Renewable energy battery storage requires stacked revenue streams

The advent of grid-scale renewable energy battery storage systems has long been viewed as the holy grail of a modern grid system that incorporates a high level of renewable energy. But with the increased use of digital grid monitors and control tools allied with interconnect trading and demand, response has so far dispelled that belief.

To date, none of the challenges presented by high volumes of renewable energy have proved to be impossible or necessitated the construction of large energy storage systems. Denmark already has more than 50 percent of their power from renewables and has a plan to increase that to 100 percent by 2050, all without the use of energy storage systems, reports Deutsche Welle.

Despite that, the growth in energy storage systems, primarily lithium-ion Battery Energy Storage Systems (BESS’s) is predicted to double six times by 2030, according to Bloomberg New Energy Finance. There are several drivers for this growth, from a more favorable market and regulatory environment with improved access to finance, to improved system costs and the need to upgrade existing aging grid infrastructure. Where these systems were once only considered viable in certain business sectors, or with the help of government funding, the technology has matured to the point that it can equal the profitability of fossil fuels in a growing number of scenarios.

Storage options

Aside from battery storage, there are several other technologies such as pumped hydro storage, flywheels, supercapacitors and compressed air storage, but batteries are still considered the most suitable alternative, especially in the short term. The greatest focus is on lithium-ion batteries, but other batteries being utilized include flow-batteries for medium-scale storage, copper zinc batteries and lithium-titanate batteries.

The major appeal of lithium-ion batteries is that they are big and versatile. They can dispatch and store energy in bulk and, if needed, for emergency response within milliseconds (making them an ideal fit for emergency services). You only have to look at recent utility scale projects such as the 120MWh system in Escondido/Aliso Canyon, California and Tesla’s 129MWh battery in Hornsdale, South Australia.

The goal is larger scale and lower cost, but this will not be achieved simply by improving energy density or incremental component innovation. Pumped hydropower will always be the most efficient, but its use is restricted to suitable geographic locations.

Technologies under development include liquid air energy storage, where cheap energy is used to cool air until it becomes a liquid. Other research is focused on gravitational potential energy storage and turbine-powered wind batteries.

Making it work financially

Unless regulated to do so, making a capital expenditure case for building grid-scale renewable energy battery storage systems requires stacking of income streams. Energy storage systems provide several services and, for each service, receive a different revenue stream. Unlike distributed storage, utility-scale storage does not have the ability to raise behind-the-meter income so it has to rely on a portfolio of ancillary services to support the grid, including voltage support, frequency regulation and spinning reserves, as noted by Norton Rose Fulbright.

The term “ancillary services” encompasses roles that assist grid operators to deliver a reliable electricity system. They will stabilize the proper flow and direction of electricity, look after imbalances between supply and demand and help the system recover after a power system event. This is particularly important in systems that have a high content of electricity from renewable sources that can be variable and of uncertain quality.

With the desire to reduce the use of fossil fuel generation and support an aging transmission and distribution grid, there is an additional way energy storage is good for the economy: when the cost is offset against the cost of building new generation plants or transmission infrastructure, reports Energy Storage World Forum. As a stand-alone revenue stream, each will likely fall short of justifying capital expenditure, so at present the only way forward is value stacking, whereby a single energy storage system can provide several services.

One challenge remains, the regulatory framework that is lacking behind the technological solutions and financial offerings. The EU’s 2016 Clean Energy For all Europeans Directive (Winter Package) recognizes the growing role of energy storage and focuses on some of the regulatory problems. These include a clear definition of what energy storage entails. At present, it is still classified as a form of generation, which requires a license. There are moves to improve this regulatory confusion but it can still present a barrier.

When it comes to ensuring maximum revenue from an energy storage system, it’s vital that there is a single source of truth. With the variables involved in culling profit from the emerging renewables sector, market participants are turning to energy trading and risk management (ETRM) software to help define how electricity storage products can be captured, how the related risk can be assessed and how such products can be priced. ETRM solutions are already being used for the planning, procuring, processing, managing, moving and trading of energy. From trade capture and position management to risk assessment, accounting and compliance, ETRMs are vital to the success of businesses that generate and trade power.