Applied Energy 124 (2014) 377388

Contents lists available at ScienceDirect

Applied Energy
journal homepage: www.elsevier.com/locate/apenergy

Assessment of energy storage for transmission-constrained wind

Jeremiah X. Johnson , Robert De Kleine, Gregory A. Keoleian
Center for Sustainable Systems, School of Natural Resources & Environment, University of Michigan, 440 Church St., Ann Arbor, MI 48109, United States

h i g h l i g h t s
 We assess the potential for energy storage to economically decrease wind curtailment or decrease system costs.
 We assume that the wind is under contract via a power purchase agreement.
 Maximum viable energy storage costs were $780/kW with ten hours of storage capacity.
 Sizing the energy storage to reduce a small portion of curtailment supports higher unit cost batteries.
 Signicant curtailment persists even with high capacity energy storage.

a r t i c l e

i n f o

Article history:
Received 17 June 2013
Received in revised form 31 January 2014
Accepted 2 March 2014
Available online 11 April 2014
Keywords:
Wind
Curtailment
Energy storage
Transmission
Power purchase agreement

a b s t r a c t
Grid-scale energy storage is one option to reduce curtailment and increase deliverability of transmissionconstrained wind. This study examines four hypothetical wind and transmission projects in the United
States to quantify the reduction in curtailment under various energy storage congurations and
determine the cost targets that energy storage must achieve to become a viable solution for use with
remote wind. The delivered cost of wind is determined using a power purchase agreement approach
and six AC transmission voltage classes are considered. The ndings show that curtailment reduction
can be achieved with energy storage costs as high as $780/kW with ten hours of storage capacity, a value
that is 5085% lower than current cost estimates for redox and sodium sulfur batteries. Batteries with
higher power ratings result in greater curtailment reduction, but also lower maximum viable costs. Sizing
the battery to reduce a small portion of curtailment allows for higher utilization of the storage and
supports higher cost batteries. Using energy storage to increase wind installed capacity can also be
economically viable, but at costs lower than those for curtailment reduction. The results were most
sensitive to the elimination of wind subsidies, the installed cost of transmission, battery efciency
degradation, and battery cycle life. The study did not show economic viability for the use of energy
storage to reduce transmission voltage class.
2014 Elsevier Ltd. All rights reserved.

1. Introduction
The highest quality onshore wind resources are often located far
from load centers and a signicant amount of new transmission
will be needed to support high penetrations of wind energy [1].
Minimizing the cost to deliver remote wind is essential for this
technology to continue to compete with other renewables and
with traditional generation. Energy storage co-located with the
wind resource can reduce curtailment, increase transmission line
utilization, allow for lower voltage lines to be used, and, poten-

Corresponding author. Tel.: +1 (734) 763 3243.

E-mail address: jxjohns@umich.edu (J.X. Johnson).
http://dx.doi.org/10.1016/j.apenergy.2014.03.006
0306-2619/ 2014 Elsevier Ltd. All rights reserved.

tially, decrease the delivered cost of energy. The cost of energy

storage is currently too high to justify widespread deployment
for this purpose. The goal of this paper is to quantify the reduction
in curtailment under various energy storage congurations and
determine target costs for grid-scale energy storage that improves
deliverability or reduces costs of transmission-constrained wind.
To do so, this study assumes that the delivered wind is under contract via a power purchase agreement, with contract prices based
on the delivered cost of energy (i.e., inclusive of wind and transmission). This analysis is useful to set cost targets for grid-scale energy storage and illustrate the conguration and size of batteries
necessary to reduce curtailment or increase the deliverability of remote wind. The analysis does not target specic types of energy
storage, but intends to inform the discussion on the potential role
of energy storage for transmission-constrained wind.

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J.X. Johnson et al. / Applied Energy 124 (2014) 377388

1.1. Delivering wind

Wind generation is a mature technology over 13 GW of new
installed capacity was added in the U.S. in 2012, bringing the total
installed wind capacity to 60 GW [2]. Global installations now exceed 280 GW [3]. The highest quality wind resources are often remote and lack access to transmission to bring it to market. When
planning for wind development, one must consider the economic
tradeoff between developing lower quality local resources or building transmission to access distant, but higher quality, wind resources. Wind output is variable and the average project capacity
factors are 33% across the large sample of projects examined by
Lawrence Berkeley National Labs, with very few projects achieving
capacity factors greater than 50% [4]. Accessing remote wind with
dedicated transmission forces a trade-off between building wind in
excess of the available transmission capacity (resulting in curtailment) and maintaining transmission with low utilization.
The two main drivers for wind curtailment are inadequate
transmission capacity and the ability of conventional generators
to vary output, particularly during off-peak hours [5]. In recent
years, forced curtailment of wind has signicantly reduced total
delivered wind energy. In 2009, 17% of potential wind generation
was curtailed in ERCOT, the grid operator in Texas. This dropped
to 8.5% in 2011, due in part to a new transmission line linking
the West zone with the South [4]. While the ERCOT region has
encountered some of the most signicant wind curtailment, other
regions face non-trivial levels; in 2011, 3% of potential wind generation in the Midwest ISO (less Northern States Power) was curtailed in 2011 [4].
Options to reduce wind curtailment and increase wind deliverability include increasing transmission loadability, increasing load
at the wind site, increasing the diversity of the wind resource, and
adding energy storage. Increasing transmission capacity beyond
the cost-optimal level will result in the rising delivered cost of
wind unless the excess transmission capacity is used to carry other,
non-wind generation. Increasing the load at the wind site is not
within the inuence of wind developers; while low cost energy
from wind may attract industry, this is not typically a planning
objective for developers. Increasing the diversity of wind resource
can result in a atter, less variable wind shape, which in turn
would lead to higher transmission line utilization. This is within
the ability of transmission developers to inuence, but one must
consider the additional cost of spur transmission lines to reach
projects in multiple wind regimes. Energy storage offers the potential to atten the wind generation shape, reducing curtailment and
increasing transmission line utilization. This study examines this
option using energy storage for transmission-constrained wind
to assess the cost targets needed to achieve viability.
1.2. Grid-scale energy storage for wind
With the exception of several dozen pumped storage hydro
facilities, there are few grid-scale energy storage facilities in current operation. In 2010, the Electric Power Research Institute
(EPRI) estimated that there is 127,000 MW of global pumped hydro
capacity, dwarng 440 MW of compressed air energy storage
(CAES), and approximately 400 MW of batteries [6]. Despite the
lack of wide-spread adoption, there is recognition of the variety
of potential applications for large scale energy storage, including
providing balancing services to accommodate variable renewables,
energy arbitrage to reduce peak prices and manage congestion,
load following, deferring transmission and distribution investment, and improving power quality and reliability.
Major studies, including those by the Pacic Northwest
National Laboratory [7], Sandia National Laboratory [8], and the
EPRI [6], have evaluated the market potential and value of various

