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Majority of planned energy storage sited alongside other power plants

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A Tesla battery pack stores energy produced from a solar farm on the island of Kauai in Hawaii.
Source: Tesla

Locating energy storage facilities alongside other generating units, or "colocating," can result in lower project costs and a more efficient operation, according to a new white paper.

Project developers appear to be seeing the advantages of such hybrid projects. According to an S&P Global Market Intelligence analysis, three-fourths of the 7,777 MW of planned energy storage resources is colocated with other generating units.

Consultants Rob Gramlich and Michael Goggin of Grid Strategies LLC as well as Jason Burwen, vice president of policy at the Washington D.C.-based Energy Storage Association, wrote in a September paper, "Enabling Versatility: Allowing Hybrid Resources to Deliver their Full Value to Customers," that colocating storage resources with other generating resources can reduce a project's capital costs and better use transmission interconnection capacity, among other things.

Also, storage projects colocated with solar resources can qualify for the investment tax credit, or ITC, available to solar projects. The federal ITC allows eligible solar projects to write off 30% of system costs for commercial and residential systems that start construction in 2019. The credit for commercial solar projects declines to 10% by 2022 and expires that year for residential systems. Battery systems charged by solar for at least 75% of the time for the first five years of operation are eligible for the ITC as well.

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The bulk of planned storage additions is scheduled to come into service between 2020 and 2023, with peak installations expected in 2021.

In addition to tax credit advantages, colocating storage on the same site as solar and wind projects also helps store excess output and balance the variability of renewable generation. "Hybrid resources are far more nimble, versatile, and controllable," Gramlich, Goggin and Burwen said in the paper.

Three states — California, Nevada and Texas — have the most planned colocated storage, mostly at gas or solar plant site. California has a total of 1,694 MW of colocated storage in development, roughly half at gas plant sites and half at solar sites. Nevada has 1,030 MW of colocated storage, all at solar sites, while Texas has 545 MW of colocated storage at solar farms and another 20 MW at gas plants.

Among the 10 largest states for planned colocated storage, California, New York and Oregon have adopted storage procurement targets. In other states, utility procurements are driving development of hybrid resources. In June, NV Energy Inc. selected three solar plus storage projects in Clark County, Nev., as part of a competitive solicitation that totaled 1,190 MW of solar and 590 MW of battery storage. Arizona Public Service Co. announced a plan in February to bring on 950 MW of battery storage and solar arrays by 2025.

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Storage supply by region

The regional power market with the most storage is the California ISO, which has a total of 2,853 MW of planned and operating storage, including colocated and stand-alone projects. Following CAISO is the Electric Reliability Council of Texas, with 807 MW, and the New York ISO and ISO New England, which had 588 MW and 575 MW, respectively. An S&P Global Platts Analytics report tallied about 40 GW of battery storage still waiting to interconnect to regional transmission systems as of May. That is triple the amount as of June 2018, according to the report.

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New storage development has been encouraged by the Federal Energy Regulatory Commission's issuance last year of Order 841, to remove market barriers for storage, and Order 845, which directs regional transmission operators and independent system operators to reform the process for interconnecting new large resources to the grid, Gramlich, Goggin and Burwen write. But they also identify at least 11 market participation shortcomings that need fixing. Among them is a suggestion that FERC should initiate a proceeding to cover how to treat hybrids given the lack of standardization and clarity across wholesale power markets. The paper notes that CAISO and the Midcontinent ISO have opened processes on the topic but that many questions are still unanswered.