The World Bank’s Energy Storage Program, under the Energy Sector Management Assistance Program (ESMAP), together with the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the Acelerex team released a report detailing Guidelines for Planning Solar-Plus-Storage Projects. Solar-Plus-Storage projects allow offtakers to address issues with intermittent renewable generation by shifting energy to when it is needed most. The report’s ready-to-use planning framework, the decision-making tree, sample business models, and the PPA template and term sheet streamlines the otherwise complex journey to commercial operation of hybrid projects. This enables the adoption of solar-plus-storage projects that leverage private investments in countries where fuel dependency is putting stress on limited public resources.
Findings and frameworks detailed in the report are the result of hundreds of hours of interviews and research on commercial PPAs, PPA templates, Integrated Resources Plans, Stacked Storage Services, and Solar-Plus-Storage business models.
Key Findings of the report include:
- Many developing countries are exposed to vulnerabilities associated with energy imports, volatile prices, and fuel dependency
- Deploying solar and integrating it with energy storage is a viable, cost-competitive alternative that has the potential to reduce the dependency on thermal generation, especially when leveraging private investments
- The three primary business models for solar-plus-storage power purchase agreements (PPAs) include:
- Two-part contract for capacity and energy
- Capacity contract
- Blended contract (single price for capacity and energy)
- Time Differentiated Rates
- 24/7 Firm Supply
The report also details a four-phase framework for planning solar-plus-storage projects:
The first phase focuses on overall system planning including least-cost planning and renewable energy integration studies, that help a utility or country determine the value of solar-plus-storage as part of its future energy and grid needs. The second phase begins with strategy and defines the project based on a detailed analysis of the country’s power system needs and expansion plans. This phase characterizes use cases, the sizing of the project, and the system requirements in terms of dispatchability and energy firmness. The third phase identifies and quantifies the optimal business models and contract structures that meet needs of the project and offtaker. Structuring bankable solar-plus-storage projects is key to financing clean energy projects and ensuring their long-term viability. The choice of business model depends on the desired risk allocation and technical configuration requirements of the off-taker and system operator. The fourth phase provides a decision tree to help practitioners evaluate the trade-offs involved in selecting a business model:
This Business Model Decision Tree is a tool that allows practitioners understand what type of PPA is most useful and relevant for the transaction. The decisions that need to be made are centered around the needs of the buyer and optimizing that value of the solar-plus-storage asset. If the buyer finds value in firm or quasi-firm power from the asset, than a blended energy contract a single payment for capacity and energy is most relevant. If the Buyer finds value in time-matching the firm power, than either a time-differentiated or 24/7 firm power supply blended energy contract is most relevant. If firm or quasi-firm power is not a requirement of the buyer, either a two part (capacity and energy) or single capacity contract is more applicable. The discernment between a two part and single capacity contract is whether or not the buyer finds value in controlling the solar-plus-storage asset.