Co-location of PV and BESS shapes the future of SEE solar energy

As the region prepares to significantly increase solar power capacity, this is expected to lead to lower wholesale prices. However, this growth in solar energy also creates a complex puzzle: how to seamlessly integrate these systems into the power grid and manage their inherent variability.

The paradox of abundance

The rapid development of renewable energy sources has led to an ironic twist: cannibalization. Solar power plants, synchronized with the sun’s schedule, produce energy simultaneously, flooding the market and driving down prices during peak hours. This phenomenon, in which photovoltaics with negligible marginal costs displaces more expensive power plants, leads to a collapse in prices exactly where solar power plants are looking for revenues.

Nets at the intersection

In addition to prices, the rapid deployment of photovoltaics places a strain on existing grid infrastructure, which struggles to keep pace with the development of renewable energy. To fully exploit the potential of solar energy and avoid constraints, a robust and expansive grid is essential. In SEE, grids require deep strengthening to adapt to increasing photovoltaic power.

The emergence of storage and flexibility

Amid slow grid expansion, energy storage and flexible demand are becoming key elements for integrating more solar PV into power grids. Elastic demand that adjusts to price signals serves as a buffer during periods of low prices, helping to stabilize the market. On the other hand, battery energy storage systems (BESS) offer a more complex solution, balancing power extraction and injection while maximizing revenues across different market segments.

Strategic colocation alliance

The co-location of photovoltaics with BESS is proving to be a strategic move for the future of solar energy. This approach provides a common grid connection point for both solar and storage assets, leading to increased project economics and reduced revenue risk. Colocation not only allows for optimal use of valuable network bandwidth, but also opens up additional revenue streams through system services that would otherwise not be available with standalone setups.

Politics as a guiding light

Policy decisions play a key role in driving the market trajectory. Recent policy moves, such as colocation auctions in Bulgaria, the introduction of an automatic frequency restoration reserve (aFRR) standby requirement for new solar assets in Hungary, and energy injection limits in Greece, signal the growing importance of colocation in the regional solar strategy.

The combination of economic benefits, grid integration challenges, and supportive policies make co-located solar and battery storage systems an attractive solution for SEE. As the region continues to grow, it is becoming increasingly clear that the co-location of solar PV and battery energy storage will set a new standard for solar energy projects.

Panos Kefalas is the chief research expert for Southeast Europe at Aurora Energy Research, an energy market analysis company based in Oxford, UK.