Shifting the sun : Can coupling Lithium-ion batteries with solar power be economically justified in a Dutch setting?

Abstract: The rapid development of the lithium-ion battery industry is currently driving down sys-tem costs as a result of maturing processes. Decreasing system costs enables additional revenue streams and applications, provided through li-ion battery storage, to be ex-plored. EAM Solar, a Norwegian solar utility company with operational solar power plants across the globe, seeks to build and operate a solar power plant (SPP) in the Dutch region of Leeuwarden. This thesis investigates whether an SPP with an installed capacity of 16.1MW, can be economically profitable when utilizing li-ion battery energy storage systems (BESS) for arbitrage and time-shift of subsidized solar power in order to avoid large(r) grid-connection costs while accepting grid transmission limits. Literature, environment parameters and estimates from the industry was combined with financial data from the client and collaborators, such as a battery manufacturer, to create viable and realistic economic evaluations.The literature study provided information for relevant parameters such as the life cycle of a battery, which enabled a realistic modeling procedure regarding cyclic and calendric degradation, charge/discharge behavior, end of life terms and overall efficiencies. It was modelled quantitatively in Stella Architect and Microsoft Excel to obtain economical and financial indicators, such as Net Present Value (NPV) & Internal Rate of Return (IRR), to subsequently provide recommendations on whether to make the investment.Results show worse economic outcomes for li-ion BESS investments compared to the original investment of a stand-alone SPP, even when arbitrage was implemented as a cost recovery mechanism and with a smaller grid-connection cost. Furthermore, it is shown that a stand-alone BESS only used for arbitrage is unlikely to become profitable in the foreseeable future at this location or in a similar market mainly due to large in-vestment costs combined with substantial fees associated with access to the day-ahead electricity auction in the Netherlands, EPEX Spot NL. It is also shown that in spite of the lower grid connection for a SPP combined with a li-ion BESS, a 20-25% decrease in battery investment cost is required for the investment to yield similar rate of returns as a stand-alone SPP investment. The model developed in this thesis can be considered to be a tool for evaluating similar systems in the future with minor modifications, espe-cially as the market- and technology environment evolves.