  Expanding transmission capacity is likely a bottleneck that will restrict
variable renewable energy (VRE) deployment required to achieve ambitious
emission reduction goals. Grid interconnection and inter-regional transmission
capacity may be reduced by the optimal sizing of VREs to grid connection or
co-location of VRE and battery resources behind the grid interconnection, but
neither of these capabilities are commonly captured in macro-energy system
models. We thus develop these two new functionalities to explore the
substitutability of storage for transmission and VRE resource trade-offs
through 2030 in the Western Interconnection of the United States. Our findings
indicate that not modeling co-location fails to capture the full
substitutability of storage and solar photovoltaic (PV) resources for
transmission: co-location can reduce long-distance inter-regional transmission
expansion by 12-31% and decrease grid connection capacity and shorter-distance
transmission interconnection by 20-25%. We also demonstrate that not modeling
colocated storage does not accurately reflect competition between wind and
solar PV resources and underestimates the value of energy storage: co-location
of VREs and storage favors solar PV (4-5% increase) and lithium-ion battery
deployment (1.7-6 times increase), while decreasing wind buildout (0.9-1.6%
decline).
