The next frontier of electric power will maximize renewable energy and storage
For most of history since Thomas Edison, electric power was pretty simple. It mostly came from large power plants that used a few different fuels, mostly fossil, and with exceptions like nuclear or hydroelectric power, emitted tons of carbon dioxide. In a relatively short amount of time, this paradigm has been upended by the growth of affordable renewable energy, both utility-scale and distributed, that does not burn any fuel, and the political, regulatory, and corporate drive to cut emissions.
This new era of power has only begun but is already quickly evolving. The next frontier goes beyond the shift from fossil fuels to renewables and moves toward different power resources working together—wind, solar, batteries and energy efficiency in many different permutations—to deliver clean energy affordably and efficiently in ways that were just theoretical only recently.
The midwestern U.S. is a fascinating region in which to observe these changes because coal was the primary source of electricity there for many years. But as many of these legacy coal plants began retiring, the region has seen a striking switch toward renewable energy. In the Midcontinent Independent System Operator (MISO), the nonprofit organization that operates the electric transmission in most midwestern states, wind, and solar energy have gone from less than 1% of the region’s power capacity ten years ago to over 12% today.
These different types of resources complement each other, which is why, increasingly, battery storage is being added to renewable energy projects. Batteries help fill in the gaps by charging up with electricity generated when the wind is blowing and the sun is shining and then discharging at other times. But in MISO and other regions of the country, the ways these sources can work together so that clean energy is available around the clock is only beginning. It will take some big changes in the way the MISO market works to fully realize this potential.
There has been a great degree of enthusiasm about the combination of storage and renewable energy in the Midwest. MISO just announced that in 2021, 58 so-called “hybrid resource” projects representing about 11,000 MW were added to the queue of generation sources waiting to interconnect to the grid, coming on top of the 5,000 MW of hybrid projects that were already in the queue, adding up to about 16,000 MW or about 3% of the total power capacity in MISO’s queue. These are mostly solar-plus-storage projects in which both solar panels and a storage component are combined into one project. The economics driving these hybrid projects forward are strong enough that according to a MISO staff presentation this June, “all-new solar projects will have a storage component.” A survey of members of the Clean Grid Alliance, a Midwest-based trade organization of project developers and utilities, found that 90% of its members are pursuing a hybrid project of some kind, and 75% expect to bring one online in the next three years.
The economic tailwinds include the falling costs of lithium-ion batteries and the need for energy sources to replace retiring coal plants that do not emit greenhouse gases but are still available around the clock.
There are still going to be plenty of renewable energy projects built without a storage component and storage projects built without a renewable component. However, hybrid projects do fulfill distinct needs in the marketplace. To understand what makes these hybrid projects special and why they are distinct from stand-alone renewable energy or storage projects, which have already been growing quickly, let’s back up and talk about the big picture.
The familiar case for energy storage is that utilities in many parts of the country, from California to Michigan to New England, are procuring storage to back up renewable energy and compensate for the intermittency of wind and solar.
That is true, but it is not the whole story. Renewables and storage can sometimes unlock even more value if they work together as what is called a “hybrid” resource. In that case, the renewable resource and the storage component work together as one—and with those powers combined, they can tackle some of the biggest challenges for the grid.
If we are to have a cleaner grid that can deliver net-zero emissions, one of the biggest challenges that will need to be overcome is the transmission system—specifically, how much we need new transmission lines to link new wind and solar projects to population centers, but how difficult and expensive it is to build them. Building out the transmission grid to unlock the amount of renewable energy needed to meet net-zero goals will cost billions of dollars. Nearly 250 renewable energy projects have been withdrawn from MISO from 2016 to 2020, and insufficient transmission infrastructure is one of the main causes, according to a recent study from the Natural Resources Defense Council’s Sustainable FERC Project. The grid is congested and needs more lines to relieve that congestion.
The high costs of connecting to the grid are passed down to an individual power generator like a wind farm or solar facility. Any electric facility connected to the MISO grid is assigned “interconnection rights”—the amount of power it is allowed to inject onto the grid at any time. Based on the requested interconnection rights, MISO studies how much an individual project would contribute to grid congestion or other reliability issues, and then charges the project for the costs of any transmission upgrades necessitated by the project.
A solar project might be using all its interconnection rights on the sunniest part of day, but at other times, it is not running at full output, and so is not using the full interconnection rights. Money is essentially being left on the table. But if the project could discharge a battery during those less sunny times, the project would be using its interconnection rights more efficiently.
Another situation to consider is when the project is supplying more electricity than is being demanded on the grid, so the project output has to be curtailed. For example, over 4% of wind energy in MISO’s territory is curtailed each year, more than any other grid operator region in the country. That energy is essentially lost.
Energy storage can help by holding energy that would otherwise be curtailed, and then discharging that energy at times when wind or solar is not available.
With the addition of storage, the batteries can use the interconnection rights to inject electricity into the grid at one time of day, and the solar panels can use the interconnection rights at another time.
Maggie Kristian and Matt Prorok of the Great Plains Institute explain this well in a recent blog post:
By using more of their already procured and paid for interconnection rights more of the time, hybrid resources more efficiently use transmission infrastructure and could avoid paying for some network upgrades needed to expand the capacity of the transmission system. This would help relieve the bottleneck of transmission capacity and network upgrade costs that are becoming increasingly problematic in the western portions of the MISO region.
When renewable energy and storage are combined into a hybrid project, transmission needs are smaller than they would be if these were separate projects. That makes it cheaper to build renewable energy projects because the developer does not need to spend as much on transmission upgrades, while also making it less necessary to build as much transmission to integrate more renewable energy. That is a big win-win for two challenges standing in the way of clean energy goals.
Transmission congestion is just one hurdle for the clean energy transition that hybrid projects could help overcome. Another is this: we need significantly more renewable energy to decarbonize the electricity sector, but we need backup power sources on the grid to support all resources when they aren’t operating. Natural gas-fired power plants have been the default option, in both MISO and most of the rest of the country, to replace coal-fired power and back up renewable energy. While an improvement compared to coal, natural gas is still carbon-intensive.
Hybrid resources are a powerful alternative to natural gas. A hybrid project can be available for power around the clock—providing electricity generated by wind and solar or discharged by the battery when renewable energy is not available.
But that’s not what is happening—yet—on the grid. As shown by all the proposed hybrid resources waiting in the queue, the technology and economics are there. The regulations, however, have not caught up. Hybrid resources have to use existing market rules that were not designed for them. Under current MISO rules for how power resources can participate in the wholesale electricity market, there are barriers that make it more difficult for hybrid storage projects to charge storage technologies from the grid and then sell that electricity later. MISO also does not have a clear path to enable projects to sell the many ancillary services that energy storage can provide, such as voltage control. As a result, many possibilities for these projects to provide valuable services are cut off.
Because of urging from FERC, MISO is working on developing new market rules to address these shortcomings, but the timeline is challenging. Among other delays, the grid operator says it needs until 2025 to make software upgrades that will allow its systems to handle the additional complexities that hybrid resources will bring to their markets. Considering the short timeframe to reduce emissions and move toward clean energy, that 4-year delay may be a problem.
Any policymakers who care about making the grid cleaner at the most affordable price should be thinking about how to continue to enable storage and renewable energy to work together. MISO also needs to move more quickly to establish the rules that will allow hybrid projects to fully participate in the market. Join us in urging MISO and other grid operators to establish these rules as required by FERC, because time is of the essence.