Earlier this year, we hosted a webinar on cross-market battery optimization with quality speakers from TotalEnergies, Arenko, ECO STOR, AFRY and entelios. The audience had a series of interesting questions for the presenters, from monetary and market-specific concerns to regulatory and technological inquiries. Read on for the Q&A.
How will FCR revenues develop over the next few years?
Fleur Greetham (AFRY)
If FCR is your only access point, the value of your asset will likely decrease over the years as ambitious plans for new storage installations across Europe are running the risk of saturating the market. A cross-market approach is therefore in your best financial interest.
What can the US, UK and EU markets learn from each other?
Rimshah Javed (Arenko)
Looking at front-of-the-meter grid-scale batteries, the US has the highest installed capacities, and they've been forward-thinking when it comes to regulations and enabling renewable assets. There is catching-up-potential in Europe in terms of interconnectivity, demand response and storage capacity for bidirectional flows. However, the UK is more mature because batteries alone constitute a lucrative business, whereas the US relies on their integration with other forms of generation such as natural gas, putting the UK ahead in innovation and competition. When it comes to behind-the-meter batteries, the UK and US markets are quite small, while Germany has the biggest residential capacity in Europe, and Italy focuses on both behind- and front-of-the-meter storage. The grid of the future is one of better visibility and greater decentralization and therefore depends on the interconnected participation of all market players, large and small.
How important will the co-location of batteries with other assets become?
Johanna Jungbauer (ECO STOR)
Co-located batteries share grid access with PV and wind, which restricts operation and results in lower revenues. In Europe, standalone batteries are currently more lucrative, but if we arrive at a point where grid access becomes a problem, co-location will get very interesting.
What impact will the upcoming changes in the French aFRR market have on BESS?
Perrine Tanguy (TotalEnergies)
It will have a positive impact as the opening of the market introduces new arbitrage opportunities for batteries in France, and aFRR service no longer needs to go through a secondary market.
Which policies, regulations and insurances are required to ensure future revenue streams?
Fleur Greetham (AFRY) & Johanna Jungbauer (ECO STOR)
From the investment side, changing existing regulations would make it easier for battery storage to access the grid. This includes building permits, grid access fees and any additional regulatory aspects that would facilitate investment security. From the operational side, removing policies that disincentivize cycling and introducing policies that endorse flexibility would help. Furthermore, the TSOs and governments designing the future market system have to make sure that it is storage-ready. The codes currently governing how a battery is operating were written in a world where generators were the only creators of power and suppliers the only consumers, which isn't supporting the premise of batteries because they are effectively doing both. New market structures need to be more encouraging in their jurisdiction of BESS as they are vital to the growth of intermittent renewables, and by extension, the decarbonization of the industry.
What are the most fitting markets for battery storage?
Clarissa Irion (entelios)
In Europe, aFRR is a quite suitable market for batteries, especially in combination with FCR and wholesales. Despite unknown activations making it hard for marketers to navigate this market, batteries are a perfect fit for it, much more so than for the capacity market.
What is the main technical hindrance to the market performance of a battery?
Cécilia Masut (enspired)
The maximum number of runnable cycles specified in the warranty terms cuts into the revenue potential of storage assets.
How are battery cell manufacturers adapting to new use cases?
Johanna Jungbauer (ECO STOR)
There are two trends in motion with manufacturers. One is moving from power cells to energy cells to support 4-hour over 1-hour systems. The second development involves more integrated solutions such as containers with rack, fireproofing, ventilation and climatization as opposed to rack-only. Storage assets are becoming single commodities rather than products of individually manufactured components.
Are centralized or decentralized assets more cost-efficient?
Fleur Greetham (AFRY) & Rimshah Javed (Arenko)
Decentralized assets need effective tools for proper management; otherwise, they can become very expensive. Greater digitalization enables decentralized systems to communicate with each other and establish a certain level of visibility so that they can be aggregated and optimized together. Since traditionally we've had large-scale centralized assets, the system in its current form is not yet geared toward decentralization. For this to change, massive investments into cost-efficiency measures for the system itself are required. Without such funding, decentralized assets will remain more costly than centralized units. However, the system design does factor in here to an extent. If centralized structures are very poor, the decentralized kind might be a better way to go as the former really depends on a properly functioning grid infrastructure.
What does the battery monetization look like across the world? Explore trading strategies with us, learn about the technical considerations and pay a visit to markets in Germany, the US, Belgium and France.
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