Co-locating solar and storage can pay off, Lawrence Berkeley study says

May 21, 2021

by Peter Maloney
APPA News
May 21, 2021

Coupling battery energy storage with renewable energy projects is more economically attractive than the independent siting of batteries and renewable resources, according to a new study from Lawrence Berkeley National Laboratory.

The study, Are coupled renewable-battery power plants more valuable than independently sited installations?, found that the value of adding a 4-hour battery sized to 50 percent of renewable-plant nameplate capacity is $10 per megawatt hour(/MWh) on average across all Independent system operators (ISOs). The study found the value of batteries and renewables deployed independently to be $22.5/MWh, indicating a $12.5/MWh “penalty” for co-locating a project.

The study attributed the penalty to the greater flexibility in siting and operation. For example, batteries co-located with solar projects are eligible for a federal Investment Tax Credit (ITC) but are penalized if they are not charged by those solar panels.

However, the co-location penalty is tempered by potential cost savings of around $15/MWh in the form of construction cost savings and use of the ITC for co-located battery projects, which “outweighs our estimated coupling penalties,” the authors said, “making coupled project development more attractive than independent siting of battery and [intermittent renewable] technologies on average.”

The authors also emphasized the importance of regional variations in determining the value of renewable and battery storage projects. California, for instance, is one of the most attractive locations for co-location. There, the value of adding storage to a solar project averages $15/MWh, the study found.

In California, batteries can partially offset the decline in the value of solar power that results from high solar penetration. “As other regions increasingly install solar, they may demonstrate greater interest in solar-battery projects as well,” the study’s authors said.

Regional variations in prices and regulations also affect the value of potential coupling penalties, suggesting that “the tradeoff between coupling penalties and savings will vary by situation,” the authors said. Therefore, “roles exist for independent and coupled projects from a system optimization perspective.”

There is also reason to believe that “real-world coupling penalties” will tend to be lower than the default-case penalties in the study, the authors said. Developers’ choices in project design, such as grid charging, can reduce the coupling penalty by about $5/MWh, they said.

In the study, the authors set out to address the fact that prior research on the value and cost savings of resource coupling did not consider the geographic constraints of co-location.

So, they studied how pricing volatility differences between nodes within electricity markets impact the system value of coupled renewable-battery projects compared with independently sited renewable and battery installations. The study used wholesale power market prices from 2012 to 2019 across the seven main ISOs.

The study did not address system values not currently priced in wholesale markets, such as the benefits of mitigating dynamic stability issues in weak grids, but the authors noted “these can be another important reason to site storage near renewables.”

The authors also noted that as storage technologies continue to develop, many questions will remain, such as how values will change under high levels of penetration of both solar and storage resources. They also noted that although ancillary service markets currently play a small role in wholesale power markets, they could become increasingly important as renewable resources continue to proliferate.

In current markets, developers can mitigate the “coupling penalty” by considering “alternative approaches to integrating battery storage,” the authors said. “This result implies that renewable-battery power plants will play an increasing role in electricity systems if they can be built for $2/MWh to $13/MWh less than independent projects of comparable size.”

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