• Renewable Energy Generation
  • Renewable Energy
  • Energy Storage
  • Solar Plus Storage

Renewable Plus Storage Is More Economical Than Gas Plants

Pritil Gunjan
Jun 10, 2019

Solar 10

A recent study by Fluence and Carnegie Mellon University found that the cost of generating power from solar plus storage was cost-competitive with new build gas power generators. The study considers both operational and financial performance across these projects. Installing solar plus storage as an economical substitute to gas peaker plants is an emerging trend; therefore, building gas plants may not be the most attractive solution for utilities in future. Renewable energy and storage solutions are in a strong position to compete with conventional gas plants for flexibility solutions. While colocated wind plus storage pilot projects are on the rise, the commercial incentives and regulatory barriers to invest in wind plus storage has restrained market growth in the past.

This study closely follows an announcement by Enel Green Power, which observed that industrial power generation interest in Mexico is shifting from gas-fired generation to renewables plus storage. While the renewable plus storage market is largely driven by customer awareness and adoption, the fixed generation cost of renewables offers an attractive proposition against gas price volatility, which influences future power tariffs.

Renewable Energy Plus Storage: An Attractive Option

Power purchase agreement (PPA) prices have declined almost 60% over the last 2 years. Meanwhile, levelized costs for renewable plus storage are reaching the same levels as standalone wind or solar projects. According to Navigant Research, the 2021 levelized cost of energy for a new combined cycle gas plant is expected to be equal to or less than PPAs for solar plus storage plants commissioned in the same year. While economics are not the only factor, battery storage can ramp its output faster than a single cycle gas plant. 

In the US, favorable regulations in California have encouraged power producers to choose renewable energy plus storage over new gas plants, baseload gas and oil-fired power plants, and gas peaker plants. In most cases, energy storage can support not only renewable shifting but also ancillary services such as frequency regulation and voltage stabilization. 

Renewables plus storage projects are coming in at lower prices and are being chosen over new gas plants. However, this does not mean that wind, solar, and storage will simply eliminate the need for gas (or some other form of flexible generation) since the technical issues of integrating large-scale renewables are still being fleshed out. Intermittency of renewables and variability in supply have created a duck curve where solar power produces more energy that can be used, leading to renewable curtailment (or where solar power tails of at sunset just before peak demand) and creating pressure on peaker plants to ramp up quickly. Grid integration of renewables will continue to be the largest driver of renewable plus storage applications as it offers a much greater degree of flexibility and quicker dispatch.