By Jeffrey Perry, VP of Asset Management, Agilitas Energy
Coupling energy storage with existing utility-scale solar generation assets allows solar projects to reach their greatest financial earnings potential. The abundance of solar energy is pushing down mid-day wholesale power prices and, therefore, shrinking margins. Adding storage to an existing solar project allows flexibility through dispatchability and, therefore, makes the solar asset more valuable.
But the playbook for integrating energy storage with utility-scale solar is far from being final. Beyond some very large, well-publicized projects, the industry is just beginning to bring coupled utility-scale storage online, and these early experiences are important to help the industry evolve to accommodate this new, critical piece of infrastructure.
Business models drive foundational decisions
There are pros and cons to each configuration. Retrofitting an existing facility to an AC-coupled system will be cheaper because the rewiring for a DC-coupled system is a more complicated and expensive proposition. In addition, an AC-coupled system will allow the battery system to be easily charged not only from the solar system but also from the grid. This increases the flexibility to manage the battery and allows for easier participation in front-of-the-meter wholesale applications, such as frequency regulation.
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 tax credit (ITC), worth roughly one-third of the capital costs of the installation, will factor into the business model analyses as well. Battery systems that are charged by a renewable energy system more than 75% of the time are eligible for the ITC. So, although an AC-coupled system allows the battery to charge more easily from either the grid or the PV system, the ITC benefit may outweigh the decision to AC couple.
Retrofitting to a DC-coupled system maximizes efficiency in that DC systems convert electricity from solar panels only once. In addition, DC-coupling allows excess generation, caused by PV production that is curtailed by the inverter when PV generation exceeds the inverter’s power rating, to be diverted into the battery during periods of overproduction. This captured energy can then be discharged later in the day. And, of course, DC-coupling preserves the ITC.
|Comparison of ESS Retrofit Configurations||AC-coupled ESS||DC-coupled ESS|
|Installation Cost||Cheaper||More Expensive|
|Charging Source||From both solar and the grid||Largely from solar only|
|Market Participation Flexibility||Higher||Lower|
|ITC Eligibility||Eligible only when ESS charges from the renewable system for 75%+ of the time||Eligible|
The interconnection challenge
Beyond the cost associated with installing the battery and coupling it with the PV system, much of the cost — as well as the uncertainty — is associated with the interconnection. This is the same process that you go through for a PV installation, but energy storage interconnection can add increased complexity.
Today’s transmission & distribution (T&D) systems were designed to step-up power from electric generators onto transmission lines, deliver that power to substations and then step it down to the lower voltages used by homes and businesses. These T&D systems were not designed to add large amounts of power at various points across the distribution grid; nor were they designed to charge large batteries. The result of adding distributed generation can create equipment and safety hazards. For instance, if voltage deviations or islanding occur, equipment can be damaged or safety concerns can be created for utility workers or others who interact with power lines during grid failure.
Grid operators cannot risk interconnecting elements that can take the grid down or even disrupt service. It can be a very expensive, and lengthy, process to interconnect energy storage.
Interconnection costs are an important consideration, but they are hard to estimate due to the pace at which renewables and storage are being added. Each proposed new interconnection affects every other one behind it in the queue, so when the time comes for a study, the grid could look very different. Further, depending on where the project is interconnecting, interconnection requests could be in FERC’s or the public utility commission’s jurisdiction, and sometimes both.
Currently, the grid is experiencing a transformation to accommodate more renewables and energy storage installations, and there are many growing pains associated with this change. It’s not uncommon for an interconnection approval to take years and, depending on needs, to cost significantly more than the site real estate.
Asset management challenges
Coupling a PV installation with storage clearly provides incremental value. In addition to wholesale market opportunities, many states are creating incentives for PV-coupled systems. For instance, in Massachusetts, the SMART and Clean Peak programs provide additional revenue opportunities for coupled systems. However, these increased opportunities also require increased focus on the operation of the facility. Introducing a battery to a PV system makes the system much more complicated in terms of asset management in that the system changes from a passive generating facility to a complex dispatchable system. Decisions about daily market participation, state-of-charge management of the energy system, posturing energy for later discharge and fade curve management are made every day. So, coupling may require a full-time asset manager or group, or outsourcing to contractors that specialize in the complex dispatch of coupled assets.
Adding storage adds value. However, it’s important to understand that coupling adds complexity. While there is some site management and O&M work that needs to be performed on a PV installation, an energy storage system needs to be actively managed daily to maximize revenue.
Jeffrey Perry is Vice President of Asset Management at Agilitas Energy, a leading integrated solar + storage developer, responsible for the company’s growing energy storage operations. Jeff has been involved in the energy industry for more than 30 years and oversaw the development of the Northeast’s first utility-scale operational battery storage systems.