Combining solar and wind parks with large battery storage systems at a single location, known as co-location, offers many advantages. For example, the risks for the operators of the renewable energy generation plants are reduced by diversifying revenues, protecting against price cannibalization and shifting generation or feed-in to the evening hours. The economic efficiency of battery storage can be increased by cost savings due to a common grid connection point and a faster grid connection. Advantages for the power supply arise from fewer grid bottlenecks, avoided curtailment of plants and better utilization of scarce grid resources.
So far only small market share for hybrid systems
However, the market for renewable co-location projects in Europe is only just beginning. According to Aurora Energy Research, solar and wind farms with an installed capacity of almost 1.2 gigawatts (GW) were in operation across Europe in 2023, combined with large-scale battery storage. PV plus battery storage was the frontrunner here with 724 megawatts (MW), while onshore wind power plus battery storage was at 475 MW. According to SolarPower Europe, of the 0.8 GW of large-scale battery storage systems with a capacity of 1.1 gigawatt-hours (GWh) installed in Germany between 2021 and 2023, 11 percent were combined with renewable energy plants, primarily solar parks. In the UK, 12 percent of wind and solar farms were combined with battery storage or electrolysers, according to an April 2024 report by industry association Renewable UK.
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However, experts and industry representatives are seeing a significant increase in demand for large-scale battery storage and co-location projects. In Germany, project developers have currently submitted grid connection requests for 161 GW of battery storage capacity, which is a hundred times more than the 1.6 GW currently installed. SolarPower Europe also predicts strong growth in large-scale battery storage in its “European Market Outlook for Battery Storage 2024-2028”. According to a medium scenario, the total installed battery storage capacity is expected to climb to 78 GWh, double the 2023 figure (35.8 GWh).
Growing interest in co-location projects
In a “high scenario”, installed battery capacity in Europe is expected to grow to 135 GWh by 2028. Large batteries, especially grid storage (so-called utility-scale storage), will dominate. Their share of newly installed capacity is expected to rise to 45% by 2028, more than doubling from 2023 (21 percent). As a result, interest in co-location projects is also growing, according to analysts such as Jannik Carl and Eva Zimmermann from Aurora Energy Research. Almost all large-scale PV projects are now combined with battery storage, says Stefan Müller, Chief Operating Officer (COO) of the EPC Enerparc.
Co-located solar park for a resilient grid completed in Sweden
Valerii Lazarev, Projects Bankability Manager at WElink Energy, sees negative electricity prices (at peak times), bottlenecks and high costs for grid access as important drivers for co-location projects. EPCs could benefit from the hybridization of existing solar projects by flattening the production curve and delivering energy on demand and thus at higher prices. And this with comparatively low investment costs because there is no need to set up a new, expensive grid connection.
Largest hybrid plant in Portugal
The international developer, based in Ireland, is currently in the process of expanding a 219 MW solar park in Vaquieros (southern Portugal), which was commissioned at the end of 2021, in several phases into a co-location facility with a capacity of over 1 terawatt-hour, according to Lazarev. Initially, the existing 219 MW of PV capacity will be increased by a further 50 MW, followed by the construction of a 165 MW wind farm and then a 100 MW/400 MWh battery storage facility. Construction is scheduled to begin in the second half of 2025 and should be completed by the end of 2027.
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Europe’s largest co-location power plant is currently being built by the Spanish energy producer Endesa, also in Portugal (Pego, province of Santarém). The plan is to combine a 365 MW PV plant, a wind farm with 264 MW and a 168 MW battery storage facility. In addition, a 500-kilowatt (kW) electrolyzer will be installed to produce green hydrogen using surplus energy that the battery storage system cannot absorb.
Further cost decline an important driver
The continued decline in costs, particularly for photovoltaics and battery storage, is also an important driver for more co-location projects. According to a study by the Fraunhofer Institute for Solar Energy Systems (ISE) in July 2024, the levelized cost of electricity (LCOE) of solar parks in Germany is between 4.1 and 6.9 euro cents/kWh. When combining ground-mounted PV systems and battery storage, the LCOE is 6.0 to 10.8 cents/KWh.
Large battery storage systems in Europe are all the rage
Should battery prices fall to the predicted levels of 180 to 700 euros/KWh by 2045, the ISE even expects production costs for ground-mounted PV battery systems to be between 3.1 and 5.0 cents. By comparison, the production costs for fossil fuel power plants are significantly higher today: brown coal power plants cost 15.1 to 25.7 cents, hard coal power plants 17.3 to 29.3 cents, combined cycle power plants 10.9 to 18.1 cents and flexible gas power plants 15.4 to 32.6 cents per kilowatt hour. Nuclear power plants are between 13.6 and 49.0 cents/kWh.
Reduce construction and operation costs by 50 %
According to Aurora Energy Research, the actual increases in profitability (IRRs) that can currently be achieved by combining a solar power plant with a battery storage system in key European markets are in the range of one to just over two percent. The IRRs of individual solar parks were compared with those that are combined with a battery storage system.
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RenewableUK points out the high potential cost advantages of co-location projects if regulatory barriers are removed and approvals are simplified. Combining PV projects with battery storage at the same grid connection point could reduce construction and operating costs by 50 percent. In addition, a more flexible energy system with the integration of storage in the UK would save 16.7 billion pounds (19.8 billion euros) in electricity system costs annually by 2050, which would also benefit electricity customers.
Complexity and regulation as obstacles
There are various reasons why co-location projects are often unable to fully exploit their potential cost advantages in practice and why the number of projects implemented is only gradually picking up speed. “In addition to regulatory issues, this combination of technologies is extremely complex in terms of structure and commercialization. Business models must be considered individually and, depending on local parameters, a single project can often be more attractive than a co-location project,” says Philipp Kraemer, Director Strategic Growth & Digitization at CCE.
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In Germany, for example, the so-called exclusivity principle of the Renewable Energy Sources Act (EEG) has so far slowed down the economic viability of solar and wind farms combined with battery storage. It states that EEG-subsidized plants may only be charged with green electricity and not with gray electricity (from the grid) throughout the year, otherwise the EEG plant status or the subsidy will be lost. This severely limits a profitable, flexible operation of the storage system in co-location with a solar or wind farm for shifting the feed-in to high-price hours and for providing balancing energy (during which grid electricity is also charged).
UK, Ireland and Italy already further ahead
According to the solar package I, it should be possible to change the operating mode every two months from June 2025, and to charge the storage system from the grid and the renewable energy system in parallel from June 2026. However, Aurora analyst Zimmermann fears delays in the regulation coming into force in Germany, because the Federal Network Agency, which is responsible for the regulation, has not yet decided on a measurement concept. Other European countries, such as the United Kingdom, Ireland and Italy, which allow flexible operation of co-location systems, are already further ahead in this respect, says Zimmermann.
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Intersolar Europe, which is taking place this year from May 7-9, offers a comprehensive overview of the latest products, technologies and solutions, as well as the major trends in the field of PV hybrid power plants. At the accompanying Intersolar Europe Conference, there will be a session in English from 2:00 to 3:30 p.m. on Wednesday, May 7, titled “Hybrid PV Power Plants II: Strategies for Matching Energy Generation & Power Demand.” On Thursday, May 8, the topic of hybrid power plants will be the subject of a session in English at the Intersolar Forum (Hall A3, Booth A3.150) from 3:00 to 4:30 p.m. (hcn)
