Governments and private companies are increasingly turning to battery storage to add more renewable energy to the grid. But where and how to develop this storage remains an open question.
The US Energy Information Administration predicts that the country will have 59 GW storage facilities by 2050, and the bulk of that development has focused on hybrid projects that combine solar or wind power with on-site batteries. However, this trend may not represent the most efficient scenario for the network or for developers, as the farms have the option of being located anywhere.
A May 2021 study of the Lawrence Berkeley National Laboratory (LBNL) compared the market value of co-located battery and renewable energy projects versus those that are independently located. Using wholesale electricity market prices from 2012 to 2019 across the seven U.S. Independent System Operators (ISOs), the researchers found that a battery-independent location could lead to a higher value on almost all markets and all years. Although the benefit varied by region, the average value increase was $ 12.50 / MWh due to the benefits of not sharing infrastructure capacity and reduced restrictions on the pricing of the network. network.
In fact, the researchers found that among the most volatile nodes in ISOs, only 1.5% of large-scale wind and solar locations would report a higher value of coupling rather than storage independent installation.
“A storage resource is dense, it can be located anywhere, and we found it worthwhile to place it near a high-demand location,” said Will Gorman, author of the study and graduate student researcher at LBNL. “In some of these high volatility places, the added value was quite substantial.”
Why build hybrids?
Of course, hybridization brings many benefits, especially in the initial cost savings. Combining resources means dealing with one piece of land and sharing equipment and construction costs. Sharing a point of interconnection on the network can also reduce costs and permissions. A 2017 Study by the National Renewable Energy Laboratory (NREL) found that developers could save up to 8% of the total project cost by pairing solar power with utility-scale storage.
Hybrid systems also facilitate energy arbitrage, storing energy when wholesale market prices are low and selling it when prices are high. High production from the variable generation can lead to congestion or even line capacity overruns, while hybrid systems can allow batteries to charge during these peak times and store them until they are empty. prices rise again.
“Co-location should not increase costs and there is a lot of potential to reduce costs” as opposed to independent location, said Sean Ericson, a doctoral student at the Joint Institute of Strategic Energy Analysis at NREL. “On the other hand, the optimal implantation of these components should not decrease revenue and could potentially increase revenue.”
Even the LBNL study from 2021 found that initial savings could reach $ 15 / MWh, making the development of coupled projects more attractive than independent locations in some cases, although this could change depending on the rules and policy of the company. market. An important factor is the Federal Investment Tax Credit (ITC), the 26% credit for residential, commercial and large-scale solar installations that extends to storage only when combined with solar projects. eligible. Stand-alone storage, on the other hand, is not eligible.
“I don’t think it’s necessarily news to regulators that there is this incentive that contributes to strategy-based development that may be less valuable,” Gorman said. “It’s probably the case that people could have developed an independent battery unit, but ITC got them to co-locate it.”
In the American Jobs Act infrastructure plan and in its fiscal 2022 budget, the Biden administration proposed to extend ITC for a decade (it is currently on the verge of phasing out in two years) and expand it for stand-alone storage. The expanded ITC was also adopted by the Senate Finance Committee in a clean energy tax package in May and was touted as a bicameral invoice.
Advocates say the tax incentive could be a massive boost for the storage industry and help cut costs the same way it did for solar panels. A Wood Mackenzie analysis from June 2021 found that an ITC adopted this year would increase its five-year market outlook by 20 to 25 percent, with the meter segment expected to benefit from an additional 6 GW of capacity over five years.
“If we are able to set up a stand-alone storage ITC, I’m sure you will see more stand-alone storage at key locations in the network. To what extent you would see less solar storage and combined storage is an open question, ”said John Smirnow, general counsel of the Solar Energy Industries Association (SEIA). “Our industry can adapt and our members can build storage, but that’s what’s most valuable to the market.”
Location, location, location
The LBNL study found that the value of separating batteries from production varied across the country, depending largely on geography. Long Island in New York, for example, had the highest difference in value for coupling batteries ($ 30-50 / MWh less than an independent site between 2012 and 2015), due to its dense population and its congested transmission system. The best markets for hybrids, meanwhile, were in Texas and the western states.
This is true in the installations. ISO of California and Southwest Power Pool have the highest share of batteries offered in hybrid systems, study finds, while ISO of New York (NYISO) had only 2% of pending projects interconnection as hybrids.
David Sandbank, vice president of distributed energy research technology at the New York State Energy Research and Development Authority (NYSERDA), said NYISO currently has no way of evaluating hybrid projects. But even as the grid operator undergoes a change in storage policy, the state’s unique geography does not lend itself to hybrids.
Most of the wind and solar opportunities are located in the upstate, while the highest demand is concentrated in the upstate around New York. A congested distribution network makes it even more difficult to respond to the strong urban demand. With the commissioning of offshore wind generation, Sandbank said the region lends itself to a “self-sustaining” market for bulk storage near demand centers.
“I’m a huge fan of putting storage where it’s needed most, not just where ITC encourages it,” Sandbank said. “If we get any kind of stand-alone ITC, [New York] probably has a market that doesn’t need other kinds of incentives. “
“I don’t see a world where companies want to pay a premium price for batteries without changing the ITC.”
President, Colorado State and Storage Association
In the midst of the ITC debate, states are crafting their own rules that encourage more storage of all kinds. Connecticut is set to become the eighth state to set an energy storage target after the passage of a bill that also mandates the state’s Utilities Regulatory Authority to work on incentives and d ‘other policies to encourage storage in all its forms. In May, the Colorado Public Utilities Commission revised interconnection rules which will streamline permitting and allow more flexibility in solar and storage projects and create a pilot program to provide incentives for further storage development.
State legislators have also approved a bill establish an independent Colorado power transmission authority that could operate transmission and storage facilities to help state utilities physically participate in regional markets. Mike Kruger, president of the Colorado Solar and Storage Association, told Utility Dive that the state is going from “zero to hero” when it comes to storage. But, he added, he expects most of the development to focus on hybrid projects, as the state must also increase its solar output at the same time.
“I don’t see a world where companies would want to pay a high price for batteries without changing the ITC,” Kruger said. “Maybe with wildfires and drought you could see stand-alone projects for resilience, but that would be relatively small.”
Ultimately, said SEIA’s Smirnow, policymakers will need to respond to the changing needs of the storage industry. “We will see applications of all types of storage if and when the costs align,” he said. “And the more storage there is, the more we will see the penetration of renewables.”