Pexapark says in a new report that European developers and investors are increasingly using AC coupling in co-located renewables-plus-storage assets throughout Europe.
According to the report, approximately 15% of the surveyed companies plan to use AC coupling for their projects over the next three years. Additionally, other companies are considering hybrid AC coupled approaches, conventional AC coupled methods, behind-the-meter storage applications, or none of the mentioned approaches.
The report acknowledges that AC coupling is the most popular set-up due to its simplicity, but interest in the potential benefits of DC coupling is growing. However, there are still engineering and contractual challenges that need to be addressed.
Around 64% of the respondents aim to introduce or expand storage in their portfolios to mitigate the risk of cannibalization, but the complexity of monetizing co-located assets can slow down deployment.
The United Kingdom leads in solar and storage co-location in Europe, supported by mature grid services and energy storage markets, along with increased contractual provision for hybrid PPAs.
In Germany, the government has subsidized more than 1 GW of solar plus storage projects through tenders, driven by market dynamics such as increased volatility in wholesale markets.
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The Nordic countries strive to lead in wind plus storage to counter cannibalization risks, while in Spain, cannibalization poses a threat to the solar sector.
The report notes the role of hybrid power purchase agreements (PPAs) in providing revenue from grid services while enhancing the value of renewable asset power production. It identifies three types of hybrid PPAs and their respective advantages, disadvantages, and price-influencing factors.
Pexapark describes three possible models for PPAs, depending on investment objectives, risk propensity, and marketing capabilities of asset owners. One model involves two contracts: a renewable PPA for the generation asset and a separate contract for the storage asset, functioning independently. Another model considers a variable price based on delivery time, and the third option involves shared contractual agreements between the two assets.
“Co-locating renewables and storage can create new value streams and opportunities for hybrid projects, but it also adds complexity and uncertainty to the revenue modeling,” said Xuejiao (Jo) Han, lead storage quant at Pexapark. “Our report aims to help developers, IPPs, and funds overcome this challenge and explore this emerging and exciting market segment.”
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