Storage and Solar Are Burning Bright in the US

Solar-plus-storage developers are thriving in the current era as reduced costs, improved O & M and the increasing demand for renewable energy improves their economic outlook.

Falling costs for both solar PV and storage options are ensuring that companies that offer this product are winning in the marketplace and attracting investors. According to research group IHS Markit lithium-ion battery cells are expected to dive below $100/kWh in 2023 as larger factories cut manufacturing costs. In 2013, the average battery cells were costing around $680/kWh.

Now in various states, the cost of this energy-efficient solution is dropping below gas-fired generation. The tandem use of storage and solar makes sense when demand peaks in the late afternoon as the sun wanes, so utilities need the additional energy available from storage, which is mainly batteries, but hydrogen and other advanced storage methods are developing. The Lawrence Berkeley National Laboratory estimates that around 28 per cent of major US solar projects included energy storage. Some developers have now made it “standard practice to always provide a storage option when responding to a solicitation,” the Berkeley Lab opined.

Financial Risks are reduced by pairing Solar and Storage

One of the interesting developments is a new eagerness to invest in these projects. The market can accommodate more renewable energy schemes. Although there is a small amount of extra risk due to the complexities of managing solar and storage it is not a show-stopper. The technologies are well understood and long-term contracts enable secure revenue streams.

A typical project is in San Juan, New Mexico, where a coal-fired plant, due to shut in 2022, is being replaced by four solar-plus-storage farms commissioned by the Public Service Company of New Mexico (PNM). These projects are expected to generate electricity at between $18 and $28 per MWh, which is a lot cheaper than coal at $66 to $112 per MWh, or combined-cycle gas-fired generation which is $44 to $64.

New Projects Ensure Market Growth

State mandates or goals in New York, New Jersey, Virginia, Massachusetts and California, have accelerated growth. About 67 per cent of solar projects in California's CAISO market at the end of 2019 featured energy storage, according to Berkeley Lab interconnection queue data. Across the non-ISO West region, storage was incorporated into 50% of projects, while in ERCOT, SPP, MISO, PJM and NYISO, the level was 13%, 22%, 17%, 17% and 5%, respectively, Berkeley Lab said.

There is also strong demand for solar-plus-storage schemes in states like Arizona and Nevada where excellent solar resources and large-scale solar generation have pushed prices below gas-fired alternatives.

Solar-plus-storage developers are able to access federal investment tax credits (ITCs), which are being phased out from 30 per cent in 2019 to 10 per cent from 2022 onward. The US Solar Energy Industry Association (SEIA) is lobbying the new Biden administration to extend the program and also broaden it to include stand-alone storage projects, which would improve solar PV growth.

Energy storage does mean a greater range of operational risks for solar plant operators and their maintenance personnel will need a wider range of expertise to deal with new issues.

Storage asset owners must implement charging and discharging strategies that optimize revenue and reduce degradation of the batteries. Also longer dispatch periods for solar-plus-storage projects can impact O & M where lifespans of major components differ from each other.

Despite the various challenges, the growing inclusion of storage in new projects suggests that the future for this sector of the energy market is bright.