Time to Shine

Nov 30, 2020

Unleashing ‘hybrid’ projects will get more from solar and wind at lower cost.

 

The Prime Minister’s commitment to 40 gigawatts (GW) of offshore wind by 2030 is a huge undertaking that will galvanise industry to redouble their efforts to deploy clean energy projects. However, despite the scale of the ambition and the falling cost of offshore wind, the UK could also be getting more from a range of energy technologies by helping them to work together. ‘Hybrid’ clean energy projects, such as solar farms working with batteries, have the potential to significantly reduce costs by sharing components, particularly expensive grid connections. Other combinations include wind with hydrogen production or wind with interconnectors.

The Government mainly supports clean energy projects through the Contracts for Difference (CfD) auctions. However, it’s currently unclear how hybrid projects can participate. This makes project developers nervous about pursuing hybrid projects, even though they could save customers money. To reduce the cost of Net Zero, the Government needs to clarify the CfD rules to ensure that hybrid clean energy projects can fully participate.

The UK’s plan for offshore wind makes hybrid projects more important.

Offshore wind capacity in the UK is set to double by 2025 and to quadruple by 2030. As we build more offshore wind, we’ll often have too much clean energy. Instead of wasting it, this energy could be used by ‘hybrid clean energy projects’, which could make low-carbon hydrogen or store the energy in batteries and use it later. One example hybrid project is Gigastack, which plans to use UK-manufactured electrolysers to make hydrogen from offshore wind energy when the grid doesn’t need it.[1]

As the UK heads for Net Zero, we could see a range of hybrid clean energy projects, whether offshore wind-plus-hydrogen, solar-plus-battery storage, or even data centres and EV charging integrated with wind or solar farms. We can’t yet know the full range of possibilities for hybrid clean energy projects because many of the technologies are at an early stage.

Hybrid clean energy projects can contribute to lower customer bills.

The Government recognises that there’s an issue with hybrid projects in the CfD, and first consulted on changes in May 2016. [2]There are technical barriers that make it hard to include hybrid projects, including metering arrangements and calculating CfD payments through the process known as settlement.[3] However, there is a major prize on offer.

Hybrid solar-plus-battery storage projects are taking off around the world, including in Australia,[4] California,[5] and Chile.[6]These projects increasingly use ‘DC-coupling’.[7] Before being converted to Alternating Current (AC), which is what the grid uses, solar and battery storage both use Direct Current (DC). If assets couple up and work together before this conversion happens, then the process only needs to happen once, which cuts the cost of building and operating hybrid projects. DC-coupling means that the solar panels and batteries share a lot of equipment, including inverters and the grid connection.[8]

Analysis from 2018 suggested that hybrid solar-plus-storage projects could reduce costs by 8% compared to standalone projects.[9] These savings will be higher now as a proportion of overall costs, because the cost of solar panels and battery cells has fallen, which means that shared elements like the grid connection make up more of the cost. The current CfD rules almost certainly preclude DC-coupling, due to onerous metering requirements. Without changes, the UK could be left behind in this growing market.

Ideally, the Government would move fast to remove barriers to hybrid projects. However, if the Government gets this wrong then developers will take advantage of any loopholes. This week, the Government has said that it won’t make any changes in time for next year’s CfD auction.[10] However, developers could still build hybrid projects if the Government provides a strong direction of travel in the upcoming Energy White Paper.

Policy Exchange’s 2016 paper, Power 2.0, made several recommendations to reduce barriers to energy storage projects.[11] The Government and Ofgem have implemented many of these, including removing the ‘double charging’ of environmental levies on storage,[12] and increasing market access for aggregators of small-scale projects including energy storage.[13] By removing the current barriers to hybrid projects, the Government can continue to reduce barriers to energy storage projects.

Hybrid projects could help to keep the UK ahead in the race to Net Zero, but only if we unlock their full potential.

Today, the UK’s CfD scheme is holding back good projects that could reduce costs in next year’s auction, as well as blocking longer-term ambition for hybrid projects. The UK has led the world in decarbonising its electricity system, mainly through adaptive and forward-thinking policy and regulation. By allowing hybrid projects to fully participate in future CfD auctions, the Government can again demonstrate that the UK is at the forefront of the energy transition.

[1] Gigastack (undated). Vision. Link

[2] BEIS (February 2017). CfD: Government response to the consultation of changes to the CfD contract and CfD regulations. Link. Page 15 onwards (Original consultation issued on 11th May 2016).

[3] EMR Settlement Limited (December 2019). G8 – Contracts for Difference Metering. Link. Page 8.

[4] Edify Energy (undated). Gannawarra Solar Farm. Link

[5] Colthorpe, A. Energy Storage News (September 2020). California community energy group signs PPA for 400 MW / 540 MWh solar-plus-storage plant. Link

[6] Colthorpe, A. Energy Storage News (October 2020). AES begins work on 560 MWh [battery system] for wind and solar in Chile. Link

[7] Verbruggen, S. Energy Storage News (October 2019). Go big, go DC: an in-depth look at DC-coupled solar-plus-storage.

[8] Gupta, M. Greentech Media. DC-coupled solar-plus-storage system are gaining ground. Link

[9] NREL (November 2018). 2018 U.S. Utility-scale PV-plus-Energy Storage system costs benchmark. Link

[10] BEIS (November 2020). CfD: Proposed amendments to the scheme 2020. Link

[11] Policy Exchange (November 2016). Power 2.0: Building a smarter, greener, cheaper electricity system. Link (page 11).

[12] Ofgem (June 2019). Clarifying the regulatory framework for electricity storage. Link

[13] Coyne, B. The Energyst (December 2019). Balancing mechanism now open to smaller players. Link

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