Black Hills Energy is seeking 200 MW of solar power or wind plus energy storage capacity as part of a request for proposal, driven by summer 2019 bids for solar+storage of $0.024/kWh and $0.036/kWh and looming cuts to the 30% investment tax credit.
From pv magazine USA
During the summer of 2019, South Dakota utility Black Hills Energy conducted a targeted competitive request for proposals (RFP) to replace solar and solar+storage projects. It resulted in 133 bids, with a median price for solar power of $0.024/kWh and solar+storage of $0.036/kWh.
The surprise of these rates, combined with pending cuts to the 30% investment tax credit (ITC), is driving them to seek this new capacity, the utility has said. It has no immediate need for new capacity to meet load requirements, and doesn’t need new energy to meet the state’s renewable energy standard requirements. Renewable advantage is thus solely focused on whether the opportunistic window represented by Public Service Co. of Colorado’s recent competitive solicitation and the phase-out of tax credits will permit Black Hills to significantly increase renewable and storage resources with savings to customers.
Short version – it’s all about the money. The utility states that if the bids don’t save their customers cash, then it will not proceed with the procurement.
The competitive bidding process will accept four types of bids – power purchase agreements, build-transfer arrangements, power purchase agreements that include a future sale to Black Hills Energy, or – drum roll, please – utility self-build. The bids are due by Feb. 15, 2020, with projects expected to be approved by the end of 2020 and interconnected to the power grid before the end of 2022.
Due to the intermittent natures of solar and wind, the utility will give “effective load-carrying capacity” (ELCC) of 23% and 19%, respectively. Adding energy storage will increase the ELCC.
The example the company gave explained how a battery will increase the ELCC of a solar or wind facility:
For example, a 100 MW 8-hour storage device would receive a 95 MW capacity credit. If it were paired with a 100 MW solar facility, the solar facility would receive a 23 MW capacity credit. The combined capacity credit would be 118 MW. However, since that amount is greater than the eligible energy resource nameplate capacity, the capacity credit will be reduced to 100 MW.
The combination of this information leads pv magazine USA to believe the volumes of solar power installed could be up to five times higher, if no energy storage would be included, but in fact will be scaled back as the developers run their economic models to feather in financially viable volumes of energy storage.
If the projects go through, this will bring the utility to approximately 60% CO2-free electricity in its southern Colorado generation portfolio in 2023. The recently added 60 MW Busch Ranch II wind project brought the group to 30% renewables, fulfilling the requirements of Colorado’s renewable energy mandates.
Source: pv magazine