Lithium-ion battery arrays charging on solar farms and flanking fossil fuel power stations have become defining new features of the U.S. electricity supply picture in recent years.

More than 270 battery-power plant pairings are now in operation, offering almost 6 GW of power storage capacity, according to S&P Global Market Intelligence data. The multi-gigawatt surge, three-quarters of which is solar-powered, is centered in California, Texas and the greater Southwest. But ripples are forming across the country.

Leveraging lucrative incentives in the Inflation Reduction Act of 2022 — celebrated as the largest climate legislation in U.S. history — fully hybridized resources and energy storage stations that augment or supplant fossil generation appear poised to rapidly remake America's energy landscape. Already, electrochemical energy storage has emerged as an effective, if not essential, system reliability asset for grid operators strained by variable renewable energy resources, conventional generator retirements, changing consumer demand patterns and extreme weather.

"I'd be shocked if 10 years from now we're not sitting here with energy storage at pretty much most of the power generation that exists today," said Yann Brandt, chief commercial officer at FlexGen Power Systems Inc. "Development is far easier. ... The interconnection is not going to be a big issue. The zoning is not going to be an issue because who's going to care about a battery next to a power plant?"

The Durham, N.C.-based system integrator has tied batteries to solar photovoltaic facilities in Puerto Rico, Texas and Utah and equipped a natural gas plant in Indiana with energy storage "jump-start" capability, also known as black start. Recently, FlexGen struck an agreement with Middle River Power LLC to connect roughly 200 MW/420 MWh of battery resources at four existing natural gas-fired plants in California.

'Why wouldn't I leverage [batteries] and give additional capability to my existing plant?" Brandt said.

'Forced integration'

Another 40 GW is planned at nearly 400 new and existing power plants, mostly over the next five years, Market Intelligence data indicates. About 92% of that pipeline, which does not reflect the deeper pool of early-stage projects under study in grid operator interconnection queues, is at solar farms.

Utility and developer plans are so rich in solar-battery combinations because, up until the passage of the Inflation Reduction Act, storage facility operators could only qualify for a federal investment tax incentive if their projects charged directly on solar generation.

"There was sort of forced integration," said Gus Flores, principal manager of origination at Edison International utility subsidiary Southern California Edison Co., or SCE. The utility's contracted energy storage portfolio contains about 1,850 MW of colocated batteries, mostly at solar plants, and another 3,150 MW of stand-alone storage.

Now that batteries not tied to solar farms can also access the investment tax credit, "we'd expect stand-alone storage to be more competitive, or at least on par with, colocated," Flores said.

Entering 2023, overall U.S. utility and developer plans tilted toward colocated projects. But it is "hard to say" how the new rules may affect the success of stand-alone versus colocated storage, according to Flores, partly depending on how many colocation opportunities still exist. Another question is how favorable those remaining locations may be for capturing value in energy markets.

Battery replacements

The line between stand-alone and colocated storage can also be blurry.

Flores, for instance, views the AES Alamitos Energy Battery Storage Array as stand-alone. Yet, it is part of AES Corp.'s Alamitos energy complex in Long Beach, Calif., where the SCE-contracted system shares infrastructure with gas-fired generation.

Such projects are clearly in a different resource category than fully operationally hybridized projects in SCE's portfolio, such as W Power LLC's battery-backed, gas-fired Stanton Energy Reliability Center in Orange County, Calif., and NextEra Energy Inc.'s sprawling Blythe and McCoy solar-plus-storage complex in Riverside County, Calif.

While colocated storage comprises an energy storage system placed with one or more power plants, hybrid resources combine multiple technologies into a single resource. The California ISO and other grid operators distinguish between hybridized and colocated resources. But such projects do share many of the same co-development advantages, such as ease of permitting in already industrialized areas with existing interconnection.

In other cases, battery arrays are arising where fossil plants are retiring or have already ceased operation.

Two of SCE's largest stand-alone storage agreements involve battery systems at the site of the demolished Inland Empire Energy Center, a prematurely retired General Electric Co. gas plant in Riverside County, Calif., originally developed by Calpine Corp.

The California Public Utilities Commission recently approved SCE resource adequacy contracts with a Calpine subsidiary for the 230-MW Nova I and 230-MW Nova II projects. The four-hour battery systems are planned to come online in 2024. Peninsula Clean Energy, a local government-run retail power supplier based in Redwood City, Calf., has a contract for another 50-MW tranche, dubbed Nova III.

Such gas-to-battery station makeovers are "the wave of the future," said Peninsula Clean Energy CEO Jan Pepper. "It makes sense to utilize those interconnections to put something cleaner there, a storage project, if those gas plants are being shut down."

Similar transformations are happening at some aging renewable energy installations as well. In one case, Terra-Gen LLC plans to replace historical concentrating solar plants in the Mojave Desert with photovoltaics and batteries.

Energy community opportunity

The Inflation Reduction Act could accelerate the shift to energy storage at or near retired coal and gas facilities in areas referred to as energy communities. The law gave the U.S. Energy Department $250 billion in loan authority to reinvest in energy infrastructure that has ceased operations and created a 10% bonus incentive on top of investment and production tax credits for projects in qualifying energy communities.

While market participants await specific IRS guidance on energy community requirements, preparations for storage projects in such areas are well underway.

"It's changed our siting strategy," said Julie Blunden, chief operating officer at battery project developer Plus Power, speaking at an S&P Global Commodity Insights webinar in January. "That policy will absolutely have a real impact on where we build storage projects."

Webinar: Supercharged: U.S. Energy Storage Reaches for Deeper Impact

Over the next six months, whether or not projects are in energy communities could help to determine "what stays in the interconnection queue versus what falls out," Blunden said.

Retiring or retired fossil fuel projects can offer the best spots for storage "because the grid got built around those locations," John Zahurancik, president of the Americas region at energy storage technology specialist Fluence Energy Inc., said on the webinar.

"What we're seeing is, as we retire older power generation, it's often embedded closer into the middle of a load center. ... It's much easier to permit an energy storage system in the middle of that load center, and it provides very unique value."

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