Firming up the business case for wind-plus-storage solutions

Frazer-Nash Consultancy Ltd

Wednesday, 05 June, 2019



Firming up the business case for wind-plus-storage solutions

Sindhu Shankar* of Frazer-Nash Consultancy discusses how a systems engineering approach can help manage complexities and firm up business cases for wind-plus-storage.

The Clean Energy Council’s Clean Energy Australia Report 2018 highlighted that wind power accounted for 7.1% of Australia’s total electricity generation and 33.5% of its total renewable energy generation. As more and more large-scale energy projects are set up, the requirements for establishing a wind farm are no longer as simple as ‘build in a windy location and connect to the grid’.

Developers’ business cases need to consider a large number of interrelated and interdependent factors, beyond simply the local weather conditions. These factors are constantly shifting and evolving and range from complex and changing policies and regulations to asset considerations such as firming options and generator performance standards, financial issues such as investment justification and energy market participation, and environmental concerns taking into account local communities and ecosystems, to name just a few.

Perhaps one of the most complex challenges facing wind farm developers is in their consideration of firming options.

What is wind firming?

There are challenges to delivering electricity from wind generating as its variable and intermittent supply may not correlate with demand. These changes in output make it more difficult to manage the power system and transmission networks, and challenge the economic viability of the developments themselves.

Firming uses an additional energy source or storage to provide a backup for the intermittent generation of wind. Firm capacity is the capacity from these sources and/or storage, which will be guaranteed to be available when needed.

Firming can help wind power companies to address the inherent challenges of intermittent generation, to meet fast frequency response requirements and to manage the risks associated with exposure to ‘causer pays’ — whereby the party causing generation and frequency loads deviation is responsible for the resulting costs. By ensuring firm capacity, renewable generation companies can remain viable in a competitive generation sector.

Considering firming options

Firming options can include economic and contractual as well as physical options. AGL Energy’s Wind Product Firming Unit (WPFU), an example of a derivative product, allows wind generators to enter into forward swap contracts with them, to guarantee supply in the future when wind assets are generating less energy than forecast. Other capacity firming solutions are physical: for example, geographically distributed wind farms, wind plus solar or wind plus battery/storage. These firming options deliver benefits to both network operators and wind power generators. The networks gain certainty that power will be available when it is needed, while operators can capitalise on increased and more reliable income.

Whilst firming helps address the challenge of intermittent wind, it introduces its own complexities. Developers will need to consider which capacity firming option best suits their needs. Economically, they will need to examine firming costs, and the selected option will change — potentially raising the true cost of their wind projects. In trading terms, wind farms need to identify how valuable their megawatts are, and the best time and price to bid their capacity and charge/discharge their storage systems. Whether considering firming options and costs, the technical complexities or the economics of generating revenue, it’s essential that all the interwoven issues are assessed. So how do we manage these complexities to present a sound business case for wind projects?

Managing complexities using systems engineering

Systems engineering is an interdisciplinary approach that can be used to manage the complexities of modern-day wind projects, helping to enable the successful realisation of complex systems. In practice, the systems engineering approach follows the processes shown in the V-diagram in Figure 1: definition of the organisation’s goals, objectives and operational needs; deriving and analysing the requirements to meet these needs; and system design as per the defined requirements. The system is developed and integrated as documented in the design; testing and evaluation takes place to demonstrate requirements have been met; then the delivery of the system that meets its intended purpose. The systems engineering approach can be repeated throughout the operation and maintenance phase for the life of the system.

Figure 1: The systems engineering V-diagram.

In the context of a renewable project, the systems engineering approach begins by capturing the developer’s operational needs, goals and objectives. Of course, each wind system developer has different goals, which will influence the way they intend to operate their system. For wind firming, this might be to demonstrate the benefits of co-locating wind and solar, showing proof of concept that the complementary resources are optimised; or they may wish to use battery storage to firm their wind supply, allowing them to enter into energy supply contracts or to ‘time shift’ their output, capitalising on price fluctuations. Establishing these goals and objectives is essential, as they drive how the system is to be structured and crystallise the requirements that need to be met.

Once the organisational goals have been identified, the next phase of the systems engineering approach is to define the requirements and system specifications needed to achieve the identified goals. Requirements definition and analysis can be difficult for a complex system that has many interrelationships and interdependencies. Picturing the overall system of systems often helps with the requirements definition phase.

Picturing the system

Systems engineering offers an excellent approach to structuring the requirements definition, system design, integration, testing and delivery processes, but it can often be hard for users to picture a complex system in its entirety and be sure that all interrelationships and interfaces between the systems and subsystems have been covered. At Frazer-Nash, we use a tool which allows an approach known as model-based systems engineering (MBSE), which enables us to present the structure and behaviour of a system visually, capturing and describing its interrelationships and interdependencies in a logical way, organising the logic of the organisational structure and business processes and facilitating the flow of information.

For example, at the development stage of a wind farm, developers will have a number of concerns, including regulatory compliance, governmental and council approvals, financial approvals, technical design, physical construction, revenue modelling and contract set-up. In the operational phase, the elements that owners and operators need to consider evolve — from the challenges of ongoing operations and maintenance to asset management, in-service updates, continued revenue generation, and ultimately decommissioning and disposal. MBSE can be used to define all of these complex functions, organisations, systems, drivers, business processes and requirements, and can illustrate how these elements interact with one another. It enables wind developers to view their systems architecture at increasing levels of detail. A functional layer (Figure 2) can show primary functions, organisations and their interrelationships; a systems layer can detail the systems used to realise organisational goals and the required information and data interactions; and a business process layer (Figure 3) can show the depth of detail of critical business processes, considering roles, systems and key decision points.

Figure 2: High-level functional/organisational layer of a wind farm project. For a larger image, click here.

Figure 3: Business process layer for bid supervision and submission function.

Delivering power to the wind sector

For wind energy companies, there is power in understanding the level of detail presented in system architectures down to the level of detail in critical business process definition. Requirements naturally fall out of business processes, and these requirements are essential for specifying the system and interfaces to be developed or procured, as well as for detailing the roles, organisations, facilities, processes and procedures that are required. In addition, this detailed definition enables work packages to be planned, contract requirements to be written and core system elements to be identified, and helps support workforce planning.

These requirements can be carried forward through the life of the project, allowing in-service changes to be undertaken more easily. With the overall ‘system of systems’ defined, even if a new asset needs to be added or new systems procured after some years, a systems engineering approach and MBSE can deliver understanding of the requirements for change and the impacts of change on the overall system.

So what does all of this mean to new and existing renewables projects? It means that a systems engineering approach is a valuable tool that can help you keep pace and make sure your organisation has the right strategies to meet the challenges of a rapidly evolving energy world, where more and more responsibilities are being placed on owner/operators.

*Sindhu Shankar is an experienced systems engineer who has recently transitioned to the energy and resources sector, having worked in the Australian defence aviation industry for over nine years. In Frazer-Nash Consultancy’s Systems Safety and Assurance Group, Sindhu has successfully applied her strong systems engineering skills to new clean energy development projects, focusing on the integration of battery technology into the National Energy Market (NEM).

Sindhu has led the technical development of a system architecture illustrating the functional structure and interrelationships of a battery asset within the broader Australian energy sector environment, and requirements to define market participation processes, as well as operations and maintenance activities.

Image credit: ©stock.adobe.com/au/malp

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