Solar in tandem with battery storage gaining traction among utilities
Energize Weekly, August 23, 2017
The hottest couple in the utility industry these days may be photovoltaic solar generation and battery storage. The pair is being seen all over the country.
Drawbacks to photovoltaic (PV) panels include their intermittent production and the difficulty of matching that production to demand. When the sun isn’t shining, utilities opt for alternative generation. When PV installations produce more electricity than is needed, they have to be taken offline or “curtailed.”
In 2016, about 305,000 megawatt-hours were curtailed in California, enough to power 45,000 homes for a year.
The problem with battery storage has been part technical and in part financial—they have just been too expensive.
Increasingly, however, combining the two appears to be producing new value propositions for utilities.
“We’ve turned the corner where solar and wind plus storage is cheaper than building and maintaining a power plant,” said Jim Lazar, a senior adviser with the Regulatory Assistance Project, a think tank promoting clean energy. “That is a pretty dramatic shift, a tectonic shift in the cost for utilities.”
And as the costs for both PV and storage continue to decline, the tandem will become even more competitive, said Brett Simon, an analyst with GTM Research, a cleantech marketing and consulting firm. “What we are seeing across the world is that battery manufacturers are scaling up, and that is going to drive down costs,” he said.
GTM Research is projecting the storage market to reach roughly 2.6 gigawatts (GW) in 2022—a nearly 12-fold increase over 2016.
In January, the Kauai Island Utility Cooperative (KIUC) announced a power purchase agreement (PPA) with AES Corporation for a 28-megawatt (MW) solar array with 20 MW of storage, providing 100 megawatt-hours of electricity to supply the Hawaiian island at 11 cents a kilowatt-hour.
It is KIUC’s second solar-storage project. The utility also has a deal with Tesla for a 13-MW solar array with a 13-MW battery (52 megawatt-hours), delivering power at 14.5 cents a kilowatt. Tesla is also building the world’s largest storage project in Australia, 100 MW, which will be linked to a wind farm.
In May, Tucson Electric Power (TEP) signed a PPA with Florida-based NextEra Energy for a 100-MW solar installation with 30 MW of storage (120 megawatt-hours) to provide electricity at 4.5 cents a kilowatt-hour.
“This new local system combines cost-effective energy production with cutting edge energy storage, helping us provide sustainable, reliable and affordable service to all of our customers for decades to come,” Carmine Tilghman, TEP’s senior director of energy supply and renewable energy, said in a statement when the deal was announced.
Analysts caution that the 4.5 cents a kilowatt-hour price includes subsidies and doesn’t reflect the true system costs. One evaluation done by Lazar put the cost closer to 9 cents a kilowatt-hour. “It isn’t 4.5 cents, but it is still pretty good,” Lazar said.
Connexus Energy, Minnesota’s largest distribution cooperative, is in negotiations for the development of a 20-MW (40 megawatt-hours) storage system. It would be located next to three solar facilities with a combined output of 10 MW that the co-op plans to build next year. It will be one of largest storage projects of its kind in the Midwest.
“Just like solar PV, with continuing drop in storage pricing, it is now becoming cost effective in specific applications,” Brian Burandt, Connexus vice president of power supply and business development, said in a statement. “While we expect broad applications will be enabled with ongoing cost reductions and performance enhancements, we believe the technology is ready today for application on our system.”
There are other storage pilots going on around the country. In November, Xcel Energy is slated to install six utility-scale batteries along a distribution feeder in Denver’s Stapleton neighborhood. “We chose the Stapleton area because of its high concentration of residential solar,” Mark Stutz, an Xcel spokesman, said in an email.
In the two-year trial, Xcel is looking to see if battery storage systems can be used to reduce high solar penetration issues such as high voltage or flicker. “By reducing these impacts, we may be able to accommodate higher amounts of solar energy,” the utility said.
Florida Power & Light Company is also conducting a series of pilots adding storage batteries in Miami-Dade and Monroe counties.
Battery storage provides a variety of values to the electrical grid, but whether they provide enough value is still a case-by-case decision.
“They are technologically viable. In terms of economics, solar is viable, and storage adds additional value streams,” said Todd Olinsky-Paul, a project director at the Clean Energy Group, a Vermont-based non-profit promoting clean energy. “Whether those additional value streams are monetizable depends on the system’s location, on the local grid and what market the utility is operating in.”
For example, in markets where transmission costs are high or experience congestion, which boosts transmission costs, storage can save money.
Green Mountain Power, Vermont’s largest utility, operates the Stafford Hill microgrid, which includes storage, and Sterling, Mass., installed a 2-megawatt solar array with 3.9 MW battery.
“Both have to pay for capacity and transmission services,” Olinsky-Paul said. “So they can use storage to moderate demand peaks, and that is worth quite a bit of money. Sterling estimates that they are going to save $400,000 a year, which would pay off the project within 7 years, even discounting the grants they received.”
Green Mountain Power charges its battery with solar or with cheap grid power overnight. During last summer’s annual demand peak, the utility saved $200,000 by running the system for two hours, Olinsky-Paul said.
Another potential saving storage can provide is in avoiding the need to add peaking plants, used to meet maximum peak loads. “If a utility’s options are to buy solar plus storage or a gas peaking plant that is used only a few hours a year, it may be cheaper to go with solar plus storage,” Lazar said.
Arizona Public Service (APS) is adding utility-scale batteries in the small town of Pumpkin Center, population 600. It was a cheaper solution to the problem of hitting local grid capacity than upgrading 20 miles of lines to the town through difficult terrain.
APS’s decision raises a broader question of whether storage can ultimately make the grid leaner and more efficient.
“The grid hasn’t changed since it was built,” Olinsky-Paul said. “Historically, demand and supply have had to balance out every moment, in real time, and we’ve done that by ramping generators up and down. We don’t store electricity or at least didn’t have a way to do it until recently. So the entire grid has been built to meet occasional peaks, meaning there is a large portion of the grid structure that sits idle most of the time, and this is wasted capacity. Storage allows you to smooth out the peakiness of intermittent generators, like wind and solar, while meeting demand spikes without the need to ramp up gas peaker plants. One big contribution of storage, we think, will be in reducing wasted grid capacity over time.”