Suitable Recognition to Unlock Storage, Grid Solution Potential

You can watch the video of this panel here.

In a country like Mexico, where an aging transmission and distribution system faces deeper integration of new technologies and non-conventional resources, the reliability and stability of the grid will sooner or later dominate the discussion. Building further transmission lines is a logical but costly solution. However, storage solutions can help to provide further stability and support to end-users if a blackout occurs, among other benefits. In the panel, “Preparing for the Future: Storage Solutions and Grid Stability”, moderated by independent energy analyst Rosanety Barrios, experts discussed what technology can do for Mexico’s transmission and distribution system and energy users in general during Mexico Energy Forum on Thursday, Mar. 11.

After a short update presented by Barrios on a suspension against the government’s energy bill, a ‘counter-reform’ of sorts received with strong criticism by the private sector, attention turned back to why the instability of the grid is such a strongly debated topic in the Mexican energy sector. Ivette Castillo, Commercial Director North America of GE Grid Solutions, acknowledged that increased renewable capacity is stimulating this debate. “The penetration of renewable energy might contribute to instability but it is certainly not the only hindering factor,” she said, referring to the aging grid system and a change in the fuels used in the energy mix. Furthermore, the way demand is spread throughout the day provides a further hurdle. “When you are generating more and consuming less, this creates an unbalance,” she said. If this is not delt with correctly, the system eventually blacks out. But Castillo points out that Mexico is far from being the only country dealing with these issues.

One technology, Castillo pointed out, is that of flexible AC transmission systems, a flexible AC-based transmission system that can enhance the controllability of the grid and increase its capability to transfer power. These large systems work as compensators for the grid and can be constructed parallel to existing substations. If transmission is adequately monetized within the Mexican context, Castillo argues that returns on investment can be achieved easily enough. Another option is flexible power, coming through storage, batteries or flexible generators. “All of these solutions together can bring balance to a grid, working as an auxiliary service that kicks in when intermittence becomes an issue,” she said. However, such auxiliary services need to be incentivized before they become attractive to the market. In Australia, where auctions for storage projects were already held, a successful precedent already exists, said Castillo.

Gianni Moreno, International Sales & Marketing Director of Hitachi ABB Power Grids, gave another example of a success story that could be of interest to Mexico. “Jamaica has had a national strategy to get 30 percent of renewables by 2030 since the year 2010,” he explained. At that time, it committed to two wind farms, totaling 38MW of capacity. With such strong government support, investors were confident and PPAs were soon signed. However, when the wind farms were ready to go online, Jamaica’s grid operator raised a red flag and signaled that wind energy was too intermittent for the power system to handle. “Intermittency is always a core part of any grid, even without renewables, I should add,” said Moreno. Limiting renewable participation in that grid was an option but the Jamaican government decided to work together with the private and academic sectors to come up with a solution, coming in the form of storage. The success of this approach convinced Jamaica to increase its 30 percent goal up to 50 percent by 2030. After all,” storage projects fixed instability in the first place,” said Moreno.

In Mexico, storage and grid solutions are already a strong topic of discussion as well. Nevertheless, the actual adoption of such technology is still somewhat limited. One company pushing the envelope is Wärtsilä. Raul Carral, Business Development Mexico, Central America & Caribbean at Wärtsilä, explained that the company has already constructed over 500MW of generator capacity in Mexico, much of which can operate flexibly. This means that they can go from 0 to 100 percent capacity in a matter of minutes. Carral notes that the company also developed an isolated-supply project for an automotive player. Even though the benefits of isolated systems for the main grid are not directly obvious, taking away some demand that would otherwise have been problematic during peak hours can greatly help stability. Nevertheless, the company’s new storage for a wind project in La Paz is of particular interest. “This is a 10MW battery that supports the Eolica Coromuel wind project’s energy when intermittency becomes an issue,” Carral explained. The project is only the second storage solution integrated in a large-scale renewable project in Mexico.

For Alejandro Fajer, Co-Founder & CEO of Quartux Mexico, this trend is gaining ground. “Storage is already a viable reality and a great option for small, medium and large-scale energy users,” he outlined. “Energy storage costs have decreased around 89 percent in 10 years and investors are noticing that these systems are being adopted more widely as a result.” The fact that China and the US are quickly turning toward storage is a further sign of its capabilities. Smaller-scale systems focused on consumption for end-users are an important niche for the technology as well. “Ninety percent of Mexico’s 45 million electricity users are domestic users, after all,” said Fajer. Nevertheless, industrial users still represent 50 percent of the nation’s electricity supply. For these companies, storage can help provide electricity when demand, and thus price, of energy is at its highest during the day. “Intelligent storage systems playing toward user consumption profiles will generate many benefits, also in the case of blackouts,” Fajer added.

Guillermo García, Professor at ITAM and former President Commissioner at CRE, underwrote these benefits. "Storage is like a Swiss army knife; it can perform its stated function but also play a role in measurement, regulation, management and public policy," he said. Peak-shaving is one major benefit, but storage’s ability to inject power makes it valuable for the national grid as well. “A lot of investment is needed when it comes to the transmission and distribution system,” he said. The lack of recognition for auxiliary services, already addressed in countries such as Australia, provides a hurdle. “At one point, CRE had the idea to recognize auxiliary services, although the plan was not fully exhaustive,” explains García. Since this has not happened yet, he argues that Mexico should define and publish regulations and subsequently issue auctions for projects providing auxiliary services. Regulation, García emphasized, is crucial to enable these developments. “We need an open dialogue in this planning to improve the stability of the system that we are all part of,” concluded Barrios.