applications for energy storage. Denholm and Sioshansi found that

co-location of energy storage and transmission-constrained wind
allows for more efcient use of the winds transmission capacity,
but also subjects the energy storage to line losses and limits its
ability to maximize revenues on the grid [9]. The ndings show
that reducing transmission capacity by co-locating energy storage
with wind would be economically justied for a signicant number
of projects based on recent costs for transmission.
In an examination of the ERCOT market, Denholm and Hand
found that greatly increasing the exibility of traditional generation could allow penetration of wind and solar up to 50% with curtailment rates less than 10%. To achieve 80% penetration, load
shifting and storage equal to one day of average demand is needed
[10]. Fertig and Apt also examined the ERCOT region to assess compressed air energy storage (CAES) integration at specic sites using
a multiparameter optimization of wind, CAES, transmission, and
dispatch. They found that a baseload CAES/wind system is less
protable than a natural gas combined cycle under most scenarios
[11]. Greenblatt et al. also examined the competition between natural gas combined cycles and CAES to make baseload wind [12].
Their ndings suggested that high natural gas prices (>$9/GJ) or
high carbon prices ($35/tCeq) would be necessary for CAES to be
a competitive option. DeCarolis and Keith demonstrated that
increasing wind diversity through spatial distribution of sites provides benets in excess of the costs of additional transmission
infrastructure and there is a trade-off between wind site diversity
and storage [13]. Succar et al. developed a model to jointly optimize the wind turbine specic rating and CAES conguration using
a levelized cost of energy approach, and found that such an optimization would decrease the baseload plants storage capacity and
decrease greenhouse gas emissions [14]. Madlener and Latz
examined a wind and CAES system using a prot-maximizing
algorithm and found that centralized storage performed better
than integrated storage [15].
1.3. Objectives
This study examines the potential of grid-scale energy storage
to reduce the delivered cost of remote, transmission-constrained
wind. This study is novel because it assumes that the wind is under
a power purchase agreement (PPA), as opposed to receiving market
energy prices. In 2011, 51% of new U.S. wind development was
under a PPA and 25% was utility owned, while only 21% was
merchant or quasi-merchant [4]. That implies that three-quarters
of new wind (i.e., PPA and utility-owned) was likely priced on a
delivered cost of energy basis, while a far smaller fraction received
market energy rates. Another differentiator is that this study
examines the AC transmission development considering multiple
voltage classes. Most comparable studies conducted to date
assume DC transmission despite the fact that the vast majority of
transmission is AC in the U.S.
2. Methods
In this analysis, we develop a constrained optimization problem
to minimize the delivered cost of energy of a wind and transmission system which represents the cost of delivered energy for a
PPA-based project. These optimizations are conducted in a Visual
Basic model that maintains the chronological nature of the wind
generation data and the associated behavior of energy storage
and deconstructs the delivered costs into three elements: the
revenue requirement for the wind, the revenue requirement for
the transmission, and the amount of delivered wind after accounting for curtailment and line losses. The approach taken for each of
these elements is discussed in Sections 2.2.12.2.3, respectively.

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J.X. Johnson et al. / Applied Energy 124 (2014) 377388

After minimizing the cost of delivered wind, we then introduce

batteries in varying congurations to determine the breakeven
battery cost (i.e., the battery cost below which would decrease
the delivered cost of energy) for three applications: reducing curtailment, reducing the transmission voltage class, and increasing
the wind installed capacity. With base case assumptions, the delivered cost of energy is constant across all hours (i.e., the PPA is
structured to value all hours equally). A time of day contract which
varies the cost for on-peak and off-peak hours is also examined, in
addition to a sensitivity analysis on several key assumptions.
2.1. Scenario description
Fig. 2. Wind durations curves for four selected sites.

Four hypothetical transmission lines are represented, selected

to provide a variety of wind resource quality and transmission distance, as shown in Fig. 1. Line A represents a 500 mile transmission
line connecting west Iowa wind with the Chicago area market,
while Line B is a 100 mile transmission line interconnecting the
Minneapolis area with wind resources in southern Minnesota. Line
C connects upstate New York to the metro New York City area (300
miles) and Line D connects Maine with Boston area load (260
miles). The transmission line length is 40% higher than the
straight-line distance between the points, to allow for the transmission path to avoid difcult terrain and populated areas. Sites
A and B were developed with a range of 0 MW to 1000 MW of
wind, Site C has between 0 MW and 700 MW, and Site D has between 0 MW and 600 MW. These ranges of potential developable
wind were selected to provide illustrative examples of a variety
of wind-transmission scenarios. In each case, the theoretical wind
resource exceeds these limits.
2.2. Determining the power purchase agreement price by costminimizing a wind-transmission system

the project life based on the assumption that the discounted

project costs would equal the discounted revenue requirement
(and thus the PPA terms) over the project life, as shown in
Eq. (1) and following the approach described in CBO, 2008 [17].
T
T
X
X
1 r WACC t  RRwind;t
1 r WACC t  C wind;t
t0

where r WACC equals the weighted average cost of capital, RRwind;t is

the revenue requirement for the wind project in year t in $, and
C wind;t is the cost of the wind project in year t in $.
The costs for each project are evaluated twice: once with the
production tax credit (PTC) which is a subsidy for the rst ten years
of operation and is a function of generation (as shown in Eq. (2)),
and once with the investment tax credit (ITC) which provides a
subsidy as a function of installed cost (as shown in Eq. (3)). The
lower cost option is selected.

