News, Solar, Storage, Wind Power

Laying out the pros and cons of hybrid energy storage

As battery prices continue to fall and the penetration of variable wind and solar generation rises, power plant developers are increasingly combining wind and solar projects with on-site batteries, creating “hybrid” power plants.

New research from Lawrence Berkeley National Laboratory and the Electric Power Research Institute shows that interest in hybrid plants is high, and that hybridization can offer benefits relative to stand-alone plants. There are also limitations to hybridization, however, and market rules and policy incentives can make or break the finances of a project. 

There are 4.6 GW of wind, gas, oil and photovoltaic (PV) power plants co-located with batteries, with another 14.7 GW in the immediate development pipeline and 69 GW in the longer-term interconnection queues of regional power markets. In the interconnection queues, a quarter of all proposed solar projects are combined with batteries, with 4% of wind projects also proposed as hybrids. In California, almost 2/3 of solar projects are proposed as hybrids.

Thanks to a high penetration of solar (20% of energy in 2019), California is seeing low net load in the day, with a large ramp in the evening hours, as the sun goes down – a phenomenon known as the “duck curve.” The state is also seeing the highest amount of standalone battery systems proposed and is the region with the greatest amount of proposed wind hybrids (see Figure 1).

Figure 1: Hybrid capacity and standalone battery capacity in each ISO queue.

Putting the generators and batteries in one location can save on shared equipment, interconnection and permitting costs, capture otherwise clipped energy, and take advantage of federal tax credits that encourage coupling solar and batteries (Figure 2). System operators and purchasers may prefer hybrid plants relative to stand-alone generators given the greater dispatch flexibility.

But co-locating batteries with generating units may not always be the optimal solution. Batteries may be blocked from full participation in the market if constrained to charge from their co-located generators. Plus, co-locating could reduce siting flexibility of a battery project. Large wind and solar plants are located where the renewable resource is strong, land is available, and grid connections are possible. However, this location might not be where a battery provides the most grid benefits. Policy and market designs can also be a critical factor.

Figure 2: Pros and cons of hybridization

Power purchase agreement (PPA) prices for hybrid power plants have plummeted in recent years, with declining costs for wind, solar, and batteries. Figure 3 shows the declining sales prices for solar+batteries in both Hawaii and the Southwest.

Figure 3: Solar+battery PPA prices

However, whether developers get paid for providing capacity or just energy is a big factor in whether hybrid plants pencil out, as is whether the market has high penetrations of solar that influence daily wholesale pricing profiles. Recent PPA prices for solar+battery hybrids are about $10/MWh higher than for solar-only plants, when the battery is 4-hours in duration and sized at 50% of the solar plant’s nameplate capacity. As shown in Figure 4, the added value of such a hybrid plant in wholesale power markets given recent pricing trends is $13 to $31 per MWh in the combined energy and capacity market in California, and $1 to $9 per MWh in the energy-only power market in Texas. Whether hybrid plants are economically attractive is location dependent, and will be influenced by future wholesale pricing trends.

Figure 4: Value premium for PV and wind hybrids compared to standalone projects

In addition, the Berkeley Lab research finds that, compared to standalone wind/solar and battery plants, hybridization that restricts grid charging and decreases the hybrid plant’s combined interconnection limits results in a 2–11% loss in wholesale market value. The benefits of hybridization from receiving the investment tax credit and reducing interconnection costs may need to exceed these levels to offset the value loss from hybridization.

Finally, the paper summarizes market participation options within regional wholesale power markets, and issues that system operators are grappling with to accommodate growth in hybrid project development.

The research, appearing in the Electricity Journal, looks at the operational benefits and drawbacks, relative costs and benefits, and industry trends toward hybrid power plants. A free webinar will be held to discuss the results on March 24, 2020 at 11am PDT.

For further details on these findings and others, please refer to the study and accompanying slide deck briefing, which can be downloaded here.

We appreciate the funding support of the U.S. Department of Energy for making this work possible.