Monday Study – Energy Storage Has Become A Power Plant Standard
Batteries Included: Top 10 Findings from Berkeley Lab Research on the Growth of Hybrid Power Plants in the United States
Will Gorman, Joachim Seel, et. al., April 2022 (Lawrence Berkeley National Laboratory)
Abstract One of the most important electric power system trends of the 2010s was the rapid deployment of wind turbines and photovoltaic arrays, but a twist for the 2020s may be the rapid deployment of ‘hybrid’ generation resources. Hybrid power plants typically combine solar or wind (or other energy sources) with co-located storage. While hybridization helps to ease the challenge of balancing variable supply and demand, its relative novelty means that research is needed to facilitate integration and promote innovation. Combining the characteristics of multiple energy, storage, and conversion technologies poses complex questions for grid operations and economics. Project developers, system operators, planners, and regulators would benefit from better data, methods, and tools to estimate the costs, values, and system impacts of hybrid projects. This publication showcases some of Berkeley Lab’s robust research program intended to support private- and public-sector decision-making about hybrid plants in the United States. Our short briefing summarizes articles that we published between 2020 and 2022, links to the in-depth reports, and provides contact details for further engagement on the specific research topics…
Growth Developer interest in hybrid power plants is strong and growing Falling battery prices and the growth of variable renewable generation are driving a surge of interest in hybrid power plants (generating capacity with co-located storage). Current interest is mostly directed toward pairing solar photovoltaic (PV) plants with batteries, but a wide range of generator and storage pairings is possible.
By the end of 2021, there were more than 8 GW of PV or wind hybrid plants online PV hybrids dominate this total, representing over 5.9 GW of hybrid capacity, compared to only 2 GW of wind hybrids and 750 MW of PV+wind+storage hybrids. This market has started to achieve exponential growth, with cumulative operational hybrid capacity increasing by 133% in 2021 compared to the online capacity at the end of 2020. Though there are a number of fossil+storage hybrid projects, they include a relatively low amount of storage compared with the size of the generation plant.
Proposed plants indicate growing interest in renewable hybrid configurations
Data on plants under development from the interconnection queues of all seven organized wholesale markets plus 35 utilities demonstrate considerable commercial interest in hybrid plants (Figure 2). At the close of 2021, there were more than 675 GW of solar plants in the nation’s queues; 286 GW (~42%) of this capacity was proposed as a hybrid, most typically pairing PV with storage. For wind, 247 GW of capacity sat in the queues, with 19 GW (~8%) proposed as a hybrid, again most often pairing wind with storage. While many of these proposed plants will ultimately not reach commercial operations, the depth of interest in hybrid plants portends strong growth. This is especially true in the California Independent System Operator (CAISO) region, where 95% of all solar capacity and 42% of all wind capacity in the queue was proposed as hybrid plants.
Price Versus Value
PV+storage hybrids have low PPA prices and high value in some regions
Though the number of operational hybrid plants is still small (but growing), we can gain insight into upcoming hybrid plant configurations and pricing by reviewing power purchase agreements (PPAs), which are often executed several years before a plant becomes operational. Berkeley Lab’s analysis of an extensive sample of hybrid (and standalone) PV plant PPAs, in conjunction with value modeling of similar hybrid plant configurations, helps to explain the growing appeal of PV hybrids in some regions.
The price of PV hybrid plants is low, and falling
Within Berkeley Lab’s utility-scale PPA price sample, the per-MWh price of PV hybrids (shown in Figure 3 by open circles that are sized to reflect the battery-to-PV capacity ratio) is close to that of standalone PV plants (smaller filled circles, not sized). As a result, PV hybrids have become increasingly common over time. In Hawaii (orange), virtually all utility-scale PV plants with PPAs executed post-2017 include a battery, and the balance seems to be shifting among the other four states shown (in blue). These levelized PPA prices reflect the receipt of the federal investment tax credit (ITC).
A hybrid’s PPA price premium reflects the size of its battery
A sub-sample of 17 PPAs separate the pricing of the PV and storage components, enabling us to calculate exactly how much storage adds to the PPA price. This “levelized storage price adder” increases linearly with the battery-to-PV capacity ratio (Figure 4), and is one of several reasons why Hawaiian hybrids—all with relatively larger batteries—are priced at a premium over the other states in Figure 3.
The net value of hybridization appears to be positive
To see whether the PPA price adder shown in Figure 4 is worth it, we modeled the value of adding 4-hour batteries sized at 50% of PV capacity to a standalone PV plant in both CAISO and ERCOT (Figure 5). Figure 4 suggests that this configuration should add $8-$13/MWh to PPA prices—comparable to the $11-$13/MWh value boost in the “low” case (simple dispatch based on dayahead prices and generation profiles), and well below the $21- $22/MWh “high” case (perfect foresight), shown in Figure 5. Of course, the value of hybridization will vary over the life of the PPA, but—at least in recent years, and with the help of the ITC—the incremental value added appears to justify the price premium.
Solar hybridization is driven by tax credits and other benefits
Hybrid plants with co-located renewable generators and batteries can benefit from tax credits, construction cost savings, and more flexible generator dispatch, but suffer from siting constraints. Berkeley Lab quantified the benefits and costs of hybridization and found a rough equivalence in their values, suggesting that the co-location choice is sensitive to local market conditions and configuration choices.
Tax Credits are one, but not the only, reason for hybridization
Co-locating PV and batteries can make the batteries eligible for the federal investment tax credit for solar, save on shared equipment and interconnection and permitting costs, capture otherwise clipped energy, and facilitate intraday energy shifting. Furthermore, variable generators paired with batteries have greater dispatch flexibility, making them more attractive for grid operations.
But a renewable project’s location might not be where storage provides the most grid benefits
Large wind and solar projects are located where the resource is strong, land is available, and grid connections are possible. Alternatively, batteries can be put practically anywhere, like in high-value locations where they can provide additional values to the local grid, such as congestion relief and price volatility mitigation. We found that separately siting renewables and batteries results in $2-$9/MWh higher market value than co-location, depending on the region and year. This ‘coupling penalty’ averaged $2/MWh across the seven organized wholesale markets (default case, Figure 6).
Higher standalone value is largely offset by hybrid cost savings
We calculated rough cost savings of $15/MWh, with $10 coming from the 30% ITC and $5 from construction cost savings—both higher than the default coupling penalty. However, the coupling penalty can grow to $14/MWh if batteries charge solely from the co-located renewable generator, if the interconnection capacity is limited to the generator’s size, and if storage dispatch is operated with perfect foresight. Uncertainty in both the coupling penalty and cost savings from hybridization suggests both standalone and hybrid battery development models can be viable.
Configuration Choices: Market prices have incentivized shorter duration batteries with PV…
Capacity Value: The capacity contribution of a hybrid is less than the sum of its parts…
Ancillary Services: AS markets are a valuable yet fleeting option for hybrids…
Market Participation: Hybrids can more flexibly engage with electricity markets…
Operations: The power system value of hybrids depends on how they are operated…
Distributed Hybrids: Growth of customer-sited PV+storage hybrids offers new opportunities…
Future Research: Where next? Priority areas for hybrid power research…