Slap a Battery on a Gas Turbine and Make an Extra $1.4 Million

(Bloomberg) -- Edison International has found what every electric utility wants in this time of sputtering demand: a new source of revenue.

By adding battery storage to a quick-start natural gas turbine, General Electric Co. made a hybrid power plant that allows Edison to collect payments for keeping the generator ready to instantly supply electricity when California's grid needs it, 24 hours a day.

That's a market that peaker plants, which are needed only when demand surges in hot weather, haven't been able to access unless they continuously burned gas to keep the turbine spinning. The hybrid units can provide Edison's Southern California Edison utility as much as $1.4 million a year in revenue that similar plants without batteries miss out on, according to Bloomberg New Energy Finance. Edison's move comes as cheap natural gas and abundant renewable energy pummel electricity prices, hurting power generators' profits.

“The batteries allow the gas plants to participate in spinning reserve markets, an essential grid service, even when offline,” said Yayoi Sekine, a New York-based BNEF analyst for smart technologies. “Offline units are typically relegated to the non-spinning reserve market, which offers much lower revenues.”

Grid operators like California's pay for services that help balance supply and demand through market mechanisms. For instantaneous supply that batteries can provide, it paid an average of $4.48 per megawatt to be ready, compared with the 24 cents per megawatt it pays generators that need to cold start.

Recouping Costs

Adding battery storage to two of its five 50-megawatt GE turbines probably cost Edison about $9.8 million, an amount the utility may recoup within about three years, according to BNEF.

Utilities in other regions that pay premiums for instant supplies may also profit from providing such services, though it's not clear yet how big the market would be because grid operators have different rules, Sekine said. Texas and the U.S. Northeast could be attractive markets based on recent pricing for spinning reserves. Still, those premiums could also shrink as new battery supplies come online, she said.

Edison isn't allowed to provide revenue and cost estimates because that's market-sensitive information, said spokeswoman Jude Schneider. But even though the hybrid units have been operating a little more than a month and haven't had much use yet, Edison is already considering adding battery storage to its three other gas turbines, said Phil Herrington, vice president of generation at the utility.

“It's early days, but they're doing exactly what we expect them to do,” Herrington said in an interview. “These hybrids have a very important role.”

To contact the reporter on this story: Christopher Martin in New York at cmartin11@bloomberg.net.

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Christine Buurma, Susan Warren