C wind;t r debt  Bdebt;t r equity  Bequity;t  PTC t  CF t

 8760 h=yr Incomet  Intt  Dept  rincome

2.2.1. Calculating the revenue requirements for wind

Wind speed data for each site, at ten minute intervals and 80 m
hub height, are from National Renewable Energy Labs Eastern
Wind Dataset [16]. A wind power curve representative of a contemporary GE 2.5 MW wind turbine (IEC Class II) was employed
to determine generation as a function of wind speed. An outage
rate of 4% was applied randomly across all time intervals.
Fig. 2 shows the wind duration curves, representing one year of
hourly wind generation at each site, sorted in descending order.
The capacity factor at Site A is 51%, Site B is 46%, Site C is 43%,
and Site D is 35% (prior to including the impact of transmission
losses and curtailment). The shape of these curves determine the
level of curtailment at a given transmission capacity.
The annual revenue requirement needed to support wind in
each scenario is determined by levelizing the project costs over

Fig. 1. Map of four scenarios. Wind map adapted from the National Renewable
Energy Laboratory.

t0

tax

Taxproperty;t Inst FOM t  CAPwind

where

Bdebt;0 C ov ernight  1 AFUDC  /debt

Bequity;0 C ov ernight  1 AFUDC  /equity
C wind;t r debt  Bdebt;t r equity  Bequity;t Incomet  Intt  Dept
 r income

tax

Taxproperty;t Inst FOMt  CAP wind

where

Bdebt;0 C ov ernight  1 AFUDC  /debt  1  ITC  bITC

Bequity;0 C ov ernight  1 AFUDC  /equity  1  ITC  bITC
where rdebt is the interest rate on debt, Bdebt,t is the balance of debt in
year t in $, requity is the nominal return on equity, Bequity,t is the balance of equity in $/MW, PTCt is the value of the Production Tax Credit in $/MWh, CFt is the capacity factor of the wind project in %, Incomet
is the project income in $/MW, Intt is the interest paid in $/MW,
Dept is the depreciation expense in $/MW (with both evaluations
including bonus and accelerated depreciation), r income tax is the total
income tax rate (with the federal rate not paid on the value of state
tax collections), Taxproperty,t is the property tax in $/MW, Inst is the
cost of insurance in $/MW, FOMt is xed operations and maintenance costs in $/MW, CAPwind is the installed capacity of the wind
project in MW, Covernight are the overnight costs of the wind project
in $/MW, AFUDC is the allowance for funds used during construction in % of overnight costs, /debt and /equity are the share of project
costs paid by debt and equity, ITC is value of the Investment Tax

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J.X. Johnson et al. / Applied Energy 124 (2014) 377388

Credit as a % of installed costs, and bITC is the share of installed costs

eligible to receive the ITC.
Table 1 provides a summary of the assumptions used to determine the cost of wind.

2.2.2. Calculating the revenue requirements for transmission

This study includes six AC transmission line voltage classes:
115 kV, 230 kV, 345 kV, 345 kV double circuit, 500 kV, and
765 kV. Table 2 provides a summary of the cost assumptions used
for new AC transmission by voltage class. It is recognized that
transmission costs vary greatly from project to project. These costs
are representative of line paths dominated by non-mountainous,
lowly populated terrain. More challenging terrain would quickly
escalate project costs, as is tested in the sensitivity analysis.
Assumptions for taxes, insurance, ination, and the cost of capital
are consistent with the assumptions used for wind, provided in

Table 1
Wind Assumptions.

Cost assumptionsa
Overnight capital cost ($/kW)
Fixed O&M ($/kW-yr)
Variable O&M ($/MW h)
Allowance for funds during construction

Site A

Site B

Site C

Site D

2099
27.2

3%

2099
27.2

3%

2300
29.8

3%

2521
32.7

3%

Tax and insurance assumptionsb

State tax
Fed tax
Tax rate (exc. property tax)
Property tax
Insurance

5.0%
35.0%
38.3%
1.0%
1.0%

Cost of capital assumptionsc

Nominal return on equity
Percent equity
Interest rate on debt
Life of debt
Weighted average cost of capital

14.0%
30.0%
6.0%
20
6.8%

Ination assumptiond
Ination (%/yr)

2.0%

Depreciation assumptionse
5-Year MACRS (% of installed cost)
20-YrMACRS (% of installed cost)
No MACRS (% of installed cost)
Bonus deprecitation (% of installed cost)

45.0%
2.5%
2.5%
50.0%

Tax credit assumptionsf

Production tax credit ($/kW h)
Investment tax credit (% of installed cost)
Share of installed cost covered under ITC (%)
ITC Value that is depreciable (%)

0.022
30%
95%
50%

a
Installed cost assumptions are based on Wind Technologies Market Report,
selected for each region [4]. All O&M costs are treated as xed costs (i.e., independent of generation levels) and escalate at the rate of ination. O&M costs do not
include property tax or insurance, which are included separately. Allowance for
funds used during construction is consistent with construction nancing costs in
Tegan et al. [18].
b
Tax and insurance rates are estimated. Property tax and insurance costs escalate
at the rate of ination.
c
The debt to equity ratio was estimated based on the amount of secured debt for
4000 MW of wind [4]. Debt rates under 6% are noted in the same reference.
d
Estimate.
e
Bonus depreciation was extended in American Taxpayer Relief Act of 2012.
Accelerated (MACRS) depreciation is allowed under 26 USC 48(a)(3)(A). The share
of installed cost that is eligible for 5-year depreciation (after bonus depreciation) is
based on Bolinger et al. [19].
f
Wind projects are eligible for either the federal production tax credit (PTC) or
the investment tax credit (ITC). The PTC and ITC were renewed in January 2013
under the American Taxpayer Relief Act of 2012. The share of installed costs that
qualify for the ITC is from Bolinger et al. [19]. The Internal Revenue Service allows
half of the value of the ITC to be depreciable.

