Co-location of batteries with solar or wind can reduce construction and maintenance costs, compared to a standalone battery. Constraints to the grid connection, however, limit battery trading strategies and reduce revenues.
So, how does co-location work, and do the cost savings offset lost revenues?
- Co-located batteries share a grid connection with a generator, which can limit their ability to export power.
- Export constraints mean that co-located batteries sometimes can’t follow optimal trading strategies - reducing revenues.
- Higher load factors and a flatter generation shape mean that revenue impacts are greatest for batteries co-located with wind.
- Reducing battery capacity relative to the generator reduces revenue impacts.
- Savings from a shared grid connection are likely to offset lost battery revenues in many scenarios, but additional savings may be required for projects co-located with wind.
Co-located batteries share a grid connection with a generator
A co-located battery shares a single grid connection with another asset. Typically this is a solar or a wind farm, which we will focus on here, but this can be other asset types.
Export constraints reduce revenue opportunities
As the battery shares a grid connection with a source of generation, its export capacity can be limited when generation is high.
Batteries typically cycle up to twice per day on the wholesale market, discharging during the morning and evening peaks when prices are highest. Co-located batteries may be unable to export at full power to capture these price peaks, as the grid connection is partially constrained.
Instead, optimizers must sell some of this power at a different time for a lower price. This decreases revenues compared to a standalone battery.
Co-located generation type has a big impact on battery operations
Wind and solar have different daily and annual generation profiles - constraining the grid connection at different times. Solar generation only constrains co-located batteries during peak daylight hours when prices are low. Wind, however, may significantly constrain batteries for several days at a time.
The maximum daily average generation for a solar farm was 26% in 2019. For wind, this was 92% - with 42 days above 70%. This means that optimizers of a solar co-located battery should almost always be able to fully discharge a battery, just sometimes at a lower price. However, at a wind co-located battery, there are days when they may not be able to profitably export enough power to complete two cycles.
This is particularly true during periods with high wind generation- such as during Storm Gareth in 2019. The average constraint on the grid connection caused by wind generation in this period would have averaged 85% across 4 days, with little variation.
The daily generation profile of solar means that at times with peak prices, solar generation averages only 9% of the export capacity, compared to 29% for wind.
Revenue impacts are greatest for batteries co-located with high load factor wind farms
Wind load factors - the amount of power generated by the wind farm - vary significantly. The load factor for an onshore wind farm could vary between 25% and 40%, depending on its location and configuration. A 50 MW battery would earn 5% less than a standalone battery if co-located with a lower load factor wind farm, but 12% at a higher load factor site.
The same battery co-located with 50MW of solar would earn only around 1% less than a standalone battery. This revenue impact is broadly similar across Britain, as variance in solar load factors is low. These are typically between 12% and 15%.
Undersized batteries see lower revenue impacts
Revenue impacts depend on how the battery is sized, relative to the renewable capacity and grid connection size. When a battery is proportionally smaller, it takes a higher level of renewable generation for the battery’s export capacity to be limited.
A battery sized equally to a co-located solar array would be constrained whenever the solar was generating. A battery sized at 40% would only be constrained if solar generation was greater than 60% of its capacity.
For batteries co-located with solar, the revenue impact is low and consistent across different ratios of battery to solar capacity. Wind co-located batteries, however, see large revenue impacts when co-located with an equal capacity of wind generation. These decrease gradually as battery capacity decreases.
This could explain why in the CfD scheme batteries co-located with solar were sized at 85% of the renewable capacity on average, while batteries co-located with wind were sized at just 25%.
When solar is oversized, co-location can increase battery revenues - but only in DC-coupled setups
Developers sometimes oversize the capacity of installed solar panels to the inverter and grid connection to maximize revenues. This results in higher output at the same level of irradiance, but means that peak power has to be ‘clipped’ - wasted as heat so that the inverter capacity is not exceeded.
When solar is 40% oversized relative to the inverter, 70 MW of panel capacity to a 50 MW inverter for example, the revenue impact for an AC-coupled battery from co-location is proportionally higher. In this instance, revenues are 2.5% lower than a standalone battery. This compares to 1.8% where solar is sized equally to the inverter. Oversizing of wind is less common but has a similar impact.
If the oversized solar is DC-coupled to a battery, however, this ‘clipped’ energy can be used to charge the battery. This increases battery revenues by 10% when solar is oversized by 40% - more than compensating for revenues lost from constraints. This revenue upside increases linearly with greater levels of oversizing.
Co-located projects make sense when cost savings outweigh lost revenues
Co-location impacts some revenue streams more than others. Wholesale trading, Balancing Mechanism, and frequency response revenues are directly impacted. Capacity Market payments should not be affected, while the impact on triads depends on whether the battery is co-located with solar or wind.
Solar co-located batteries should experience no reduction in triad revenues. Wind co-located batteries can be affected if wind generation limits their export during these periods, however triads are unlikely to fall during periods with high wind generation.
Overall, in the worst-case scenario, the present value of lost revenues for a battery co-located with an equal capacity of wind would be £92k/MW, compared to a standalone battery. Smaller batteries, those located in areas with lower wind load factors, or co-located with solar all see smaller revenue impacts.
Savings from utilizing a single grid connection vary between projects but are likely to be in the range of £25-55k/MW. These savings are likely sufficient to offset lost revenues for solar co-located projects. Additional savings of up to around £67k/MW from reduced construction costs or operational expenses could be required for wind co-located projects to be viable.
Ultimately, while co-location can make economic sense for many projects, its practical feasibility may differ from project to project. Introducing a battery to a solar or wind farm can significantly increase the complexity of financing and trading the site.
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