Co-Locating Energy Storage & Renewables with Brian Knowles
Oct 3, 2023
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Brian Knowles, Director of Energy Storage and Flexibility at Pexapark, shares insights from his extensive experience in energy storage and renewable projects. He highlights the essential role of energy storage in tackling the duck curve and market volatility. The discussion delves into the complexities of co-locating storage with renewables and the challenges of grid interconnections. Brian also addresses regulatory hurdles and the evolving dynamics of power purchase agreements, emphasizing the economic opportunities this integration creates in both European and American markets.
Integrating energy storage with renewables addresses supply-demand fluctuations and enhances project economics, critical for modern grid management.
The evolution of power purchase agreements reflects the growing recognition of energy storage's value in mitigating pricing risks and optimizing returns.
Deep dives
The Importance of Energy Storage in Renewables
Energy storage is essential for the effective deployment of renewable projects, particularly in addressing the volatility introduced by weather-dependent energy sources like wind and solar. As renewable energy generation gains prominence, the existing grid, originally designed for stable central generation, faces challenges in managing supply and demand fluctuations. Integrating energy storage systems allows excess energy to be stored during peak generation times and released during periods of low production, facilitating a smoother energy flow. However, commercializing and implementing these co-located systems has required navigating complex regulatory frameworks that historically have not valued energy storage.
Co-location and the Duck Curve
Co-location refers to the integration of energy storage systems alongside renewable generation facilities, sharing the same grid connection to enhance project economics. This strategy mitigates issues highlighted by the California duck curve, which depicts how increased solar energy generation leads to low or negative pricing during peak sunlight hours. The ability to store energy during these low-price periods and release it during high-demand times positions co-located projects as viable and attractive investments. Recent data indicates that nearly all interconnection requests for new solar projects in regions like California are now being paired with battery storage, illustrating the necessity and market recognition of this strategy.
Adapting to Technological Changes in Batteries
The landscape of battery technology is evolving rapidly, with lithium-ion systems being favored for co-location due to their established reliability and investor familiarity. However, the industry is also witnessing a shift in battery chemistries based on availability and cost, creating a need for adaptability in project planning. Developers often experience last-minute changes in battery technology proposals, contingent on market fluctuations and supply chain constraints. This adaptability is critical, as developers strive to balance performance, cost, and reliability in increasingly competitive energy markets.
Market Dynamics and Power Purchase Agreements
The commercialization of co-located renewable-energy projects is deeply influenced by the structure of power purchase agreements (PPAs), which have evolved in response to market volatility. In regulated markets, storage assets provide added capacity and flexibility, often leading to revised PPA terms that can command higher prices compared to traditional renewable contracts. Customers are increasingly recognizing the value of energy storage systems as a means to manage risks associated with energy pricing and supply. As the market matures, the integration of optimization agreements with PPAs is becoming more common, reflecting a nuanced understanding of how to maximize returns on co-located projects.
Combining energy storage and renewables tackles intermittency and synchronicity (the famous duck curve) and unlocks the economics and trading opportunities. However, implementation is challenging. The technical and engineering challenges around which battery and the transformers required to connect to the grid (currently on extended back log). The contracts and commercials are challenging? How will manage and profit from the trade? And both of these depend on location and regulatory environment. Joining us to discuss the complexities and opportunities around combining energy storage and renewables is Brian Knowles, Director of Energy Storage and Flexibility at Pexapark, the PPA pricing and consulting firm. Brian has a unique background pioneering the deployment and commercialization of energy storage with wind and solar projects in Europe and the US.
HC Group is a global search firm dedicated to energy & commodities markets. Visit www.hcgroup.global for more information and contacts for Paul Chapman
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