Evaluating the Role of Co-located Energy Storage in a Decarbonized Future

Abstract

Cost-effective decarbonization of the electricity sector involves substantial increases in installed wind and solar photovoltaic (PV) capacity. With the falling costs and ability to provide flexibility and reliability to the grid, energy storage resources are critical to balance the variability of renewable energy resources in a deeply decarbonized power sector. Numerous modeling studies have focused on the value and optimal design space of standalone storage assets but have not analyzed how batteries co-located with solar PV or wind – optimally sited in the same physical location as the variable renewable energy (VRE) resource – could change the role of batteries and buildout of various technologies. Thus, we focus on two projects related to the value of co-located short-duration energy storage using GenX, a least-cost optimization capacity expansion model, in the American West for 2030. First, we evaluate the effects of optimizing VRE resources to transmission interconnection sizing and co-locating VRE and battery resources on reducing transmission network expansion and increasing VRE and battery capacity deployment in low-carbon scenarios. Our findings indicate that co-locating VREs and battery energy storage can reduce long-distance inter-regional transmission expansion by 12-31% (106-744 GW-miles) and decrease grid connection capacity and shorter-distance transmission interconnection or ‘spur lines’ by 21-32% depending on battery penetration (7-22 GW). Second, we investigate the impacts of the current federal policy environment on deploying co-located energy storage, transmission, and VRE resources. We find that the Inflation Reduction Act (IRA) could further solar PV capacity by 10-11%, wind energy by 36-38%, and inter-regional transmission expansion by 51-81%. However, even with the introduction of the IRA, new battery technologies are not deployed in our models for 2030 due to the value that batteries can provide to the grid at their projected costs and the existing storage resources in the Western Interconnection.