
    Question 1b. What percentage of preliminary permits in the past has 
resulted in actual license applications for pumped storage systems?
    Answer. In the past three years, the Commission has issued 36 
preliminary permits for pumped storage projects. To date, one 
permittee, Eagle Crest Energy Company Inc., has filed a license 
application, for the L300-MW Eagle Mountain Pumped Storage Project No. 
13123. to be located in Riverside County, California. In addition, five 
permittees for pumped storage projects, having a proposed total 
installed capacity of 3,732 MW, have begun preparing license 
applications by filing notices of intent to do so, along with 
preliminary application documents that contain all currently-available 
project information.
    Question 1c. What is the typical time period for licensing a pumped 
storage system? For how long is a pumped storage system license valid?
    Answer. The time period for licensing a pumped storage project is 
largely site-specific and may vary widely depending upon the 
configuration of the project, whether closed loop (i.e., using off-
stream and/or underground upper and lower reservoirs) or conventional 
(i.e., using a new upper reservoir and an existing lower reservoir that 
is located on a river). The relative potential for impacts on 
environmental resources will weigh heavily on the process length. Under 
existing licensing procedures, it is possible that an appropriately-
sited pumped storage project having minimal potential for environmental 
impacts could be licensed in 1.5 years or less from the filing of an 
acceptable license application. The process would likely be longer if 
the project had the potential to cause significant adverse effects on 
cultural resources or environmental resources including, but not 
limited to, endangered species or their habitats, or water quality. 
Also, delays in receiving authorizations from other Federal or state 
agencies (pursuant to, for example, the Clean Water Act or the 
Endangered Species Act) might delay a final Commission licensing 
action.
    The Federal Power Act authorizes the Commission to issue original 
licenses for a period not to exceed 50 years. Original pumped storage 
project licenses have typically been issued for a 50-year term.
    Question 1d. How many of the existing pumped storage facilities 
have been relicensed by FERC? What is the typical time period for re-
licensing?
    Answer. To date, the Commission has relicensed three pumped storage 
projects. The time period for relicensing those projects has averaged 
2.6 years from the filing of the application to the issuance of the 
license.
    Question 2. Much of the new pumped storage development proposals 
are for off-river, closed-loop systems that are low impact. Currently, 
these projects must navigate the federal licensing process, which can 
take several years. With the immediate needs we have for energy 
storage, what can FERC do to achieve a more efficient licensing 
timeframe for these types of pumped storage projects?
    Answer. As discussed above in my response to your Question 1 (c), 
proposed pumped storage projects using off-river, closed-loop systems 
that are low impact likely could be processed in 1.5 years or less from 
application filing. Where consensus can be reached with Federal and 
state agencies and other stakeholders that project impacts will be 
minor, the Commission may be able to waive various procedural 
regulations and thus reduce the length of the licensing process.
    Question 3. In your testimony, you reference a situation in West 
Texas during one month in 2008 where wind generation resulted in over 
nine hundred 15 minute intervals of negative pricing. ``Negative 
pricing'' essentially means that you have more generation than demand 
since, and is supposed to serve as a signal not to produce electricity 
at that time. However, I understand that in Texas, wind generators will 
continue to offer their energy at negative prices in order to get the 
federal Production Tax Credit and the value of a state Renewable Energy 
Credit. Additionally, due to transmission constraints, wind developers 
can be paid to remove their production from the grid. Please comment on 
this situation.
    Answer. A negative price need not signal only that electricity 
production should be reduced. It could also signal that using more 
electricity during such periods would be appropriate. Energy storage 
could be particularly valuable in responding to such a signal, in that 
energy could be retained for use at a time when demand would otherwise 
outstrip supply or would require use of higher-cost generation. Much as 
one application of demand response involves ``load shifting,'' this 
application of energy storage resources could be viewed as ``generation 
shifting.''
    I would note that wind generation is not the only potential 
contributor to negative pncmg. Certain base-load generators that must 
operate at a more or less steady state around the clock (i.e., they 
have inflexible dispatch characteristics) may have a strong incentive 
to continue generating even when there is not enough load to balance 
their output. Thus, they also may contribute to the incidence of 
negative pricing.
    Question 4. Compressed air energy systems are considered an energy 
storage mechanism because electrical energy is used to compress air 
that is stored in a pressurized reservoir. Given the fact that 
compressed air energy systems require some method to use the compressed 
air to make electricity, should these systems be classified as a 
generation technology or a transmission and distribution technology?
    Answer. Traditional generation, transmission, and distribution 
resources are associated with well understood functions and methods of 
rate recovery. At a high level, generators are used to produce 
electricity, transmission lines move that electricity to the 
distribution grid, and distribution lines move that electricity to end-
use consumers.
    Energy storage technologies, by contrast, have some characteristics 
that resemble generation and some characteristics that resemble 
transmission. For example, like a generator, an energy storage resource 
may be able to act as a power marketer, arbitraging differences in peak 
and off-peak energy prices or selling ancillary services. The same 
energy storage resource also may be able to support transmission 
service, such as by supporting voltage on a transmission line, in which 
case it might be categorized as transmission, much as some static VAR 
compensators and capacitor banks already are. In addition, energy 
storage resources may be used as a substitute, temporary or otherwise, 
for traditional resources in some circumstances. For example, where 
peak period transmission congestion might prevent the importation of 
sufficient power to serve peak load, but where there is available off-
peak transmission capacity that could be used to charge an energy 
storage resource, that energy storage resource could be used to 
maintain uninterrupted electric service until additional transmission 
or generation assets could be installed.
    Thus, energy storage resources, including those that involve energy 
conversion steps like compressed air energy systems and hydro pumped 
storage, can perform different functions on the grid. In light of these 
characteristics, the Commission has not yet made a generally applicable 
classification of compressed air energy systems, nor has the Commission 
determined whether such a generally applicable classification would be 
appropriate.
     Responses of Jon Wellinghoff to Questions From Senator Shaheen
    Question 1. As we think about policies to support the development 
of new transmission lines to connect location-constrained resources, 
such as wind and solar resources, how should energy storage be 
considered?
    Answer. I believe that effective transmission planning is an 
important step in the development of new transmission lines designed 
primarily to connect location-constrained resources such as generators 
of wind and solar energy. I also believe that it is appropriate to 
consider energy storage as part of the transmission planning process.
    In February 2007, the Commission issued Order No. 890, which marked 
an important step to promote consideration of energy storage in the 
transmission planning process. In Order No. 890, the Commission 
required all transmission providers to develop a regional transmission 
planning process that satisfies nine principles, one of which is 
comparability. To reflect that principle, the Commission required 
transmission providers to outline in their tariffs how they will treat 
comparably in the transmission planning process all resources, 
including non-traditional resources that could impact the need for 
transmission expansion. Such an impact might arise, for example, where 
it is practical to use energy storage resources as a substitute, 
temporary or otherwise, for new transmission facilities.
    I would also note that the Strategic Plan that I provided to 
Congress this fall states that as transmission providers refine their 
transmission planning processes, the Commission will assess best 
practices, including the potential for collaborative decision making, 
and adopt reforms as necessary to its transmission planning process 
requirements. Toward that end, Commission Staff this fall completed a 
series of conferences held around the country to review how well the 
transmission planning requirements of Order No. 890 are meeting the 
needs of our Nation, and to collect input as to how the Commission can 
improve upon the regional transmission planning processes. The 
Commission is now in the process of reviewing comments that were 
submitted in response to questions that Commission Staff posed as a 
follow-up to the conferences held this fall.
    Question 2. One of the proposals put forward to connect these 
resources with new transmission lines is to spread out or 
``regionalize'' the costs of these new transmission investments.
    Question 3. If we regionalize the cost of new high voltage 
transmission lines for renewables as a part of transmission rates 
without storage, we could end up with a big transmission line with a 
relatively low capacity factor because of the intermittent nature of 
many renewable resources. When a lower overall cost option might be to 
have storage near the intermittent generation, like a wind farm, and a 
smaller transmission line with a higher capacity factor and higher 
utilization rate.
    Question 4. As Congress considers policies to connect our renewable 
resources to the grid, how can we achieve that objective in a cost-
effective manner? How should energy storage technologies be 
incentivized under broader transmission and renewable policies?
    Answer. I agree that decisions related to development of new 
transmission lines should be made based on meeting energy needs in a 
cost-effective way. Toward this end, it is important to promote 
effective transmission planning, as discussed above in my response to 
your first question. It is also important to carefully consider a 
proposed project's costs and benefits. As you know, cost allocation is 
often a threshold consideration in the development of transmission 
facilities. For example, there are often significant costs associated 
with building the transmission facilities needed to deliver power from 
remote renewable energy resources. If the resource developer or the 
host utility is compelled to bear all of the cost of such transmission 
facilities, regardless of benefits to others, then it is less likely 
that the associated renewable energy resources will be developed. A 
closely related point is that the Commission must and, I believe, does 
ensure that costs of new transmission lines are allocated fairly to the 
appropriate entities that benefit from the projects.
    With regard to incentivizing energy storage technologies, I would 
note first that some such technologies appear able to provide a nearly 
instantaneous response to regulation signals, in a manner that is also 
more accurate than traditional resources. These characteristics could 
reduce the size and overall expense of the regulation market. Most 
existing tariffs or markets do not compensate resources for superior 
speed or accuracy of regulation response, but such payment may be 
appropriate in the future as system operators gain experience with the 
capabilities of storage technologies. In the meantime, the unique 
characteristics of energy storage technologies could warrant different 
market rules for providing energy and ancillary services than those 
established based on the characteristics of traditional resources.
    I would also note that in section 1223 of the Energy Policy Act of 
2005 (EP Act 2005), Congress identified ``energy storage devices'' as 
an ``advanced transmission technology'' and also stated that in 
carrying out the Federal Power Act (FPA), the Commission shall 
``encourage, as appropriate'' the deployment of advanced transmission 
technologies. The Commission has recognized that Congress envisioned a 
connection between section 1223 and section 1241 of EP Act 2005, which 
added section 219 to the FPA and directed the Commission to establish, 
by rule, incentive-based rate treatments to promote capital investment 
in transmission infrastructure. The Commission subsequently issued 
Order No. 679, which set forth the criteria by which a public utility 
may obtain transmission rate incentives pursuant to FP A section 219. 
The Commission has carefully considered applications for such 
incentives filed by energy storage developers and will continue to do 
so.
    Question 5. As you may know, an amendment pertaining to cost 
allocation was adopted during consideration of the transmission title 
of the S. 1462, American Clean Energy Leadership Act. The provision 
reads:

          Sec. 121 (i)--COST ALLOCATION

          . `(B) may permit allocation ofcosts for high-priority 
        national transmission projects to load-serving entities within 
        all or a part ofa region, except that costs shall not be 
        allocated to a region, or subregion, unless the costs are 
        reasonably proportionate to measurable economic and reliability 
        benefits; ''