Table 1. Straight line depreciation was employed over a 30-year

horizon and a 30-year life of debt was assumed. Based on the cost
assumptions employed, the annual revenue requirements for
transmission were determined following a formula analogous to
Eq. (1).
2.2.3. Calculating the quantity of delivered wind
We assessed AC line power carrying capability using St. Clair
curves, a method developed to provide a universal approach to
quantifying limits of the load carrying ability of a transmission line
(loadability) for various line lengths and voltage classes [23].
Dunlop et al. subsequently developed the analytical basis for the
St. Clair curve and expanded its use to higher voltages [24]. St. Clair
curves represent the thermal, voltage, and stability limits for transmission lines based on their surge impedance loading (SIL) and are
commonly used for transmission planning. Thermal limits determine loadability below approximately 50 miles, voltage limits
are binding between approximately 50 and 190 miles, and stability
limits are binding for lines longer than approximately 190 miles. In
this study, only lines longer than 50 miles were examined. A 300
mile line has a loadability of 1.0 SIL, regardless of the voltage class.
Loadability is calculated as the product of the line loadability in
per unit of SIL for a given distance and the SIL for the relevant
voltage class (Table 3).
Similar to Newcomer and Apt [22], line losses were modeled as
resistive, varying by the electricity generated, conductor resistance, line length, and voltage class, as shown in Eq. (4):

Loss %

Q rd
V2

where Q is the wind production at a given time in MW, r is the

resistance in ohm/mile, d is the distance in miles, and V is voltage
class of the line in kV. Assumptions for resistance are provided in
Table 3.
2.2.4. Minimizing the cost of delivered energy
Based on the assumptions and calculations for line loadability,
wind cost, wind shape, and transmission cost, the minimized cost
of delivered wind (Cdelivered) is calculated using Eq. (5).

C deliv ered P52;560

t1

RRwind RRTX
Q t  h  X t  1  Lt

where RRwind and RRTX are the annual revenue requirements for
wind and transmission in $, Q is wind production (MW), h is time
(hours), X is the energy lost to curtailment (MWh), and L represents
the transmission loss rate (%), summed over all time intervals t for
the year (there is 52,560 ten-minute time intervals in a non-leap
year). The minimized delivered energy cost is bounded by the maximum installed wind capacity and solved using the site-specic line
distance and wind shape, coupled with cost assumptions provided
in Tables 1 and 2. Delivered costs are calculated for each of the
six voltage classes. The minimized cost determines the lowest cost
combination of wind capacity and voltage class and represents the
target value of a signed PPA with a load serving entity. The effective
introduction of energy storage to the wind-transmission system
should result in lower delivered costs or more wind delivered at
the same cost.
2.3. Determining the breakeven cost for energy storage integration
into wind-transmission system
For each scenario, we assessed the opportunity to introduce energy storage into the wind-transmission system for three applications: (1) mitigation of curtailment, (2) reduction of transmission
voltage class, and (3) increasing the wind installed capacity. For

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J.X. Johnson et al. / Applied Energy 124 (2014) 377388

Table 2
Transmission cost assumptions.

Cost assumptions
Line ($000/mile)a
Station ($M)b
Less than 300 miles
300480 miles
More than 480 miles
Allowance for funds during construction and overheadc
Fixed O&M (% of installed cost)d

115 kV

230 kV

345 kV

345 kV 2 circuit

500 kV

765 kV

483

927

1298

2077

1854

3060

2.7
2.7
2.7
17.5%
3%

12
14
15
17.5%
3%

32
38
42
17.5%
3%

61
71
79
17.5%
3%

65
79
90
17.5%
3%

148
175
200
17.5%
3%

a
Costs for 115 kV project based on project proposal estimates. Transmission line costs for 230 kV, 345 kV, and 500 kV are based on Black & Veatch analysis [20]. Costs for
765 kV are based on selected projects detailed in Mills et al. and escalated to current dollars [21].
b
Station costs are based on the same references in footnote a, following the approach employed by Newcomer and Apt [22].
c
Based on NREL review [18].
d
Estimate.

Table 3
Transmission loadability and loss assumptions voltage class.

SILa
Resistanceb

MW per unit
ohm/mi

115 kV

230 kV

345 kV

500 kV

765 kV

35
0.24

140
0.07

420
0.048

1000
0.024

2280
0.012

a
The surge impedance loading for each voltage class is representative of typical
assumptions for 60-Hz overhead lines [25].
b
Line resistance can vary greatly within a voltage class. The assumed values are
consistent with the weighted averages for U.S. transmission lines by voltage class,
as published in Kappenman (2010) [26].

each application in each scenario, the breakeven battery costs were

determined for a series of battery power ratings and battery energy
to power ratios.
2.3.1. Batteries to mitigate curtailment
To determine the amount of curtailment that can be mitigated
and the value provided by energy storage, the following approach
is used:

Pcharge;t Q t  CAPTX ; bounded by the requirements that

P charge;t 6 Pbatt;t ; SOC t 6 1:00

where Pcharge,t is the charge rate for the battery at time t in MW, Qt is
the wind output in MW, CAPTX is the transmission line loadability in
MW, Pbatt,t is the batterys rated power in MW at time t, SOCt is the
batterys state of charge as a percentage of the total storage
capacity.

Pdischarge;t CAPTX  Q t ; bounded by the requirements that

Pdischarge;t 6 Pbatt;t ; SOC i P 0; Pdischarge;t Q t 6 CAP TX

where Pdischarge is the discharge rate for the battery in MW.

The initial state of charge, SOC0, is assumed to be 0.50 and the
roundtrip cycle efciency, gt, is assumed to be 0.75 (but is tested
in the sensitivity analysis). The state of charge at a given time is
determined by:

SOC t1 SOC t Pcharge;t  t  gt  Pdischarge;t  t; such that

0 6 SOC i1 6 1:00

The reduction in curtailment by the battery is assumed to be the

difference in curtailment with and without the battery plus any
difference between the initial and nal state of charge. The additional energy delivered by reducing curtailment is assumed to have
the same value as the cost-minimized delivered energy before the
introduction of the battery. These additional revenues are used to
determine the maximum cost of the battery, taking into account
the cycle life.

