Solar PV with Energy Storage

Surveying a swiftly shifting energy landscape in 2014, Engie, one of the world’s largest energy companies, made a dramatic decision. The nearly 200-year-old company with annual revenue of €67 billion was a major global producer and supplier of energy and owned the largest natural gas pipeline in Europe, but the French company’s leadership saw a bellwether in the sharp drop in fossil fuel costs. This led to what the company calls a “strategic epiphany.” It would rapidly shift the company’s focus toward renewable energy in both Europe and growing areas like India and China while reducing future exploration in fossil fuels.

Global Outlook

According to Bloomberg New Energy Finance, global installed capacity of battery storage will grow at a cumulative average rate of 44% from 2015 to 2024, as outlined below. It will grow from 6 GWh in 2015 to 29 GWh in 2020 and more than 81 GWh in 2024. Bloomberg New Energy Finance estimates that by 2020, solar batteries will be the dominant form of battery storage.

High or low growth influences for energy storage include: a) electricity prices; b) energy storage systems prices; c) Federal, State and Territory government policies; d) industry standards and industry perceptions of quality and safety; e) availability of trained installers; and f) public perceptions of safety and quality.

Adding battery storage is one way to at least partially restore the value of solar, and three recent PV plus storage PPAs in Nevada (each using 4-hour batteries sized at 25% of PV nameplate capacity) suggest that the incremental PPA price adder for storage has fallen to ~$5/MWh, down from ~$15/MWh just a year ago for a similarly configured project. As PV plus battery storage becomes more cost-effective, a number of developers are regularly offering it as a viable upgrade to standalone PV.

California – a Case Study

Historically, the Californian electricity crisis of 2000 and 2001 was an early incentive for the US state to find alternative energy sources. Rolling blackouts caused by aging power stations, limited hydro generation and transmission constraints brought utilities to the point of bankruptcy, and led to a demand for renewable power sources and innovation to improve energy reliability. There is currently a mandate in place for 50% renewable energy by 2030. The battery market in California is developing strongly. This is partly due to a natural gas shortage, the result of a significant and unprecedented gas well leak. In 2013 the Californian Government introduced requirements for the three largest privately owned utilities to purchase a total of 1,325 MW of energy storage by 2020 through a variety of methods, including behind-the-meter installations and a 400 MWh battery bank which will act as a “peaker plant”. Additionally, there are US Federal Government incentives in place to compensate fast response for frequency regulation, and as batteries have faster response times than fossil-fuel generators, storage facilities stand to benefit the most.

Utility Scale PV Sector

Determining which electric power projects qualify as “utility-scale” (as opposed to commercial- or residential-scale) can be a challenge, particularly as utilities begin to focus more on distributed generation. For solar PV projects, this challenge is exacerbated by the relative homogeneity of the underlying technology. For example, unlike with wind power, where there is a clear difference between utility-scale and residential wind turbine technology, with solar, very similar PV modules to those used in a 5 kW residential rooftop system might also be deployed in a 100 MW ground-mounted utility-scale project. The question of where to draw the line is, therefore, rather subjective. Though not exhaustive, below are three different—and perhaps equally valid—perspectives on what is considered to be “utility-scale”.

United States

Today we see an increasingly competitive utility-scale PV sector with installed prices having declined significantly since 2007- 2009, relatively modest O&M costs, solid performance with improving capacity factors, and record-low PPA prices across the globe. Even in USA, around $20/MWh (levelized, in real 2017 dollars) in a few cases and under $40/MWh on an average—even in areas outside of the traditional strongholds of California and the Southwest have been witnessed.

As recently as 2011, solar PPA prices in excess of $100/MWh were quite common. Since the beginning of 2015, however, levelized PPA prices higher than even $50/MWh have been more the exception than the rule, generally limited to a few projects in high-priced areas like Hawaii and Long Island, and/or to projects that also incorporate significant amounts of long-duration battery storage. Though this price decline is impressive in terms of both scale and pace, it is also worth noting that in some markets with high solar penetration, the wholesale market value of solar energy has also declined over time as solar penetration has increased.

The cost of installing, operating, and maintaining a utility-scale PV project, along with its capacity factor are key determinants of a project’s levelized cost of energy (“LCOE”) as well as the price at which solar power can be profitably sold through a long-term power purchase agreement (“PPA”).

Chinese Market

China has had an ambitious focus on renewables in the last few years, with generous solar feed-in tariffs and more than 140 GW of renewable energy already installed. However, this capacity does not contribute fully to the generation mix; clean energy is frequently constrained off the system due to network issues such as peak regulation. Peak regulation essentially involves paying thermal generators to generate less overnight. Coal-fired generation takes several hours to start up or turn off, yet overnight much of this generation is not required. As a result, Chinese coal fired power stations are compensated when they ramp down to a minimum level of generation overnight. In 2016, the Chinese Government introduced a new compensation scheme for energy storage; instead of curtailing wind energy overnight, excess wind generation is stored using batteries. The operators are paid for that overnight storage when it is used during peak periods in the daytime. This has helped reduce the number of coal-fired power stations. China has significant incentive to reform its power market in this way. Already, around 100,000 electric cars are in use, with 10 million forecast to be on China’s roads by 2020. The demand these vehicles place on the electricity system will be substantial and its large network will need to be increasingly robust. With a 200 MWh battery bank in development and plenty of incentive to make the best use of all the country’s installed generation, China’s energy storage industry is likely to continue to boom.