    If approved, how would this policy affect, if any, New England's 
existing cost allocation methodology for reliability-based and 
participant-funded transmission infrastructure improvements? As you 
know, the methodology, established in 2004, provides for regional cost 
support of regionally planned transmission upgrades that provide 
region-wide benefits. I am interested in how the cost allocation 
language in S. 1462 may affect New England's existing policies for 
transmission improvements necessary for reliability purposes.
    Answer. In my view, the first clause of the language that you 
quoted from S.1462 includes an important clarification to the 
Commission's authority in the area of transmission cost allocation. It 
is critically important that the Commission continue to have the 
flexibility to approve cost allocation methods that meet local and 
regional needs in a manner that provides just and reasonable rates for 
consumers as well as nondiscriminatory access to the transmission 
system. It is also appropriate that Congress clarify that the 
Commission has authority to allocate transmission costs to all 
loadserving entities within an interconnection or part of an 
interconnection where it is appropriate to do so. Of course, as I noted 
above in response to your previous question, the Commission would need 
to ensure, as it does today, that the costs are allocated fairly to the 
appropriate entities.
    However, I am very concerned about another aspect of the language 
that you quoted from S.1462. Legislation should avoid unduly 
restrictive language on cost allocation, particularly language that 
could be read as imposing a requirement to calculate the precise 
monetary benefits expected to accrue from a new transmission facility. 
It is possible that ISO New England's existing cost allocation method 
would be found inconsistent with the restrictive language in S.1462 
that requires a showing that ``costs are reasonably proportionate to 
measurable economic and reliability benefits.''
    Question 6. As you may know, thermal energy storage--that is the 
thermal momentum of buildings, both heating and cooling, can mimic the 
same characteristics of electric energy storage technology--like pumped 
storage, air compression, flywheels or battery technologies.
    Do you consider thermal storage technologies, such as offpeak 
cooling with thermal energy storage, as an electricity storage 
technology like pumped storage, air compression, flywheel and battery 
technologies? Ifnot, why not?
    Answer. I generally agree that thermal energy storage can be 
classified as an energy storage technology. It is noteworthy that there 
are a variety of thermal energy storage technologies and applications, 
which can be located on different parts of the electric system. For 
example, some large concentrating solar thermal electricity generation 
plants can be designed to include on-site thermal storage capability 
for excess heat to permit electricity generation to continue after the 
sun has set. Another form of thermal storage can involve controlled 
cooling at large refrigeration plants that serve industrial, 
commercial, or residential cooling loads. Yet another technology 
involves smaller distributed thermal energy storage for shifting 
cooling loads from peak to offpeak periods. Each of these technologies 
could constitute an ``energy storage device'' and thus could also be 
considered as possible ``advanced transmission technologies'' as 
defined in section 1223 of EPAct 2005.
    Question 7. Considering that 40% of the summer peak demand in New 
England consists of air conditioning and cooling loads, what can we do 
to promote offpeak cooling with thermal energy storage, such as ice 
energy, to avoid paying more for transmission and generation capacity 
that is only used a few hours per year?
    Answer. Because thermal energy storage for cooling requires the 
storage to be located at the cooling location, support for distributed 
thermal storage or possibly some type of district cooling (e.g., large 
thermal ponds at the neighborhood level) may have particular promise. 
In both cases, this equipment would likely be located at the retail end 
of the electric grid. Given that location, in circumstances where a 
developer of a distributed thermal storage technology chooses to work 
with an electric utility to encourage consumers to adopt that 
technology, retail regulators could promote that use of distributed 
thermal storage by permitting the utility to recover the cost of such 
investments in bundled retail rates. Where a developer of a distributed 
thermal storage technology does not choose to work with an electric 
utility, changes in retail rate design or other policies such as tax 
credits could make investments in such technologies more attractive to 
prospective users. In addition, to the extent that a developer of a 
distributed thermal storage technology does not choose to work with an 
electric utility, it may be possible to develop tariffs for wholesale 
markets under which users could receive compensation for the demand 
reductions they achieve by deploying such technologies. I would be 
supportive of exploring such mechanisms.
    Question 8. Anyone who has spent time studying renewable energy 
sources and how they work knows that having grid-scale energy storage 
assets will be crucial to the effectiveness and extent of renewable 
integration into our electrical power system. When you want power from 
a generator that burns fossil fuels, you turn it on. Solar panels and 
windmills, however, require sun to shine and wind to blow to generate 
power. Since that might not happen at exactly the moment that power is 
needed, the capability to store the energy and use it at a later time, 
whether it's 10 seconds or 10 hours later, is crucial.
    Question 9. As we increase the amount of renewable on the grid, how 
much energy storage and what type of storage, will be required to meet 
our goals? I say what type of storage, because I understand there are 
two types of challenges to making the renewable generation system work 
effectively. One relates to balancing the supply and demand of power on 
the grid at any moment, called regulation. Regulation requires energy 
storage that can absorb and inject energy into the grid very quickly. 
The other relates to what's called diurnal storage--storing energy when 
the wind blows, for example, and using it when the wind dies down but 
demand for electricity stays high.
    Question 10. How much of each type of storage do we need to make 
our renewables, both current and planned, work most effectively?
    Question 11. Is there a clear ratio that we need to achieve between 
storage and renewable resources?
    Answer. I agree that there is a close relationship between the 
development and implementation of energy storage and our Nation's 
ability to harness the potential of our renewable energy resources. As 
I stated in my December 10, 2009 testimony to this Committee, energy 
storage can make integration of renewable energy resources not only 
reliable, but also efficient and cost-effective.
    I would note that I have directed Commission Staff to conduct a 
study to determine the appropriate metrics for use in assessing the 
reliability impact of integrating large amounts of variable renewable 
energy into the grid. That study, which is being undertaken by Lawrence 
Berkeley National Laboratory and overseen by Commission Staff, is due 
to be completed in the spring of 201O. When the study is complete, it 
will help to inform policy makers about the current limitations of the 
grid, and to identify what investments will be necessary to reliably 
accommodate continued growth of renewable energy resources.
    However, generalizing about either the amount or type of storage 
needed to integrate renewable energy most effectively into the electric 
system is difficult given the variances in renewable generation types 
(e.g., solar as compared to wind) and the varying capacity factors of 
each resource depending on location and other characteristics (e.g., 
on-shore wind as compared to off-shore wind). The Commission also has 
not identified a ratio as to the amount of energy storage needed per 
amount of a particular type of renewable energy. In addition, I would 
note that other non-traditional resources, such as demand response, 
also can contribute to the reliable, efficient, and cost-effective 
integration of renewable energy resources.
    Question 12. Is energy storage keeping up with renewables 
deployment, or do we have to ramp up the rate at which energy storage 
is made available to keep pace with our plans and goals for integration 
of renewables?
    Answer. The recent expansion of our Nation's reliance on renewable 
energy resources has progressed more quickly than deployment of energy 
storage. Several factors have helped to accommodate this expansion, 
such as pre-existing flexibility in the system and, in some regions, 
greater use of demand response in coordination with variable renewable 
energy resources. With pre-existing system flexibility diminishing, 
however, and for the reasons discussed above in response to several of 
your previous questions, I believe that there are substantial potential 
benefits to increasing the pace of deployment for energy storage 
resources. The lag in development of energy storage resources is also 
one of the primary reasons why, as noted in my response to your 
previous question, I directed Commission Staff to conduct a study to 
determine the appropriate metrics for use in assessing the reliability 
impact of integrating large amounts of variable renewable energy into 
the grid. I am hopeful that the results of that study will provide 
information to assist in assessing what investments in energy storage 
and other types of resources will be necessary to reliably accommodate 
continued growth of renewable energy resources.
    Question 13. Do we need to find a way to link the promotion and 
deployment of energy storage to the incentives we provide for 
renewables? It seems that renew abIes and energy storage are 
complementary components of a single system.
    Answer. Yes. It would be ideal if we could associate sufficient 
energy storage with each new megawatt of variable renewable energy 
resource developed to ensure the consistent capacity factor necessary 
to deliver the energy when and where needed. However, we should not 
lose sight of the fact that energy storage is not the only mechanism to 
accomplish this task. For example, transmission can provide for 
delivery of energy from diverse and non-coincident renewable energy 
resources and, therefore, also should be linked to that complementary 
single system. Thus, the aim should be to develop a market incentive 
system supported by federal policy that encourages the appropriate 
development of renewable energy resources, supports storage and other 
appropriate resources for balancing and delivering those renewable 
energy resources when needed, and a transmission system that enables 
that delivery from any of the renewable energy resource, a non-
coincident alternative resource, or storage.
    Question 14. FERC Order 890 mandates that all independent system 
operators open their markets to non-generation resources to provide 
grid ancillary services, such as grid regulation. Electricity storage 
has been cited as one technology that can provide some of these 
services, with one company already using a flywheel energy storage 
system to provide grid regulation in Massachusetts, by which I mean the 
process of balancing the power injected into the grid with the level of 
power consumed at any given moment. I understand from the experience of 
this company, Beacon Power, that the extent of compliance with Order 
890 varies greatly among the ISOs. Some ISOs have moved relatively 
quickly to adjust their tariffs and control technologies to meet this 
new technology, whereas others have been more resistant to FERC's 
mandate.
    Question 15. Do you agree with this characterization?
    Question 16. What is the FERC doing to enforce compliance with 
Order 890?
    Answer. In Order No. 890, the Commission modified most ancillary 
services schedules of the pro forma Open Access Transmission Tariff to 
indicate that those ancillary services may be provided by generating 
units as well as non-generation resources, such as demand resources, 
where appropriate. The Commission also stated that sales of those 
ancillary services by load resources should be permitted where 
appropriate on a comparable basis to service provided by generation 
resources.
    I agree with the characterization in your question to the extent 
that it recognizes that various regional transmission organizations 
(RTO) and independent system operators (ISO) are at different stages of 
developing appropriate tariff mechanisms for energy storage resources 
to provide ancillary services. All of the RTOs and ISOs that operate 
energy and ancillary services markets are working with their 
stakeholders to determine how non-generation resources, including 
energy storage resources, can provide ancillary services in those 
markets. As I described in my December lO, 2009 testimony to this 
Committee, some of the RTOs and ISOs have also made or proposed 
specific tariff changes, while others have established pilot programs. 
Achieving compliance with major initiatives such as Order No. 890 often 
involves an iterative process, rather than a single compliance filing.
    I would also note that the Strategic Plan that I provided to 
Congress this fall sets as a long-term performance goal that all 
resources technically capable of providing ancillary services wil1 have 
the opportunity to provide those services. Toward that end, the 
Commission will consider instituting formal proceedings that may 
address the modification or creation of ancillary services. as well as 
the removal of additional barriers that may exist to any resource 
capable of providing an ancillary service from having the opportunity 
to do so.
      Responses of Jon Wellinghoff to Questions From Senator Udall
    Question 1. Chairman Wellinghoff, how would you assess the changes 
that Independent System Operators and Regional Transmission 
Organizations have made in recent years to allow storage to compete in 
their markets? Would you judge that they have made significant 
progress? What do you think is still left to do?
    Answer. Various regional transmission organizations (RTO) and 
independent system operators (ISO) are at different stages of 
developing appropriate tariff mechanisms for energy storage resources 
to provide ancillary services. All of the RTOs and ISOs that operate 
energy and ancillary services markets are working with their 
stakeholders to determine how non-generation resources, including 
energy storage resources, can provide ancillary services in those 
markets. As I described in my December 10, 2009 testimony to this 
Committee, some of the RTOs and ISOs have also made or proposed 
specific tariff changes, while others have established pilot programs.
    I believe that these actions taken by the RTOs and ISOs constitute 
significant progress. Nonetheless, I would note that the Strategic Plan 
that I provided to Congress this fall sets as a long-term performance 
goal that all resources technically capable of providing ancillary 
services will have the opportunity to provide those services. Toward 
that end, the Commission will consider instituting formal proceedings 
that may address the modification or creation of ancillary services, as 
well as the removal of additional barriers that may exist to any 
resource capable of providing an ancillary service from having the 
opportunity to do so.
    I also stated in my December 10, 2009 testimony that some energy 
storage technologies appear able to provide a nearly instantaneous 
response to regulation signals, in a manner that is also more accurate 
than traditional resources. These characteristics could reduce the size 
and overall expense of the regulation market. Most existing tariffs or 
markets do not compensate resources for superior speed or accuracy of 
regulation response, but such payment may be appropriate in the future 
as system operators gain experience with the capabilities of storage 
technologies. In the meantime, the unique characteristics of energy 
storage technologies could warrant different market rules for providing 
energy and ancillary services than those established based on the 
characteristics of traditional resources.
    Question 2. Chairman Wellinghoff, what is your view on how rate 
recovery should be done for storage projects that are built to defer 
the need for new investments in transmission infrastructure or to 
relieve transmission congestion?
    Answer. Energy storage technologies have some characteristics that 
resemble generation and some characteristics that resemble 
transmission. For example, like a generator, an energy storage resource 
may be able to act as a power marketer, arbitraging differences in peak 
and off-peak energy prices or selling ancillary services. The same 
energy storage resource also may be able to support transmission 
service, such as by supporting voltage on a transmission line, in which 
case it might be categorized as transmission, much as some static VAR 
compensators and capacitor banks already are. In addition, energy 
storage resources may be used as a substitute, temporary or otherwise, 
for traditional resources in some circumstances. For example, where 
peak period transmission congestion might prevent the importation of 
sufficient power to serve peak load, but where there is available off-
peak transmission capacity that could be used to charge an energy 
storage resource, that energy storage resource could be used to 
maintain unintelTupted electric service until additional transmission 
or generation assets could be installed. In light of these 
characteristics, the Commission has not yet made a generally applicable 
classification of energy storage resources for purposes of cost 
recovery, nor has the Commission determined whether such a generally 
applicable classification would be appropriate.
    Responses of Jon Wellinghoff to Questions From Senator Stabenow
    Question 1. I appreciate the opportunity to hear more about the 
potential for energy storage technology usage in our energy grid.
    Continuing to pursue energy storage technologies like those 
mentioned in your testimony will help make our grid more efficient, 
connect renewable technologies to our systems, and ultimately lead to 
less greenhouse gas emissions and more jobs for our workers.
    I would like to point out a connection between grid energy storage 
issues to another interest important to my state of Michigan--advanced 
batteries for vehicles.
    Advanced electric vehicles provide two benefits for the electricity 
grid. First, vehicle battery technology can improve store energy for 
the grid. Second, those vehicles can communicate with the grid and use 
more energy at low demand periods when energy is cheaper or more 
renewables are available.
    I was proud to help provide funding for advanced batteries in the 
Recovery Act which provided nearly $2.3 billion for advanced battery 
manufacturing. :Many companies and universities in Michigan, such as 
A123 systems and the University of Michigan, have used this funding to 
make Michigan and the United States a leader in advanced battery 
technology development. A123 is also working with our Michigan utility, 
Detroit Edison, to demonstrate its battery technology for grid storage.
    Certainly energy storage technology and cost will depend on both 
the vehicle and electrical industries. Please provide examples of the 
need for government R&D efforts and these two industries to continue to 
work together to develop the next generation of advanced batteries 
required by both industries.
    Answer. I agree that both the electric and vehicle industries will 
benefit from the development of advanced batteries that can enhance the 
operation of electric transportation, as will consumers who purchase 
electric vehicles. I also agree that to fully realize such benefits, 
government support for research and development in this area is 
appropriate, and cooperation between the electric and vehicle 
industries is essential.
    As you know, there are many examples of technologies that 
originally emerged from research and development that was conducted 
with Federal government support. Indeed, much of today' s existing 
battery technology for electric vehicles could be placed in that 
category, although to date much subsequent development and 
commercialization of that technology has occurred outside of the United 
States. I believe that continuing the Nation's commitment to research 
and development in this area offers the promise of further technology 
breakthroughs.
    One illustration of the need for cooperation between the electric 
and vehicle industries is related to the potential for the batteries in 
electric vehicles to provide services to the grid. As I stated in my 
December 10, 2009 testimony to this Committee, researchers at the 
University of Delaware have demonstrated that electric vehicles can 
provide regulation service. In fact, P1M Interconnection (P1M) is 
currently paying electric vehicles to do so. P1M aggregates a 1 
megawatt battery that a utility installed at P1M headquarters with the 
batteries of three electric cars associated with the University of 
Delaware's research. The batteries then sell into P1M's regulation 
market.
    The University of Delaware researchers believe that, using this 
technology, parked electric vehicles connected and aggregated in large 
numbers in places like parking garages could be made available as 
energy storage to support grid operations. Achieving that larger-scale 
potential will involve increased cooperation between the electric and 
vehicle industries, such that electric vehicles are equipped with 
appropriate vehicle-to-grid (V2G) technology that allows the necessary 
two-way communication and bidirectional controlled flow between the 
vehicle and the grid.
    Question 2. How critical are auto technologies to the electrical 
industry and infrastructure as we strive to use energy more efficiently 
and tap into more renewable sources?
    Answer. I believe that energy storage resources have great 
potential to complement our Nation's efforts to reliably incorporate 
into the grid increased output from variable renewable energy 
resources. With increasing commercial availability, electric vehicles 
could become a widespread energy storage resource and contribute to 
reaching that goal. For example, as I noted above in response to your 
first question, electric vehicles can provide ancillary services, like 
regulation service, to the grid and thus assist system operators in 
balancing the variability of many renewable energy resources.
    Question 3. In addition, are there any regulatory or statutory 
barriers that would make FERC's efforts to integrate this kind of 
technology more effective?
    Answer. As I stated in my December 10 testimony, the Commission 
recognizes and is taking steps to address the challenge of removing 
regulatory barriers that impede the vast potential of energy storage to 
support our national energy goals.
    For example, the Strategic Plan that I provided to Congress this 
fall sets as a long-term performance goal that all resources 
technically capable of providing ancillary services will have the 
opportunity to provide those services. Toward that end, the Commission 
will consider instituting formal proceedings that may address the 
modification or creation of ancillary services, as well as the removal 
of additional barriers that may exist to any resource capable of 
providing an ancillary service from having the opportunity to do so.
    More specifically, I would note that most existing tariffs or 
markets do not compensate resources for superior speed or accuracy of 
regulation response. Such payment may be appropriate in the future as 
system operators gain experience with the capabilities of storage 
technologies. In the meantime, the unique characteristics of energy 
storage technologies, including electric vehicles, could warrant 
different market rules for providing energy and ancillary services than 
those established based on the characteristics of traditional 
resources. The Commission is working toward removal of such barriers to 
market participation by energy storage resources.
    Question 4. Does FERC require any additional authority to advance 
energy storage technology and use?
    Answer. PJM's compensation of electric vehicles for providing 
regulation service demonstrates that it is possible under existing 
authority to integrate electric vehicles into Commission-jurisdictional 
markets. Removing the types of barriers described in my response to 
your previous question will create additional opportunities for market 
participation by electric vehicles and other energy storage resources.
    It also should be noted that retail regulatory authorities have an 
important opportunity to directly support the widespread adoption of 
energy storage technologies, including electric vehicles. To date, 
states have led the way in pushing for increased reliance on our 
Nation's still largely untapped renewable energy resources, and in 
light of the potential for energy storage to complement those often 
variable resources, retail regulators may come to see benefits of 
supporting storage development through retail rate recovery. The 
Commission will look for ways to work with the states to ensure that 
innovative retail rates do not raise concerns for the operation of 
Commission jurisdictional wholesale markets.
                                 ______
                                 
