Renewable energy projects often have long development lifecycles (2-5+ years) that require the developers of and investors in those projects to make key commercial, financial, and technical decisions years before projects become operational. Developers and investors are left to navigate uncertain future market, regulatory, and supply chain dynamics. With the near endless array of potential commercial and technical design considerations, this presents a major modeling challenge for developers to understand if a project pencils and under what scenarios. This blog post explores how developers and investors can leverage Tyba’s software platform to optimize and future-proof the design of projects.
With the passage of the Inflation Reduction Act (IRA), developers and investors are revisiting their project pipeline to account for new considerations such as:
You need flexible modeling solutions that can handle the wide range of scenarios, that can be updated on the fly, and create a shared understanding organizationally of your project (risks and upsides). In the following case study, we will walk through how you can leverage Tyba’s web application and API library to scale your modeling efforts.
You have a solar project in MISO’s interconnection queue. When initially submitting for interconnection, the plan was for this to be a solar-only project with 100 MWac and a 1.3 DC/AC ratio. With the IRA passage along with recent changes in MISO’s capacity market, your leadership team has come to you with the following asks and constraints.
Based on the ask, you want to evaluate the following set of design scenarios.
In total, this translated to 72 different design options. Inputs that are fixed across all options include solar capacity (AC), module, inverter, racking, irradiance, POI, storage cycle caps, degradation, market strategy (energy + capacity), energy prices used.
Through Tyba’s web app and/or API, it is easy to setup the the analysis.
Now that we’ve run the analysis, it’s time to review the results and address the questions from your management team.
Q1: Should we add energy storage to this project?
Average across all design variations, the hybrid designs provide a $10 per MWh revenue uplift compared to their solar-only counterparts. Let’s dive into this further to see how different market assumptions and design tradeoffs impact performance.
Q2: If so, how should storage be sized relative to solar? And what benefit do we get from DC-coupling and enabling grid charging?
To help answer the first part of this question, we looked at a subset of the hybrid designs to see how the revenue ($/MWh blended rate and Year 1 total) and production (annual MWh) were impacted by changing the DC/AC ratio for solar and the storage capacity and duration.
By increasing the DC/AC ratio from 1.3 → 1.5, we get a:
Next, we compared AC vs. DC coupled design options modeled under the high capacity case. The DC-coupled options have slightly higher revenue than their AC-coupled counterparts, and that differential increases as you increase storage capacity and duration.
By switching from a AC → DC coupled system with grid charging, we get a:
Finally, we compared the DC-coupled designs with and without grid charging enabled. We see a substantive increase in Year 1 revenue (4-10%+) by allowing grid charging. In particular, being able to grid charge provides flexibility to deliver during dual-peaking (early morning and late afternoon) days.
Q3: How sensitive are the results to the assumed capacity rates? Does the move to a seasonal capacity market have an impact?
Assumed Capacity Rates
The capacity rates have a substantial impact on expected revenue. The table below details the expected Year 1 production and revenue under the Low and High capacity rate scenarios.
The higher capacity rates drive the following increase in production-weighted revenue:
Market Structure Impact
In addition to the capacity rates, MISO is undergoing changes to their capacity market structure, moving from an annual to seasonal auction and a performance-based approach.
To inform how different designs deliver during these peak MISO hours each season, we looked at capacity factor for a:
200 MWh hybrid design:
400 MWh hybrid design:
For the hybrid designs, capacity performance could be further improved by allowing more than 1 cycle per day.
Q4: What configurations meet your 6% IRR hurdle?
While we see revenue uplifts from increasing the DC/AC ratio, DC-coupling, and adding energy storage, these design enhancements come with added costs. As such, we need to run each of these scenarios through a financial model to understand which options meet our target hurdle rate. Of the 72 different designs, 33 (or 46%) hit the 6% IRR hurdle under the base CapEx and OpEx assumptions in the financial model.
A key driver for hitting the IRR hurdle is the assumed capacity rate. None of the low capacity rate designs hit the 6% target, with most falling in the 2-4% range. Likewise, reducing the storage CapEx by $50 per kWh pulled a couple designs within the target IRR hurdle range.
If you are re-evaluating your project designs due to the IRA, or more broadly looking to bolster your modeling efforts, we’d love to talk to you. Shoot us an email at email@example.com to speak with the Tyba team and explore how we can work together.
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