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IEEFA U.S.: 5 ways utilities are driving the rapid expansion of solar-plus-storage

February 14, 2019
Dennis Wamsted

The utility industry, broadly speaking, has a checkered history on renewable energy development, often having fought state renewable energy portfolio standards, curtailed residential net energy metering for solar and brought into question the reliability of wind and solar.

But a new dynamic is at play now, especially around solar-plus-storage projects. Here, sharp and continued price declines have turned utilities, regardless of size or location, into market drivers—a shift with major implications for baseload power providers.

Northern Indiana Public Service Company’s recent decision to pursue the phase-out of its coal-fired generation over the next 10 years demonstrates how the economics of solar-plus-storage have changed. NIPSCO serves some 466,000 customers in the northern third of the state and like other Indiana utilities is heavily reliant on coal for its electricity needs, currently getting more than 60% of its generation from its two coal plants.

When it solicited bids as part of its most recent integrated resource planning process for future power supply needs, NIPSCO received some eye-opening proposals that convinced its managers that change was both possible and economic. In its preferred resource plan released this past October, NIPSCO proposed adding 1,145 megawatts (MW) of solar and solar-plus-storage by 2023, which would push its renewable generation well above 50% and its coal-fired power capacity down to 17%.

NIPSCO is no anomaly. In January, Hawaiian Electric asked state regulators to approve seven contracts for a total of 262MW of solar generation and 1,048 megawatt-hours of companion storage. Six of the seven proposals will deliver electricity to consumers at or below $0.10 per kilowatt-hour, a big reduction over the cost of fossil fuel generation on the island, which averages about $0.15/kWh.

It is not just the economics that set the Hawaiian Electric example apart, it is how the contracts are structured. For example, in its contract submission with AES, which involves a 30MW solar/120MW storage facility on the big island of Hawaii, the utility outlines a potentially groundbreaking power purchase agreement.

Under the terms of this PPA, AES will receive a lump sum from Hawaiian Electric every month based on the facility’s energy potential and availability instead of being paid for every kilowatt-hour delivered. This arrangement, which Hawaiian Electric is calling a renewable dispatchable generation PPA, gives AES payment certainty and eliminates the threat of curtailment while allowing the utility to manage the facility. It’s a win for both parties.

The structure of the deal, which was proposed by AES, serves—like the NIPSCO example—as another marker development: Solar-plus-storage is not a one-size-fits-all application, and it can be tailored to specific market conditions and corporate needs, as the following examples illustrate.

  • Supplying Peak Needs
    Seeking additional peak summertime supply, Arizona Public Service in 2017 issued RFPs that resulted in a contract in early 2018 with First Solar that has the company providing electricity to APS during its peak demand period, from 3-8 p.m. The First Solar projects that will support the deal include a 65MW solar photovoltaic unit and a 50MW battery, enabling First Solar to fulfil its supply obligations initially with solar-generated electricity and then augment that in the evening with electricity from the battery—essentially providing firm power during the peak five-hour window. Outside that window—and provided it can meet its daily contractual obligation—First Solar is free to use the units as it sees fits.
  • Cutting Transmission Charges
    Vermont-based Green Mountain Power recently won regulatory approval for three solar-plus-storage projects designed to help cut demand during peak periods in order to reduce charges levied by ISO-New England, the region’s transmission system operator. Under current ISO-New England rules, member utilities’ capacity charges for their use of the system are based on peak demand. If a utility can cut demand during regional peak periods, it stands to gain accordingly. Green Mountain previously has used storage-only resources built in cooperation with Tesla to accomplish this strategy. Last summer, the utility saved customers $600,000 by tapping into energy stored in over 600 Tesla batteries installed across its service territory, a move that also lowered the utility’s needs during New England’s summer peak demand periods in early August. The new solar-plus-storage projects, which each include a 2MW/8MW battery and a PV unit of between 4.5MW or 4.99MW, should enable Green Mountain to expand savings.
  • Enabling Coal Plant Retirements
    In Nevada, NV Energy has big plans for its recently approved solar-plus-storage investments, including the related early retirement of a 254MW coal-fired unit at the North Valmy Generating Station in the north-central part of the state. All told, the company will be building 1,001MW of new solar PV at six sites, three of which will include 100MW of storage capacity. Those solar-plus-storage projects, all situated close to North Valmy, will play a key role in maintaining the system’s reliability when the plant is shuttered in 2021.
  • Providing New Capacity
    In announcing late last year that it would turn to solar-plus-storage and natural gas to meet its near-term electricity supply needs, El Paso Electric said it would procure 200MW of solar and 100 MW of battery storage to help meet summer supply needs beginning in 2022-2023. Specific projects have not yet been named, but the company stressed in its announcement that the winning bidders “will enable us to meet the growing need for power in our region in a safe, clean, reliable and cost-effective manner.”
  • Improving Core Economics
    Elsewhere in West Texas, Vistra last year partnered with FlexGen to add a 10MW/42MHh battery to its existing 180MW Upton 2 solar project, a notable decision given the cutthroat nature of the Texas electricity market. The solar facility’s transmission interconnection is limited to 180MW, but during certain peak periods, the unit can produce up to 200MW of power, meaning that without its battery component, its production would be clipped, or wasted. The company estimates that the battery project can provide investment returns in the mid-to-high percentage teens.

Every new project like these that comes online highlights the broad potential of solar-plus-storage and chips away at the fossil industry narrative that renewable energy isn’t reliable or cost-effective. Clearly, the utility industry has a different perspective, and it is not just talking the talk, it is walking it too.

Dennis Wamsted is an IEEFA editor.



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Dennis Wamsted

Dennis Wamsted focuses on the ongoing transition away from fossil fuels to green generation resources, focusing particularly on the electric power sector. He has 30 years of experience tracking utility transitions and technology developments.

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