Arizona Public Service will add a 50-megawatt battery system to its fleet for storing solar energy to use during evening peak hours.

The regulated utility revealed Monday that it had signed a 15-year power-purchase agreement with First Solar for the dispatchable solar power. The storage system will be paired with a new 65-megawatt solar plant in western Maricopa County and should be up and running in 2021.

This represents a significant escalation of storage activity for APS, which has developed storage systems at the single-digit-megawatt scale. Fifty megawatts would overpower any battery system in the U.S. today, although Fluence is slated bring a 100-megawatt system online in 2021.

The joint system suggests a new paradigm for solar-rich markets: the solar peak power plant.

“When you look at the desert Southwest, you’re already seeing the growing pains of having so much solar on the system and having to curtail,” said Brad Albert, APS vice president of resource management. “This [project] is a necessary evolution of how we deploy solar energy and take advantage of what we have in abundance in the Southwest.”

The hours that really matter

APS didn’t set out looking for storage, per se.

This project emerged from a request for proposal that started a year ago. It was open to any technology, but the bids had to deliver power between 3 p.m. and 8 p.m. in the summertime.

Those are the peak hours that drive much of the new capacity investments APS will have to make in coming decades, even as the abundance of midday solar power grows.

Bids included conventional renewables, standalone batteries and natural-gas peaking plants, but First Solar’s hybrid solar-storage proposal won out.

The solar plant will charge up the battery during the day and deliver power during the first few hours of the peak window, until the sun sets. That also allows the whole project to qualify for the federal Investment Tax Credit.

Then the battery will kick in and discharge stored power through the rest of the window. It will come with 135 megawatt-hours, providing a bit less than 3 hours' worth of duration at the full 50-megawatt capacity level.

“For anything outside those hours of 3 p.m. to 8 p.m., APS is not buying that,” Albert said. First Solar technically has free rein to play with other revenue streams in the off-hours, provided it can ensure capacity to deliver its obligation when the rush hour starts.

Albert declined to disclose pricing details, but it’s clear from the timing component that this is a structural advance for solar and storage PPAs.

“We have not seen any like that,” Albert confirmed.

New era for storage

This project entails several notable developments for the solar-plus-storage market.

It is First Solar’s first publicly announced storage project. Recall that the thin-film specialist and largest U.S. solar developer confirmed to GTM last year that it was actively bidding storage alongside new solar.

"We can deliver energy comparable to or less expensively than a new-build fossil fuel plant,” said Scott Rackey, head of PV-plus-storage development, at the time.

Now the company has made good on that promise, beating out gas peakers in reality, not just in theory. First Solar expects this project model to become “very common in many of our markets,” spokesperson Steve Krum said in an email.

That’s crucial for the continued growth of solar power in sunny regions that have more than they need at mid-day. Transforming solar power into a dispatchable capacity resource could allow utilities to reduce reliance on gas peaker plants, reducing costs and carbon emissions to keep the lights on.

Arizona could adopt that model wholesale: Commissioner Andy Tobin of the Arizona Corporation Commission recently proposed an ambitious plan that would raise the state’s clean energy share to 80 percent by leveraging storage for clean peak power.

The First Solar bid came in well before that plan was announced, but offers a data point that suggests this model is cost-effective even before a regulatory driver comes into effect.

The project also showcases an even ratio of solar to storage capacity.

Historically, paired systems had relatively small storage capacity, because battery costs would weigh down project economics. The groundbreaking Tucson Electric Power hybrid PPA got to $45 per megawatt-hour with 100 megawatts of solar and 30 megawatts of 4-hour storage.

The new APS project has stepped a bit closer to 1-to-1. That reflects cheaper battery costs making larger systems tenable, but it also means the value proposition is changing. Storage is no longer a nice add-on to a solar project; it played the key role in winning this bid.