Analysis Report (1): Cost and Value of Hybrid Energy Storage Projects in the United States

　　The rapid deployment of wind and solar power projects is one of the most important power system trends of the 2010s, and survey data suggest that a tipping point in the 2020s may be the rapid deployment of "hybrid" deployment projects.

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　　Hybrid deployments typically co-locate solar power projects or wind power projects (or other energy sources) with battery storage systems. Just as falling costs have driven rapid growth in solar and wind projects over the past decade, falling battery prices and the growing need to integrate renewable energy generation are driving plans to deploy hybrid projects. While hybrid deployments can help alleviate the challenge of balancing intermittent supply from renewables, their relative novelty means that research is needed to foster integration and innovation.

　　Combining energy storage and conversion technologies and the characteristics of multiple renewable energy sources creates complex issues for grid operations and costs. And project developers, system operators, planners and regulators need to estimate the cost, value and system impact of hybrid projects in order to benefit from better data, methodologies and tools. Opportunities to deploy hybrid deployments are increasing as the power system moves towards more renewable power, but their impact and optimal application have yet to be determined.

　　The Lawrence Berkeley Laboratory (Berkeley Lab) recently released a research report titled "Top Ten Findings from the Renewable Energy Research Project". The report analyzes where and why hybrid deployments are built, models optimal hybrid design choices, and assesses hybrid deployments' contribution to resource adequacy and short-term supply reliability.

　　How to define a hybrid hybrid deployment project?

　　• Combination of power generation facilities and battery storage systems.

　　• Operates as one or two independent generating units.

　　• Co-located.

　　Top 10 findings of the Renewable Energy Research Project:

　　(1) Growth

　　Interest in hybrid deployment projects is strong and growing among renewable energy developers.

　　(2) Price VS Value

　　Solar + energy storage projects have low power purchase prices but high value in some regions.

　　(3) Market driving factors

　　Solar-plus-storage projects are driven by tax credits and other incentives.

　　(4) Configuration selection

　　Market prices have incentivized solar power facilities to deploy short-term battery storage systems.

　　(5) Capacity value

　　The capacity contribution of a hybrid deployment project is less than the sum of its parts.

　　(6) Ancillary services

　　The ancillary services market is a valuable but short-lived option for hybrid deployment projects.

　　(7) Market participation

　　Hybrid deployment projects can participate more flexibly in the electricity market.

　　(8) Operation

　　The power system value of hybrid deployment project systems depends on how they operate.

　　(9) Distributed hybrid deployment project

　　The growth of solar-plus-storage projects at customer sites presents new opportunities.

　　(10) Future Research

　　How will the future develop? A priority area of research for hybrid deployment projects.

　　a. to grow

　　(1) Strong and growing interest from renewable energy developers in hybrid deployment projects

　　Falling battery prices and demand for renewable energy generation have driven interest in hybrid deployment projects. Current developer interest is focused on deploying solar power generation facilities with battery energy storage systems, but energy storage systems can be deployed with a variety of renewable energy generation facilities.

　　(2) By the end of 2021, the number of solar + energy storage projects or wind power + energy storage projects already connected to the grid in the United States has exceeded 8GW

　　Solar+storage projects dominate the total installed capacity of hybrid deployments with more than 5.9GW of installed capacity, while wind+storage projects are only 2GW and solar+wind+storage projects are only 750MW. And this market has already started to grow exponentially, with a 133% increase in the cumulative installed capacity of operational hybrid deployment projects in 2021 compared to the cumulative installed capacity deployed at the end of 2020. Although there are many hybrid deployment projects of fossil energy + energy storage, the total installed capacity is relatively small.

　　(Location of existing hybrid deployment projects in the U.S. by 2020)

　　(3) Plans for planned deployment indicate growing interest in hybrid deployment projects of renewable energy and energy storage systems

　　Data from energy projects under development in interconnected cohorts of seven wholesale markets and 35 utilities in the U.S. suggest that renewable energy developers have considerable commercial interest in hybrid deployment projects.

　　By the end of 2021, the installed capacity of solar power generation facilities planned to be deployed in the United States exceeds 675GW, of which 286GW (about 42%) are proposed as hybrid deployment projects, the most common deployment of solar power generation facilities and energy storage systems. There are also plans to deploy 247GW of wind power facilities, of which 19GW (about 8%) are proposed as hybrid deployment projects, which are also usually deployed with wind power facilities and energy storage systems.

　　While many of these proposed projects will ultimately fail to achieve commercial operations, strong interest in deploying hybrid deployments bodes well for strong capacity growth. This is especially true in the California Independent System Operator (CAISO) service area, where 95 percent of solar and 42 percent of wind facilities are proposed for hybrid deployments.

　　Figure 2. The installed capacity of hybrid deployment projects planned for deployment in the United States in 2021

　　B. Price vs Value

　　(1) The power purchase price of solar + energy storage projects in some areas is low but the value is high

　　While the number of hybrid deployments currently operating in the U.S. is still small (but growing), it is possible to gain insight into the configuration and pricing of upcoming hybrid deployments by looking at power purchase agreements (PPAs), which are often the project was implemented several years before it was put into operation.

　　(2) The electricity purchase price of solar + energy storage projects will gradually decrease

　　In the price sample, the price (USD/MWh) of a hybrid solar+storage deployment project (shown in the figure below as an open circle reflecting the installed capacity ratio of battery storage systems to solar power generation facilities) is close to the price of independently deployed solar power generation facilities (smaller filled circle).

