Business models for storage
Simon Bradbury, principal consultant with Pöyry, outlines how energy storage can deliver benefits for the energy sector.
Interest in energy storage is “definitely on the up” in Great Britain, Pöyry Management Consulting’s Simon Bradbury relates, and is increasing among policy-makers, regulators, network operators and the finance community. The growth in financial interest over the last 6-12 months is a “particularly important development.”
As of 2013, Great Britain had 7MW of non-pumped hydro storage but the Electricity Storage Network has set out an ambitious vision of installing an additional 2GW of storage by 2020. This growth will be spread across a range of technologies from centralised bulk energy trading to 10-15MW distribution projects and down to user-led, behind the meter based applications.
Bradbury explains: “We’re all expecting increased penetration of variable renewable generation as we move forward and that creates a drive for different types of flexible resources to support a system with greater reliance on variable renewable generation.”
Conventional generation was the traditional source of flexibility but is not as economically viable as it was in the past. Increasing the capacity of interconnection can be expensive and time-consuming and the availability depends on conditions at the other end of the link.
Demand side response is become more and more prominent – a trend helped by the development of large data centres in Ireland. Electricity storage was often “dismissed or discounted” because of the costs but the market is now changing “quite markedly” and a larger range of applications is opening up. These include the ability to offset or delay conventional grid reinforcement, ancillary services for distribution or transmission systems, and options for energy trading and consumer applications.
The business case tends to be multi-layered. Actual revenues from market sources tend to be lower than costs, but there can also be significant indirect benefits such as avoiding capital expenditure on the network and displacing conventional generation. The majority of demonstration projects are supported by innovation funding e.g. from the Low Carbon Network or Energy Entrepreneurs Fund.
At a consumer level, the Moixa system combines rooftop solar power with a battery application linked by a DC system which also controls lighting within the home. This can also be aggregated into a block comprising a series of houses and businesses.
Funded by Ofgem, the UK Power Network Smarter Network Storage project is seeking to test a range of network and commercial models based on revenues from ancillary services and potential market-related benefits.
Pöyry is one of several consortium members in the project and trials will continue into 2016. Bradbury remarks: “This is the space to watch because you’ll see some interesting information coming out of this in terms of the outcomes of the trials and what they might suggest.”
He adds: “The two models that are really being explored are the DNO [distribution network operator] contracted and the contracted services, and the key here is who owns the asset.”
In the former model, the DNO owns the asset but makes it available to a third party via a commercial arrangement. Contracted services involve third party ownership and allow for a contract provide the DNO with the services needed to manage its system.
“The direction of travel that we take is going to be influenced by a number of factors,” Bradbury notes. Demonstration projects enable developers to learn more about the technology’s potential applications and commercial opportunities.
Legal and regulatory frameworks can be reformed to enable greater uptake. Sources of value have to be identified along with the ability to realise that value. The final factor is the rate of change defined by the technology’s cost and capabilities. On the latter point, he concludes: “We’ve seen quite a sharp fall-off in costs recently and we’re eager to test and extend the capability of various different technologies.”
