US PV-storage developers face new revenue, opex decisions
As demand for U.S. PV plus storage surges, trends in DC versus AC-coupling will be driven by emerging revenue streams and operations and maintenance (O&M) savings, market experts told New Energy Update.
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Rapid falls in solar and energy storage costs and rising renewable energy capacity have triggered a boom in U.S. PV plus storage projects. PV plus storage projects are spreading from Southwest markets into eastern and northern states and starting to compete with gas-fired generation.
PV developers are building storage capacity to maximize the value of solar assets and co-locating the technologies can significantly reduce costs.
Co-locating the PV and storage systems reduces installed costs by 8% for DC-coupled system and 7% for an AC-coupled system, according to a recent study by the National Renewable Energy Laboratory (NREL).
The study, ‘2018 U.S. Utility-Scale Photovoltaics Plus-Energy Storage System Costs Benchmark,’ used bottom-up cost modeling to benchmark the installed costs of various standalone PV and lithium-ion storage and PV-plus-storage system configurations. Summary results were based on 100 MW PV capacity, DC-coupled and AC-coupled, and a 60 MW/240 MWh battery providing four hours of storage capacity.
Coupled systems save on interconnection and permitting costs but also through shared hardware and installation labour costs, the study showed. In particular, sharing of system components such as switchgears, transformers, wiring and for DC-coupled plants, shared inverters, reduce the cost of co-located projects. Electrical balance of system costs for co-located DC-coupled and AC-coupled projects were around 30% lower than stand-alone PV and storage plants, the report said.
Installed costs of US PV plus storage projects
(Click image to enlarge)
Source: NREL, November 2018.
While shared inverters reduce the cost of DC-coupled projects, AC-coupled systems benefit from wider installation and O&M savings.
The cost of installation labor and equipment for co-located AC-coupled projects was around 14% lower than stand-alone plants, while co-located DC-coupled plants saw minimal savings, NREL said in its report.
AC-coupled systems have separated PV and battery systems, which allows more flexibility on battery location for installation and O&M efficiencies. Developers of AC-coupled systems can use larger battery racks and reduce the number of Heating, ventilation, and air conditioning (HVAC) and fire-suppression systems in the containers.
In the short term, the U.S. looks set to see strong growth in both DC-coupled and AC-coupled as developers pick designs according to offtake strategies and local project economics, industry experts told New Energy Update.
For future design choices, falling tax credit allowances, power market priorities and O&M efficiencies will prove crucial, the experts said.
Revenue edge
Overall, DC-coupling can be more cost-effective than AC-coupling because of lower project costs and higher revenue potential, Brett Galura, Chief Technology Officer of Fluence, a storage solutions company created by Siemens and AES, told New Energy Update. Fluence opted to develop a turnkey DC-coupled storage system for PV plants based on cost advantages for DC-coupled units and forecasted demand from developers.
According to Galura, DC-coupled systems offer lower overall project costs due to “avoided AC switchgear, cabling and second low-voltage to medium voltage transformer, as well as lower installation costs and faster installation time due to the more compact project layout."
DC-coupled systems can also provide greater revenues from higher storage efficiency without AC conversion, Galura said.
"Additionally, DC-coupling can increase solar yield that would otherwise be clipped by the inverter in an AC-coupled system," he said.
Regional power price patterns will drive the value of reduced-clipping, favoring markets with peak shifting requirements.
"A market where solar PV is saturated and mid-day prices fall near or below zero, but evening energy prices are very high, would provide a good case for adding DC-coupled systems," Galura said.
"Places already experiencing the “duck curve,” such as California, are good candidates," he said.
In Florida, dominant supplier Florida Power & Light Company (FPL) is building storage as part of a massive solar expansion plan.
Supply and demand-side energy shifting measures will become more important in Florida when PV penetration reaches levels of 15% to 20%, researchers at the National Renewable Energy Laboratory (NREL) said in a study published in September 2018.
Florida PV impact on net load ('Duck curve')
Source: National Renewable Energy Laboratory, 2018
Maintenance savings
In the wider solar market, operators are playing a growing role in project designs as developers seek to lower the lifetime cost of the plant.
The separated layout of AC-coupled PV plus storage systems means they offer lower O&M costs than DC-coupled projects.
As AC-coupled systems can locate the batteries outside of the PV field, “maintenance work can be quicker and easier," NREL said in its November report.
Single building maintenance, instead of multiple containers, and centralization of HVAC units reduce maintenance costs for AC coupled units, Leigh Zanone, Director, Operations and Asset Management at solar developer 8-minutenergy, told New Energy Update.
Other O&M savings are gained from reduced cable lengths and fewer points of connection, he said.
AC-coupled units also become a single point of dispatch, Zanone noted.
This means they can be "adjusted to point of delivery and contractual guarantee much more simply than DC-coupled," he said.
Researchers at NREL are currently analyzing O&M costs for different PV plus storage designs and will include their findings in an updated version of their report later this year.
Grid support
Frequency regulation as a grid service is also set to be a key application for PV plus storage projects and this could favour AC-coupled projects, which innately offer greater flexibility.
DC-coupled units require bi-directional inverters and a distributed control system so that output matches grid requirements, Galura said.
For DC coupled units, frequency regulation is limited to the capacity of the shared inverter while AC coupled systems set up correctly can provide the combined capacity of the solar and storage inverter systems.
"This can be especially useful in smaller, or less well-connected networks," Galura said.
Retrofit strategies
For developers looking to retrofit a battery to an existing PV array, an AC-coupled battery may be more cost efficient than a DC-coupled battery, as DC-coupled systems require replacement of the existing PV inverter with a bi-directional inverter, NREL said in its report.
"The additional costs due to replacing the inverter and rewiring the system could make retrofit costs higher for a DC-coupled system...In addition, AC-coupled systems enable the option of upgrading the PV and battery separately, because these systems are independent of one another," the report said.
For larger DC-coupled projects, distributed battery containers may make it more costly to upgrade or replace batteries in the future. Developers planning to add DC-coupled storage at a later date must account for this at the beginning of the project, as there is currently a limited number of suitable inverters available, Galura said.
"AC-coupling at a later date comes with many more inverter options, making it more flexible as a retrofit option," he said.
Market drivers
The scaling down of U.S. investment tax credits (ITCs) and new market regulation supporting grid services could be major drivers of design choices going forward.
The ITC for PV and energy storage steps down from 30% for projects starting construction in 2019, to 10% from 2022 onwards. This could favor the DC-coupled approach, Galura said.
"The benefit of having a more capital expense (CAPEX)-heavy project compared to the operating expenses (OPEX) decreases. Therefore, the relative tax advantage of an AC-coupled system (having a higher CAPEX relative to OPEX) will decline," he said.
A new market order from the Federal Energy Regulatory Commission (FERC) is set to accelerate PV plus storage deployment in the coming years and developers must factor this into their design plans.
FERC Order 841, issued last year, requires market operators to implement regulation that allows energy storage to participate in wholesale power markets, including real-time and reserve markets.
Developers are increasingly looking to capture additional revenue streams, such as frequency regulation or spinning reserve, Galura said.
"While both AC-coupled and DC-coupled systems can provide these services, they must be built with that flexibility in mind from the beginning," he said.
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