Industry commentators are already calling 2016 ‘the year of battery storage’
but developers could face challenges with getting the commercial case to stack up…
Regular readers of our weekly newsletter The Informer will know that battery storage is a hot topic at the moment. We’re keen observers of the decreasing technology costs and are engaging with government on the regulatory change needed to support battery technology.
Everything is moving in the right direction and the possibilities for storage are exciting, but we are still hearing project developers talk about the challenges in creating an investment case.
> Take our survey to tell us what you think about the battery business case
Setting up a battery project - whether standalone, co-located with renewables or behind the meter - will be a costly exercise. The >1GW of projects currently in the pipeline of developers we are in discussions with, will need to demonstrate the payback timeline to turn their plans into reality.
Over 60 companies have pre-qualified for the first Enhanced Frequency Response auction to be held by National Grid in the summer, how many of these projects are contingent upon winning from a limited pool of capacity? Is the revenue from EFR alone sufficient to secure investment? In the absence of long term EFR contracts, what will the revenue streams be once these initial contracts expire?
For developers planning to use batteries to optimise solar or wind generation, is the revenue from moving export into more profitable peak hours sufficient? has the consultation on embedded benefits created uncertainty that will stifle development on unlocking the potential in this sector?
Behind the meter battery projects will also have to look at all potential incremental revenue streams. Avoiding peak energy prices for consumption is unlikely to be enough but coupled with grid contracts and accounting the value of avoided investment in other UPS infrastructure, could this soon look like an attractive investment for I&C consumers?
If you are planning to develop a battery project, we want to hear your thoughts on the commercial opportunities. Please take 5 minutes to complete our survey and we’ll share our report with you next month:
For more information on our commercial agreements for battery projects, contact storage@smartestenergy.com or read more here.