Integrating BESS With Solar Plant to Reduce DSM Penalty and Monetize Clipping Power

DSM charges (Deviation Settlement Mechanism) can be a significant drag on a renewable energy project’s revenue. Some reports indicate that DSM penalties can range from 0.3% to over 1.5% of annual generation revenues, and in some cases, even higher for projects with poor forecasting accuracy. Reducing errors in deviation ranges beyond 20%, achieving higher accuracy within the ±10% range for solar and hybrid, and ±15% for wind, presents significant challenges.

Analysis of existing project data indicates that more than 85% of the time, errors remain within these ranges. Achieving further accuracy within these bounds would necessitate substantial technological advancements in forecasting tools and access to highly precise weather. This results in substantial financial losses, potentially millions of rupees per year for a large-scale solar or wind project. Integrating BESS has a direct and significant impact on reducing DSM penalties.

How Battery Storage Can Reduce DSM Penalties

Installing a battery energy storage system (BESS) along with a solar or solar plant is one of the most effective ways to reduce DSM penalties. BESS provides the flexibility to manage the intermittent nature of RE generation and align it with the scheduled output. Here’s how a BESS helps:

• Reducing Over-injection: When the plant generates more power than scheduled, the BESS can absorb and store the excess energy instead of injecting it into the grid. This prevents the project from losing revenue or paying penalties for over-injection beyond the acceptable limits. The stored energy can then be discharged later.
  
• Preventing Under-injection: During periods of low generation (e.g., cloudy weather, low wind), the BESS can discharge its stored energy to compensate for the shortfall. This ensures the plant meets its scheduled output, avoiding the penalties for under-injection.

Savings in DSM Penalty

A study by TERI SAS indicated that BESS integration can lead to an optimal reduction of DSM penalties by 45.19%. Ideally the target should be to reduce the penalty by 90%. So, for a solar plant of 500 MW with 22% CUF and considering a DSM penalty of 1.5% of revenue, savings in DSM penalty could be ₹3.25 Crore per year (90% DSM penalty saving).

• For the 500 MW plant with 22% CUF annual generation would be 963600 MWh.
• Assuming a PPA tariff of ₹2.5/kWh, the penalty would be ₹3.61 Crore per year.

Integrating BESS With Solar to Monetize Clipping Power

Clipping loss occurs when a solar plant’s DC-side generation exceeds the rated capacity of its AC-side inverter. Solar plants are often “oversized” with a DC-to-AC ratio (DC overloading) greater than 1. This means that for a solar plant with 1.4 DC overloading, total DC capacity of the solar panels (e.g., 140 MWp) is higher than the AC-side inverter and grid-connected capacity (e.g.100 MWac). Here, the excess energy is not converted to AC power and is ‘clipped’ or lost.

While this might seem counterintuitive, a certain degree of clipping is often accepted as a trade-off for improved overall energy yield and better inverter utilization. The amount of clipping loss is directly dependent on the DC/AC ratio and the intensity of solar irradiance at the plant’s location. A DC/AC ratio of 1.2 typically results in clipping losses of about 0.25%. However, as the ratio increases, potential for clipping increases. A DC/AC ratio of 1.5, for example, can lead to annual clipping losses ranging from 2% to 4%.

In India, which is characterised by high solar radiation levels (typically ranging from 1,600 to 2,200 kWh/m² annually), the impact of clipping can be more pronounced. Studies suggest that oversizing the DC capacity beyond 1.4 DC overloading can result in clipping losses of 1.5 % to 3%, without tracker during peak sunshine hours. With single axis tracker installed, which results in almost 15% increase in generation the clipping losses can range somewhere between 4-5 %. Common clipping loss for a well- designed plant in a high-irradiance region of India is around 1% to 2.5% of the total annual generation.

BESS is crucial for monetizing this clipped energy. It acts as a buffer, absorbing surplus electricity during peak solar hours and releasing it during peak hours. The integration of Battery Energy Storage Systems (BESS) with existing solar plants not only can reduce the revenue losses which occurs due to this wasted power but can generate additional revenue by dispatching it to the grid when it is most valuable, typically during evening peak demand hours when electricity prices are significantly higher.

Let’s look at how much revenue can be generated for a 500 MW solar plant with a 2% clipping loss if BESS is integrated.

Clipping Loss in a Typical 500 MW with 22% CUF Solar Plant in India:

• For the 500 MW plant with 963600 MWh of annual generation, a 2% clipping loss would be 19272 MWh per year.

Revenue from Storing Clipping Power:

Storing this clipped energy in a battery allows it to be used later, either to fulfil the scheduled power or to sell it during peak hours when electricity prices are higher.

• Assuming a PPA tariff of ₹2.5/kWh, the potential revenue loss from clipping is: 19,272 MWh x ₹2,500/MWh = ₹4.81 Crore per year.
• By storing this energy and selling it at a conservative average price of ₹3.30 /kWh going by the latest discovered tariff of solar +BESS tender, the potential revenue that can be generated is: 19,272 MWh x ₹3,300/MWh = ₹6.35 Crore per year.

The overall revenue realization by storing the clipping power in battery and selling it later in the peak hours is ₹11.16 Crore per year (₹4.81 + ₹6.35).

Integrating BESS with existing solar plant simply to store clipping power will not justify the cost. Only for storing clipping power considering a 500 MW solar plant with a 2% clipping loss a 53 MWh battery is needed. The cost of a 73 MWh battery @1.2 Crore/ MWh is ₹88 Crore. So, the payback period would be close to 10 years considering battery degradation of 1.5% every year.

But the problem is clipping loss will be there only in about 5-6 months in a year which when spread out through the year result in an average 2% of the total generation as in these months especially the peak summer months clipping loss goes up to 10%.

So, the battery will remain unutilized for the rest 5-6 months of the year. In case of a PPA for stored battery power that is simply not an option since the developer has to pay high penalty for not meeting the availability criteria. So, for the rest of the months, the battery has to be charged by buying power from the market or installing additional modules. Buying power from the power exchange to charge the batteries is an easy option as installing additional modules requires extra space for which land should be available.

The integration of Battery Energy Storage Systems with solar plants is a strategic transformation that addresses multiple revenue challenges simultaneously. With the potential to reduce DSM penalties and capture lost clipping power, BESS integration offers compelling economics that extend far beyond simple energy storage.

Note: The views expressed in this article are solely those of the author and do not necessarily reflect the views or positions of any affiliated organizations.

References:

1- https://www.mercomindia.com/cerc-draft-deviation-settlement-regulations

2- https://www.mercomindia.com/harsh-penalties-deviation-settlement-solar-wind

3- https://www.spglobal.com/esg/s1/research-analysis/indias-new-dsm-regulations-wind-plants-may-become-unviable.html#:~:text=Further%2C%20the%20fourth%20amendment%20in,segment%20on%20the%20power%20exchanges

4- https://www.saurenergy.com/solar-energy-news/cea-clarifies-on-new-energy-storage-rule

5- Study of Application of Battery Energy Storage System (BESS) for reducing DSM penalties in discoms by TERI School of Advanced Studies, New Delhi, India 110070

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Also Read: Decode : Chapter 4 – Understanding the Critical Aspects of BESS Project Planning