Is Adding Solar Batteries Worth it?

Landmark Methodology Report Helps Unlock Value of Solar PV + Energy Storage A Framework to help states quantify benefits, understand opportunities

Seeking to help states better address the value proposition of solar+storage systems, the Interstate Renewable Energy Council, Inc. (IREC) engaged Clean Power Research (CPR) to develop a methodology that could be used to value solar energy coupled with battery storage. The methodology described in the report can be applied in any location. It focuses on Hawaii as an example, as it is likely to be an early adopter of storage regulations.

"The concept of adding batteries alongside a utility customer's solar array intrigues utility customers, solar developers, and utility planners on several levels, but the underlying question for everyone is whether adding batteries is 'worth it,'" says Jason Keyes, Partner at Keyes, Fox & Wiedman LLP, attorney for IREC and report collaborator.

Though still at a nascent stage, the recent rapid growth in the distributed energy storage market suggests that now is an opportune time to take a closer look at distributed energy storage, especially in combination with distributed solar, and the values it has to offer. The new IREC study lays out the methodology to do just that and sets forth a pathway for more robust analysis and dialogue.

Proposed in the report, Valuation of Solar + Storage in Hawaii: A Methodology, is a method to quantify the added economic benefits that could result from adding behind-the-meter storage to supplement solar energy generation in Hawaii. The method provides a useful framework and information tool that can be used to conduct a more comprehensive valuation analysis in Hawaii and other states.

Given that the report is primarily proposing a methodology, the rough estimates of Hawaii solar plus storage valuation should not be the big takeaway from the report. However, a rough analysis using the methodology indicates that the incremental capacity benefit of adding storage to a customer's solar array adds about 10 cents of value per kWh generated (including storage losses), at a cost of just over seven cents per kWh generated. Other benefits are not calculated, but obviously would increase the value.

While solar valuation studies have become fairly commonplace, with more than 20 states now having conducted and/or actively considering an analysis, adding storage to the mix creates new layers of complexity not easily assessed (or understood). This methodology helps define key study assumptions and parameters, and new calculations to make a valuation study more manageable.

"With limited experience with customer-owned solar+storage systems, more states are seeking to better understand the value these systems can bring to the utility, the electricity grid and energy consumers," says Sara Baldwin Auck, IREC's regulatory director. "This report provides a timely tool to guide and inform policy and regulatory decision-making on this highly relevant topic."

Hawaii is first in the nation in terms of solar capacity per capita and is one of the top ten states for overall installed solar capacity. Given its high penetrations of distributed solar and high electricity rates, distributed energy storage holds significant promise. In particular, it has the potential to mitigate operational challenges on the grid relating to high penetrations of customer-sited, non-dispatchable resources (which, for a small island grid can pose considerable challenges if not properly managed). Coupled with solar, storage could also be used to charge daytime solar energy for later dispatch during the peak after sundown, thus increasing both capacity and energy benefits of both technologies.

Hawaii and other states exploring energy storage might consider conducting a more comprehensive study, using the methodology laid out in this report. From there, states, utilities and customers can determine whether or not customer-sited storage should be pursued and how rates should be structured to compensate customers for the value they are providing.

CPR brings its considerable expertise and experience on solar valuation analyses to bear on this methodology. The economic methods likely to be used in a full analysis using this methodology have largely been developed in other studies for solar-alone resources. However, this methodology required new innovations to accurately model the inclusion of storage, in particular to reflect when storage is charged (i.e., using sunshine to charge the battery for later use) and when it is discharged (i.e., using the stored energy to serve the customer or the grid).

"One of the interesting innovations in this methodology is the approach used to assume when and how storage is charged, and when and how it is discharged -- in short, defining the rules by which these hybrid systems would be expected to be operated," explains report author, Ben Norris, senior consultant with Clean Power Research. "The methodology includes algorithms that define charge and discharge patterns based on specific objectives, such as maximizing value to the utility, or the customer/owner, depending on specific rate structures."

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