This report summarizes the technical capability and market rules that influence the capacity value of PV+battery systems. It also discusses the potential tradeoffs between computational complexity and accuracy for the various ways in which grid operators can credit PV+battery systems for capacity. Finally, it describe markets for capacity, survey current wholesale market rules applying to PV+battery systems, and provide a snapshot of the current regulatory landscape for PV+battery systems. Simplified approaches for calculating capacity value may not be adequate for capturing the full value of PV+battery hybrids (and other flexible resources), particularly in a grid with significant shares of variable generation. While the transparency of simplified approaches—including “sum of parts” and capacity factor-based approximation methods for calculating hybrid system capacity values—is appealing, it may be outweighed by the drawbacks of limited accuracy and risks to maintaining resource adequacy in the most cost-effective manner. As a result, there is a general effort among grid operators to transition to probabilistic reliability-based methods. Because of the growth in PV+battery systems and their increasing complexity—involving multiple configurations and likely increases in DC/AC ratios—it is important that research in capacity valuation methods continue, along with development of transparent algorithms and stakeholder vetted software tools. These improved tools and methods will help address not only the growing challenges associated with PV+battery hybrids, but they will also provide improved approaches for modeling complex resources such as advanced demand response.
