The purpose of this study is to summarize the potential benefits of energy storage additions to the Public Service Company of New Mexico (PNM) system. In particular, PNM is interested in understanding the advantages of a standalone utility-owned energy storage project compared to a PPA (Power Purchase Agreement) contract structure for storage that is co-located with a solar photovoltaic (PV) facility and owned by a third party.
Our assessment identifies two areas in which utility-owned storage provides incremental benefits relative to a contract for storage that is co-located with solar PV. First, PNM’s knowledge of its own transmission and distribution (T&D) system would allow the company to site utility-owned storage in the most beneficial locations on the power grid, irrespective of whether that location is suitable for co-location with solar generation. We estimate this locational transmission-related value of storage to be up to $22/kW-year for a 4-hour (e.g., 1 MW / 4 MWh) battery. Second, storage ownership would give PNM greater operational capabilities, including the flexibility to mitigate off-peak wind curtailments. Specifically, a standalone energy storage system could charge during any hour of the day, rather than being constrained to charging from the output of the solar PV facility. This ability to charge and discharge any time would increase the energy value of the storage system by approximately $10 to $25/kW-yr according to our simulations (and more through the provision of ancillary services and possibly other grid services). Direct ownership would also provide PNM with options to modify the use of the storage device as operational experience is gained and market conditions change over time.