Flexibility of power network hinges on storing excess electricity and demand response to alleviate the impact of intermittent generation. California and Germany used subsidies as a trigger to advance power storage; yet to further commercialise these technologies the industry needs market-based regulation that remunerates flexibility and puts in place a level playing field between different assets.
Such ‘flexibility payments’ and not plain subsidies is “what is really going to enable batteries and storage to find their footing in Europe’s energy market,” suggested Fabien Roques, senior VP in the Paris office of the consultancy Compass Lexecon.
California and Germany – the frontrunners in terms of power storage – used subsidies to support R&D and pilot schemes of various technologies. Yet, there has not been a wider appetite for storage subsides across Europe, which hampers the commercialisation of viable technologies.
Aspirations in Germany are for renewables to account for 60% to 80% of energy supply as a result of power storage. Targets are set but “Lots of storage technologies remain commercially unviable,” Bernd von der Heide, managing director at Mehldau & Steinfath Umwelttechnik warned, stressing “this can't persist if we're to continue on the path towards increased reliance on intermittent renewable generation.”
Energy storage helps to balance power grids, alleviating the impact from intermittent wind and solar power supply on system stability. It can also help local communities to become self-sufficient – yet, technologies on offer are still having some teething problems.
Curbing costs by putting a value on flexibility
“There’s no magic bullet; but if the goal is to move away from fossil fuel-fired generation, then the focus should be on making alternative generation cheaper,” said Simon Hobday, partner at Osborne Clarke. He expects storage to be part of the mix; but this includes not just batteries but also other forms of energy-conversion such as heat stored in a thermal capacitor, storage heating in a home or pump storage water or flywheels.
Cost is often cited as the number one challenge to energy storage but there are other issues such as robustness of existing technology, and commercial models for deployment. Storing electricity is still very costly compared with conventional power production, cautioned Mathias Meusburger, head of excitation department, Andritz Hydro. Moreover, lack of public support can complicate the approval process.
If storage costs continue to fall quickly and market frameworks evolve to monetise the value of flexibility – then storage could evolve as a key element of European energy systems within less than 10 years. Yet, for storage to become a ‘game changer’ country-specific regulation and support schemes would have to be aligned – across the increasingly disjointed club of nations within the EU-28.
Finding finance is another obstacle to develop new technologies and help roll them out. To attract project finance, technology developers need to bring the costs down and demonstrate their systems are safe and viable to operator – not a niche technology.
Integrating peaking units & power storage
Pointing out ‘business model challenges,” Mr Roques said that the value you could currently get for the storage is spread across several markets segments – wholesale markets, balancing, reserve and potentially capacity markets – which makes returns difficult to capture for operators. In his view, “we need business models that can put the pieces of the puzzle together to capture and monetise the full value of storage across the value chain.”
Asked what the industry can do to overcome such challenges, he stressed that energy storage implementation should go beyond decentralised, small-scale applications. “Flexible peaking units and reciprocal engines – combined with power storage – can be aggregated in larger-scale virtual portfolios,” Roques said.
Citing the target to have one million electric cars on German roads by 2020, he suggested that “the battery that everybody will have in their homes or car in the future could be aggregated to form a large-scale virtual battery.”
All industry experts quoted in this article will further evaluate the energy storage conundrum at the upcoming PowerGen Europe conference in Milan later this month.