The base case assumption for battery life is the equivalent of

2000 cycles and maintenance efforts eliminate battery roundtrip
efciency, storage capacity, and rated power degradation over time,
consistent with approaches employed in other studies (e.g., [6]).
While the design of this model is intended to represent generic
grid-scale energy storage, these base case assumptions for battery
life and degradation are more representative of compressed air energy storage or redox ow batteries with periodic cell stack replacement [27]. With redox ow batteries, design can minimize
degradation of electrode surface and the storage capacity degradation can be mitigated by using electrolytes with different oxidation
states of the same element (e.g., vanadium) so that crossover would
not irreversibly consume the electrolytes [28]. Such assumptions of
mitigating storage capacity fade would not be appropriate for technologies such as lithium ion batteries. To better understand the impacts of alternative battery technology options, these assumptions
(cycle life, roundtrip efciency degradation, and storage capacity
fade) are tested in the sensitivity analysis.
For each battery conguration, the annual number of cycles is
used to determine battery life, which is used to calculate the
annual carrying cost as a percentage of installed battery cost. A
maximum lifetime of 20 years is assumed. Given that the model
represents generic grid-scale energy storage, the number of
cycles or maximum years in service determines the storage life.
Thus, the effect of usage patterns such as the rates and durations
of charging and discharging are not directly included in the model,
but the sensitivities on cycle life and degradation can inform how
various usage patterns would impact the results of this study.
The maximum cost of the battery is determined for a range of
battery designs, varying the battery power and energy storage as
follows:

Range of Pbatt 0 to CAP wind  CAPTX

Range of Storage Capacity Pbatt  t; with range of t from
10 min to 10 h
We assume that the ramp rate is not binding constraint. Additionally, the battery allows for full depth of discharge, which is a
realistic assumption for some energy storage technologies (e.g.,
vanadium redox ow batteries [6]). With technologies for which
a lower depth of discharge should or must be used (e.g., sodium
sulfur batteries, for which EPRI assumes a 90% depth of discharge
[6]), the allowable cost targets for the energy storage would
decrease accordingly.
2.3.2. Batteries to reduce transmission voltage class
In addition to reducing curtailment, batteries could be integrated into a wind-transmission system to allow for the use of a
lower, less expensive voltage class for the transmission. To assess

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J.X. Johnson et al. / Applied Energy 124 (2014) 377388

if energy storage could be used to reduce the transmission voltage

class, the cost minimized results determined in Section 2.2.4 are
employed. The installed wind capacity is applied to a transmission
system with a lower voltage class, coupled with energy storage.
Only battery congurations that result in a lower delivered cost
are viable options to reduce transmission voltage class.
2.3.3. Batteries to increase wind installed transmission capacity
The introduction of energy storage to support increasing wind
capacity is also examined. Based on the results determined in Section 2.2.4, additional wind capacity in added in 20 MW increments.
For each increment, battery congurations are tested to determine
if the additional wind could be incorporated within increasing the
delivered energy costs.
2.4. Sensitivity analysis
A sensitivity analysis is conducted for Case A to determine the
impact of key assumptions. Case A was selected because it offered
the most promising (i.e., highest) results to support grid-scale
energy storage.
2.4.1. Sensitivity to time-of-day pricing
Base case assumptions assume a at PPA price for delivered
wind, irrespective of the time of day of generation. A time of day
PPA scenario is conducted to determine the impact of structuring
a PPA with on-peak and off-peak pricing. As shown in Eqs. (9)
and (10), the off-peak PPA price (C del;off ) and on-peak PPA price
(C del;on ) are calculated such that the average price received matches
the minimized cost of delivered energy (Cdelivered), as described in
Section 2.2.4, and the difference between the off-peak and on-peak
PPA price is equal to the difference between the historical annual
average off-peak and on-peak locational marginal price at the point
of delivery (LMPoff; LMPon).

C deliv ered

52;560
X
t1

C del;off  Q t;off C del;on  Q t;on

Q t;off Q t;on

C del;on  C del;off LMP on  LMP off

10

On-peak hours are assumed to be between 8:00 am and 12:00

am on weekdays. The difference between on-peak and off-peak
rates is insufcient to support energy arbitrage with the assumed
roundtrip charging cycle losses. The approach to battery discharge
maximizes revenues by optimally delaying discharge until on-peak
hours, assuming a perfect wind forecast is available.
2.4.2. Sensitivity to key parameters
For the base case scenario, the sensitivity of the results to
curtailment reduction and maximum battery costs for seven
assumptions were tested:
1. Wind installed cost was tested at 20% above and 20% below
base case assumptions. This yields a range of overnight capital
costs from $1,679/kW to $2,519/kW for Site A, which covers
much of the range of individual project costs detailed in
Wiser and Bolinger (2012) [4].
2. Transmission installed cost was also tested. A sensitivity at 20%
below base case assumptions was conducted to illustrate
potential economies of scale or lower commodity prices. A high
sensitivity was created that illustrates the impact of transmission development through more difcult terrain and more populated areas. Using the same Black & Veatch source for data
[20], the transmission costs are assumed to increase by 28%
over the base case based on the following assumed terrain:
25% hills, 20% suburban development, and 10% forested land.

3. Given their signicant value, the impact of expiration of federal

wind subsidies (i.e., the PTC and ITC) were tested.
4. Battery cycle life was tested at 1000 cycles and 5000 cycles,
intended to represent the impact of different usage patterns
and technology choices on the results.
5. Financing costs can vary considerably from year to year and,
given the large capital investments required for these projects,
can signicantly inuence the delivered costs of energy. Sensitivities were tested at 20% above and below base case nancing
costs to provide context on the magnitude and direction of the
impacts.
6. Because this analysis does not assume a specic technology is
providing the energy storage, a base case assumption of 75%
round trip efciency is assumed. Actual energy storage applications can achieve higher and lower results, so a sensitivity
analysis was conducted to test the impact of 60% and 90% round
trip efciencies.
7. Battery roundtrip efciency degradation was tested with 2%
and 5% roundtrip efciency decreases per year.
8. Energy storage capacity fade was tested based on assumptions
appropriate for two lithium-based batteries. Lithium iron phosphate batteries have been found to experience capacity fade at a
rate of approximately 0.3% per 100 accumulated discharge
cycles under charging patterns typical for wind generation,
while lithium cobalt oxide-nickel manganese composite batteries show capacity fade at a rate of 1.5% per 100 accumulated
discharge cycles [29]. A linear relationship between capacity
fade and accumulated discharge cycles is assumed, which is
well reected in the results of Krieger et al. (2013).
The sensitivity analysis was conducted by minimizing the delivered cost of energy without storage (as described in Section 2.2)
using the new assumptions and then determining the break-even
cost of introducing energy storage (as described in Section 2.3).
These new assumptions will yield different wind installed capacities, transmission voltage classes, and break-even storage costs,
when compared to the base case.