　　As a result, solar-plus-storage projects will become more common over time. And in Hawaii (orange), almost every utility-scale solar facility that signed a power purchase agreement (PPA) after 2017 was equipped with battery storage, and the balance appears to be in the other four states shown (blue) changed. These power purchase agreement (PPA) levelized prices reflect the US federal Investment Tax Credit (ITC) incentives.

　　(3) The power purchase agreement (PPA) premium of the hybrid deployment project reflects the scale of its battery storage system

　　A subsample of 17 power purchase agreements (PPAs) separates the price of each component of a solar-plus-storage project, enabling an accurate calculation of how much power purchase agreement (PPA) prices for storage systems have increased.

　　The ratio of battery to solar capacity increases linearly (above), which is one of several reasons why hybrid deployments in Hawaii (all batteries are relatively large) are more expensive than other states in the graph one.

　　(4) Hybrid deployment projects are almost always net worth

　　Berkeley Lab modeled the value of California Independent System Operators (CAISO) and Electric Reliability Commission of Texas (ERCOT) independently deployed solar power facilities supporting battery energy storage systems with an installed capacity of 50% for solar power facilities. Half of the installed capacity for a duration of 4 hours (as shown in the picture below).

　　This configuration should increase power purchase agreement (PPA) prices by $8-$13/MWh. Of course, the value of a hybrid deployment project will vary over the life of a power purchase agreement (PPA), but at least in recent years, and with the help of the federal Investment Tax Credit (ITC), the added value appears to be Justify the price premium.

　　C. Market Drivers

　　(1) Solar+storage projects are driven by tax credits and other incentives

　　Hybrid deployments and co-located renewable energy facilities and battery storage systems can benefit from tax credits, construction cost savings, and more flexible generation facility scheduling, but are subject to site selection constraints.

　　(2) Access to investment tax credits is a major reason for promoting hybrid deployments

　　Co-locating solar and battery storage is required to make battery storage eligible for federal investment tax credits, save on shared facility and interconnection and permitting costs, reduce solar curtailment, and facilitate energy transfer. In addition, renewable energy generation facilities deployed in conjunction with battery energy storage systems have greater dispatch flexibility, making them more attractive for grid operations.

　　(3) The location of deployment may not be where the energy storage system provides the greatest benefit to the grid

　　Large-scale wind power projects and solar power projects are usually deployed in places with abundant power generation resources, vast land and can be connected to the grid. And battery storage systems can be deployed almost anywhere, such as high-value locations that can provide additional value to the local grid, such as alleviating grid congestion and mitigating price volatility. The study found that, depending on the region and year, the market value of a separate deployment of renewable energy generation and battery storage is $2 to $9/MWh higher than a hybrid deployment. Across seven wholesale markets in the US, this “coupling loss” averages $2/MWh (as shown in the chart below).

　　(4) The higher costs of deploying projects independently are largely offset by the cost savings of hybrid deployments

　　A rough cost savings of $15/MWh was calculated in the study, with $10 from the 30% investment tax credit (ITC) earned and $5 from construction cost savings—both above the default coupling loss. However, if the battery storage system is only charged from co-located renewable energy generation facilities, if the interconnection capacity is limited by the size of the renewable energy generation facilities, and the storage system dispatch can operate with perfect predictability, then the coupling Losses could increase to $14/MWh.

　　Uncertainty about coupling losses and cost savings for hybrid deployment projects shows that development models for both independent and hybrid deployment projects are feasible.

　　(Site selection for independent deployment of battery energy storage systems vs. site selection for co-location deployment of battery energy storage systems)

　　D. Configuration selection

　　(1) Market price encourages solar power generation facilities to deploy short-term battery energy storage systems

　　We found significant differences in the final figures by configuration and region, with solar generation penetration being a major factor.

　　(2) The duration and energy storage capacity of the battery energy storage system have the greatest impact on the net value of the hybrid deployment project

　　In the most attractive hybrid deployment project configuration to receive the Federal Investment Tax Credit (ITC), the duration of the battery energy storage system is often 2 to 4 hours, and the installed capacity of the supporting battery energy storage system is a solar power installation or 25% or 100% of the installed capacity of the wind power facility, depending on the region (shown below).

　　Setting grid interconnection capacity to allow both renewable generation and energy storage to discharge simultaneously would yield a higher net hybrid value than limiting the interconnection size to only solar or wind installations.

　　(3) Among the areas served by CAISO, ERCOT and SPP, the net value of solar + energy storage projects with short duration is the highest

　　The duration of grid-connected projects and proposed deployments is typically 1 to 4 hours. Among all battery storage systems, the relative value of hybrid deployments is highest among the California Independent System Operator (CAISO), Electric Reliability Commission of Texas (ERCOT), and Southwest Power Associates (SPP) service areas, which have a large number of proposed Deployed solar + energy storage projects. The study also found that the net worth of solar-plus-storage projects is more attractive than wind-plus-storage projects when the federal Investment Tax Credit (ITC) is included.

　　(4) The penetration rate of solar energy in the region promotes the value of solar + energy storage projects

　　High solar penetration shifts the time of grid price peaks from summer afternoons to evenings, enabling solar power utility projects to gain greater value. California Independent System Operators (CAISOs) have had the greatest impact so far, with solar penetration reaching 21% in 2020.

　　However, as energy storage systems improve the ability to transfer energy, the deployment of solar power facilities projects that cut power generation to change the timing of power generation has become redundant. In contrast, configurations that maximize solar power generation (including through single-axis tracking systems and scaling solar power facilities) can provide greater net benefit when combined with energy storage.