   Responses of Ralph D. Masiello to Questions From Senator Bingaman
    Question 1. Dr. Masiello, in your testimony you discussed the need 
for considering energy storage in transmission planning. S.1462 
includes energy storage as an alternative that must be considered in 
transmission planning. Is this sufficient? What other legislative 
language may be necessary?
    Answer. Storage on the distribution system offers new capabilities 
that can affect the need for transmission capacity expansion. This 
poses the challenge that transmission planning would have to include 
some consideration of how storage at the distribution level can be a 
transmission resource. Given that many renewable resources are 
developed as ``distributed generation'' on the distribution system, 
this will become an increasingly important consideration. Ideally, 
transmission planning would have to show quantitative evaluation of 
energy storage as an alternative in transmission planning, including 
its impacts on reliability and congestion.
    I cannot speak as an expert as to how best to implement the 
requirement via legislation or regulation. It may be that requiring how 
to demonstrate consideration of energy storage is something FERC would 
do via a regulatory process. However, FERC oversight today generally 
does not extend to distribution systems though we now have the 
potential for transmission assets on the distribution system to be a 
factor in transmission planning.
    Question 2. Dr. Masiello, how is energy storage currently addressed 
in transmission and generation planning processes? What planning, 
analysis, and modeling tools do we need to develop to be able to 
determine where to best site storage technologies?
    Answer. Storage is already considered in generation planning 
processes today where known storage alternatives to generation such as 
pumped hydroelectric storage are viable resources. Generally speaking, 
however, storage is not a routine consideration today in transmission 
planning either from a reliability perspective or a transmission 
congestion perspective. Storage is beginning to be considered in the 
context of renewable generation that is subject to transmission 
congestion, as in the case of remote wind farms.
    To allow for storage to be routinely considered in system planning, 
the industry needs to have standard models for storage systems which 
can be parameterized to represent different technologies and sizes. 
This is the case today with generation systems and with transmission 
apparatus--there are formal standards from the Institute of Electrical 
and Electronics Engineers (IEEE) for models of different equipment 
classes that are identified as suitable for particular planning 
purposes such as transient stability, load flow, and other analyses. 
These standard models allow for the exchange of planning data as well 
as a degree of compatibility across different software applications 
from different vendors. One key step, therefore, is the development of 
similar standards for storage systems so that they may be consistently 
represented in the various planning models and tools. Because many 
storage technologies are novel and somewhat developmental, and because 
the life expectancy of storage systems as a function of their usage is 
central to the economic analysis of different applications, 
considerable work is required to develop methodologies for 
characterizing and modeling storage system life cycles as well as 
validating those characterizations over time.
    A key inherent benefit of storage systems is in the ability to 
shift energy delivery in time; that is to deliver energy at a time 
later than when it is generated. In general, transmission studies today 
analyze a ``shapshot'' of the system at a moment in time (usually 
assumed to be at peak loading) as opposed to analyzing conditions over 
a period of time. Determining the optimal size of a storage system 
requires that the transmission planning analysis look at system 
performance over a time period during which the storage system is 
optimally used. Thus, new methodologies for optimization and simulation 
are required and these must be incorporated into transmission planning 
tools. Storage inherently transforms the ``economic dispatch'' 
problem--how to best allocate generation at a given moment in time--to 
a ``unit commitment'' problem--how to best allocate resources over 
time. As such, it will require that transmission planning must also 
consider these time dynamics.
    Question 3. Dr. Masiello, what kinds of system information-sharing 
and collaboration must exist, to ensure that storage and distributed 
renewable generation (two sides of the same coin) can be effectively 
dispatched such that the bulk power grid is managed most reliably and 
efficiently? What role must interoperability and cybersecurity 
standards play, to ensure this becomes a reality? How do transmission 
system operators need to change their practices and software to 
accommodate efficient dispatch of energy storage?
    Answer. The ISO RTO Council of North American Independent System 
Operators is developing proposed business process, data model, and 
interoperability standards for storage and distributed generation as 
inputs to the National Institute of Standards and Technology (NIST) 
Smart Grid interoperability standards process. These will include 
proposals for what information must be exchanged and with what 
periodicity for different reliability, dispatching, and control 
purposes at the wholesale or transmission level. These proposed 
standards will be reviewed by the appropriate teams and working groups 
within the NIST standards framework, and will have to be compatible and 
compliant with the broader set of NIST interoperability standards, 
including cyber security provisions.
    The key issues for distributed resources and renewable resources 
are: forecasting, visibility or monitoring, and control. At low levels 
of penetration inaccurate forecasts of renewable production and a lack 
of direct visibility are manageable. At high levels of penetration 
(i.e., over 20%), the system operators will require more accurate 
forecasts of production and real time visibility of actual production 
of both grid connected and distributed resources. Controlling renewable 
resources requires the means to avoid unanticipated and sudden fall 
offs in production. This implies that a grid operator might require 
renewable resources to ``ramp down'' or be curtailed in anticipation of 
near-term weather changes. Alternatively, storage as a local resource 
or as a grid service could help resolve sudden drops in renewable 
generation.
    The variable nature of renewable resources will add more 
uncertainty to the daily and hourly scheduling processes. Grid 
operators will have to adapt to this via changed protocols for 
scheduling reserves and perhaps ``ramping'' capability in the system.
    The algorithms used by market operators or by vertically integrated 
utilities to optimally schedule day-ahead, hour-ahead, and real-time 
generation will all have to be able to consider and optimize the 
ability of storage to shift energy demand and production in time. In 
general, this is a difficult problem which is addressed today only in 
specific cases of hydro thermal scheduling that have incorporated 
models of particular pumped hydroelectric facilities. Even in these 
cases, because existing pumped hydroelectric storage is not 
controllable when pumping, the solutions are not at the level of 
sophistication that will be required in the presence of high renewable 
production and large amounts of available and distributed storage.
   Responses of Ralph D. Masiello to Questions From Senator Murkowski
    Question 1. In your written testimony, you indicated that demand 
response and dynamic pricing cannot be maintained at certain renewable 
penetration levels. The energy bill passed by this Committee would 
require up to 15% of the electricity supply from renewable sources or 
energy efficiency by 2021. Is this percentage practically achievable if 
the energy storage technologies are not deployed on a large scale given 
the intermittency of the renewable sources? Will development and 
deployment of energy storage technologies proceed at a pace sufficient 
to match the need for meeting a federal renewable mandate?
    Answer. To clarify this point, my intention was to say that 
managing the production characteristics and variability of renewable 
resources when they are over 20% of the portfolio may be difficult with 
demand response and dynamic pricing alone, as it is not clear what 
level of demand control the public might accept. (This is a personal 
opinion of mine). In conjunction with demand response and dynamic 
pricing, storage offers another resource for mitigating the 
intermittent behavior of renewables.
    For storage development to proceed as rapidly as mandated renewable 
development, the technology must be proven and either the economics 
must be attractive (such as with the time arbitrage of energy for the 
renewable developer or storage developer). Today, there is no easy way 
for a storage developer to anticipate what the time arbitrage of energy 
prices will be under high renewable levels if demand response or 
dynamic pricing is the key determinant in setting marginal prices--
there is not sufficient data to understand what consumer price levels 
for demand response will need to be to achieve high levels of demand 
control. The tradeoffs between high levels of renewables, demand 
response or dynamic pricing, and storage are not well understood 
economically. Studies are needed to identify the various tradeoffs and 
begin to assess the quantitative economics.
    Question 2a. Pumped hydro has been the workhorse for utility-scale 
energy storage and provides 21 gigaWatts (GW) of electrical capacity. 
However, suitable locations for pumped hydro are considered limited.
    Of the nearly 80,000 dams in the U.S., how many have hydroelectric 
generating capabilities?
    Answer. Though KEMA has expertise in hydroelectric generation, the 
national labs appear to have developed national assessments of 
hydropower potential in the U.S. In particular, Idaho National 
Laboratories (INL) has completed a series of reports over the past 
decade to assess hydropower potential in the U.S. and have developed 
tools for modeling the potential and the economics of a given site. Dr. 
McGrath of (NREL) may also be able to provide better information on 
national inventories. However, it appears that according to the Army 
Corp of Engineers, 2,400 of the nearly 80,000 dams in the U.S. have 
hydroelectric generating capabilities.
    Question 2b. If so, how much additional capacity could be obtained 
in doing so?
    Answer. The 2003 INL report identified potential conventional 
hydropower capacity additions of 30,000 MW by developing feasible sites 
to full potential. Other analyses may differ, especially in the 
weighting factors used to assess issues such as environmental and land 
use factors. This estimate includes run-of-the-river hydropower as well 
as other hydropower sources not typically conducive to pumped storage. 
As such, these studies do not explicitly identify potential 
hydroelectric pumped storage project potentials.
    Other sources identify significant numbers of projects in the 
permitting stage for the construction of above-ground and cavern-based 
pumped storage--as much as 31,000 MW of pumped storage capacity. 
Whether these projects will pass federal, state, and local 
environmental, land use, and eminent domain reviews and processes and 
proceed to construction is difficult to assess, as is predicting the 
timeline for such approvals.
    Pumped storage can be the most economically attractive large scale 
storage technology (00's to 000's of MWh) if the siting provides 
sufficient elevation difference between low and high reservoirs and 
sufficient acreage for large amounts of storage. Efficiencies can be as 
high as 80% overall if elevation differences are great enough and if 
the reservoirs do not lose water to leakage into the water table or to 
evaporation. Unfortunately, most existing hydroelectric generation 
facilities are not suitable for pumped storage applications due to lack 
of a sizable reservoir below the dam. One notable exception to this is 
at Niagra Falls where a very large pumped storage facility has been 
proposed. There are obvious environmental and public factors that come 
into play in such a location.
                                 ______
                                 
