Co-location refers to the shared use of a grid connection point by a renewable energy generation facility and a battery storage system. Given the declining market values for solar and wind power, battery storage systems in co-location offer an attractive way to economically enhance the value of existing photovoltaic and wind farms. Excess electricity can be stored and sold at a more economically favorable time.
What does “co-location” mean in the context of battery storage systems?
In a co-location setup, a battery storage system is installed directly at the site of an existing or new photovoltaic or wind power plant. Both systems can share central infrastructure such as the grid connection and the transformer. Under certain conditions, this can simplify the grid connection process compared to a fully standalone battery storage project. Whether a new or amended grid connection application is required depends on the specific project and the requirements of the responsible grid operator.
Why Battery Storage Systems Are Becoming More Important in Co-Location Facilities
By their very nature, renewable energy sources feed a particularly large amount of electricity into the grid when there is plenty of solar or wind energy available—which often coincides with output from many other plants. This leads to a growing number of hours with low or even negative electricity prices, during which feeding power into the grid is hardly worthwhile. A battery storage system connected to the same grid connection can temporarily store excess energy and sell it at a later, more economically attractive time.
What types of co-location models are available for battery storage?
In practice, two basic forms can be distinguished:
- Stand-alone operation: The storage system uses only the available technical capacity of the existing grid connection for its own feed-in and feed-out, independent of the generation plant
- “True” co-location: The storage facility and the generation plant are operated in close technical and economic integration, for example through joint optimization of power feed-in
Regulatory Requirements for Co-Location Projects
Co-location projects can be implemented, among other things, as part of the EEG innovation tenders, which provide targeted funding for combined generation and storage facilities. Co-location is also particularly relevant for photovoltaic systems whose regular EEG subsidies have expired (so-called post-EEG systems), as the economic viability of their continued operation must be reassessed in these cases.
Economic Benefits of Co-Located Battery Storage Systems
There are several benefits for plant operators:
- No grid connection process—or a significantly simplified one—compared to a standalone storage project
- higher realizable market value of the solar or wind power generated
- Additional source of revenue from electricity trading and system services provided by the storage facility
- better utilization of existing grid connection capacity
For which companies is colocation a good fit?
Co-location is particularly relevant for operators of existing solar and wind farms, project developers in both new and existing projects, and owners of larger commercial rooftop systems with unused connection capacity.
Distinction from related terms
Not to be confused with:
- Atypical Grid Usage: a tariff-based tool for reducing grid fees, independent of the co-location concept
- Peak Shaving: aims to reduce peak demand, while co-location optimizes the marketing of generation
- Direct Marketing: an independent marketing model that can also be applied in the case of co-location facilities
Summary
Battery storage systems in co-location combine renewable energy generation with more flexible use of the existing grid connection. They enable operators of solar and wind farms to market electricity in a way that better matches demand, make better use of existing infrastructure, and tap into additional revenue potential. In this way, co-location can make an important contribution to the economic development of existing and new renewable energy facilities. Given the growing expansion of renewable energy, limited grid connection capacities, and increasing price fluctuations, co-location is likely to become even more important for plant operators in Germany.
