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In areas with high population density or abundant solar energy, adding one to four hours of battery storage to a solar installation can significantly increase site revenue. However, the added value diminishes with storage capacities greater than four hours.
Grid tails are increasingly dominated by solar projects, with a significant portion of these being solar-plus-storage (hybrid) installations. In recent years, Texas ancillary markets and California’s nighttime peak demand have been the primary targets for battery investments. As these markets become more competitive and battery costs continue to decline, developers are exploring new opportunities to maximize value, such as retrofitting existing solar plants. Industry leaders such as NextEra and BayWa re have indicated that retrofits will be a key revenue driver going forward.
Unsurprisingly, the study found that solar-plus-storage power plants located near high-demand areas, which face constraints on building new capacity and experience higher energy prices, could achieve significant revenue increases. Furthermore, regions with abundant variable renewable energy (VRE), such as solar and wind, also benefited from the addition of short-duration battery storage.
In Texas, for example, battery storage typically has a capacity of one hour, while in California the average is about four hours.
In modeling scenarios with increasing amounts of energy storage alongside solar installations, the researchers observed notable differences: Solar plants in regions with load centers saw substantial revenue increases, while VRE-rich regions showed higher percentage increases. This reflects higher energy costs at load centers, as opposed to VRE-dominated areas, where prices are typically low but there are large “duck curve” opportunities.
The most significant percentage increase in revenue per kilowatt-hour came from adding an initial one-hour battery improvement.
At load centers, converting stand-alone plants to solar-plus-storage plants with one hour of storage increased the value of those plants by 48.8%, from $33.8/MWh to $50.3/MWh. In VRE-rich areas, this trend was even more pronounced: one-hour batteries increased the average values ??of solar and wind plants by 80.5% and 81.1%, respectively.
The AEM study includes a key caveat: the revenue model assumes “perfect foresight,” an ideal scenario in which solar-plus-storage plant operators can perfectly predict the best times to store and release energy. In reality, operators face uncertainty when determining optimal charging and discharging periods.
The finding that storage beyond four hours offered minimal additional revenue surprised the researchers. According to the study, “the increase [in revenue per kWh] from five to eight hours duration was much smaller (7.3% and 6.1% for solar and wind, respectively).”
Another notable finding was that retrofitting a solar plant with energy storage significantly increased its likelihood of generating electricity during the “100 hours of highest net load” of the year, from a low of 20% with one hour of storage to a high of 100% with five or more hours of storage.
The authors also weighed trade-offs between maximizing battery longevity and optimizing near-term revenue, noting that “more sophisticated treatment of battery degradation may enable greater value maximization for solar-plus-storage power plant owners.” Under different battery degradation models, revenues varied by as much as 18%.
With recent advances in battery longevity, such as “five-year zero degradation” costs, the revenue potential of these installations would increase even further.
Lower degradation rates also create new revenue opportunities by allowing facilities to charge from the grid at lower rates during non-solar hours. This capability, now allowed by the Inflation Reduction Act, adds about $0.012/kWh in revenue opportunities. |