     Responses of Robert McGrath to Questions From Senator Bingaman
    Question 1. Dr. McGrath, what planning, analysis, and modeling 
tools do we need to develop to be able to determine where to site 
storage technologies that may be able to defer or negate the need for 
distribution and transmission upgrades or even the need for new 
generation/transmission/distribution?
    Answer. Analysis is required at multiple scales to quantify the 
need for energy storage and to develop the appropriate decision-making 
tools sufficient to balance trade-offs among new transmission, 
generation, load management (e.g. SmartGrid) and energy storage. 
Because energy storage can be considered by utilities and grid 
operators as either a central (large) or distributed source of 
dispatchable generation, modeling and simulation will need to cover a 
range of scales from single renewable energy sources to regional zones 
and the entire grid. Analysis is needed to understand the options under 
a number of potential scenarios at regional and national scale, to 
determine the scale(s) and timeframe(s) required for energy storage 
technology development and deployment, and provide the necessary 
information for market assessments. The need for a more holistic 
national-scale study is made all the more acute by the proliferation of 
renewable portfolio standards at the state level.
    For scenarios that look at increasing the use of Variable-Resource 
Renewable Energy (VRRE) options such as wind and solar, significant 
improvements are needed to quantitatively describe the actual electric 
grid and power flows to incorporate the complexities of storage and 
transmission technology options for planning scenarios. These improved 
analysis tools are needed to address a variety of problems ranging from 
long-term planning for capacity expansion decisions, to hourly 
decisions supporting least-cost system operation, and finally to sub-
hourly decisions affecting emissions, reliability, ramping and reserve 
considerations.
    DOE has funded the development of significant electric grid 
modeling and analysis capabilities at national laboratories, e.g. ORNL, 
PNNL, SNL, LANL, and LBNL, mainly to address questions related to 
overall grid reliability and homeland security. NREL has developed 
collaborations with these national laboratories to specifically apply 
their data and analytic capability to studies of renewable energy 
penetration into the electric grid for multiple regions and scales.
    A number of efforts are underway to assess the interrelationship of 
storage and transmission and generation, but no significant large-scale 
studies have been completed. The bulk of the work to date has been to 
demonstrate that renewable energy can be integrated into the electric 
grid. Little work has been targeted to date at developing optimal 
solutions. Additional efforts should be directed at large-scale, 
detailed models, using large datasets. These models can then be used to 
draft broad potential scenarios, and reveal the proper balance of 
storage and transmission upgrades.
    As an example of work specific to renewable energy integration, 
NREL has developed the Regional Energy Deployment Systems (ReEDS) model 
for the long-term capacity expansion modeling at the national level. 
This model includes in considerable detail Variable-Resource Renewable 
Energy options (VRREs), along with more simplified analytical 
descriptions of storage and transmission. NREL is in the process of 
improving how transmission is represented in the ReEDS model, to better 
represent actual power flows. Detailed descriptions of distribution and 
storage considerations, however, remain outside the present scope of 
the model. Additional investments are required, supporting work at NREL 
and other sites, to develop, validate and integrate detailed 
descriptions of storage, transmission and distribution into models such 
as ReEDS in order to support long-term grid planning and associated 
national policy formation.
    For least-cost system operation throughout a year at the individual 
utility, regional reliability entity, or ISO/RTO level, there are a 
number of existing commercially-available optimal power flow models 
that address renewables and generation/transmission/storage tradeoffs, 
with varying degrees of accuracy. Providing these models with valid 
hourly renewable resource data, obtained from actual operation over 
multiple years, is an ongoing challenge now being addressed by NREL. 
Approximating these detailed hourly model results in the capacity 
expansion models described in the preceding paragraph is another 
crucial ongoing modeling effort. Modeling at the sub-hourly level for 
system reliability, carbon and local air emissions, ramping, and 
reserves, in a system with large amounts of VRREs, will be critical as 
we look to the future--though limited funding has kept such effort in 
its infancy. Finally, it is important to recall that the authority for 
generation, transmission and distribution approval is largely in the 
purview of state government.
    Question 2. Dr. McGrath, some of the commercial software that grid 
planners use today grew out of previous DOE-funded research. What is 
DOE doing to help develop grid planning software that takes account of 
energy storage and renewable energy? What are the national labs doing 
to support transmission planning models and software? How much funding 
is going towards this work now, and how does this compare to past 
funding levels?
    Answer. Energy storage will be an important element in the 
extremely complex process of integrating large quantities of renewable 
energy into the electric grid. As pointed out by Undersecretary Koonin, 
a national grid-scale energy storage RD&D program aimed at developing 
and implementing cost-effective, energy-efficient, large-scale energy 
storage technologies will require a serious commitment to grid 
optimization analysis, as well as to energy storage technology 
development.
    In the area of grid analysis, the DOE Office of Electricity funds 
several national laboratories, including NREL, PNNL, ORNL, LBNL and ANL 
as well as universities to advance tools, develop methods, and perform 
specific studies. For example, ORNL and PNNL have developed extensive 
visualization capabilities in collaboration with utilities. Los Alamos 
and Sandia have developed extensive physics-based models of the 
existing national electric grid that include real-time power generation 
and flows to predict the impacts of disruptions, either natural or man-
made, on the electric grid. This model was developed initially through 
DOE-OE, then through the Department of Homeland Security's National 
Infrastructure Simulation and Analysis Center (NISAC). DOE-EERE is 
supporting data development and looking at needed advancements to 
accurately capture the characteristics and effects of variable 
renewable energy sources.
    NREL has specifically been engaged in grid analysis for renewable 
energy integration and has developed collaborations with a number of 
national laboratories and companies to apply their models and data to 
studies of renewable energy penetration into the electric grid for 
multiple regions and scales. In the Western Wind and Solar Integration 
Study (WWSIS), NREL is working with GE and its GE-MAPS software to 
examine the potential synergies between pumped hydro storage and VRREs. 
In another effort, the Renewable Electricity Futures Study, NREL is 
working with ABB to use and improve their GridView model for assessing 
the role of transmission and storage under high renewable penetration 
scenarios. In a third effort, the Western Renewable Energy Zone (WREZ) 
initiative, NREL provided highly detailed VRRE data maps, then worked 
with western states, Canadian provinces, and Mexico (which encompass 
the western grid interconnection), for assessing renewable resource 
potential, and transmission requirements necessary to deliver these 
resources to load centers.
    Recently, NREL has been collaborating with Los Alamos National 
Laboratory through funding from the DOE-EERE wind program to 
incorporate models and data from LANL's large DHS-funded NISAC. These 
models use power flows on the existing grid and will allow for detailed 
``what-if'' analysis as to when, where, and how best to enhance the 
grid for maximum integration of renewable energy.
    NREL has been working with Western Electricity Coordinating Council 
(WECC) to create a support partnership with national laboratories that 
will draw upon prior work and existing capabilities across the national 
lab complex. WECC was notified by DOE on Dec. 18 that it has been 
selected for an award to research options for alternative electricity 
supplies and associated transmission requirements, in an integrated 
approach to the western grid that could involve several laboratories in 
addition to NREL. The goal of this effort would be to create a tool 
that would allow for ``what if'' assessments for the effective 
integration of renewable energy into the existing and future electric 
grid. A total of about $80 million in Recovery Act funding is to be 
obligated by DOE toward this and other projects also selected in 
December. Through ARRA funding, DOE has additionally funded a number of 
relevant solicitations, including studies on high penetration of solar 
energy and two large blocks of grants on SmartGrid at the distribution 
level.
    To realize the goal of high penetration of renewable energy and 
enable utility companies to meet their goals, understand their options 
(including integration, storage, or new transmission capacity), and 
assess the impacts and economics of future scenarios over multiple 
timescales, additional investment is needed both for applying current 
models to renewable energy integration scenarios (in multiple regions 
and at the national level), and for developing more quantitative models 
and processing large complex datasets. Akin to the emerging partnership 
NREL has helped facilitate between WECC and National Laboratories, DOE 
and its National Laboratories can play a particularly important role in 
objective planning over longer timeframes (i.e., greater than 10 years) 
in integrating among planning groups across regions. DOE and its 
National Laboratories can also assist by making available, in a non-
regulatory environment, the massive amounts of data and information 
that will be generated from large renewable energy installations, from 
the SmartGrid and from utilities in general. Decision-making tools 
would also be valuable for analysis of future government investment and 
policy options.
    Responses of Robert McGrath to Questions From Senator Murkowski
    Question 1. In your testimony you state that ``To achieve 20 
percent wind penetration by 2030 consequently requires more than a ten-
fold increase in wind production, to more than 300 GW.''

    a. For this additional 300GW of actual electricity that would need 
to be produced, what would be the total name plate capacity? Do you 
have cost estimates for the production of this much electricity from 
wind?
    b. What is the projected cost of the additional transmission and 
distribution assets for utilizing this much wind power?

