Energy Storage Report

Batteries are increasingly playing a pivotal role in bridging the gap for flexible assets in the grid. The swift decarbonization efforts and the escalating penetration of renewable energy underscore the urgent need for grid operators to secure capacities that can be quickly mobilized for critical applications such as grid balancing, frequency regulation, and ancillary services. Stringent emission regulations have shifted the landscape away from gas or coal-based power generation facilities, making standalone battery storage units more competitive. Recent procurement auctions by transmission utilities reflect this trend, highlighting the emergence of batteries as viable options.

Auctions have proven instrumental in providing long-term visibility for investors and developers alike. Notable examples include Germany’s ‘innovative auctions,’ initiated in 2021, which offer 20-year contracts for renewable-plus-storage projects. These auctions stipulate that selected battery storage projects must be charged from renewable energy assets and capable of providing automatic Frequency Restoration Reserve services. In Spain, similar auctions mandate a minimum energy storage capacity of 1MW or 1MWh with a minimum discharge duration of two hours. Selected projects are eligible for grants of up to €15 million per project and €37.5 million per company.

As energy storage deployment continues to rise, the power market is poised to become increasingly complex, necessitating the development of new procurement models to incentivize capacity expansion. However, it’s crucial to note that regulatory changes in market participation must precede energy storage developers’ involvement and investment. Many markets globally currently lack these regulatory frameworks, representing a vast untapped potential for energy storage development and integration.