A windy day has turbines spinning tirelessly, generating much-needed clean energy, only for much of it to go to waste because the grid can’t handle the surplus. Meanwhile, batteries, sitting idle at separate sites, are ready to store that energy but lack the infrastructure to tap into it. This inefficiency is one of the core drivers behind the growing interest in co-locating renewable generation with batteries. By sharing infrastructure, co-location promises an integration of supply and storage. But as with any good idea, the devil is in the details.
The promise of co-location
Wind and solar energy curtailment - reducing power output due to grid constraints - has been a significant issue in various regions. For instance, in 2020, the United Kingdom experienced curtailment costs of £224 million, with wind farms in Scotland being curtailed approximately 40% of the time. In California, curtailment surged significantly in the spring months of 2020 and 2021, reaching 150–300 GWh per month. A month's curtailment of 300GWh could power up to 42,000 U.S. households - for a year!
Despite the availability of battery storage systems, their integration into the grid has faced challenges. In the UK, outdated IT systems have led to the underutilization of batteries by up to 90%, even when they are more cost-effective than fossil fuel plants.
In theory, co-locating renewable energy sources with battery storage offers a solution to these inefficiencies and seems like a straightforward win-win. The intermittency of renewable energy - whether a solar farm producing at full capacity on a sunny afternoon or a wind farm reaching peak output during a stormy night - creates a fundamental mismatch between generation and demand. Without storage, this excess energy often goes to waste, curtailed because the grid cannot absorb everything. Co-location changes this dynamic. By placing batteries alongside renewable generation, any surplus can be captured and stored for later, smoothing out supply and reducing reliance on fossil-fuel backup during periods of low renewable output.
This capability is precious in regions where grid constraints have become a bottleneck. Grid infrastructure, designed for centralized, predictable power plants, often needs to be equipped to handle the decentralized and variable nature of renewable energy. Obtaining a new grid connection for a standalone renewable or battery project is a lengthy and complex process, frequently taking years, sometimes even decades.
Co-location offers a pragmatic workaround: by sharing an existing grid connection between renewable generation and battery storage, developers can bypass much of the red tape, speeding up deployment timelines and reducing costs.
The financial advantages of co-location also add to its allure. Sharing a site for renewable and battery projects allows developers to pool resources, minimizing land acquisition, infrastructure, and operational costs. Grid connection fees, a significant capital expense for any project, are effectively halved in a co-located setup. Furthermore, charging batteries directly from on-site renewables eliminates the need to draw power from the grid, reducing transmission losses and ensuring more efficient energy use.
Another overlooked benefit of co-location is its role in enhancing the business case for renewable projects. Co-located systems can stabilize energy output by integrating storage, making renewable generation less volatile and more predictable. This improves grid reliability and provides renewable developers access to additional revenue streams, such as arbitrage (buying and storing energy at low prices and selling it at high prices) and frequency regulation services. Diversified income sources strengthen the financial viability of renewable projects in competitive markets.
Some strings attached
While co-location offers undeniable advantages, its implementation comes with many challenges that are anything but straightforward. At the issue's core is the inherent conflict between the operational priorities of renewable generation and battery storage. In a co-located setup, renewable energy typically takes priority for grid access. From a resource efficiency perspective, this makes sense - every kilowatt-hour curtailed represents wasted potential. However, this priority system often limits the flexibility of the battery, forcing it to operate under suboptimal conditions. For instance, when the renewable generator thoroughly utilizes the grid connection, the battery may not be able to charge or discharge at times when it would be most profitable.
This operational constraint introduces complexities that do not exist in standalone battery projects. The battery’s ability to capture value from market price fluctuations—charging during periods of low prices and discharging during high prices—is significantly diminished in a co-located system. As a result, the battery's economic returns are tied not just to market dynamics but also to the operational schedule of the renewable generator. This interdependence complicates optimizing co-located systems, requiring advanced algorithms and real-time management to balance generation and storage.
AC or DC coupling?