    Answer. Based on analysis conducted for the DOE 20 Percent Wind 
Energy by 2030 report, 300 GW of wind nameplate generation capacity 
would provide 20 percent (1200 TWh annually) of the projected US 
electricity demand in 2030. Total system cost (including capital 
investment for conventional and wind generation technology, fuel costs, 
operation and maintenance cost, and transmission expansion costs) for a 
scenario encompassing 300 GW of wind capacity was compared to the total 
system cost for a scenario with essentially no additional wind 
capacity. It was found that the 20 Percent Wind Scenario requires 
higher initial capital costs, yet offers lower ongoing energy costs for 
operations, maintenance and fuel. Overall, a 20 Percent Wind Scenario 
was estimated to cost about 2% more than a scenario that did not 
include new wind capacity.
    The proposed transmission expansion associated with the addition of 
300 GW of wind capacity is estimated at $20 billion in net present 
value (NPV). The actual grid investment required could involve 
additional costs for permitting delays, construction of grid extensions 
to remote areas with wind resources, and investments in advanced grid 
controls, as well as training to enable regional load balancing of wind 
resources. This estimate is similar to a conceptual transmission plan 
that provides for 19,000 miles of new 765 kV transmission line at an 
NPV cost of $26 billion. Distribution asset cost was not included in 
this analysis. As electric demand grows in the future, distribution 
assets will also require upgrading, regardless of the central 
generation technology that supplies the electricity.
    Question 2. In your testimony you state that the current 
electricity system can absorb much greater quantities of renewable 
generation than are currently deployed without significant increases in 
storage technologies. But, given the experiences in West Texas in which 
excess wind generation in off-peak hours resulted in negative pricing 
is it prudent to pursue broader deployment of renewable technologies 
when the electricity produced cannot or is not stored? Should wind 
generators produce electricity only in order to get the federal 
production tax credit?
    Answer. Short-term negative prices in West Texas are a result of 
excess generation from an area where transmission to load in East Texas 
is currently inadequate. The Electric Reliability Council of Texas 
recognized the problem, and in anticipation of further wind generation 
deployment to meet the state-mandated Renewable Portfolio Standard, 
conceived and is implementing what is known as the Competitive 
Renewable Energy Zone process. The Texas CREZ proactively identifies 
renewable resource areas, then plans and builds long-lead time 
transmission in advance of short-lead time specific renewable 
generation projects.
    The DOE 20 Percent Wind report states that there are no fundamental 
technical barriers to the integration of 20 percent wind energy into 
the nation's electrical system. However, there needs to be a continuing 
evolution of transmission planning and system operation policy and 
market development if this is to be economically achieved. CREZ is a 
good example of the non-traditional, creative thinking that will be 
necessary to economically integrate large amounts of variable renewable 
power onto the grid. Storage is another, albeit relatively high-cost, 
option to bring more flexibility to grid operations. In a future that 
may progress beyond 20-30 percent variable renewable generation, 
storage may play an increasingly important role--particularly if 
storage technology costs can be reduced and efficiency increased.
    In all cases today, negative pricing and curtailment are not common 
or widespread issues. Continued transmission expansion, electricity 
market practice revision and perhaps broader use of storage and other 
grid flexibility technology options in the future, are issues that NREL 
continues to analyze as part of our work to anticipate an expansion of 
renewable power's role. For example, NREL and Oak Ridge National 
Laboratory researchers have shown that market practice revisions that 
permit cooperation among larger balancing areas within an 
interconnection (and even between interconnections) can help mitigate 
the changing output of large numbers of variable generators.
    With regard to your final question, production of electricity with 
the sole purpose of receiving tax credits is not in the national 
interest. Isolated occurrences like the negative pricing that occurred 
in West Texas, points out the need to diligently determine the most 
economic ways to integrate increasing amounts of renewable electricity 
onto the grid. NREL will continue to be a resource to the DOE and to 
the public interest in this ongoing endeavor.
    Moreover, the broader deployment of renewables should be directed 
at satisfying multiple policy goals, including energy security, 
environmental protection and climate change mitigation, as well as 
economic prosperity and job creation.
    Question 3. Pumped hydropower storage is an existing and readily 
deployable large-scale energy storage technology. Currently, the U.S. 
has over 20,000 MW of pumped storage capacity with dozens of new 
projects under consideration, particularly in the West. Yet pumped 
storage is often overlooked in the discussion of energy storage options 
for this country. Please discuss the role you believe pumped storage 
can play as we look to increase and integrate intermittent renewable 
resources, such as wind and solar, as well as provide other grid 
services.
    Answer. Pumped Storage can be an economic technology that is 
currently available. Future expansion of this technology may be limited 
by geography, but advanced concepts now under development may make 
pumped hydro attractive across more regions of the country. Pumped 
hydro may be able to play an extremely important role in integration of 
variable renewables. In Colorado, Xcel Energy has examined the value of 
more frequent cycling of an existing pumped hydro plant to take 
advantage of increased wind deployment, and found integration costs can 
be decreased by approximately one-third at penetration of 10 percent 
wind.
    NREL is currently completing a Western Wind and Solar Integration 
Study examining integration issues across the Western electric grid. 
The production cost simulation modeling being performed by GE shows 
that for high-penetration scenarios (up to 30 percent wind and 5 
percent solar), the existing pumped hydro fleet can play an important 
role in economic renewables integration. Pumped hydro appears to be an 
underappreciated technology and a potentially valuable resource toward 
meeting grid ancillary services and contingency and operational reserve 
needs.
    Question 4. What kind of work is NREL undertaking on hydropower in 
general and pumped storage in particular?
    Answer. NREL has no current research underway with respect to 
conventional hydropower and pumped storage facilities, each of which 
uses impoundments such as dams. Other organizations such as the 
Electric Power Research Institute have projects underway to develop and 
test more ``fish-friendly'' and efficient turbines to help mitigate 
environmental impact from conventional facilities. NREL is, however, 
using its unique and long-standing expertise in wind energy to help 
meet the research and development needs of a new class of renewable 
energy technologies--wave, tidal, river current and ocean thermal 
energy conversion. These technologies are not related to conventional 
hydropower technologies. Many of these technologies more resemble wind 
turbines and are often thus referred to as marine hydrokinetic energy 
converters because they convert the kinetic energy of moving water or 
the thermal energy of hot water into electrical energy.
    NREL has been funded by DOE through a competitive solicitation to 
perform R&D to accelerate the development and deployment of these 
marine and hydrokinetic technologies by providing industry with the 
support it needs to model machine dynamic performance, increase device 
efficiency and capacity factors, and reduce capital costs. This is 
expected to increase investment and regulatory confidence in this 
emerging field and hasten the deployment by 2015 of what will be the 
first commercial marine hydrokinetic energy technologies in the U.S.
    Regarding continued development and deployment of pumped hydro 
storage, in the many regions where this option is geographically and 
ecologically feasible, pumped hydro will continue to be a desirable 
approach--even as costs are reduced for other storage technologies such 
as batteries. Consequently, continued research and development efforts 
are needed on advanced engineering of water turbines to improve 
efficiencies, methods and technologies to lower excavation and 
construction costs, and on continued resource assessment to determine 
when and where additional pumped hydro storage represents the most cost 
effective and reliable addition to local electricity generation, 
storage and delivery systems. Clearly, mountainous regions with ample 
precipitation, such as the Rocky Mountain and Pacific Rim States 
represent regions well suited for potential deployment of additional 
pumped hydro storage.
                                 ______
                                 
      Response of Kenneth Huber to Question From Senator Bingaman
    Question 1. Mr. Huber, in your testimony you state that 34 
megawatts of battery storage have been put in the PJM generation queues 
for 2010. Given that storage has inherently different capabilities and 
characteristics than generation resources, can the generation queue 
process appropriately and expeditiously accommodate energy storage 
technologies (especially since storage technologies rely on a two-way 
flow of energy) or does storage need its own process?
    Answer. PJM's current interconnection process accommodates both 
generation technologies and storage technologies. To date, one battery 
and four flywheel storage systems have gone through this 
interconnection process. The one battery storage system, a 1 MW system, 
has been interconnected with the PJM grid. Recently, two battery 
systems (one 20 MW and one 14 MW) have entered into the PJM generation 
queues and are being evaluated by PJM to determine their impact, if 
any, on the transmission grid.
    The PJM System Planning interconnection process is a three-phase 
process utilizing network studies to test for a proposed project's 
impact on the grid in meeting reliability standards promulgated by the 
North American Electric Reliability Corporation (NERC) and approved by 
the Federal Energy Regulatory Commission (FERC). Phase one, the 
Feasibility Study, consists of analyses of deliverability and short 
circuit reliability. PJM's FERC-approved tariff allows, as a guideline, 
that this phase be completed within three months of the end of the 
queue in which the project is submitted. For storage system requests 
below 10 MW, this would likely be the conclusion of the analyses, thus 
providing the developer with critical information on system impacts and 
costs, which it can consider in deciding whether to proceed with 
entering into a formal interconnection agreement. Larger and more 
complex systems would proceed to phase two, the Impact Study. Here the 
analyses are expanded to include stability and multiple contingency 
studies; with guidelines for completion in 150 days (30 days for 
signatures on an agreement to proceed and 120 days for analyses). There 
is a third phase, the Facilities Study, that would likely not be 
required for storage systems unless significant network upgrades are 
identified during the Impact Study phase. In short, although there is 
no separate expedited process for storage analyses and an 
interconnection agreement can be completed within a half-year of the 
close of the queue in which the application is received.
    PJM does not believe that establishing a separate interconnection 
queue for energy storage would be beneficial to the development of 
innovative cost-effective solutions that benefit the grid and 
consumers. Specifically, a common queue allows for all resource 
solutions to be considered without artificially ``choosing'' one 
technology solution over the other. As directed by FERC, PJM maintains 
a common queue that is available to all resources and options including 
generation and merchant transmission, as well as energy storage 
solutions. This reflects the fact that all generators have a two-way 
flow of energy that must be considered. (In the case of traditional 
generation technologies, the two-way flow is represented by the energy 
used for auxiliary power and for unit start-up and shutdown). By 
considering all projects in a given queue, the value of each resource 
can then be recognized through the awarding of financial transmission 
rights to reflect the value, in the form of congestion relief, 
associated with the particular upgrade in question. A separate queue 
for energy storage would disrupt the analysis of various competing 
resources that is inherent in the existing queue process and would 
advance one technology over others without the benefit of analysis of 
the site-specific facts and circumstances that are so important to the 
location of generation or energy storage devices.
    The generator interconnection process was established by FERC based 
on the assumption that resources interconnecting to the grid should 
bear the costs of any grid upgrades needed to accommodate their request 
while maintaining system reliability in accordance with NERC standards. 
The FERC is presently considering whether to modify its present cost 
allocation policies. Proponents of socializing interconnection costs 
argue that the present system, which is grounded in principles of cost 
causation, may be an impediment to the development of renewable 
technologies. On the other hand, opponents of broad socialization of 
such costs argue that ratepayers should not bear the costs of 
facilities and resources that cannot be shown to be beneficial to them. 
Any changes ordered by FERC to its present cost allocation policies 
could affect whether energy storage resources remain subject to the 
cost allocation policies inherent in the queue process.
      Response of Kenneth Huber to Question From Senator Murkowski
    Question 1. In your written testimony, you indicated that variable 
renewable energy sources present a reliability challenge. You also 
indicate that the lack of storage is already causing concern for PJM.

          a. What is the current percentage of renewable electricity 
        produced in the PJM region?
          b. Will development and deployment of energy storage 
        technologies in PJM proceed at a pace sufficient to match the 
        need for meeting a federal renewable electricity standard or 
        will the utilities in the PJM region utilize more fossil-based 
        backup to renewable energy sources?

