Market Outlook for Renewable Hybrid Power Plants: Where is the Trend Heading?
The success of expanding renewable energies is evident from the fact that the power grid cannot be adapted quickly enough to meet new needs. This leads to time-consuming hurdles when grid connection points are missing. Additionally, costly side effects arise when climate-friendly electricity has to be wasted because it cannot be transmitted further.
What if there was already a solution to reduce renewable energy's dependence on grid expansion? The industry would certainly jump at the chance. This is already the case today, but in what form, and how quickly will development progress? Will renewable hybrid power plants soon become the new norm, or will they remain a distant vision only realized in pilot projects and niche markets?
Renewable hybrid power plants come in various forms: they combine different renewable energy sources at a single grid connection point, can be supplemented with storage technologies, or link a single energy source with storage.[1]
The good news is that once renewable electricity supply can be matched to demand, the objection that weather dependency is an issue disappears. There are significant potentials. For example, the generation profiles of wind power and photovoltaic systems complement each other very well. When combined with battery storage, renewable electricity can already be stored for several hours, fed into the grid as needed, and marketed under favorable conditions.[2] Distribution networks are relieved when capped generation peaks ensure smooth feeding. With an electrolyzer, electricity can even be stored seasonally in the form of hydrogen or methane.[3]
[1] https://group.vattenfall.com/de/newsroom/news/2019/08-august/paulina-asbeck-im-interview-ueber-hybridkraftwerke
[2] Duration of storage use: example 2-4 h, average storage capacity: battery storage 1 hour, pumped storage 8 hours (Agora Energiewende S 38)
Market Situation of Renewable Hybrid Power Plants
To assess the market situation, differences in technical variants must be considered. In Germany, an independent segment for hybrid power plants was established with so-called innovation tenders in 2020. After several underwhelming rounds, the tender segment is now seeing greater participation again. The market has so far been dominated by the combination of photovoltaics and battery storage.
Many developers already have their first hybrid projects in their portfolio or design new solar parks so that storage can be easily retrofitted if necessary. Last fall, the energy provider EnBW even announced that all newly built solar parks would be equipped with storage in the future.[1] Combinations of wind power and photovoltaics are still rarer, as the differing development timelines, which can span several years, pose a challenge. The use of electrolyzers is still largely limited to pilot projects.
Internationally, there are project examples in Australia and Mali where mines are autonomously supplied by renewable hybrid power plants. In Europe, the booming hybrid power plant market in Spain is particularly exciting, as it has developed positively without the need for tenders.[2]
[1] https://www.pv-magazine.de/2023/10/13/kombikraftwerke-enbw-baut-freiflaechenanlagen-standardmaessig-mit-speicher/
[2] pv-magazine.com "Gut kombiniert" (09/23) p.51
Implementation of Hybrid Projects
Hybrid power plants can either be set up as new builds or as retrofits to existing plants. It is also sensible to add storage when repowering solar parks. The existing control technology can often be upgraded to include hybrid functionalities with a paid update. For example, those who have installed meteocontrol’s "blue'Log XC" controller can upgrade the system with the "Hybrid EMS" at a later stage.[1] Hybrid projects also enjoy organizational advantages. In Germany, they are sometimes given priority in land-use planning or grid operator approval processes. In some areas, there are also benefits in obtaining building permits.
The development of renewable hybrid power plants requires additional knowledge in plant design and marketing strategies. Hybrid plants offer numerous revenue opportunities[2]:
- In Germany, participants in innovation tenders are guaranteed a minimum price per kilowatt-hour by the government. However, no additional revenue is passed on when exchange electricity prices are high.
- Additional income can be generated with battery storage in hybrid power plants through arbitrage transactions by selling and feeding stored solar power at lucrative times on the day-ahead and intraday markets.[3]
- Hybrid power plants are profitable outside of tenders whenever the ratio between the average marketing price and the exchange electricity price becomes smaller. Falling prices for electricity from renewable sources are also expected in the German market.[4]
- Hybrid power plants can sell grid services such as balancing energy for grid stability or peak shaving.[5]
- Hybrid power plants connected at a single grid connection point can also be designed as independent economic units ("co-location"), where the market premium for fed-in solar power is lower in a tender, but the storage can be used in all electricity markets. Additionally, the storage can also be charged with grid electricity when it is particularly inexpensive.
