Navigating the Evolving Landscape of Energy Storage – What drives these changes, and how can we effectively prepare for them?

Navigating the Evolving Landscape of Energy Storage – What drives these changes, and how can we effectively prepare for them?

Crafting a 360-degree Vision: Aligning Designs with Strategic Goals

When designing a battery energy storage project, aligning the design with the project’s 360-degree strategic vision is essential. This vision integrates various elements that must work together to create an optimal balance, combining technology and financial aspects.

To achieve success when designing a project, there’s a need to consider the project’s location, type (whether hybrid with PV or wind, microgrid, or standalone system), and the primary business model. Additionally, it’s crucial to understand the market the project will operate in – whether regulated or free merchant. The types of services and electricity products the BESS can offer will influence its cycling profile, impacting system life performance, potential augmentation strategies, and the overall investment profitability.

Adapting BESS to Market Dynamics

Batteries are considered as a flexible asset, acting as both consumers and generators of energy, responding rapidly to changing needs and opportunities. Over the past decade, energy storage systems have seen significant advancement in technology, configuration, capacity and energy storage duration. They have evolved from short-duration systems of 30 minutes (2C) batteries to 4-6 hours batteries (0.25C). This evolution reflects shifts in revenue options and value-stacking strategies.

Energy storage systems must adapt to market dynamics. Different markets require unique design requirements. Learning from the evolution of system configurations in different markets can benefit the design of current system designs. For example, in CAISO (the Californian Independent System Operator), systems designs were originally focused on 4-hour capacity to address energy adequacy and mitigate the “duck curve”. Over time, these systems have captured additional diversified revenue streams from the CASIO market, affecting BESS’s operation performance.

In other markets like PJM, UK, and Scandinavia, systems were originally designed for rapid responses to grid frequency changes and imbalances with short-duration energy capacity. Recently, due to increasing revenues in wholesale and balancing services markets, system designs have shifted toward longer energy capacities to capture different revenue stacking strategies, leaving older designes less profitable or even obsolete.

The diagrams below (by MODOENERGY) illustrate the evolving revenue trends in developed markets such as California, Texas, Germany, and the UK. They also highlight changes in ancillary prices and the shifting mix of revenue sources over time.

Navigating Regulatory Mandates

As the share of renewable energy and distributed energy resources (DERs) and flexible assets like BESS grows, the landscape of electricity and ancillary services pricing are changing. In regulated and semi-regulated markets like Israel and emerging European markets, energy storage systems are influenced by regulatory mandates. These include PV+BESS $/MWh public bids, capacity auctions, hybridization to prevent generation curtailments and enhance peak-hour revenues, demand response regulated programs, and new retail market mechanism for virtual electricity suppliers optimizing peak-hour procurement. BESS design in these markets will differ from non-regulated and merchant base markets, adapting first to regulatory requirements and economics of revenues in such markets.

Ensuring Long-Term Success in Energy Storage Investments

When investing in energy storage systems, owners must ensure that the system’s designs align with the intended business and operation model. This alignment should benefit not only short-term revenue outlook but also a long-term revenue. By anticipating changes in electricity markets and regulations, owners will be able to design systems that adapt over time and continue to perform effectively.

As the energy storage sector rapidly evolves, our pioneering work at BLEnergy, leveraging cutting-edge CATL ESS technology to deliver leading BESS solutions is making a significant impact. Understanding markets trends and complexities is essential for designing and operating these systems effectively. At BLEnergy, we incorporate these insights to design optimal solutions tailored for diverse markets.