    Answer. PJM embraces the growth of renewable generation as it 
satisfies a number of public policy goals, including existing state 
renewable portfolio standards which already exist in 10 of our 13 
states. More than half of the new generation in the PJM Interconnection 
Queue can be categorized as renewable generation, with a particular 
heavy emphasis on wind generation. However, renewable sources such as 
wind and solar are a challenge and concern because of their 
intermittent nature -- particularly in a region with the wind and 
weather patterns that we see in the PJM Mid-Atlantic and Midwest 
footprint. PJM is encouraging the installation of storage technologies 
to make the power generated by renewable resources available to 
consumers during times when it is most needed.

          a. The current total generation capacity in PJM is 165,000 
        megawatts. Renewables including wind, runof-river hydro, pumped 
        hydro and solid waste currently total 9,419 megawatts or 
        approximately 6% of PJM's total capacity.
          The 2008 annual energy produced in PJM is 735,244 gigawatt-
        hours. Renewables including wind, runof-river hydro, pumped 
        hydro and solid waste total 28,635 gigawatt-hours or 
        approximated 4% of PJM's total annual energy produced.
          The chart* below shows the amount of megawatt-hours of 
        renewable energy by fuel source produced in PJM for each year 
        since tracking began in late 2005.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
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          The future generation currently being proposed in the PJM 
        generation queues is 82,151 megawatts with over 55% being 
        renewable generation.
          b. PJM is aggressively working with energy storage providers 
        and our member companies to facilitate the delivery of energy 
        storage systems in the PJM territory. We are actively pursuing 
        and assisting in pilots of storage technologies that include 
        flywheels, various types of battery systems, compressed air, 
        large building controls, hot water heaters, plug-in hybrid 
        electric vehicles and refrigeration. Renewable generation and 
        energy storage systems are in their early adoption phase. The 
        growth and maturity of both will depend on technology advances, 
        economics and government policy. Forecasting the pace of these 
        many variables is difficult. Current discussions with storage 
        technology entrepreneurs, vendors and venture capitalists 
        provide some insight of expected future storage systems to be 
        installed in PJM: 1) near-term implementations, one to three 
        years out, will likely be battery and flywheel systems with 
        capacity amounts in the 500 MW to 700 MW range; 2) mid-term 
        implementations, four to six years out, should see compressed 
        air storage systems and the aggregation of building and 
        residential energy systems in the 1,000 MW to 1,500 MW range; 
        and 3) beyond 6 years PJM anticipates plug-in hybrid electric 
        vehicle storage within PJM will be available in significant 
        amounts that could provide an additional 1,000 MW to 1,500 MW. 
        If the storage systems are not available in the volume needed, 
        PJM will utilize both its demand resources, as well as its 
        fossil based resources to maintain system reliability.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

  Statement of the Coalition to Advance Renewable Energy Through Bulk 
                      Energy Storage (``CAREBS'')
    The Coalition to Advance Renewable Energy Through Bulk Energy 
Storage (``CAREBS'') applauds the Committee on Energy and Natural 
Resources for its December 10, 2009 hearing on the topic of grid-scale 
energy storage and appreciates the opportunity to provide additional 
comments for the record.
    CAREBS is a coalition formed to educate legislators, regulators, 
other policy makers, and the public about the enormous benefits that 
bulk energy storage--including compressed air energy storage (``CAES'') 
and pumped storage hydroelectric facilities--can provide in 
facilitating the development of renewable energy resources and 
increasing the efficiency and reliability of the Nation's electric 
grid. As the Department of Energy's National Energy Technology 
Laboratory has noted, grid-scale energy storage, which balances large 
variations in load and generation, is essential if the Nation is ``[t]o 
reap the full benefits of Smart Grid technologies. . . .'' 
Specifically, bulk energy storage can:

   enable greater supplies of renewable energy to be 
        incorporated into the grid, by converting these variable 
        resources into firm, dispatchable resources;
   enhance grid stability by balancing large variations in load 
        and generations; and
   increase overall efficiency by optimizing the use of 
        existing and planned transmission infrastructure

    CAREBS commends the Committee for focusing on how best to incent 
energy storage and strongly supports Senator Wyden's legislation, S. 
1091, which would provide a 20 percent investment tax credit for grid-
connected energy storage systems, This technology-neutral legislation 
would have a tremendous impact on accelerating the deployment of energy 
storage. Greater commercialization of bulk energy storage also offers 
the benefit of adding clean jobs to our existing domestic manufacturing 
base, solidifying the U.S. position as a leader in turbine and 
compressor equipment for bulk energy storage facilities.
    CAREBS also concurs with comments made by several Senators that the 
regulatory challenges may be as significant as any technical challenges 
to energy storage. Bulk energy storage provides a lower cost solution 
to reliability problems than traditional approaches such as 
transmission upgrades or the construction of new generation. At two of 
the recent Federal Energy Regulatory Commission (``FERC'') technical 
conferences, held on September 3, 2009 in Phoenix, Arizona and held on 
September 21, 2009 in Philadelphia, Pennsylvania, CAREBS 
representatives emphasized the importance of ensuring bulk energy 
storage solutions are considered on equal footing with new-build 
transmission and other solutions in the transmission planning process.
    Other electricity organizations are recognizing the vital role bulk 
storage can play in our nation's electricity infrastructure. In its 
April 2009 report, ``Accommodating High Levels of Variable 
Generation,'' The North American Electric Reliability Corporation, 
Princeton, NJ, concluded that ``Additional flexible resources, such as 
demand response, plug-in electric hybrid vehicles, and storage 
capacity, e.g. compressed air energy storage (CAES), may help to 
balance the steep ramps associated with variable generation.''
    CAREBS is eager to work with the Committee and with regulators to 
advance the deployment of bulk energy storage to advance renewable 
resources, increase energy efficiency, optimize electricity 
infrastructure, and promote a self-healing energy grid.
    About CAREBS: CAREBS supports policies that will accelerate the 
development and commercial deployment of CAES, pumped storage 
hydroelectric, and other bulk energy storage technologies. CAREBS 
members include: (1) Norton Energy Storage, LLC (``NES''), which is 
developing a CAES facility at the site of an abandoned limestone quarry 
in Norton, Ohio; (2) Magnum Development, LLC (``Magnum''), which is 
developing a CAES facility in Milford County, Utah, as part of the 
Western Energy Hub Concept, which also includes a proposed natural gas 
storage facility; (3) Texas CAES, LLC (``Texas CAES''), which is 
evaluating several sites for a planned CAES facility in Texas; (4) 
Haddington Ventures, L.L.C., a private equity firm based in Houston, 
Texas that pioneered the development of high-deliverability natural gas 
storage projects and that is currently participating in the development 
of various CAES projects, including those being developed by Magnum and 
Texas CAES; (5) Dresser-Rand Corporation, a corporation based in 
Houston, Texas that is, among other things, a U.S. manufacturer of 
equipment that is used for CAES; (6) Iowa Stored Energy Plant Agency, 
an Iowa corporation formed by interested members of the Iowa 
Association of Municipal Utilities that is developing a CAES facility 
in Iowa known as the Iowa Stored Energy Park; and (7) HDR/DTA, a 
consulting firm based in Portland, Maine that provides hydropower and 
related renewable energy consulting services to utility, industry and 
government clients.
                                 ______
                                 
              Statement of the Pentadyne Power Corporation
    Mr. Chairman and members of the Committee, Pentadyne Power 
Corporation appreciates your interest in energy storage by recently 
holding a hearing to discuss the role of grid-scale energy storage 
impact on energy and climate goals. Pentadyne Power Corporation 
encourages the Committee to also consider the role of smaller, non-grid 
energy storage systems in meeting energy and climate goals. We believe 
that smaller, non-grid energy storage systems also play a very 
important role in meeting energy needs.
    Pentadyne Power Corporation would appreciate the opportunity to 
explain the role that smaller flywheels play in the energy storage 
arena. Our impact can provide immediate help to recycling energy for 
mass transit facilities that have outlasted their original life span, 
but are still counted on to delivery passengers. Many of this country's 
transit systems have exceeded the capacity of their electric systems 
and flywheels can help keep these systems operating by storing the 
energy and then sending it back into the system when it is needed.
    While grid-scale energy storage plays an important role in a smart 
grid's system ability to meet energy goals, smaller energy storage 
systems like flywheel can also play a vital role in recycling energy in 
high electric use industries.
    As mentioned at the hearing, Pentadyne Power Corporation encourages 
the committee to take an active role discussing and developing policy 
to promote energy storage. As you well know, energy storage is the key 
to developing the renewable energy industry. We encourage the committee 
to take a comprehensive view of energy storage to prevent a perception 
in the industry of a ``two-tier pursuit''.
    As you heard from your panels at the hearing on December 10th, both 
government and industry officials agree for renewable energy industry 
to grow and help cut green house gas production, a wide variety of 
energy storage devices need to be developed. We would encourage the 
Committee to active push energy storage policy.
    Start up companies, prevalent in new industry like energy storage, 
faces many hurdles in perfecting our technology and implementing a 
successful business plan. Under today's financial conditions, we face 
significant hurdles and would gladly come explain to the committee and 
its staff how those hurdles that prevent clean energy from breaking 
into the market.
    Pentadyne is the world's leading manufacturer of flywheel energy 
storage systems. Designed to provide high power output and energy 
storage in a compact, self contained package, Pentadyne's flywheel 
products are a long lasting, low maintenance, lightweight, and 
environmentally sound alternative to lead-acid batteries, capacitors, 
and steel flywheels.
    The company shipped its first commercial production flywheel in 
2004, and has sold more than 725 since then. The company also has a 
multiyear direct supply agreement with a Department of Defense 
contractor for the purchase of more than 500 Pentadyne flywheel 
systems. Our flywheels have logged more than 4 million hours of 
reliable fleet operation. Pentadyne was recently named a ``Global 
Cleantech 100'' company by Guardian News and Media and Cleantech Group, 
LLC. We were also named to the 2008 ``Inc. 500'' list and a Technology 
Pioneer by the World Economic Forum in 2007. Our flywheels have won 
numerous awards, including being named a 2009 Top-10 Green Product by 
both BuildingGreen and GreenSource Magazine & Architectural Record.
    That is why we were pleased by the many positive statements made by 
the two federal witnesses at this hearing:

          Dr. Steven E. Koonin, DOE Under Secretary for Science:

          [M]echanical kinetic energy storage via flywheels is 
        particularly well suited to the short term requirements of 
        power conditioning; and while flywheel systems can achieve very 
        high energy densities2, the physical constraints on flywheel 
        size limit energy storage for extended activities such as peak 
        shifting.''
                                 * * *
          Among the most important requirements for stationary utility 
        storage, which ranges from half a megawatt to hundreds of 
        megawatts, are storage technologies that are low-cost and have 
        a high cycle life, meaning a large number of charge and 
        discharge cycles. High reliability, efficiency, environmental 
        acceptability, and safety are also important.

          Mr. Jon Wellinghoff, Federal Energy Regulatory Commission 
        Chairman:

          [L]ocal storage is among the best means to ensure we can 
        reliably integrate renewable energy resources into the grid . . 
        . Regulation service is usually provided by combustion turbine 
        gas-fired generators. But while such generators can generally 
        follow the minute-by-minute variations in load to keep the 
        system in overall balance, the frequency excursions that are 
        the subject of Regulation service actually occur on even 
        shorter time intervals. Indeed, it has been demonstrated that 
        distributed resources such as storage are more efficient than 
        central station fast response natural gas fired generators at 
        matching load variations and providing ancillary services 
        needed to ensure grid reliability. They are faster, generally 
        cheaper, and have a lower carbon footprint than the traditional 
        power-plant-provided ancillary service.
                                 * * *
          A newer technology for providing storage for the electric 
        grid is the flywheel, which works by accelerating a cylindrical 
        assembly called a rotor (or flywheel) to a very high speed with 
        low friction components, and maintaining the energy in the 
        system as rotational energy. The energy is converted back by 
        slowing down the flywheel. Flywheels have been successfully 
        piloted in the U.S., and their speed is particularly useful for 
        regulation service. For example, for the past year, ISO-NE has 
        been conducting a pilot program to test how alternative 
        technologies such as flywheels are able to provide regulation 
        service.

