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First Solar Enters Energy Storage Game

By Travis Hoium - Feb 14, 2018 at 9:04PM

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An Arizona solar plus storage power plant could be a blueprint for First Solar's future.

First Solar (FSLR 0.79%) has been one of the solar industry's leaders since the early 2000s, pushing costs lower and developing some of the largest solar power plants in the world. But until recently, it hasn't done much to add energy storage to its solar power plants. 

That changed this week when the company announced it would build a solar-plus-storage plant for Pinnacle West Capital Corp.'s (PNW 1.45%) Arizona Public Service subsidiary. The plant will store the electricity it generates during the day for delivery during the high-demand period between 3 p.m. and 8 p.m., extending the clean energy hours for the grid

First Solar power power plant in the desert.

Image source: First Solar.

First Solar's move into energy storage

The 65 MW solar power plant will be paired with a 50 MW, 135 MW-hr energy storage system. To put that into perspective, the system will be able to store solar electricity from the power plant after producing at full capacity for just over two hours, and then provide more than two and a half hours' worth of power at its full discharge rate. The plant is expected to be complete by 2021. 

APS has signed a 15-year power purchase agreement to buy electricity from the project. As I mentioned, the intent is to use most of the energy between 3 p.m. and 8 p.m. -- a period when the Arizona grid hits peak consumption, and which also happens to coincide with the sun going down. 

The design of this solar-plus-storage plant shows that solar energy is now competing with fossil fuels on a nearly 24 hour a day basis now. 

A new growth opportunity

Energy storage opens up some important opportunities for the solar power plants. First, it expands the market potential. One of the main criticisms of solar has long been that it's a volatile power source and only provides energy during daylight hours. That narrative holds less water once the addition of energy storage allows solar power plants deliver electricity as needed to utilities, and with less volatility. 

The second opportunity for a developer like First Solar is that energy storage is a big revenue opportunity. A solar-plus-storage power plant will naturally cost more than a solar-only power plant, and since new solar panel capacity isn't needed, the additional revenue is entirely incremental. If storage can be added to more power plants, it could help drive the company's growth. 

First Solar developing more differentiation

As competitors begin to build their own solar-plus-storage platforms, it's important for First Solar to begin playing in this segment of the industry. It'll open new market opportunity for developers and utilities who are looking for solar-plus-storage capabilities and potentially provide incremental revenue for First Solar. And the fact that solar energy is now competing with natural gas, coal, and wind to meet customers' needs during evening hours could be a game-changer in the long term. 

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Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$70.62 (0.79%) $0.55
Pinnacle West Capital Corporation Stock Quote
Pinnacle West Capital Corporation
PNW
$72.79 (1.45%) $1.04

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