If we are to believe NextEra Energy Resources, it's already possible to jam wind turbines, solar panels and lithium-ion batteries together into a profitable clean energy smorgasbord. The renewables developer has already done it at least twice, most recently in Oklahoma.
The hybridization of solar and batteries is well underway, but these new plants represent something different. Instead of calling on batteries to stretch solar generation over a few extra hours of the day, they pair up complementary renewables for round-the-clock production, with batteries to smooth the gaps in between. The upshot is a more consistent form of clean energy without an overwhelming premium charged for dispatchability.
This week in Storage Plus, we're going to think through what this new class of power plant means for the energy transition. The actual market potential for such projects is hard to assess at this stage, because there is minimal data to look at. With that in mind, I'll think through what mechanisms could help it grow from one or two plants to a proper market in its own right.
"It’s definitely worth paying attention to," said Chris Hickey, business development director for Enel Green Power. "We’re just starting to see all the different value streams that can be derived from combining these different technologies. It’s going to be very much the norm a few years out."
I tracked down a few early indicators. For one thing, Greensmith — the storage integrator that now sits within engine manufacturer Wärtsilä's corporate hierarchy — has hybridized wind, solar, batteries and more on not one but two island grids. The experience there not only shows that coordinating multiple resources into a reliable, low-carbon grid is achievable, but also reveals an early market for hybrid plants to tap.
We'll also turn to California, where an effort is underway to solidify the market participation rules for power plants with multiple resources. This could open up another significant market, and clear the way for more than the solar-plus-battery deals that have already emerged in the Golden State.
Is there anything two can do that three can do better?
We're treading new ground here, so I'll take a moment to define the terms.
For the purposes of this article, I'm interested in power plants that combine more than two resources into one plant. You could call it triple hybrid, or multiple hybrid, or wind+solar+storage, none of which are particularly svelte turns of phrase. What I'm interested in is the stacking of clean energy resources to create more value and more controllable power production.
NextEra has made the most progress turning this concept into contracts, at least in the U.S. Last month, the developer signed a deal with the Western Farmers Electric Cooperative to build a mammoth triple threat in Oklahoma, including:
- 250 megawatts of wind capacity (which will arrive first, before the end of 2019)
- 250 megawatts of solar power
- 200 megawatts/800 megawatt-hours of battery storage
That's even bigger than one NextEra signed with Portland General Electric in February, which calls for 300 megawatts wind, 50 megawatts solar and 30 megawatts/120 megawatt-hours storage. That deal has to be online by the close of 2021, whereas the Oklahoma plant will wrap up by the end of 2023.
Both of these deals resemble solar-plus-storage peakers with a wind farm thrown in for good measure. The differing timelines for production — wind first, solar and batteries later — reflect the need to capture the federal Production Tax Credit for wind and the Investment Tax Credit for solar.
Given the seemingly disjointed nature of the development cycle, it's reasonable to ask why the triple hybrid model needs to be located in the same place. Three separate resources, located at individually optimized locations, could have a similar effect within the same grid balancing authority. The three-in-one model makes sense only if it adds value that cannot be achieved in isolation.
One of the main benefits of co-location is the optimal use of scarce interconnection capacity, said Hickey, of Enel Green Power, which routinely looks at storage to pair with its wind or solar projects, but has not yet built all three together.
The logic goes like this: Developers have to pay for limited bandwidth to dispatch power from a point of interconnection. Wind and solar plants only use that bandwidth when they are producing, which leaves economic value on the table. Adding batteries makes a few more hours of dispatch possible, but combining all three pushes that even further.
The economic imperatives of today's renewables market have not made this higher utilization a top priority, but the industry will be forced to think about it sooner or later, Hickey said.
"If you look at interconnection queues across the U.S., you’re seeing them absolutely balloon in terms of the number of projects and the megawatts being filed in every queue cycle," he noted.
As the options for greenfield development without obscene interconnection costs start to dwindle, developers will feel more pressure to couple up their resources. That could mean adding storage to a project that's further along in development, or retrofitting additional resources onto existing plants. Enel, for instance, operates 5 gigawatts of existing plants in the U.S.; that fleet could keep the company busy with retrofits for quite a while.