    Both Dr. Koonin and Mr. Wellinghoff understand the role that 
flywheels can play in improving the efficiency of America's electric 
grids. We believe that significant hurdles exist to prefect energy 
storage and encourage the Committee to take a comprehensive review of 
the industry.
                                 ______
                                 
 Statement of Audrey Zibelman, President and Chief Executive Officer, 
                         Viridity Energy, Inc.
                 demand response as a storage solution
    My name is Audrey Zibelman. I am the President and Chief Executive 
Officer of Viridity Energy Inc. Prior to founding Viridity in 2009 I 
was the Chief Operating Officer of PJM Interconnection, the largest 
integrated electric grid in the world. My responsibilities at PJM 
included overseeing operations to insure that the grid remained in 
physical balance at all times. As such I managed operations involving 
the dispatch of thousands of generating units with different fuel types 
and different operating characteristics.
    Viridity is a Curtailment Services or Demand Response Provider 
specializing in the integration of customer controllable loads and 
customer owned generation into grid operations. The service we provide 
transforms a customer's controllable load and owned generation into a 
virtual power plant which grid operators can rely upon and dispatch to 
maintain the grid in balance. The purpose of my testimony is to 
describe how Demand Response can function as an energy storage resource 
to be used in conjunction with intermittent generating resources such 
as wind power. The use of Demand Response with renewable power and 
storage capability allows the aggregation of many small, distributed 
resources into a new, powerful component of our energy strategy, which 
can deliver both economic and system stability benefits.
    The principal responsibility of all grid operators is to maintain 
the physical balance between electric consumption (load or demand) and 
generation (supply). This balance must be maintained continuously and 
instantaneously. As the Committee is aware, energy storage was not 
feasible in significant amounts until quite recently. However, recent 
advances in technology and communications (generally referred to as the 
Smart Grid) have made storage and Demand Response a viable tool for 
maintaining the grid in balance. As described below, Demand Response is 
one of the storage techniques made possible by the Smart Grid.
    Historically, grid operators have maintained balance by use of a 
protocol known as Security Constrained Economic Dispatch. Simply 
stated, this means that as load increased the grid operators would turn 
on (dispatch) more generating units so as to match the load. They would 
dispatch the least expensive unit available but not currently running. 
Thus, the newly dispatched unit is necessarily more expensive than the 
last unit that was dispatched before the increase in load. This regime 
of simply turning on the next generating unit in the queue is now 
giving way to a more sophisticated, environmentally-sound, consumer-
friendly, approach to maintaining the grid in balance.
    A key characteristic of any mechanism used to maintain balance is 
its ability to respond to directions from the grid operator; it must be 
dispatchable. This means that a generating unit must be capable of 
increasing or decreasing its output upon direction by the grid operator 
to do so. One of the issues associated with wind power for example is 
that it is not dispatchable. The power is available only when the wind 
is blowing, and the output of wind generation cannot be ramped up or 
down on command, as can generation from other sources such as storage 
resources or natural gas fueled generating units. The ability to be 
dispatched--to be capable of responding to signals--is an important 
attribute of a resource. Energy storage and demand response resources 
both have this important attribute. Many customer loads are 
dispatchable.
    Many customers are ready and willing to reduce their consumption of 
electricity upon direction by the grid operator. Thus, increasing 
output from expensive or dirty generating units is not the only means 
available to grid operators to balance the grid. Customers can reduce 
their load upon a signal from the grid operator either by pre-
arrangement or in real time.
    Grid operators have traditionally maintained balance by arranging 
for sufficient generation to come on line as needed throughout the day, 
based upon the next day's forecast load. The supply is committed a day 
in advance. Generators who are advised that they will be running on the 
next day stay stand ready to respond to signals from the operator. The 
advent of the Smart Grid, sophisticated software, and 
telecommunications technology have now made it possible for customers 
to respond in the same way. Customers who are willing to reduce load in 
exchange for compensation can respond to a signal from the grid to 
reduce their consumption, or they can dispatch their storage resources. 
This `demand response' can be pre-arranged on a day-ahead basis. 
Similarly, to the extent that demand exceeds the forecasted load, 
increased supply, in the form of storage resources, can be called for 
by the grid operator in real time. Again, however, those customers who 
are willing to reduce their consumption can also do so in real time, in 
response to an instruction from the grid operator. Storage and demand 
response can be called upon in tandem to maintain the grid in balance.
    A Smart Grid enabled example of energy storage, renewable energy, 
and demand response working in tandem would be the use of Customer-
owned solar power to charge a customer-owned battery when or where 
energy loads are low, and the discharge of that energy into the grid 
when/where the load is high. The discharge of the battery would allow 
the customer to reduce its load served by the grid; that is, to engage 
in demand response, and to provide power to the grid where and when it 
is needed.
    Demand response can be a useful tool aiding in the integration of 
intermittent power sources, such as wind power, onto the grid. For 
example, fast-response customer load reductions can be called for as 
wind generation drops. This demand response will match the reduced 
level of wind generation and thus maintain the grid's balance. 
Similarly, to the extent reductions in wind power become increasingly 
predictable with improved remote monitoring, pre-arranged reductions in 
load can be relied upon to maintain the necessary balance.
    Grid balance can be maintained either by increases in generation or 
by reductions in load and grid operators should be generally 
indifferent as to the source providing the balance. However, there are 
several clear advantages associated with maintaining balance via Demand 
Response that should be noted. First, Demand Response is a less 
expensive means of maintaining balance than is dispatch of greater 
quantities of electric generation. This has been demonstrated time and 
again in the United States, most dramatically in PJM in August 2006. 
During that month, the dispatch of demand response instead of added 
generation, reduced the prices paid by customers by $650 million. The 
physical balance of the PJM grid was maintained by customers who 
reduced their consumption in response to a signal from the PJM 
dispatcher. This allowed PJM to avoid having to dispatch more expensive 
generating units. Hence, the savings noted above. Second, there are no 
green house gas emissions associated with Demand Response, unlike the 
emissions caused by dispatch of fossil-fueled generating units. The 
dispatch of coal or gas fired generating units necessarily results in 
emissions. The dispatch of demand response--that is, reductions in use 
by customers when called for by the grid--avoids emissions, much like 
all exercises in energy efficiency and conservation.
    The provision of energy storage and demand response service to the 
grid by customers requires an investment by those customers. That 
investment constitutes a barrier to the deployment of these 
technologies. Customers will only make that investment if they can 
expect a reasonable return on their investment. However, an appropriate 
regulatory regime which provides fair, non-discriminatory compensation 
to customers who are willing to make that investment would constitute a 
regulatory policy that could eliminate the barrier to deployment. At 
present, the grid rules do not provide such compensation to customers 
willing to make the investment. A change in the rules such that 
customers were compensated for the service they provide through such 
investments would significantly enhance the level of deployment.
                                 ______
                                 
