RENEWABLE ENERGY WORLD - The potential benefits of energy storage are widely recognised, from load-shifting power from high to low price periods, to managing intermittent generation on power networks by providing services to the system operator (SO). What is less certain is the profitability of those different services. Do battery owners contract for one or multiple different products, allowing for the mutual exclusivities between each? Should developers consider large or multiple small-scale projects? Who will the final customer be? Will battery owners contract with utilities, system operators or indeed home owners?
Policy makers and regulators must also ask if existing market designs will incentivise the optimal deployment of batteries, or whether innovative battery solutions will be hindered by existing regulations and policy designs.
The most obvious role for batteries is load shifting power from low to high power price periods, be that charging off the electricity grid, or charging via nearby low-cost renewable generation. Today, the value of this intertemporal arbitrage is modest. In the U.K., for example, load-shifting currently delivers less than a third of a battery’s target returns, although as battery costs decline, renewable penetration increases, and the U.K.’s cash-out policy reform is implemented, the potential returns from arbitrage may increase. Currently, 11 percent of Li-ion batteries installed globally are used for load-shifting type services.
The next most obvious application is for batteries to contract with SOs to manage the risk of there being too little, or indeed too much generation on electricity systems at any given time. Batteries’ flexibility to rapidly charge or discharge allows them to provide valuable up and down frequency regulation. That capability allows batteries to contract for the most lucrative of the suite of balancing services with SOs, often under long term bi-lateral contracts with capacity and utilization type payments. Today, 49 percent of Li-ion batteries installed globally are used for frequency regulation type services.
A third application is to locate batteries on local distribution networks, or indeed ‘behind-the-meter’ on industrial and commercial sites. Those applications could then avoid suppliers costly use of system charges (e.g. ‘TRIADs’ in the U.K.), or could contract for balancing services with SOs.