Less existentially motivating but still helpful, co-locating multiple resources can trim costs by streamlining construction mobilization compared to multiple separate locations, Hickey said. It similarly helps lower costs for operations and maintenance compared to a more far-flung portfolio of the same capacity.
Where does it work today?
Major power plants need major customers, and winning them requires identifying markets where someone has a reason to pay for the melange of values that a multiple hybrid plant produces.
NextEra made it work for Portland General Electric, a vertically integrated utility. That business structure means the utility benefits from affordable renewable production, as well as from the flexibility provided by batteries and the diversification of resources. The grid reliability buck stops with PGE, so dispatchability has a corresponding dollar sign.
Western Farmers Electric Cooperative also operates both generation and transmission. It owed capacity to the Southwest Power Pool for its resource adequacy contribution, and realized that a clean energy peaker had more favorable economics than a gas plant. The company also values clean energy, and makes decisions for the benefit of shareholders, which also happen to be the co-op's customers.
At a smaller scale but in a more transformative fashion, some island grids have begun converting from fossil fuel generation to a medley of renewable sources backed up by battery power.
The islands of Bonaire in the Netherlands Antilles and Graciosa in the Azores ramped up their renewable generation with help from Greensmith and Wärtsilä. This process involved linking the legacy power assets into a control system with newer wind, solar and battery resources, and optimizing dispatch across the multifarious fleet.
Graciosa is on track to generate 65 percent of its annual electricity production from renewables this year, said Risto Paldanius, director of business development at Greensmith. Then again, that island's peak load is only 3 megawatts, but the case at least depicts a microcosm of how hybridization can unlock higher levels of clean electricity.
"It is complex — it is not simple, that’s for sure, but it is doable, absolutely," Paldanius said. "It can go much bigger."
It's no accident that these early adopters share a holistic set of responsibilities for the reliable operation of the grid. The pathway to adoption looks murkier for the parts of the world that feature competitive wholesale markets.
But that's not to say that wholesale markets can't facilitate hybridization, provided the market rules place a clear and accessible value on the relevant services provided.
Paldanius said he firmly believes in competitive market structures, but acknowledged that "it takes time for rules and regulations to change." For now, storage has a hard time getting paid for its valuable attributes almost anywhere, and throwing wind and solar into the mix isn't going to make that any easier.
If more markets clearly define the rules for storage to participate and make money, then developers may be able to stack enough different revenue streams to justify a multiple-resource project.
This is already starting to happen in Massachusetts, where clarity from the New England ISO combined with the Solar Massachusetts Renewable Target incentive has kicked off a growth spurt of solar-plus-storage construction.
California thinks it over
California grid operator CAISO has kicked off its own effort to clarify how hybrid plants — defined as multiple resources co-located at a single point of interconnection — can participate in the wholesale markets. It collected stakeholder comments on the matter through Tuesday of this week.
There's good reason to inquire, because the CAISO has said that hybrid resources now make up a hefty 41 percent of the capacity in its generation interconnection queue.
That figure is large but not surprising, said Stoel Rives attorney Sarah Kozal, who is tracking the process and other developments in California's power markets.
"With all the variability and the really high penetration of renewables in California, a lot of developers are looking to add storage to flatten out their resources and make them less variable," she said. "The appetite for straight solar or straight wind is not what it used to be."
Among the outstanding issues for integrating hybrid plants is how CAISO should forecast multiple resources nested under one interconnection, Kozal said. It has methods for forecasting solar and for predicting a battery's state of charge, but when both those variables are at play in one facility, that gets harder. CAISO expressed support for assigning multiple resource IDs for co-located plants.
Another item to pin down is how to calculate the resource adequacy value of hybrid facilities. Resource adequacy contracts are crucial to new project economics in California's market these days.
These are mostly procedural questions, and unlikely to block the hybrid power plant market from developing, Kozal said. The bigger obstacle will be a classic California problem: how to wrangle enough land to fit several different resources while allowing them all to produce optimally.
"Land is so expensive and such a hot commodity," she said. "There will be an appetite for new and interesting models of generation; it's just, 'Where do we build it, and how do we build it?'"