  Statement of Stephen C. Byrd, President and CEO, Energy Storage and 
                               Power, LLC
                              introduction
    Energy Storage and Power (ES&P) would like to thank the Committee 
for providing the opportunity to submit testimony describing how grid 
scale energy storage can meet the country's energy and climate goals, 
ES&P exclusively markets, designs, licenses and technically supervises 
the delivery of energy storage and power augmentation projects. ES&P's 
patented second generation compressed air energy storage, or CAES, 
technology enables the widespread deployment of renewable generation 
such as wind and solar, stabilizes the transmission grid and is the 
most cost effective storage solution available. ES&P is a joint venture 
between Public Service Enterprise Group, a Fortune 200 company with 
over a hundred years' history in the power industry and Dr. Michael 
Nakharnkin, the leading voice worldwide in the Compressed Air Energy 
Storage field for over two decades.
    A number of power companies are pursuing the development of second 
generation CAES plants, most notably Pacific Gas & Electric (PG&E), 
which is developing a 300MW CABS plant, and New York State Electric and 
Gas's (NYSEG) which is developing a 150MW CAES plant. PG&E and NYSEG 
were recently awarded $ 25 million and $29.4 million, respectively, in 
grants from the Department of Energy for demonstration projects. These 
two projects alone are leveraging 73% of the total private capital 
associated with the 16 energy storage grants recently awarded by the 
Department of Energy.
    ES&P recently won Platts 2009 Sustainable Technology Innovation of 
the Year Award for its second generation CAES technology. For a more 
detailed overview of ES&P, please see Appendix A.*
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    * Appendixes A-C have been retained in committee files.
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                           executive summary
    Investments in energy storage at this time are absolutely critical. 
Energy storage will increase the usage of renewable generation and 
reduce greenhousegas emissions, will enhance grid reliability, and 
reduce overall customer power costs.
    question 1: what are the principal goals of storage--least cost 
      generation, greenhouse gas reductions, or grid reliability?
    Grid scale (i.e., large-scale) energy storage accomplishes a wide 
range of important objectives, namely the ability to (i) reduce 
greenhouse gas emissions, (ii) significantly enhance grid reliability, 
(iii) reduce the cost of power to customers and iv) reduces the need 
for additional transmission.
Firming Renewables and Shifting Their Output to Peak Demand Periods 
        Will Reduce Greenhouse Gas Emissions
    Incorporating energy storage solves the intermittent and 
unpredictable nature of renewable resources such as wind and solar and 
converts them into firm, dispatchable resources. Large scale energy 
storage enables the electricity generated from wind power to be 
provided when it's needed (on-peak), not when it's windy (predominantly 
off-peak)\1\. Without energy storage, substantial amounts of renewable 
generation, particularly wind power, will be unused because there will 
be insufficient demand for the product during off-peak power demand 
periods, when the majority of wind power is produced. Energy storage 
will enable renewables to be fully utilized, resulting in the 
displacement of fossil-fueled generation and the reduction in 
greenhouse gas emissions. The economics of a wind farm will improve as 
a result of energy storage, because the stored wind power output would 
be sold during peak demand periods, when powerprices are higher.
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    \1\ The Midwest Model Building Subcommittee (a group formed by the 
Midwest Reliability Organization, one of eight regional entities in 
North America operating under their delegated authority from regulators 
in the United States and Canada) assumes that only 20% of nameplate 
wind turbine capacity will be available during peak time periods.
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Significantly Enhances Grid Reliability
    Another important goal of energy storage is to enhance grid 
reliability. This will become critically important as intermittent 
renewable resources such as wind and solar become an even larger 
portion of the power supply mix in the future. Because wind variability 
can be so extreme\2\, substantial balancing reserves are required in 
the event there's a rapid drop in wind power output. In addition, 
existing power plants will have to cycle their output up and down to 
compensate for the changing winds; this constant cycling causes 
maintenance and operational issues for baseload power plants\3\. In 
addition, the range of options available to grid operators to enhance 
grid reliability is larger than what's typically understood. Grid 
operators require reliability service with response time within 
minutes, not milliseconds\4\. CAES technology meets grid operators' 
ancillary services requirements at a much lower cost than batteries.
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    \2\ Historically, the Midwest ISO has recorded a minimum and 
maximum output from wind power during peak periods equal to 
approximately 2 percent and 65 percent of wind nameplate capacity, 
respectively.
    \3\ ``Cycling operations can be very damaging to power generation 
equipment.'' Stephen Lefton and Bill Besuner, Power Plant O&M and Asset 
Optimization.
    \4\ For example, in PJM, the largest Independent System Operator in 
the U.S., the ancillary service known as synchronized reserve (formerly 
spinning reserves) is defined as capacity (generation or usage 
reduction) that is available in 10 minutes.
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Reduces Cost of Power to Customers
    Large scale energy storage will reduce the cost of power to 
consumers because more costly peaking generation will not be utilized 
during the day.\5\ Large scale energy storage will shift renewable 
generation output (that has no variable cost of production) from off-
peak periods to peak demand periods, which will in turn avoid the need 
to run very high cost, high emission peaking generation. This role 
played by large scale energy storage is akin to ``peak shaving'' 
technologies designed to shift demand for power from peak periods to 
off-peak periods; energy storage is essentially shifting the supply 
side rather than the demand side. This will result in a reduction in 
system-wide power costs and a resulting reduction in customers' 
electricity bills. CAES is particularly effective in this role because 
its capital cost is an order of magnitude cheaper than other storage 
options such as batteries. Further, CAES consistently has a lower 
overall cost of power than conventional generation options, such as 
coal and natural gas, under a variety of market and commodity price 
scenarios.
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    \5\ Dr. Robert Schainker, a Senior Technical Executive at the 
Electric Power Research Institute (EPRI), stated in October 2009 at the 
EESAT conference in Seattle, Washington that the addition of between 
20% and 40% of anticipated future wind capacity in the form of 
compressed air energy storage would result in a reduction in overall 
customer power costs.
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Reduces Need for Additional Transmission
    Large scale energy storage reduces the need for additional 
transmission and utilizes transmission more efficiently. Because second 
generation CAES can be built and integrated at various junctures in the 
delivery of electricity, transmission benefits can be realized. For 
example, a utility customer can build a CAES plant near load pockets to 
minimize the use of both constrained transmission lines and expensive 
local power resources. Also, a transmission grid operator (or wind farm 
owner) can build a CAES plant near generation to reduce or eliminate 
transmission congestion and increase efficiency of the grid because 
energy will be released when wind plants are at low output and 
transmission capacity is available.
  question 2: how can energy storage technologies help utilities meet 
  state renewable portfolio standards (rps) and peak demand reduction 
                                targets?
    Energy storage will be critical for states to meet RPS 
requirements. Energy storage enables renewables to be used as a 
controllable, on-peak power source, improving renewable project 
economics and improving grid reliability. Energy storage also helps to 
avoid the usage of high cost, high emissions peaking generation.
    By its very nature, energy storage enables renewables to account 
for a larger portion of the overall power generated. Energy storage 
will be critical to enabling states to meet their individual RPS and 
any federally instituted RPS requirements. For example, with wind 
power, storage will enable power produced by wind farms during off-peak 
periods to be used during peak demand periods; this will result in 
improved returns for renewable generation and provide an economic 
signal to build further renewable projects.
    Energy storage shifts the generation of power away from high cost, 
high emissions peaking generation and towards more efficient, lower 
emission renewable power sources. In a similar way to demand response 
technology, large scale storage reduces the need for peaking 
generation; this ability is often referred to as ``peak shaving.'' This 
reduces the cost of power to consumers because more costly peaking 
generation will not be utilized during the day.
     question 3: what is the total us potential for energy storage?
    The potential for energy storage in the United States is 
significant, and its deployment is in thevery early stages. If enough 
cost-effective storage is built, EPRI has indicated that the cost of 
power to consumers will be reduced.\6\ Numerous parties have already 
begun making sizeable investments in energy storage.
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    \6\ Dr. Robert Schainkera, Senior Technical Executive at the 
Electric Power Research Institute (EPRI), stated in October 2009 at the 
EESAT conference in Seattle, Washington that the addition of between 
20% and 40% of anticipated future wind capacity in the form of 
compressed air energy storage would result in a reduction in overall 
customer power costs.
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    Several sources have discussed the potential for large scale energy 
storage. Estimates of market size vary, but all agree storage is 
needed. . .and a lot of it. The American Institute of Chemical 
Engineers published a study in 2008 forecasting that if wind and solar 
accounted for 20% of the power generated in the United States, 114,000 
MW of storage would be required. This represents a $342 billion market 
opportunity according to their calculations.\7\ Others have more 
specifically defined the sizeable market opportunity for CAES. In a 
recent presentation, EPRI discussed a CAES to wind ratio of 20% to 40% 
reducing the overall cost of power for customers. Assuming the 
projected installed capacity for 2009 by the American Wind Energy 
Association of approximately 32,500 MW, a 30% CAES to wind ratio, 9,750 
MW of CAES could be built in the United States. Whichever assumption is 
used to estimate the size of the large potential domestic jobs.
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    \7\ ``Massive Electricity Storage,'' Bernard Lee and David Gushee, 
June 2008.
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    A number of utilities and merchant power generators have already 
recognized the potential for storage and have begun to make substantial 
investments. For example, Pacific Gas & Electric is developing a 300 MW 
CAES plant (expected cost: $356 million) and New York State Electric & 
Gas (NYSEG) is developing a 150 MW CAES plant (expected cost: $125 
million). Both of these projects have received grants from the American 
Recovery and Reinvestment Act of 2009 ($25 million for PG&E and $29.6 
million for NYSEG). In conjunction with the awards to PG&E and NYSEG, 
the Department of Energy recently made 16 grant awards for a total of 
$185 million to fund ``utility-scale energy storage projects that will 
enhance the reliability and efficiency of the grid, while reducing the 
need for new electricity plants.''
         question 4: what are the most promising technologies?
    There are a number of technologies available for electricity 
storage. However, some are better suited for large scale storage and 
are more economical. Technology like batteries, flywheels and 
supercapacitors are best suited for small scale storage in situations 
where instantaneous response is required. For large scale energy 
storage, CAES and pumped hydro are the technologies of choice.
    Of these two alternatives, we believe that CAES holds advantages 
from the perspectives of cost,time required to deploy and number of 
suitable locations. Batteries, flywheels and supercapacitors are 
significantly more expensive on a capital cost basis and cannot be 
built at the scale required. Unlike CAES or pumped hydro, these 
technologies are better suited for distributed storage or ancillary 
services that require an instantaneous response. It is rare to have a 
battery built bigger than 5 MW, but a CAES plant can be built up to 450 
MW.
Overview of CAES
    CAES stores low cost, off-peak wind energy in the form of 
compressed air primarily in anunderground reservoir, but it can also be 
stored in above-ground canisters. During peak hours,the air is released 
and heated with the exhaust heat from a standard natural gas-fired 
combustionturbine. This heated air is passed through expansion turbines 
to produce electricity. The exhaustair from the expansion turbines is 
then used to increase the output of the combustion turbine 
byapproximately 10% and create ``free green megawatts.'' The second 
generation CAES technology has a ``heat rate'' (a measure of energy 
usage per unit of electricity output) that is three times as efficient 
as that of a coal plant or a combustion turbine when renewable 
generation is used as its power input. (See Appendix B for a graphical 
depiction and a detailed description of the technology).
    Improvements to the CAES technology ensure that it is adjustable to 
meet specific customer smart grid requirements, utilizes standard, 
proven components, has a very low emissions design, and has 
significantly lower capital and operating costs than other storate 
technologies, and is a lower cost generator than coal and natural gas-
fired power plants.\8\
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    \8\ The Western sub-region of the Texas power market, known as 
Western ERCOT, provides an excellent example of how 2nd generation CAES 
can be (1) highly efficient relative to conventional fossil fuel fired 
generation and (2) enhance the value of renewable generation. As a 
result of substantial wind generation construction in Western ERCOT, 
wind generation economics have deteriorated in the region. Because 
there is so much wind capacity in Western ERCOT and its power is 
generated mostly at night when demand for power is low, off-peak power 
prices are often negative due to the utilization of the Production Tax 
Credit for wind. Wind generation in Western ERCOT is often being 
curtailed substantially at night because the volume of generation is 
greater than demand which obviously wastes a resource with no 
incremental cost. 2nd generation CAES enhances the value of wind 
generation while producing on-peak power at a cost lower than 
conventional natural gas-fired generation. The variable cost of 
generation is substantially lower than the most efficient combined 
cycle generation. In addition, 2nd generation CAES has a positive 
economic impact on wind generation by providing an incremental source 
of demand for the output of the wind generation.
     To calculate the variable cost of generation, assume a $10 off-
peak power price and a $5/mmBtu cost of natural gas. The 2nd generation 
CAES variable cost of generation would be $26 per megawatt-hour (($10 
off-peak power price x .7 energy ratio) + (3,810 heat rate x $5/mmBtu/
1000) + $2/MWh variable operations and maintenance cost). For the most 
efficient combined cycle generation the variable cost of generation 
would equal $38 per megawatt-hour ((7,000 heat rate x $5/mmBtu/1000) + 
($3/MWh variable operations and maintenance)).
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    There are several other characteristics of CAES that make it a 
straightforward technology to deploy on a widespread basis. Suitable 
geology exists in a large portion (approximately 80%) of the United 
States.\9\ The CAES technology is proven and it works.
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    \9\ EPRI.
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     question 5: what are the obstacles, technical, regulatory and 
     legislative, to commercial deployment of storage technologies?
    There are numerous obstacles currently preventing the wide-scale 
deployment of storage technologies. However, we believe these obstacles 
can be overcome with coordinated efforts among industry, legislators 
and regulators. No technical obstacles have been identified relating to 
the construction and operation of CAES plants. Appropriate investment 
incentives should be instituted for storage. Storage is in the very 
early adoption phase, but further catalysts are needed to move from the 
demonstration phase to the mass deployment phase. Constrained financing 
environment is still limiting investment in storage. Certain parties 
have posited that energy storage isn't necessary as renewable 
penetration increases, contrary to consensus among grid operators and 
other entities responsible for grid reliability.
                          technical obstacles
    There are no technical obstacles to the widespread deployment of 
second generation CAES plants. The technology and geology for CAES 
exists and it works. The first generation CAES technology has been in 
operation since 1991 and has had an availability factor above 95%. A 
variety of parties that have reviewed the second generation CAES 
technology have signed off on all technical specifications and agree 
it's a significant improvement over first generation CAES.
                  regulatory and legislative obstacles
    There are a number actions that could be taken by regulators and 
legislators that could acceleratethe adoption of storage. The 
successful deployment of energy storage technology requires regulatory 
and legislative certainty, (including passage of the energy and climate 
bills) and would be aided by the adoption of the Clean Energy 
Deployment Administration.. CAES investments currently receive no 
federal tax incentives. The institution of an Investment Tax Credit for 
storage would help spur investment. Additionally, energy storage can 
result in the loss of production tax credits otherwise available to 
certain non-CO2 generators, such as wind generators. The tax 
code needs to be amended to ensure that there is no loss of the 
Production Tax Credit (PTC) for energy stored prior to delivery to 
grid.
    A FERC technical conference on storage should be held to discuss 
integrating storage in competitive and regulated areas; the benefits of 
storage to the grid; quantifying energy storage required to maintain 
grid reliability and reduce system-wide power costs; and availability 
of FERC incentives depending on how storage is classified -- whether as 
a transmission or generation asset, or some combination thereof.
Industry Obstacles
    A very small number of industry players have said that with 20% 
wind penetration, storage is not needed.\10\ We strongly disagree with 
that assertion. There are already issues with integrating wind in many 
regions, and wind accounted for only 1.3%\11\ of the power produced in 
the United States in 2008. These issues will become far more severe and 
pronounced when wind becomes 20% of the energy mix, as some parties 
have suggested may occur. Based on the problems associated with the 
integration of wind in their respective regions, ERCOT and MISO 
strongly believe energy storage is needed. Terry Boston, CEO of PJM 
Interconnection, has stated that energy storage helps grid operators 
deal with the intermittency of renewable generation sources such as 
wind and solar. The intermittent nature of wind, with resulting 
negative effects on both grid reliability and the ability to deliver 
power when it is needed, will only be exacerbated as wind's share of 
the power generation mix continues to increase. Ignoring or downplaying 
the grid reliability issues caused by renewable generation, and the 
grid reliability benefits offered byenergy storage, is contrary to the 
thinking of transmission system operators, utilities, merchant power 
generators and Members of this Committee. In fact, large scale storage 
will increase the development of wind farms in the long run becauses 
toragew ill significantlye nhancew ind farmeconomics as wind evolves 
into a dependable power resource.\12\
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    \10\ The American Wind Energy Association (AWEA) has stated that`` 
[w]hile continuing advances in energy storage technology can make it 
more economically competitive as a provider of grid flexibility, it is 
important to remember that resources like wind energy can already be 
cost-effectively and reliably integrated with the electric grid without 
energy storage.''
    \11\ Derived from data from the US Energy Information 
Administration.
    \12\ Richard Baxter, ``A Call for Back-up: How Energy Storage Could 
Make a Valuable Contribution to Renewables.''
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                               conclusion
    ES&P would like to thank the Committee again for this opportunity. 
Investments in large scale energy storage at this time are absolutely 
critical. With the proper investment incentives in place, energy 
storage can play a critical role in helping the United States meet its 
renewable portfolio standards, enhance grid reliability, reduce 
greenhouse gas emissions, save consumers money and create jobs.

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