Report: Energy Storage Rules In Puerto Rico May Dampen Short-Term PV Development, Boost Long-Term PPA Rates

To meet the requirements introduced by the Puerto Rico Electric Power Authority (PREPA) for developers to deploy an energy storage system with utility-scale renewable energy systems, IHS predicts that the upfront costs of photovoltaic systems in the island commonwealth will increase by 15%. As a result, PREPA will now need to renegotiate power purchase agreements (PPA) previously signed with renewable developers, which will further delay the adoption of PV in Puerto Rico.

IHS forecasts that installations will commence in late 2014 once appropriate amendments have been made to PPAs, providing that PV developers can source financing. Puerto Rico has an aggressive renewable portfolio standard target of 1.6 GW of renewable installations by 2017.

According to the research and analysis firm, utilities and grid operators are coming to appreciate the benefits of installing an energy storage system at a renewable power plant to overcome many of the challenges of integrating intermittent renewables into the electricity mix. Consequently, IHS predicts that similar interconnection requirements to those announced in Puerto Rico will be introduced in other regions with growing levels of renewable penetration.Â

IHS also predicts that even in regions where storage is not mandated, developers will be able to negotiate ‘premium’ PPA rates with utilities for PV plants with storage attached, as the developers are able to guarantee a more stable and predictable output to the grid. IHS calculates that at current storage pricing, if a developer is able to increase the PPA received for a PV plant by $0.02/kWh, the payback time on the cost of the storage could be as short as 10 years, while most PPAs typically have terms of 20-25 years.

IHS forecasts that the deployment of energy storage co-located with renewables in the near term will be driven by regulations such as those introduced in Puerto Rico and by test and pilot installations, resulting in 150 MW being installed in these applications in 2014, compared to almost nothing in 2013.

However, Sam Wilkinson, IHS solar research manager, says in the long term, as levels of renewable penetration continue to increase, the cost of storage falls, and the benefits of storage in utility-scale renewables is proven, this will help drive the market to reach 1.5 GW in 2017.


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