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US solar industry powers ahead as investors back batteries

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US solar industry powers ahead as investors back batteries

Renewable energy

US solar industry powers ahead as investors back batteries

Fund managers and energy-hungry tech companies bankroll ‘solar-plus-storage’ projects

Solar-plus-storage projects have become economical after the costs of panels and batteries dropped © Bloomberg

Solar power is no longer confined to daylight hours.

Thanks to a wave of investment, solar farms across the US are increasingly being built with industrial-scale battery packs on site so that noontime surpluses can be stored for release in the evening hours when people come home to switch on lights, appliances and air conditioners.

Fund managers, power producers, utilities and energy-hungry tech companies are among those making big financial commitments to “solar-plus-storage” projects, introducing a helpful cushion for America’s finely balanced electricity markets and easing the way for a sharp rise in renewable generation.

Announcements are coming thick and fast in states from California to Florida — the latest last week when the Tennessee Valley Authority, a federal agency known for hydroelectric dams and coal and nuclear plants, announced a 200MW solar project tied to a 50MW battery system in Mississippi.

Such projects have become economical after a 77 per cent decline in solar panel prices and an 87 per cent fall in lithium-ion battery prices over the past decade, said research group BloombergNEF and the Business Council for Sustainable Energy. Some projects are now able to offer power at prices lower than natural gas-fired plants.

“The market has really exploded,” said Rob Gramlich, president of Grid Strategies, a consultancy. “It’s been a dramatic expansion, and has surprised everybody.”

Government policy has also stoked investment. Batteries installed alongside renewables will earn a US tax credit. Battery operators have been allowed to sell power on the wholesale market, thanks to a rule passed in 2018 by the US Federal Energy Regulatory Commission. Some states require utilities to install storage.

Battery capacity in the US, the largest market, is set to more than double this year to about 4,800MW and surpass 32,000MW by 2025, BNEF said in its latest forecast — enough power to serve about 26m American households.

But capacity forecasts are still only a fraction of the US’s more than 1m MW in electricity generating capacity. “It’s a drop in the bucket,” said Gary Ackerman, former executive director of the Western Power Trading Forum, an industry group.

Batteries have drawbacks. They lose charge after several hours, so while they can make daytime solar power available in the evenings, they are impractical for saving energy for the next cloudy day, let alone storing power generated in spring for use over a long, hot summer.

The FERC rule to allow battery operators to sell into the wholesale market has also been challenged in court by traditional power generators and a state utility regulators’ association, putting batteries’ competitiveness in jeopardy.

Yet storage is not just a financial opportunity; in some cases it is a financial imperative.

In California, solar and wind generators selling into the main electric grid were forced to discard almost 1m megawatt-hours of production last year because there was nowhere to deliver it, according to the state’s independent system operator. Even when power is delivered to the grid, the daytime glut crashes prices.

The state is bringing on more storage capacity than any other in the US. It has only 263MW of utility-scale batteries currently, but has required investor-owned utilities to procure 1,325MW of storage by this year, and more than 3,400MW of solar-plus-storage projects have been commissioned for the future, according to BNEF.

In Los Angeles, the municipal utility recently agreed to buy electricity from a project with 400MW of solar and 300MW of storage capacity owned by Capital Dynamics, a Swiss-based fund manager.

“There’s been a massive shift,” said John Breckenridge, Capital Dynamics’ head of energy infrastructure. “A 20MW system a couple of years ago would have been a huge system. Now, that’s changed.”

In neighbouring Nevada, the tech giant Google and NV Energy, a division of Warren Buffett’s Berkshire Hathaway Energy, are awaiting government approval to run a new data centre on 350MW of solar panels and up to 280MW of batteries. The companies described their partnership as “the nation’s largest solar-plus-storage corporate purchasing agreement”.

In Florida, known as the sunshine state, a utility owned by NextEra Energy will open the world’s largest solar-powered battery in 2021.

Batteries tied to renewables such as solar and wind are “now at a tipping point of large-scale deployment”, said David Scaysbrook, co-founder and managing partner of Quinbrook Infrastructure Partners, whose $1bn Gemini project plans to supply NV Energy from a solar-plus-storage complex built on 7,100 acres outside Las Vegas.

The federal tax credit is scheduled to shrink over the next few years. However, “improvements in efficiency, production and the cost are expected to more than outweigh the reduction”, said Mr Scaysbrook.

The lifetime cost of solar-plus-storage is more than solar alone, with a midrange of $83 per megawatt hour compared with less than $50 for the latter, BNEF estimates. But the technology is now cheaper than coal and some projects are competitive with gas-fired plants. Minneapolis-based utility Xcel Energy recently agreed a deal to buy solar-plus-storage power at $36 per MWh, Greentech Media reported.

Renewable fuels — mainly hydroelectricity, wind and solar — will generate about 20 per cent of US electricity this year, according to the Energy Information Administration. The agency projects that generation from utility-scale solar power will rise tenfold by 2050, giving renewables more than a third of the market.

Mr Breckenridge of Capital Dynamics predicted that share could go even higher, at least in the sun-scorched desert south-west. “If you take this to its ultimate extreme,” he said, “you get to the point where solar and batteries together can represent the vast majority of the power requirements for the grid.”

Empire State eyes stored electricity

New York is far from the Sun Belt. But it is charging ahead with battery electricity storage.

The north-eastern US state illustrates how such technology is shaking up the country’s power market in a variety of ways. It has set a target for 3,000MW of energy storage by 2030, backed by $405m in subsidies, part of Governor Andrew Cuomo’s “Green New Deal” initiative.

Developers are considering solar-plus-storage projects in the rural vastness of upstate New York.

But beyond that, the developer LS Power has received approval for a 316MW battery-only installation at the Ravenswood Generating Station, an old power plant in Queens, New York City. There, the batteries will recharge not from solar panels but by drawing power from the grid at off-peak times, before reselling that power during periods of peak demand.

The project would “displace energy produced from fossil plants during peak periods”, said John Rhodes, chairman of the New York State Public Service Commission.

The proliferation of industrial-scale batteries has given some residents pause, however.

A resident in the town of Canton, New York, raised concerns about their safety after a battery exploded in Arizona last year, injuring firefighters, the news site North Country Now reported. Last week, town officials passed a moratorium barring local battery installations until September 30.

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