The topic of the upcoming Cool Energy World "Perpetual Sun" forum is "Can Solar Generation plus Battery Storage become the cheapest form of dispatchable power?". It appears that the answer is "yes", albeit with a number of assumptions. (Note: if this interests you, be sure to register for the upcoming Cool Energy World "Perpetual Sun" forum.)
CHP Generation is the current benchmark.
In the last decade in the United States, gas-fired combined cycle heat and power ("CHP") plants have become popular and it's easy to see why: CHP plants are relatively inexpensive to build and work dependably 24 hours a day. And—as long as natural gas prices remain low—they are inexpensive to operate.
CHP plants have two disadvantages: they generate greenhouse gasses (albeit considerably less than coal-fired plant), and the operational expenses of CHP plants depends on the cost of natural gas, which is likely to increase over time.
PV (Solar) Generation is clean and inexpensive
By contrast, photovoltaic solar ("PV") generation plants have several advantages over CHP plants. They do not emit greenhouse gasses, and the cost of "fuel" (i.e. sunshine) is guaranteed to be zero for the foreseeable future. In addition, PV plants can be economically built in small increments: there's no compelling need to build a single huge plant.
... but PV is not a complete solution.
Since PV plants have an LCOE between $46 and $56 per MW-h compared to $48-$78 for CHP plants, it might be tempting to assume that PV plants would be the preferred choice for new plants. But there's a fundamental difference: you can control the output of a CHP plant while the output of a PV plant depends upon available sunlight.
To underscore the implications of this, imagine that your utility company offered you inexpensive electricity, but only between the hours of 8AM and 5PM, and even then, only on sunny days?
Adding Batteries to the mix
So it's reasonable to ask: Could we add battery storage to a PV generation plant in order to get the dependable output of CHP generation with the zero-emissions (and zero variable cost) of PV? And if so, when will building a PV + Battery Storage plant become as cheap (or cheaper) than building a CHP plant?
What follows is a rather crude analysis, but hopefully enough to whet one's appetite for a more detailed and nuanced analysis in the future.
The median LCOE for a CHP plant in 2016 was $63/MW-h. This price is not likely to decrease in the future; if anything, it will likely increase due to changes in the cost of natural gas and possible taxes or tariffs on carbon generating technologies. But for this analysis, we will assume a constant LCOE of $63/MW-h going forward.
The median LCOE for a PV plant with 10 hours battery storage in 2016 was $92/MW-h. Depending on who you listen to, the cost of solar and battery systems will continue to fall anywhere between 6%/year and 15%/year.
Here's how it looks when you plot the LCOE of PV + Battery against the LCOE of CHP:
If the cost of Solar + Storage continues to decline at 12% annually (and there's evidence that this is possible), then it will become the cheapest form of dispatchable power within just four years. With a more conservative prediction of a 6% annual decrease in cost, the crossover will happen in less than seven years.
Why this analysis may be wrong
The astute reader will notice that the battery bank added to the solar system is sized to last ten hours. Ten hours of storage alone without some other source is almost certainly not sufficient for long-term uninterrupted supply. In addition, for solar plus storage to become a mainstream source of energy will require major changes to policy and pricing structures in the utility companies.
But for both of these points, see "new baseload" below.
Why this analysis may be right
Incremental Build-out means lower financial risk
Until now, any new form of generation requires large capital investment, with correspondingly long payback time. It's not unusual for a conventional thermal plant to be priced with the assumption that it would not break even until it had been in operation for ten years or more.
However, PV Solar with Battery backup doesn't require large scale installations to realize profitability. It's easier to raise money when you can make a series of smaller, low-risk bets.
Independence from fossil fuels removes cost uncertainty
One of the beauties of solar energy is that you know the "feedstock" (the sunlight that creates the power) is always free. This is in direct contrast to fossil fuels, whose future price is highly uncertain. This also makes PV solar systems a lower-risk investment.
Removing short-term variability stabilizes the grid
Adding battery systems to solar systems creates "firming": the batteries kick in if the sun goes briefly behind a cloud and smooth out any short-term changes in supply or demand. This becomes increasingly important as more variable generation, such as solar or wind energy, is added to the mix.
Distributed Generation can defer infrastructure build-out
As previously noted, PV + Battery systems can be deployed in relatively small units. This makes it possible to site PV + Battery systems in parts of the grid that are running near their full capacity in order to better balance load and this defer the addition of additional transmission and distribution wires.
The New Baseload
Currently, electric grids in the United States follow a traditional pattern: relatively constant "baseload" energy is provided by natural gas, nuclear and coal generation plants. These plants run 24 hours a day and vary their output levels slowly, if at all. For example, CHP systems can be started and stopped, but it takes in excess of an hour to ramp up or down. To handle fast changes, gas-fired "peaker plants" are added to the mix to make up for changes in short-term demand. Unfortunately, peaker plants are expensive to run and maintain.
A grid with ample battery storage can do things differently: the need for additional power will be known hours in advance, giving ample time for an inexpensive CHP plant to ramp up. Correspondingly, batteries can absorb excess energy, giving time for CHP plants to ramp down.
The Next Grid
At Cool Energy World, we believe that the cost of PV and Battery technology will continue to fall rapidly, paving the way for a grid whose dominant source of energy is PV buffered by battery storage. And we could see this emerge within the next decade.
The largest obstacles to adoption will likely be policy and incumbent interests.