Influence of Hybridization on the Capacity Value of PV and Battery Resources

Utility-scale systems that combine solar photovoltaic and battery (PV+battery) technologies are growing in popularity on the U.S. bulk power system. The business case for PV+battery systems depends on both their ability to reduce costs and their ability to generate value synergies associated with the provision of energy, capacity, and ancillary services. Capacity value can constitute a significant portion of the value PV+battery hybrids provide to the grid (e.g., through avoided or deferred capacity) and receive through revenues. Throughout this report, we define capacity value as the monetary value of a plant's contribution towards the planning reserve margin, which ultimately depends on market rules and structures. PV+battery hybrids do not always fit into current market structures because of the interactions between the PV and battery components. Unique considerations for the capacity value of PV+battery hybrids include the disparate nature of participation models for PV and battery technologies in existing market rules and the potential influence of a shared interconnection capacity; limitations imposed by a shared inverter; limited ability to charge the battery in advance of capacity events if charging must be sourced from the coupled PV; and challenges or uncertainties associated with co-optimizing the operations of the PV and battery components. Grid operators are currently considering how market structures can be modified to optimally determine the capacity value provided by PV+battery systems, and the rules of how they are integrated into markets are still being written. As with any resource, poorly designed rules could increase the cost of energy and reduce system reliability, while well-designed rules could allow markets to receive the full benefits hybrid systems can offer without overcompensating them for the services they provide. Well-designed rules for PV+battery systems must consider the unique aspects listed above, while leveraging the commonalities with existing resource types. In this report, we summarize the technical capability and market rules that influence the capacity value of PV+battery systems. We further discuss the potential tradeoffs between computational complexity and accuracy for the various ways in which grid operators can credit PV+battery systems for capacity. Finally, we describe markets for capacity, survey current wholesale market rules applying to PV+battery systems, and provide a snapshot of the current regulatory landscape for PV+battery systems.