Energy
Friday, June 24th, 2022 12:52 pm EDT
Andy Tang, Wärtsilä’s VP of energy storage and optimization, sat down with me for a CleanTech Talks episode a few weeks ago. This second half of our wide-ranging conversation includes conversations about major island microgrids in the Azores and the Caribbean, the advantages of Wärtsilä’s engines in a net-zero transition and flexible fuel engines for marine and ground-based power.
There are two broad sets of topics on why you need to manage storage, safety/risk and revenue, both equally important. On the safety and risk aspect, while everyone calls batteries commodities, they are very picky on how they want to live their lives. State of health, state of charge, resting point, ideal operating temperature, and other factors have to be maintained and tracked to keep warranties valid. Optimally discharging batteries avoids thermal runaway risks and preserves the asset life.
Then there’s the commercial aspect. A battery is a pile of chemicals sitting in a field. It only makes money if electrons are flowing in one direction or the other. The energy management system (EMS) connects it to the electricity markets to market. This varies by jurisdiction, by utility, by independent system operator (ISO), and by revenue streams like ancillary grid services. And how do you get these revenue streams without degrading the battery?
But that said, at peak demand points when a utility is willing to pay $9 per kWh for electricity, everything else goes out the window except risk concerns. Tang’s demand management efforts with PG&E and startups prepared him very well for finding the optimal through path.
In the Azores on the island of Graciosa, 1,500 kilometers from the mainland of Portugal, the 4,000 residents had wind and solar, but couldn’t get above 17% of annual demand. Their diesel generators have their own management requirements that can be tripped creating island-wide blackouts. Wärtsilä’s GEM EMS created day ahead predictions of wind and solar generation from weather forecast services and combined that with their understanding of optimal use of the generator engines, and put in a small, one-hour duration battery. That reduced the levelized cost of electricity by $0.10 per kWh and increased renewables utilization to over 60%. Massive fuel savings, of course.
The battery alone wouldn’t have done that. The intelligence embodied in the EMS plus the battery allows that.
Another example is on the island of Bonaire of the ABC islands, Aruba, Bonaire, and Curacao. It’s a 20,000-resident island in the southern Caribbean. Wärtsilä’s efforts enabled them to shift their wind generation assets from mid-teen percentages of annual demand to upper 30s, again with a significant reduction in electrical generation from diesel. These aren’t tiny grids, but MW-scale grids.
This is well-aligned with the other side of Wärtsilä’s business, marine power. Their biggest engine is a 20 MW power output brute. All ships are ‘microgrids’, and virtually all of the systems which aren’t pushing them through the water are run off of electricity. Every massive cruise ship and bulk freight ship is a microgrid. More and more of them have significant battery storage as well, although few larger ships have hybrid drivetrains.
Thirty years ago it would have been close to impossible to effectively manage storage in a mixed renewables and generators micro-grid because the forecasting was much poorer, the computers were expensive, and the battery technology was much less mature. Twenty years ago it would have been hard as well. Now the intersection of emergence of mature LFP and lithium-ion batteries, plus cheap computers, plus internet, plus high accuracy weather forecasting, has made this type of microgrid optimization much more viable.
Wärtsilä brings in data from a handful of different weather systems and uses the appropriate ones for the geography. While 5-day weather forecasts are now as accurate as 1-day forecasts used to be, that doesn’t mean that every weather forecasting system is equally good in different regions.
Wärtsilä’s storage business is a subset of their energy business. They are looking at future fuels and are strongly focused on flexible fuel engines to get through the transition. Wärtsilä’s ‘Front-loading Net Zero’ white paper models cost-optimal pathways to 100% renewable power systems in different markets with vastly different socioeconomic dynamics, distinct energy systems, and challenges to overcome. A key focus is how to do it in a cost-effective way. While critics say it will be too expensive, Wärtsilä has done the math for their scenarios. Ignoring politics, Wärtsilä asserts that it’s possible to get to net zero more quickly by acknowledging that there’s a role for engines that provide long-duration storage that run on current fossil fuels but transition to green fuels in the future. California, for example, could use existing natural gas storage, run engines off of it, and then shift to biomethane in the future.
This is aligned with finding pathways to profitability for natural gas and coal generators to operate in annually diminishing capacities until they are no longer required at all. Denmark did this with their coal generation assets as their wind energy fleet grew, as an obvious example.
Wärtsilä has an advantage with its reciprocating engines over gas turbines for this long-duration storage pathway. An engine can start-stop hundreds of times a year with no impacts on maintenance, unlike gas turbines which would be impacted. It’s similar to modern cars which shut off their engines at stop lights and then restart them. Gas turbines don’t like being turned on and off multiple times per day. They can be adjusted up and down in terms of output, but maintenance costs increase with more start-stop cycles.
Aligned with this, they are developing ammonia and methanol flex-fuel engines as the marine industry is considering both of those fuels. In my projection of marine shipping through 2100, I see electrification being a bigger wedge than the industry does, in combination with ongoing optimization and innovation in ship efficiency, and consider it likely that biofuels that are plug-compatible with current engines are going to be a more likely pathway.
Wärtsilä is also considering pure hydrogen for marine drivetrains and generation assets that they sell. Tang makes that point that if Europe does drive themselves into hydrogen-as-a-fuel with governmental actions and incentives, then it might end up being a thing despite the clear challenges.
Wärtsilä has seen wild dislocation in battery pricing recently, primarily due to the price of lithium carbonate, which is required for LFP and lithium-ion batteries. System level pricing is projected to go up 21% this year, and up 31% next year. The industry is digesting this and some deployments have become non-viable, with ugly negotiations. Tang’s perspective is that in 2024-2025 this will be just a painful blip in the rearview mirror. My take is similar, as lithium is a comment element in both hard rock and lithium brines in oil and gas regions, we’re just experiencing a short term disconnect between resource extraction volumes and market demand.
Tang is hopeful that things like redox flow batteries mature and enable longer-duration storage, as cell-based chemistries have significant limits in scaling energy economically. 6-8 hours is about as much duration as they can store economically, and we need longer duration solutions. His perspective is that it will be an all-of-the-above result.
Tang came to his career choices due to his love of skiing. He’s watched the average snow level in the Sierras move up a thousand feet since he started skiing three decades ago. Resorts with base elevations of 6,000 feet used to have every storm coming in as snow, and now half of the storms come in as rain. Tang’s perspective is that we have a chance to get ahead of this. We have a chance to fix this. Going renewables is personally important for Tang. He wants to be a steward for future generations of skiers. He says we have the tools, we just need the policy wrapped around behind it and make it happen.
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