Do “paired” solar plants and batteries create economic value?

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The answer to this question is – it depends and not always. This has implications for over 200 GW plus batteries and over 460 GW plus  solar in interconnection queues (vs. 1117 GW in existing capacity).

The hybridization or the “pairing” of infrastructure assets and technologies is part of the broader energy transition theme.  It enables the best of carbon-free technologies and operational innovations be brought together.

It is particularly relevant in the power generation sector where the rising penetration of renewable generation assets is creating challenges due to the intermittency of these sources.  Batteries have the potential to address some of the challenges posed from increasing renewables penetration.   Intuitively, “paired” or “bundled” batteries with solar or other renewable sources – joined at the hip – can be more profitable than standalone solar or storage assets, with the potential to displace fossil assets in the key energy markets in the US.

A study by Lawrence Berkley Lab suggests that the above “pairing” may not always be profitable, and separating generation from batteries and siting them separately may create more economic value.  This incremental value (vs. solar+storage paired business models) – ranging from $2 to $50/mwh as per the study – for the locations used in the study – may be a result of transmission constraints which a battery can profitably address.

The US Tax Code creates (or “distorts”) financial incentives to bundle solar and storage together providing tax credits if battery is charges from the attached solar asset.   Though there are additional economic benefits from bundling solar and batteries, like lower cap-ex from shared infra from “pairing”, bundled business models with batteries plus solar may not be always profitable, once the tax credit benefit is removed.

How profitable renewables and batteries become a function of location, wholesale market rules, commodity prices, and weather related volatility.  More work is needed as the Lawrence Berkley study was based on assumptions related to Li ion storage duration, relative proportion of storage to solar PV MW, and not all value-streams a battery could deliver in wholesale markets.