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Batteries: The jack of all trades

FSR Energy&Climate
Feb 28, 2017 · 10 min read

by Pradyumna Bhagwat

The EU 2020 energy and climate targets have led to a significant increase in the share of renewable energy sources in the EU’s electricity supply mix. Going forward, EU’s ambitious goal of reducing the greenhouse gas emissions by at least 80% of the 1990 value by 2050 indicates that this growth in renewable generation can be expected to increase over the coming years.

A power system based on renewable energy needs flexibility to balance demand and supply. OFGEM defines flexibility as “modifying generation and/or consumption patterns in reaction to an external signal (such as a change in price, or an electronic message) to provide a service within the energy system”.

Storing electricity is one way of providing flexibility to the system. Electrical storage can be defined as any device that can store electrical energy and make it available when required. Therefore, it could be said that while “copper wires” transmit electricity over geographical distances, storage transmits electricity across time.

Traditional storage technologies, such as pumped hydro that accounts for most of the current storage capacity, have been around for ages, but due to rapid innovation, large-scale batteries (also referred to as electro-chemical storage devices) are only recently becoming economically viable. A significant growth in the battery storage installations in the EU has been observed since 2009. It is projected that storage capacity for utility scale applications alone is expected to reach 14 GW by 2023.

Batteries have some unique characteristics that set them apart from the traditional storage resources. Unlike traditional technologies, these devices are modular and can be installed quickly. Hence, they are not constrained by location. Not only can batteries be installed at any location but they can also be moved to another location as and when required in a cost effective manner. This makes them an invaluable resource for providing location specific services such as voltage control for distribution grids.

Batteries can participate in different segments of the electricity value chain. These devices can provide ancillary services, participate in the wholesale market (as both buyers and sellers) and can also be used for congestion management. The ongoing energy transition requires a lot of investments in transmission and distribution grids. Managing grids smartly by using batteries and other potential sources of flexibility can defer some grid investments. Thus the functional versatility of batteries truly make them the “jack of all trades”.

However, this functional versatility of batteries also makes it extremely difficult to define them in the current regulatory framework. In this regard, two key topics of debate are the following. The first is concerning the ownership of such assets, which can be aptly summarised by the phrase “who will master this jack of all trades?”. While the second debate centres around the (in) ability of the current market structures in providing a level playing field for new products such as batteries. We will look into the various aspects of these debates in depth.

Finally, in a discussion about batteries, the role of electric vehicles (EVs) cannot be ignored. EVs by some have been described as “storage on wheels” that could be used as yet another flexibility resources, while others see them as a risk to our existing system.

Who will master the jack of all trades?

Balancing services

Locations specific grid services

System operators can solve such problems by procuring location specific services. For example a TSOs sometimes pay market parties to keep a power plant running in a certain location to support the voltage, even if the plant is out of the market. As market parties that provide location specific grid services have significantly more market power than those that provide regular balancing services, competition in the market will not work. Thus there is a case for permitting DSOs-TSOs ownership of assets for providing local grid services until these markets mature. Batteries which are modular, quick to install, and mobile are well-suited to deal with these local problems. However, the costs and benefits of TSO-DSO ownership of batteries vis-à-vis the current approach needs to be evaluated very carefully.

What does the “Clean energy for all Europeans” package say?

The “balancing act” of integrating batteries into the market

This view has been echoed by ENTSO-E in its position paper, where it mentions the need “for improving the market design to ensure adequate price signal for storage”. The European Parliament resolution of 13 Sep. 2016 on Towards a New Energy Market Design too calls upon the European Commission to adopt a market design structure that rewards flexible and fast reacting resources.

The same holds true in the United States, which nevertheless appears to be ahead of the EU in this aspect. In 2011, the federal energy regulatory commission (FERC O-755) ordered the overhaul of the frequency regulation market as it saw the current system as (negatively) discriminatory towards flexible and fast responding assets. Recently, FERC has proposed further changes to market design in order to facilitate a level playing field for storage technologies.

Examples of market adaptations

SPECIAL MARKET: In the UK, National Grid created a special market for Enhanced Frequency Response (EFR) to support fast responding assets. During the first auction in 2016, roughly 200MW of batteries were able to clear this market and get contracts for providing the enhanced frequency response services.

MARKET MODIFICATION: In Pennsylvania-New Jersey-Maryland (PJM), after FERC order 755, the frequency response market has been restructured to provide fast responding resource an additional remuneration. In the new market structure, the additional power provided by fast resources as compared to the traditional resources in a given time frame is taken into consideration while calculating payments. This has allowed batteries and even electro-mechanical devices such as flywheels to participate competitively in the market.

TECHNOLOGY SPECIFIC PROCUREMENT: In California, local capacity requirement auctions are organised by the load-serving entities. These auctions can be considered as a type of local level capacity mechanism to ensure reliability. In 2014, while approving South California Edison’s local area requirements, the California Public Service Commission specified the share of different technologies that should be contracted, of which storage was one technology. This resulted in South California-Edison contracting 100MW of batteries. This was part of a solution provided by AES in combination with a CCGT power plant.

The way forward

Driving on the electricity highway

The rising number of electric vehicles has led to some concerns regarding its impact on the electrical system. The system may be put at risk due to a significant growth in the electricity consumption and the increase in unpredictability of consumption patterns owing to vehicle charging. Nevertheless, with the use of smart Vehicle to Grid (V2G) solutions, electric vehicles could become a solution rather than a problem by contributing significantly in integrating intermittent renewables into the system and by providing ancillary services. Apart from the system level benefits, permitting EVs to participate in the electricity markets would present new revenue generation opportunities for vehicle owners. This in turn would further improve the business case for EVs by reducing overall costs.

EVs as an electricity market participant

Examples of ongoing trials on market participation of EVs

In May 2016, Italian power company ENEL and Japanese car manufacturer Nissan announced plans of conducting V2G trials in the UK. The trial will consist of installing one hundred V2G units at various locations for Nissan LEAF and e-NV200 electric van. These units will provide owners of these vehicles the ability to provide grid services. Since August 2016, a similar project has been undertaken by ENEL in Denmark where, 10 vehicle-to-grid (V2G) units have been installed at the headquarters of the Danish utility Frederiksberg Forsyning.

Gazing into the crystal ball

This essay was originally published as a series of fully referenced blog posts on the FSR website which can be read here.

Lights on EU

The FSR improves the quality of regulatory policy in…

FSR Energy&Climate

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The Florence School of Regulation shares high-quality & relevant academic thinking on EU Energy policy & regulation. Sign up for updates:

Lights on EU

The FSR improves the quality of regulatory policy in crucial sectors of the European economy through applied research, policy debate and training.

FSR Energy&Climate

Written by

The Florence School of Regulation shares high-quality & relevant academic thinking on EU Energy policy & regulation. Sign up for updates:

Lights on EU

The FSR improves the quality of regulatory policy in crucial sectors of the European economy through applied research, policy debate and training.

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