The Hidden Risks of Co-Located BESS and Renewables: Why Grid Constraints Can Erode Project Viability
Co-locating battery energy storage systems (BESS) with renewable energy sources (RES) has clear benefits, such as better utilisation of grid connections, increased flexibility, and access to multiple revenue streams. However, as more developers pursue co-location, an overlooked challenge is becoming increasingly apparent: The risk of export conflicts.
Beyond the operational advantages, Co-Located BESS and Renewables can also lead to significant cost savings. By sharing a single grid connection, developers can avoid the expenses associated with separate connections for each asset, reducing costs related to cabling, transformer installations, and other infrastructure. Additionally, a smaller combined capacity can result in lower Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) charges, further enhancing the project’s economic feasibility.
Grid offers for renewable generation, such as solar and onshore wind, are usually sized to accommodate peak output, ensuring the ability to export fully when generation is high. However, given the relatively low capacity factors of these technologies (around 25% for onshore wind and 10% for solar [1]) much of this grid capacity remains underutilised. The same applies to BESS, which typically imports or exports power for only a few hours each day. On the surface, co-locating these technologies seems like a logical way to maximise asset value, but the reality is more complex.
Grid Export Limitations: Understanding the Challenge
The key issue arises when the total capacity of a co-located BESS and renewable asset exceeds the site’s grid connection entry capacity. In such cases, the two assets will sometimes compete for access to the grid, leading to constrained exports.
For example, a solar farm and a BESS may have a combined installed capacity significantly above the site’s export limit. When both assets attempt to export at the same time (such as on a sunny afternoon when solar generation is high and the BESS is scheduled to discharge), one of them must reduce its output to stay within the grid connection limit. This can result in lost revenue, particularly when market prices are favourable.
Without careful analysis, developers may find that their projects do not generate the returns expected. A well-designed co-located system should balance renewable generation and BESS capacity, while considering how the grid export limit impacts energy dispatch and market participation.
Revenue Impacts: When Co-Located BESS and Renewables Compete for the Same Grid Capacity
One of the biggest risks of co-location is the unintended limitation on revenue potential. A BESS is typically charged during periods of low energy prices with the expectation of discharging at peak times when prices are high. However, if the renewable asset is also generating at these times, the combined output may exceed the export limit, forcing either the BESS or the renewable asset to scale back its export to the grid.
This shift in dispatch can have significant commercial implications. Instead of selling energy during the most profitable hours, BESS may be forced to shift exports to lower-value periods, reducing revenue. The expected returns from co-location can quickly diminish if these conflicts are not properly understood and accounted for in project planning.
Optimising the Balance of Co-Located BESS and Renewables: How to Minimise Export Conflicts
The challenge is to determine the optimal mix of renewable generation and BESS capacity within the constraints of the fixed export limit. Several key factors must be considered:
- The site’s export capacity in relation to the total installed generation and storage capacity;
- The generation profile of the renewable asset across different seasons;
- BESS dispatch strategy and how it aligns with market conditions; and
- Market revenue opportunities and potential value stacking across services.
By understanding these interactions, developers can avoid suboptimal configurations that lead to underutilised assets or unnecessary revenue losses.
How We Quantify the Impact: Advanced Modelling for Co-Located Systems
To address these challenges, Blake Clough have developed an optimisation tool that models the operational and financial impact of grid export limitations on co-located BESS and renewables projects. Our analysis provides:
- A detailed assessment of how export conflicts impact revenue streams;
- Quantification of lost revenue due to export constraints;
- Identification of the optimal balance between renewable generation and BESS capacity; and
- Scenario modelling over different timeframes to evaluate project viability under varying market conditions.
Beyond these core assessments, we also incorporate a range of sensitivities to ensure that developers have a complete understanding of the different factors that influence project performance. These include:
- Asset size combinations: Evaluating various configurations of BESS and renewable generation capacities to determine the most efficient and profitable mix.
- System configurations: Comparing AC-coupled versus DC-coupled setups to assess the impact on efficiency, losses and revenue.
- Market participation: Simulating revenue potential across different commercial structures, including Power Purchase Agreements (PPAs), Contracts for Difference (CfD), the Capacity Market, the wholesale market, and the Balancing Mechanism.
- Import constraints: Assessing not only the impacts of export limitations, but also the potential challenges of undersized import capacity, which could restrict the BESS from charging at optimal times.
By analysing these variables, we provide a comprehensive, data-driven evaluation of how to structure co-located projects for maximum profitability in real-world grid conditions.
Blake Clough’s modelling can be carried out as a standalone analysis or as a complementary study alongside our curtailment studies, ensuring that developers have a complete picture of their project’s financial and operational risks.
Import Constraints: The Overlooked Challenge
While much attention is given to export limitations, import constraints can be just as detrimental to a co-located project’s financial performance. Many grid connection offers are undersized on the import side, meaning that the BESS may not always be able to charge when market conditions are most favourable.
For instance, if the BESS is designed to import during low-price periods but the grid connection limits the available capacity, it may not fully charge in time to participate in peak-hour trading. This results in missed arbitrage opportunities and reduced flexibility in market participation.
Our modelling approach simultaneously evaluates both import and export constraints to ensure that projects are not only optimised for maximum energy export but also for the most effective charging strategy. This dual analysis helps developers avoid underutilisation and ensures that their BESS is able to capture the highest value possible across multiple market opportunities.
Case Study: The Growing Challenge of Conflicts in Co-Located Systems
The example below illustrates the impact of limited grid export capacity on the operational profile of a co-located BESS and solar system rated at 100MW each. Due to the 100 MW grid export limit, BESS dispatch must be adjusted, shifting exports away from the most profitable hours and into lower-value periods. This restriction results in missed opportunities to sell energy when market prices are highest, directly affecting revenue.
As shown in the figures, BESS technology must limit its output during peak solar generation hours to avoid exceeding the export limit, leading to suboptimal revenue capture. Without a clear strategy to optimise asset dispatch, the financial viability of the project can be significantly affected.
Next Steps: Ensuring Your Co-Located BESS & Renewables Project is Optimised
With grid constraints tightening and market conditions evolving, evaluating a co-located BESS and renewables project is no longer optional; it is essential. A poorly optimised system can lead to lost revenue on underperforming assets that fail to meet commercial expectations.
At Blake Clough, we work with clients to quantify the impact of export and import constraints, optimise the balance between renewable generation and BESS capacity, and ensure the best possible financial outcomes.
If you are developing a co-located project and want to safeguard your investment, maximise revenue, and ensure long-term viability, we would be happy to help. Get in touch to discuss how our advanced modelling and optimisation strategies can help you navigate these challenges with confidence.
Co-Located BESS and Renewables – References
[1] Department for Energy Security & Net Zero, “Load factors for renewable electricity generation (DUKES 6.3),” Digest of UK Energy Statistics (DUKES). [Online]. Available: https://www.gov.uk/government/statistics/renewable-sources-of-energy-chapter-6-digest-of-united-kingdom-energy-statistics-dukes