- Electricity from hybrid power plants can be well marketed through Power Purchase Agreements (PPAs), as the steady electricity supply is attractive to consumers.[6]
It is difficult to model the height of marketing revenues in project development. The investment costs for hybrid projects are higher than for traditional solar parks. According to Fraunhofer ISE in Freiburg, the levelized cost of electricity (LCOE) for ground-mounted systems with battery storage is between 6.0 and 10.8 cents per kilowatt-hour, with the battery storage component accounting for 400 to 600 euros per kilowatt-hour. Without battery storage, the LCOE for solar and wind farms is only between 4.1 and 9.2 cents per kilowatt-hour, according to the Freiburg researchers.[7]
[1] https://www.meteocontrol.com/en/scada-plant-control/solutions/hems
[2] pv-magazine.com "Gut kombiniert" (09/23) p.51-52
[3] Explanation arbitrage https://www.next-kraftwerke.de/wissen/arbitrage#voraussetzungen-fr-arbitragegeschfte
[4] pv-magazine.com "Gut kombiniert" (09/23)
[5] https://www.energiezukunft.eu/erneuerbare-energien/solarenergie/photovoltaik-hybridkraftwerke-im-trend
[6] https://www.windindustrie-in-deutschland.de/fachartikel/gute-ergaenzung-hybridkraftwerke-stabilisieren-die-energieerzeugung
[7] The costs for new ground-mounted photovoltaic systems and onshore wind farms are currently between 4.1 and 9.2 cents per kilowatt hour.
The electricity generation costs for small photovoltaic storage systems are therefore between 9.1 and 22.5 cents per kilowatt hour. The wide range results from the differences in photovoltaic costs, battery costs and irradiation values. For battery costs, the researchers assume values between 500 and 1200 euros per kilowatt hour of storage capacity. According to Fraunhofer ISE, the electricity generation costs for larger photovoltaic roof systems with battery storage are between 7.3 and 16.0 cents per kilowatt hour if the battery costs are between 450 and 800 euros per kilowatt hour. For the combination of ground-mounted systems and battery storage, the researchers determined electricity generation costs of 6.0 to 10.8 cents per kilowatt hour, with battery costs of between 400 and 600 euros per kilowatt hour. Article Study
Legal Framework for Hybrid Power Plants in Germany
Given the multi-year timeline for project development, prospective changes in regulatory frameworks must always be considered. Under current EEG (Renewable Energy Sources Act) conditions in Germany, innovation tenders are held twice a year. These conditions are well-suited for photovoltaic-storage hybrid power plants, as measured by the number of projects submitted. The tender round in May 2024 was almost fully subscribed.[1] In the fall 2023 round, even double the capacities were submitted as were offered. This success only came after the Federal Network Agency raised the maximum values for innovation tenders by 25% to 9.18 cents per kilowatt-hour in March 2023.[2] Before that, there were two weak tender rounds after the market premium was changed, and projects could no longer benefit from high exchange electricity prices.
This shows the high dependency on political developments and the resulting regulatory frameworks across the entire energy market. The Solar Package I, agreed upon in 2024, did not change the conditions for hybrid projects. According to the Federal Association of Renewable Energy (BEE), the German government, with its 2025 budget draft, recognized that flexibility is the new guiding principle of the energy market. The legal framework could be improved with the planned Solar Package II.
The boom in renewable hybrid power plants in Spain shows that it is not an overhyped trend, as the Iberian trend developed independently of subsidy structures. The further development of regulatory frameworks will impact the pace of market development.
[1] https://www.pv-magazine.de/2024/07/03/innovationsausschreibungen-zuschlaege-fuer-43-photovoltaik-speicher-kraftwerke/
A Way Out of the Lack of Grid Connection Points
Developers often have to wait for months for an available grid connection point. In addition, ever-longer distances must be covered to connect the plants to the grid. The lack of connection points sometimes leads to projects being abandoned.
A way out of this dilemma is offered by renewable hybrid power plants that share a grid connection point. More power is connected than the grid connection can handle (overbuilding). This is possible because the generation profiles of wind turbines and solar parks complement each other well. The remaining electricity can be controlled using storage systems, electrolyzers, CHP plants, or Power-to-X. The Fraunhofer Institute for Energy Economics and Energy System Technology (IEE) calculated, on behalf of the Federal Association of Renewable Energy (BEE), how grid connections can be utilized more efficiently, what legal adjustments would be necessary, and how significantly these connections could be accelerated.
A Boom is Possible
Renewable hybrid power plants could lead to a boom. The fact that grid expansion is a bottleneck in many countries supports this view. The multiple use of grid connection points is an effective, cost-efficient, and highly plausible solution. Not only fragile subsidy incentives but also a likely emerging market mechanism are driving the expansion of renewable hybrid power plants. Wherever the expansion of renewable energies is successful, a cannibalization effect eventually occurs, where high expansion figures drive down the marketing revenues for renewable electricity. It is still unclear how hydrogen production in hybrid power plants will develop. For battery storage, there is a clear upward trend: in just two years, the capacity of all installed battery storage systems in Germany has more than doubled. This year, for the first time, they will surpass the total capacity of pumped-storage power plants.[1]
Conclusion
Renewable hybrid power plants offer a promising solution to both grid expansion challenges and the integration of renewable energy sources. As markets and regulations evolve, these systems are likely to play an increasingly important role in ensuring a flexible and resilient energy supply.
[1] https://www.energy-charts.info/charts/installed_power/chart.htm?l=de&c=DE
Kilian Rüfer
The author Kilian Rüfer is an energy blogger and writes about the energy transition, sustainable finance and climate communication.