3. Results
3.1. Determining the power purchase agreement price
The shape of the wind duration curves, as shown in Fig. 2, determine the amount of wind curtailed for given transmission loadabilities. Fig. 3 shows the relationship between wind curtailment and
the ratio of wind installed capacity and transmission loadability.
While the differences between the scenarios may appear modest,
small differences in curtailment can greatly affect the viability of
wind projects. Case B (Minnesota wind) has a atter generation

Fig. 3. Wind curtailment and transmission loadability.

J.X. Johnson et al. / Applied Energy 124 (2014) 377388

prole, resulting in lower curtailment rates than other sites with

lower capacity factors.
Fig. 4 shows the cost-minimized results for each of the four
scenarios, with the left side charts showing all of the voltage
classes that were examined and the right side charts showing only
the optimal voltage class for the transmission. Fig. 4a shows that
Case A (Iowa wind) is optimized with 809 MW of wind on a
500 kV line, resulting in 6.5% curtailment, 46.4% effective capacity

383

factor, and a PPA price for delivered energy of $118.12/MW h.

This case demonstrates the value of allowing some curtailment
in order to achieve higher line utilization on long or costly transmission lines. Fig. 4b shows that increasing the wind capacity
serves to increase the delivered cost of wind due to curtailment
and, to a lesser extent, increasing transmission loss rates, while it
decreases the unit cost of transmission by more fully utilizing
the line.

Fig. 4. Minimized cost of delivered wind for (a and b) Site A Iowa wind; (c and d) Site B Minnesota wind; (e and f) Site C New York wind; and (g and h) Site D Maine
wind. Left side graphs = all voltage classes; right side graphs = only the optimal voltage class for transmission.

384

J.X. Johnson et al. / Applied Energy 124 (2014) 377388

Fig. 4c and d show that Case B (Minnesota wind) is optimized

with 861 MW of wind on a 345 kV line, resulting in no curtailment,
44.8% effective capacity factor, and a PPA price for delivered energy
of $69.29/MW h. This case demonstrates the value of eliminating
curtailment for short transmission distances, where transmission
costs area a smaller share of total costs. As shown in Fig. 4e and
4f, Case C (New York wind) is optimized with 700 MW of wind
on a 500 kV line, resulting in no curtailment, 41.9% effective capacity factor, and a PPA price for delivered energy of $118.45/MW h.
This case demonstrates that building a higher voltage line even
when there is insufcient wind for maximum loadability can still
produce the most cost effective outcome. Fig. 4g and h show Case
D (Maine wind) is optimized with 492 MW of wind on a 345 kV
line, resulting in 1.7% curtailment, 33.4% effective capacity factor,
and a PPA price for delivered energy of $146.77/MW h. This case
demonstrates that some curtailment may be optimal even with
lower wind quality (as compared to Case A).
These results set the target prices for the delivered cost of energy, representative of a PPA. The introduction of energy storage
to each of these systems should either increase deliverability of
wind at the same cost or decrease delivered energy costs.

energy storage ($/MW h). The maximum cost can be determined

using either convention; the results are not intended to be additive.
As shown in Fig. 6a, batteries for curtailment at Site A could be
viable with installed costs as high as $603/kW if backed with ten
hours of storage at maximum power, $366/kW with four hours
of storage, or $132/kW with one hour of storage. With a lower
power rating, the maximum battery costs increase to values as
high as $780/kW. Assessing the installed cost as a function of storage capacity (Fig. 6b) shows that with small amounts of storage,
the installed cost can be as high as $180,000/MWh of storage. With
one hour of storage, costs are viable up to $149,000/MWh of storage, dropping to $77,000/MW h with ten hours of storage. (Note
that the axis for Fig. 6b and d are reversed to allow for easier
viewing.)
For Site D, battery costs to support curtailment reduction can be
up to $353/kW with ten hours of storage at maximum power rating, $244/kW with four hours of storage, and $108/kW with one
hour of storage (Fig. 6c). As a function of storage capacity, costs
up to $172,000/MW h of storage can be supported for batteries
with ten-minutes of storage capacity, dropping to $43,000/MW h
for batteries with ten hours of storage capacity.

3.2. Assessing batteries to mitigate wind curtailment

3.3. Assessing batteries to reduce transmission voltage class
Of the four sites examined, the optimized wind-transmission
systems for only Sites A and D resulted in wind curtailment.
Optimized Site A (Iowa wind) resulted in 235,000 MW h of wind
curtailment per year before incorporating energy storage, while
Site D (Maine wind) resulted in 26,500 MWh of wind curtailment
before storage. Based on the PPA prices identied in Section 3.1,
this represents lost revenues of $28 million and $3.9 million per
year, respectively. Fig. 5 shows the reduction in curtailment for
each of these sites upon introduction of energy storage as a function of energy storage power rating and storage capacity.
The width of the charts in Fig. 5 show that battery power ratings
were examined up to the difference between wind capacity and
transmission loadability (129 MW for Case A, 30 MW for Case D).
Energy storage capacities were examined from 10 min to 10 h.
Generally, a relative increase in energy storage capacity resulted
in greater mitigation of curtailment than a comparably scaled
increase in battery power. It is important to note that largest
batteries examined (i.e., ones with 100% of needed power output
and 10 h of storage) still did not eliminate all of the wind curtailment. For Case A, 55% of the curtailment was eliminated, while
for Case D, 61% was eliminated using this battery conguration.
The results of the curtailment reduction were used to calculate
the maximum battery cost, based on the assumption that the additional energy would receive the same PPA price and the batterys
lifetime would be 2000 cycles (up to 20 years). Fig. 6 shows these
results in both cost per rated power ($/kW) and cost per unit of

For three of the scenarios (A, B, and D), dropping to the next
lower voltage class while maintaining wind installed capacity
would represent a major increase in the delivered cost of wind,
as much as 100% over the optimized cost. These large increases
in installed costs are driven primarily by reduced line loadability,
resulting in signicant increases curtailment and reductions in
the amount of delivered electricity. For Site C (NY), dropping from
500 kV to 345 kV transmission, before introducing energy storage,
increases the delivered cost of wind by 21%. This smaller increase is
because the cost minimized system with the 500 kV line had signicant excess transmission capacity and dropping to the lower
voltage line would cause a more modest amount of curtailment.
Therefore, Site C was examined to test the viability of introducing
energy storage to reduce voltage class.
Even for very large batteries (289 MW with 2890 MW h of storage capacity), the ability of the battery to atten the wind shape
was insufcient to decrease the delivered cost of wind on the
345 kV system below the costs found using 500 kV line. This suggests that, for the scenarios examined, batteries at no cost would
still not be benecial for use to decrease voltage class. These scenarios do not paint a comprehensive picture given that more transmission design alternatives could be examined, but suggest that
using batteries for this purpose may only be appropriate in very
specic situations. In addition, building transmission with lower
loadability reduces the potential for greater use in the future.

