Hybrid PV systems, combinations of solar PV with another generation source or with battery storage, are becoming increasingly important to tackling issues such as grid scarcity or negative electricity prices. These types of power plants can be game changers for the energy transition by matching electricity generation with consumption and making more efficient use of resources.
In this interview, we spoke to Simon Dupond, Policy Advisor on Renewables Markets and Investments at SolarPower Europe, about the challenges hybrid PV systems are still facing and best practices in different European countries. SolarPower Europe has recently published the report Embracing the Benefits of Hybrid PV Systems.
If we want to fully embrace the benefits of hybrid PV, we need to move away from the old vision of centralized, stand-alone electricity generation. We live in a new reality now where, if we want to decarbonize the electricity system, we need decentralized, coordinated and hybrid electricity generation. For that, we will need a suitable regulatory framework. The old vision for the electricity system makes integrating hybrid systems in the EU technically and economically difficult. The technical challenge consists in the difficulty of building and connecting hybrids to the grids. This is mostly because of outdated permitting processes, but also because of complex grid procedures.
The economic challenges lie in the difficult business case for hybrid systems because market access rules and the design of support schemes have not been adapted to these types of projects. In the report, we make proposals on how to improve those rules and how to improve the interactions between hybrid systems and grid operators. For example, how can we accelerate the implementation of grid connections for existing solar PV plants when they just want to add a battery? We also provide some best practices on how to design support schemes. Most existing schemes today have not been properly adapted or have some kind of restrictive rules on the participation of storage to other markets.
What are the political or regulatory measures necessary to promote the spread of hybrid PV systems in Europe?
We need subsidies that are suitable for these new types of projects. It will be important that all support schemes consider the option of adding wind power or storage to an existing PV system.
At the European level, we need a concrete set of policies, a flexibility package and a storage action plan. One issue to be addressed is double charging of grid tariffs for batteries. To apply a tariff both when you charge and when you discharge worsens the business case for batteries significantly.
What should also be tackled at the European level is the capacity markets because hybrids are not on a level playing field when they compete with fossil fuels in these markets.
Another EU-wide framework that should be addressed soon is the framework for guarantees of origin. At this moment, we do not have a clear methodology for certifying renewable electricity that has been stored before being distributed. Finding a solution to this will open up many markets, especially for renewable power purchase agreements (PPAs) with certificates.
Yes. Ideally, we would like to be able to track. This would be possible with a metering system that can track the electricity flow between the solar PV and the battery. But for now, we do not have a precise methodology.
UK case study: According to the report, 62 percent of all PV + BESS (Battery Energy Storage Systems) hybrid power plants in Europe are located in the UK. What regulatory or support measures have contributed to the breakthrough of this type of system?
One of the key UK policies for driving investments in hybrid systems is the progressive design of auctions. Hybrid systems can participate in traditional renewable auctions for solar power. This makes things really smooth. Plans are underway to add three gigawatts (GW) of battery capacity to solar PV plants in the UK that received funding between 2022 and 2024.
In the case of solar plants that receive support from a contract for difference (CfD), the integrated battery can operate freely in different markets. It can provide services to stabilize the grid even if adjacent solar assets are receiving support. It is a real game changer because it makes the business case much more attractive. And the battery can respond to the grid’s demand.
Can you give us some insights into the key markets for hybrid power plants, for example Poland for PV and wind and and Spain for PV and BESS?
The PV plus wind market is still very small. We saw some nice and inspiring practices in Poland. That could also be a reason why it is the top market today. They have a very clear framework for operating multiple assets in the same location and for how they interact with the grid. This means that you can very easily amend the grid connection agreements whenever you add a battery or wind turbine to a PV system - or the other way around. Centralizing communications makes things very smooth. We call this practice multiple product entries.
There is a promising practice in Spain that makes it easier for developers to combine technologies at the same grid connection: The Transmission System Operator (TSO) defines the difference between the injection capacity under a grid connection agreement and the installed capacity. If solar, wind and batteries are combined at the same grid connection, this does not mean that the same amount will actually be injected, because they are complementary. This practice significantly improves the business case for grid connections.
The Spanish solar market has been mostly driven by PPAs the last two years. There were no auctions for solar power. Co-location has also not been part of the planned auctions. One of the key obstacles was that receiving financing under a support scheme went hand in hand with limitations on grid charging. The situation in Portugal and Germany is similar. With CapEx support for your battery and PV system, providing grid services is limited or impossible. This benefits neither the investment case for batteries nor the energy system as a whole. The absence of a capacity market in Spain, scheduled to be implemented next year, is also a contributing factor. Compared to the US, for example, there is a strong capacity market that has driven the deployment of batteries.
This is to be expected. Batteries will be extremely useful for both short-term demand response and long-term supply. They allow planning for the electricity demand of the coming months, or even the next season. Ideally, you would like to use batteries in all market time frames. But this requires the right signals.
We have looked at the design of CFDs in the UK in more detail in order to understand the extensive deployment of solar and batteries there. What the UK is doing in terms of design of the contracts is that they create CFDs that function as pay-as-produced contracts. This means that the remuneration of the electricity is based on the generated output, and payments can only be claimed for direct renewable exports. This means that plant operators can charge their batteries with solar electricity when prices are low or negative. In the UK, CFDs will stop remuneration when prices are negative. When there is a lot of electricity in the system, you can charge your battery with the solar asset and transfer it to later hours. The only requirement is that generation and storage are properly separated by the metering system. This allows system operators and regulators to measure exactly what comes in and what goes out of the solar system and the battery system. The contracts offer the flexibility to optimize revenue stream, and to change from the CFD operating mode to battery charging and dispatching.
