Adding storage to utility-scale solar: Where to start?

By Jeffrey Perry, VP Wealth Management, Agility Energy

By coupling energy storage with existing utility-scale solar power generation assets, solar projects can achieve their greatest financial profit potential. The abundance of solar energy is pushing wholesale prices into the middle of the day, causing margins to shrink. Adding storage to an existing solar project provides flexibility through shipability and therefore makes the solar asset more valuable.

But the roadmap for integrating energy storage with utility-scale solar is far from final. In addition to some very large, well-publicized projects, the industry is just starting to bring utility-scale connected storage online, and these early experiences are important in helping the industry evolve to accommodate this new, critical piece of infrastructure.

Business models drive fundamental decisions

An important early decision is whether to AC or DC couple an existing system.

There are pros and cons to each configuration. Retrofitting an existing utility to an AC-coupled system will be cheaper because rewiring a DC-coupled system is a more complicated and expensive proposition. In addition, an AC coupled system ensures that the battery system can be easily charged not only from the solar system, but also from the grid. This increases the flexibility to manage the battery and makes it easier to participate in wholesale meter applications, such as frequency control.

However, AC coupled systems are less efficient than DC coupled systems. The process of inverting electricity from DC to AC results in efficiency losses, so an efficient system will eliminate multiple inversions.

In addition, the investment deduction (ITC), worth about a third of the capital cost of the installation, will also play a role in the business model analyses. Battery systems that are charged more than 75% of the time by a renewable energy system are eligible for the ITC. So while an AC-coupled system makes it easier for the battery to charge from the grid or PV system, the ITC advantage may outweigh the decision to go with AC-coupling.

Retrofitting to a DC-coupled system maximizes efficiency because DC systems convert electricity from solar panels only once. In addition, DC coupling ensures that excess generation caused by PV production that is limited by the inverter when PV generation exceeds the inverter’s rated power is directed to the battery during overproduction periods. This collected energy can be discharged later in the day. And of course DC coupling retains the ITC.

Comparison of ESS Retrofit Configurations AC-coupled ESS DC-coupled ESS
Installation costs Cheaper More expensive
Charging source From both solar energy and the grid Largely only from solar energy
Market participation Flexibility Higher Lower
System efficiency Lower Higher
ITC eligibility Only eligible when ESS charges 75%+ of the time from the renewable system Qualifying

The interconnection challenge

In addition to the costs associated with installing the battery and connecting it to the PV system, much of the cost – as well as the uncertainty – is related to the interconnection. This is the same process you go through for a PV installation, but the interconnection of energy storage can add complexity.

The current transmission and distribution system (T&D)
Source: EIA

Today’s transmission and distribution (T&D) systems are designed to increase the power of electrical generators on transmission lines, deliver that power to substations, and then reduce it to the lower voltages used by homes and businesses. These T&D systems are not designed to add large amounts of power at different points in the distribution network; they were also not designed to charge large batteries. The result of adding distributed generation can lead to equipment and security risks. For example, voltage anomalies or islanding can damage equipment or create safety issues for utilities or others who come into contact with power lines during a power outage.

Grid operators should not run the risk of risking interconnecting elements that could shut down the grid or even disrupt the service. Connecting energy storage can be a very expensive and lengthy process.

Interconnection costs are an important consideration, but are difficult to estimate due to the rate at which renewables and storage are being added. Each proposed new interconnection affects every other at the back of the queue, so when it comes time to study, the network could look very different. Furthermore, depending on where the project is interconnected, interconnection applications may fall under the jurisdiction of the FERC or the Public Utility Commission, and sometimes both.

Currently, the network is undergoing a transformation to accommodate more renewable energy and energy storage installations, and this change is bringing many teething problems. It is not uncommon for an interconnection to take years to approve and, depending on needs, cost significantly more than the site’s real estate.

Asset Management Challenges

Linking a PV installation to storage clearly provides added value. In addition to wholesale market opportunities, many states are creating incentives for PV coupled systems. In Massachusetts, for example, the SMART and Clean Peak programs provide additional revenue opportunities for linked systems. However, these increased capabilities also require greater focus on the operation of the facility. Introducing a battery into a PV system makes the system much more complicated in terms of asset management, as the system changes from a passive generation facility to a complex shippable system. Decisions on daily market entry, power system state of charge management, conservation of energy for later discharge and fade curve management are made on a daily basis. Linking may thus require a full-time asset manager or group, or outsourcing to contractors who specialize in the complex dispatch of linked assets.

Adding storage adds value. However, it is important to understand that linking adds complexity. while there is some site management and O&M work to be performed on a PV plant, an energy storage system must be actively managed daily maximize revenue.

Jeffrey Perry is Vice President Asset Management at Agility Energy, a leading integrated solar + storage developer, responsible for the company’s growing energy storage business. Jeff has been involved in the energy industry for over 30 years, overseeing the development of the first utility-scale operational battery storage systems.

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