Fig. 5. Annual reduction in wind curtailment with batteries of varying power and storage capacity for (a) Site A Iowa wind (where 100% of battery power equals 129 MW
and 100% of curtailment equals 235,000 MW h) and (b) Site D Maine wind (where 100% of battery power equals 30 MW and 100% of curtailment equals 26,500 MW h).

J.X. Johnson et al. / Applied Energy 124 (2014) 377388

385

Fig. 6. Maximum installed battery cost for Site A Iowa wind (a) per power rating and (b) per energy storage capacity (where 100% of battery power equals 129 MW); and for
Site D Maine wind (c) per power rating and (d) per energy storage capacity (where 100% of battery power equals 30 MW).

3.4. Assessing batteries to increase wind installed capacity

Coupling additional wind (beyond the optimized level) with energy storage can produce economically viable results. Fig. 7 shows
the maximum cost of energy storage to incorporate more wind
with one hour of energy storage capacity for Sites A and D, and
ten hours of energy storage capacity for Sites A, B, and D. (Site B
did not produce positive results with one hour of storage. Based
on the available developable wind resource assumptions provided
described in Section 2.1, Site C had developed all available wind.)
When integrating additional wind, the maximum cost of energy
storage is lower than the costs that can be supported for curtailment reduction.
3.5. Sensitivities
A sensitivity analysis was conducted to test the results of maximum battery costs for curtailment reduction at Site A with ten
hours of energy storage capacity on a 10 MW battery. Site A was
selected for the sensitivity analysis because the base case results
for this site proved to be the most promising for energy storage,
allowing for more expensive energy storage options than the other
sites that were examined. Base case assumptions yielded a maximum battery cost of $778/kW, and as shown in Fig. 8, the sensitivities selected result in a range of maximum battery costs from
$403/kW to $915/kW.
The elimination of wind subsidies (i.e., the production tax
credit, investment tax credit, and accelerated depreciation) greatly
reduces the maximum acceptable battery cost. Without the
subsidies, the cost of wind increases and, in an optimized
wind-transmission system, less wind is built in order to reduce
curtailment and achieve the lowest delivered energy cost. Thus,

the potential for curtailment reduction via energy storage is

reduced and the maximum battery cost decreases by 48%.
With subsidies in place, the sensitivity to the installed cost of
wind was tested. An increase in wind costs of 20% resulted in a
2% increase in the maximum battery cost, while a 20% decrease
in the installed cost of wind resulted in a 9% reduction in maximum battery cost. The results were more sensitive to transmission
costs, with a 28% increase in transmission costs increasing the
maximum battery cost by 18%, while a 20% decrease in transmission costs yielded a maximum battery cost 18% lower.
Increasing the nancing costs for all investments (wind, transmission, and battery) by 20% increased the maximum battery costs
by 9%. A decrease in nancing costs of 20% reduced maximum
battery costs by 9%.
The base case assumed no battery efciency degradation over
time. Assuming 2% degradation of roundtrip cycle efciency per
year reduces the maximum battery cost by 10%, while a 5%
degradation reduces maximum battery cost by 23%. The base case
round trip efciency was 75%. Decreasing that to 60% dropped the
maximum battery cost by 10%, while increasing the round trip
efciency increased the maximum battery cost by 7%. The impact
of improving (or decreasing) the batterys efciency is dampened
by the fact that the curtailed wind generation could not be, by
denition, sold elsewhere and thus has no direct cost associated
with its use. It is expected that energy storage which purchases
market energy to charge would be more sensitive to battery degradation and roundtrip cycle efciency.
The effect of capacity fade was more modest. Using assumptions appropriate for lithium iron phosphate batteries, which experience only slight capacity fade, the maximum battery cost is
reduced by only 2%. Under assumptions for lithium cobalt oxidenickel manganese composite batteries, the maximum battery cost
is reduced by 5%.

386

J.X. Johnson et al. / Applied Energy 124 (2014) 377388

Fig. 7. Maximum installed battery cost for increased wind capacity at Site A Iowa wind with one hour of storage (a and b); ten hours of storage (c and d); at Site B with ten
hours of storage (e and f); at Site D with one hour of storage (g and h); ten hours of storage (i and j).

J.X. Johnson et al. / Applied Energy 124 (2014) 377388

Fig. 8. Results of sensitivity analysis for Site A (Iowa wind) with 10 MW battery and
100 MW h of energy storage capacity. When low and high sensitivities are tested,
the results of the rst assumption listed are shown in blue (decrease in maximum
costs), while the results from the second assumption are shown in gray (increase in
maximum costs). (For interpretation of the references to colors in this gure legend,
the reader is referred to the web version of this paper.)

