In the United States, the anticipated load growth and the retirement of aging plants to meet state mandates are creating a compelling narrative for the expansion of battery storage infrastructure. As this demand intensifies, developers are engaged in a competition to secure the most profitable locations for their storage assets.
Among the notable regional transmission organizations (RTO) signaling a need for increased battery storage in PJM. PJM’s regulatory landscape is shaped by state mandates necessitating the retirement of traditional thermal plants. Last summer witnessed the retirement of 4GW of capacity, with an additional 1GW slated for retirement this summer. Moreover, PJM anticipates a staggering 30GW surge in load growth over the next decade and a half in the Virginia area alone. Let’s delve into how the energy landscape is evolving within PJM for the foreseeable future and uncover strategies for pinpointing promising sites for battery storage projects.
Why PJM?
PJM emphasizes the role of ancillary services in maintaining grid stability. The services primarily operate within two key markets: regulation and reserves. Regulation is used to control small mismatches between load and generation adjusting for smaller imbalances to either side. Reserves help to recover system balance by making up for generation deficiencies if there is loss of a large generator or other larger scale disturbances in the system.
PJM stands out as an RTO offering significant economic opportunities for battery projects participating in the ancillary services market. This is evident in both the dollar amount per MW in both regulation and reserve markets as well as the expected rate of return for those markets utilizing Enverus Storage Economics in Enverus PRISM®. To maximize the potential value of a battery storage system, it’s ideal to locate the project in a region where ancillary services pay the most while also being able to take advantage of large locational marginal pricing (LMP) spreads to profit from those pricing arbitrage opportunities.
PJM Expected Load Growth
According to the 2024 PJM Load Forecast Report, the Dominion Utility region is projected to have one of the highest forecasted load growths within the PJM region. This increase can be largely attributed to the significant expansion of data centers in the area, which already boasts some of the highest concentration of data centers in the U.S. The substantial presence of data centers in the region, with their specific considerable power requirements can be attributed to the forecasted growth in this region, which can also represent a need for more energy demand and ancillary services to balance that growth and demand while also potentially unlocking more potential for power arbitrage in the surrounding areas.
The graphs below depict the top 10 counties in Virginia based on the average LMP pricing spread over the last 12 months, as well as the average LMP pricing. Forgiving some outliers, Loudoun & Prince Edwards counties stand out as ideal counties for being able to participate in the ancillary services market. Their strategic locations, coupled with high LMP spread differences, position them favorably to profit from arbitrage opportunities in high power demand/possible areas.
Project Probability and Queue Commentary
The graph above highlights the project probability of energy storage projects being completed by the owner. Dominion is also the main utility for Loudoun and Prince William counties which bodes well for our previous analysis. PJM is proposing to add an expedited interconnection process to allow projects to replace deactivated units in the interconnection process which can bode well for battery storage as it has a more streamlined development process than traditional projects. This comes as PJM has a historic backlog of projects in the interconnection queue which may help get more projects through the interconnection process.
Planned Transmission
With all the above in mind, we can narrow our siting search down to Loudoun and Prince Williams counties in Virginia. By identifying areas with lower interconnection costs and higher potential for available transmission capacity, we can utilize planned transmission routes to pinpoint ideal locations for development. Overlaying this information with LMP nodes with the largest average Max – Min LMP spread will further highlight areas where the highest opportunity for pricing arbitrage is potentially available.
In this instance, locating a battery project near a planned transmission route, such as the Aspen – Golden route, offers several advantages. Not only does it help ensure the availability of transmission capacity, but it also alleviates some of the costs associated with grid interconnection for new projects.
This is just one example, but it serves to highlight some of the tools in PRISM and our publications in identifying optimal sites for battery storage systems within the PJM region. By leveraging these tools, developers can access valuable data and insights to inform strategic decision-making and maximize the potential of their energy storage projects. With the addition of Enverus Suitable Land Analytics and Parcels, users can take the next step in analyzing the suitable of land for their battery asset project by determining the best land for development. Whether it’s analyzing transmission routes, evaluating LMP spreads, or considering other factors crucial to project feasibility, PRISM equips stakeholders with the necessary tools to navigate complex energy landscapes and drive successful outcomes.