The choice between AC and DC coupling further complicates co-located project design. AC coupling, where the renewable generator and battery operate independently and connect to the grid separately, offers simplicity and flexibility. However, it involves converting energy multiple times - from DC (produced by renewables) to AC for the grid and back to DC for the battery - resulting in efficiency losses.
On the other hand, DC coupling allows the battery to charge directly from the renewable generator’s output before it is converted for grid use, reducing energy losses. However, DC systems require more sophisticated control mechanisms and can be more costly to implement. Developers must weigh these trade-offs carefully, as the choice has significant implications for both project economics and operational efficiency.
If a battery should be co-located at an existing PV site, someone would need to touch the up-and-running PV generation, which might sit there for decades. For obvious reasons, nobody would like to touch that, right? Never touch a running system. AC coupling is, therefore, the only way to employ as few lawyers as possible. ;-)
Further problems
The financial trade-offs of co-location are equally complex. While sharing infrastructure reduces upfront costs, it can also limit revenue potential. A standalone battery with its own grid connection can operate independently, fully leveraging its flexibility to maximize market returns. In contrast, a co-located battery is constrained by the shared connection and the operational priorities of the renewable generator. Developers must conduct detailed economic modeling to determine whether the cost savings of co-location outweigh the potential revenue losses. In some cases, waiting for a standalone project with its own grid connection may be more profitable in the long term, even if it involves delays.
Regulatory challenges also loom large. Policies governing co-located systems vary widely across regions, creating uncertainty for developers. For example, in markets like Germany and Spain, co-located batteries are often prohibited from charging directly from the grid under specific subsidy schemes. You'll find more special terms if your assets were under the German Innovationsauschreibungsverordnung, which is supposed to support co-location, e.g., solar and batteries. While this ensures that batteries only store renewable energy, it also limits their ability to engage in lucrative market activities like energy arbitrage. In California, new large-scale PV sites are mandated to have a co-located BESS on-site.
Lessons from fossil infrastructure
Interestingly, co-location is gaining traction between renewables, batteries, and existing or retired fossil fuel plants. These plants often have grid connections that are vastly underutilized or about to become available. Repurposing these connections allows renewable projects to bypass the years-long queue for interconnection, a strategy already being deployed in the United States.
Take Xcel Energy’s Sherco plant in Minnesota, for example. Once the state’s largest coal-fired power plant, Sherco is now transitioning to host one of the nation’s largest solar farms. By repurposing the plant’s grid connection, developers are avoiding what could have been seven years of bureaucratic delays. Similarly, UC Berkeley researchers have highlighted how reusing interconnections from fossil plants could double grid capacity overnight by enabling more renewable energy to plug in.
This approach saves time and provides a lifeline for communities reliant on fossil plants. By transitioning these sites to clean energy hubs, local jobs, and tax bases can be preserved, making the energy transition more equitable.
Policy and practical hurdles
As with all things renewable energy, policy frameworks can determine the feasibility of co-location. Across Europe, the treatment of co-located systems varies significantly. In Germany, for example, innovation tenders support co-located projects but restrict batteries from charging directly from the grid, limiting their ability to capitalize on market price fluctuations. Similarly, Spain’s policy grants for co-located systems prohibit grid charging, further constraining operational flexibility.
These restrictions trigger more straightforward and more supportive policies. Countries like the UK have shown that transparency and streamlined regulatory frameworks can significantly accelerate project deployment. Tools like the Balancing Mechanism Reporting Service (BMRS), managed by Elexon in Great Britain, offer a model for transparency in co-located systems and beyond.
Complicated but necessary
Co-location is not a magic solution that eliminates all substantial sustainability challenges, but it does offer a pragmatic way to address the dual challenges of grid congestion and renewable integration. Its ability to share infrastructure, minimize curtailment, and accelerate deployment makes it an appealing option in many markets. However, the operational, economic, and regulatory complexities it introduces require careful consideration.
With the right balance of policy support, technological innovation, and strategic planning, co-location can help us to make the most of every available resource and achieve the clean energy transition.