A standalone battery earns its revenue not only from the arbitrage opportunity between day and night prices but also from participation in FCAS markets. This remains true when the battery is paired with a solar farm but can be complicated by constraints or trade-offs between FCAS participation and solar export. When optimising for maximum trading profit, this can play out in ways that seem, at first glance, counterintuitive or even counterproductive.
In this Chart of the week, we look at the behaviour that such a hybrid system can exhibit when wholesale market prices are low and solar energy generation is high.
To do this, we have used Cornwall Insight Australia’s Storage Investment Model (SIM) to simulate a 100MW 2hr battery and a 100MW solar farm in a hybrid AC-coupled system[1] with a 100MW transmission connection. The SIM maximises the net operating profit from the hybrid system for each trading day, optimising the dispatch of the solar farm and the battery in each market (wholesale + 8 FCAS) for each half-hour interval.
An average time-of-day capacity enablement profile for 2031 (after the LRET scheme ends) for the hybrid system in each of these markets is shown in Figure 1. While the solar farm is actively generating, the capacity offered into the Raise and Lower Contingency FCAS markets is generally lowered accordingly.
However, the top and bottom of the figure in the middle of the day highlight two types of constraints that can suppress the amount of solar energy that can be exported to the grid:
- Direct solar export to the grid can be constrained by the maximum capacity of the transmission connection:
- If this is lower than the sum of the solar peak capacity and the battery power capacity (which may happen if TUoS charges are high or if line capacity is constrained), then there will be a trade-off between the solar generation export and the battery’s participation in FCAS markets.
- If wholesale prices are low, then it may be optimal to spill the solar energy and reserve transmission capacity to participate in Raise FCAS markets instead.
- Charging the battery behind-the-meter from solar can be constrained by the battery inverter’s maximum power capacity:
- If wholesale prices are zero or negative, it may be optimal to instead spill the solar energy and reserve inverter capacity to participate in Lower FCAS markets.
- This will generally be the case if a suitably large arbitrage opportunity is not present (or forecast) in the evening peak period.
The net effect of each of these types of constraints can be observed in Figure 2, where the grey area represents the solar energy spilled. When looking at how large this amount might be, note that this behaviour occurs because there is more profit to be made by instead allowing FCAS participation.
Of course, there would be many ways in which this behaviour may be altered or avoided, depending on the priorities of the project proponent, including but not limited to:
- DC-coupling the battery and solar farm to remove or reduce the bottleneck of the AC inverter capacity on BtM charging of the battery from solar;
- Increasing the maximum transmission connection capacity, up to the sum of the solar generation and battery inverter capacities, if network conditions and economics allow; or
- Running a more aggressive arbitrage strategy to force higher solar energy utilisation, at the expense of FCAS participation.
Our in-house Storage Investment Model can provide in-depth revenue forecasting and optimisation services to help investors and developers determine the right approach for their projects. For more information, please contact enquiries@cornwall-insight.com.au.
[1] Key modelling assumptions:
- Located in the Darling Downs Renewable Energy Zone (REZ) in Southern Queensland.
- Battery registered to provide up to 50MW of Regulation FCAS, and 52MW of Contingency FCAS (average recent Contingency FCAS registration of other market batteries in the NEM)
- 1-year (2031) model run, with battery capacity degradation and solar output degradation ignored