A PPA with on-peak and off-peak pricing was examined for Site
A. Due to its point of delivery, the on-peak to off-peak energy price
difference was based on the hourly locational marginal price for
the ComEd zone in PJM [30]. Based on 2012 data, average on-peak
prices were $9.69/MW h higher than average off-peak prices. A PPA
for Site A that reects this difference would offer $122.89/MW h
for delivered on-peak wind and $113.20/MW h for off-peak wind
in order to meet the revenue requirements for the wind and
transmission. Given a round trip battery efciency of 75%, this
difference is insufcient to justify time of day arbitrage (i.e., time
shifting to on-peak hours). Because the annual wind resource is
nearly evenly divided between on-peak and off-peak generation,
and the battery discharge is divided between on-peak and off-peak
hours, the introduction of a time of day PPA has minimal impact on
the maximum battery price. A discharge strategy in which a
battery maximizes revenues by optimally delaying the discharge
of some energy to on-peak hours, assuming perfect wind forecast,
results in a trivial (0.1%) increase in revenues. This suggests that
the need to incorporate wind forecasting errors is unnecessary
for this analysis.
4. Discussion
This analysis found that energy storage can be used to improve
the deliverability of transmission-constrained wind if ambitious
cost targets for energy storage are met. In instances where the
optimal wind-transmission system results in some wind curtailment, it was found that energy storage could be incorporated to reduce curtailment at costs as high as $780/kW. Not surprisingly,
higher delivered costs can support more expensive energy storage.
Energy storage can also be introduced to facilitate the incorporation
of additional wind, beyond the optimized installed capacity, but often with lower energy storage cost targets. As the overbuild of wind
increases, it becomes more difcult to cost effectively incorporate
energy storage. The results were most sensitive to the elimination
of wind subsidies, the installed cost of transmission, battery efciency degradation, and battery cycle life. In the cases examined,
energy storage was not a viable option to decrease transmission
voltage class (and thus decrease transmission installed costs).
Researchers at Pacic Northwest National Labs summarized
current capital costs for battery options [7]. Converting their results to a system with ten hours of energy storage capacity, the
range of costs in 2011 is $2600$4900/kW for sodium sulfur
batteries, $880$1170/kW for CAES, and $2700$3900/kW for redox ow batteries. The studys potential costs in 2020 would drop
these values to $1800$3300/kW, $530$1170/kW, and $1500

387

$2700/kW, respectively. With the exception of CAES, none of these

values would be low enough for use with transmission-constrained
wind based on this studys results.
The PNNL ndings are largely consistent with a 2010 EPRI study
which evaluated electricity energy storage applications, costs, and
benets, with current costs totaling $1,000/kW for CAES with 8 h of
storage, $1,440$3700/kW for redox batteries (spanning several
technologies), and $31003300/kW for sodium sulfur batteries
[6]. The study examined ten key applications, including Renewables Integration which provides time shifting, load, and ancillary
services for grid integration. The present value target benets for
transmission congestion relief were calculated as $368/kW, with
high benets reaching $1838/kW. The target and high benets
for renewable energy integration are $311/kW and $1555/kW,
respectively.
Sandia National Laboratories identied eight potentially attractive value propositions for grid-scale energy storage, which included renewables energy time-shift plus electric energy timeshift [8]. Based on a ten year battery life cycle, renewables energy
time shift was demonstrated to have a benet between $233/kW
and $389/kW, with a potential across the U.S. of 37 GW. This value
is based on the time of day of energy prices and not due to transmission-constrained curtailment.
Based on current and near-term projections for the cost of energy storage, current batteries are too costly to support curtailment
reduction or increased deliverability of transmission-constrained
wind. CAES may present the best opportunity to economically
serve this role, but is constrained to geographically-appropriate
sites. Viability for energy storage for these applications can be
achieved through reductions in the installed costs, as well as other
high impact efforts such as increasing the cycle life, decreasing or
eliminating degradation of performance, and improving roundtrip
cycle efciency. This is generally consistent with Hittinger et al.
ndings that capital costs are consistently important, with efciency and length of capital investment also be important for some
storage technologies [31].
Energy storage options must not only compete with these cost
targets, but must also be more cost effective than other, non-storage options. Flexible, dispatchable generation at the wind site can
be used to better integrate wind and fully utilize transmission
capacity. Increasing transmission loadability with new lines, substations, or series capacitors are other potential alternatives to energy storage. Increasing the diversity of the wind resource could
atten the wind output and reduce costs, even in excess of the
cost of any additional transmission.
This study relied on a PPA-based structure for the cost of delivered energy, representative of roughly three-quarters of the wind
in the U.S., while other studies (e.g., [9]) have used wholesale electricity prices. PPA prices for wind energy typically exceed market
energy rates, but because of state-level renewable portfolio standards which mandate the development of renewables, such rates
are paid by load serving entities to meet these obligations. Structuring the analysis in this way, as opposed to using market energy
prices, captures the full cost of the wind and the value of the
renewable attributes.
Future work that could augment the ndings of this study include expanding to other applications for energy storage, increasing
the number of transmission line designs considered, and testing the
impact of wind diversity on the need and value of energy storage.
Acknowledgements
This work was supported by the U.S. National Science Foundations Sustainable Energy Pathways program (Grant #1230236:
Non-Aqueous Redox Flow Battery Chemistries for Sustainable
Energy Storage).

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J.X. Johnson et al. / Applied Energy 124 (2014) 377388

Appendix A. Denition of variables

Weighted average cost of capital
Wind revenue requirement
Annual cost of wind project
Interest rate on debt
Balance of debt
Return on equity
Balance of equity
Value of Production Tax Credit
Capacity factor
Project income
Interest paid
Depreciation expense
Total federal and state income
tax rate
Property tax cost
Insurance cost
Fixed operations and
maintenance costs
Installed wind capacity
Overnight costs of wind project
Allowance for funds used during
construction
Share of project costs debt
Share of project costs equity
Value of Investment Tax Credit
Share of installed costs eligible
for ITC
SIL
Resistance
Loss
Wind production
Distance
Voltage class
Delivered cost
Delivered cost, off-peak hours
Delivered cost, on-peak hours
Locational marginal price at
delivery, off-peak hours
Locational marginal price at
delivery, on-peak hours
Transmission revenue
requirement
Curtailment
Battery charge rate
Transmission line loadability
Battery rated power
State of charge
Battery discharge rate
Roundtrip cycle efciency
Battery installed cost

%
$
$
%
$/MW
%
$/MW
$/MW h
%
$/MW-yr
$/MW-yr
$/MW-yr
%

rWACC
RRwind
Cwind
rdebt
Bdebt
requity
Bequity
PTC
CF
Income
Int
Dep
rincome tax

$/MW-yr
$/MW-yr
$/MW-yr

Taxproperty
Ins
FOM

MW
$/MW
%

CAPwind
Covernight
AFUDC

%
%
%
%

adebt
aequity

MW per
unit
Ohm/mile
%
MW
Miles
kV
$/MW h
$/MW h
$/MW h
$/MW h

SIL

$/MW h

LMPon

RRTX

MW h
MW
MW
MW
%
MW
%
$/kW
$/MW-h

X
Pcharge
CAPTX
Pbatt
SOC
Pdischarge

ITC
bITC

r
L
Q
d
V
Cdelivered
Cdel,off
Cdel,on
LMPoff

g
Cbattery,power
Cbattery,storage

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