An increase of 20GWh of battery storage could reduce the amount of wasted wind power in Great Britain by 50%, according to new analysis from LCP.
Wind curtailments between Scotland and England are expected to cost consumers £1 billion per year by 2025, a figure that will continue to grow as the nation works towards the government’s 40GW by 2030 target. This figure highlights how “rapidly scaling up battery storage capacity is key” LCP said.
GB curtailed wind power on 75% of days in 2020, according to the consultancy, with over 3.6TWh of wind power being turned off in total, a figure mainly resulting from network constraints.
This analysis comes as LCP releases a new report into the investment opportunities of battery storage, which looked at a variety of different battery trading strategies and markets.
One strategy examined assumed perfect foresight, where all potential value is captured in the wholesale and Balancing Mechanism (BM). This strategy resulted in batteries being able to make returns of £13/kW pa in the day ahead market and £35/kW pa in the BM. However, this also assumed a high number of cycles, with almost four per day in total, meaning the asset owner would need to plan to refurbish the battery after four to seven years if this strategy was used daily.
Conversely, another strategy – imperfect foresight and low cycling – sees net revenues reduced slightly to £11/kW pa for the day ahead wholesale market and £30/kW pa in the BM, a reduction of 12% and 14% respectively. This is would see cycles being reduced by 45% in day ahead and 32% in the BM.
When examining markets, LCP predicted that when it comes to arbitrage – and in particular the wholesale market – the future “looks positive”. It said that spreads are forecast to grow as gas prices recover and the increase in renewable generation creates more low and negative pricing periods.
It expects increased competition in the BM from new batteries and other flexibility providers due to the BM being a relatively shallow market, which is likely to cap the potential for returns in the long term.
Frequency response will continue to be an “important source of revenue”, with Dynamic Containment set to expand. However, it too is a shallow market meaning the value is likely to reduce as it becomes saturated as competition increases. Once the capacity cap is reached, LCP expects to see the different markets interact more closely, with operators looking at the opportunity costs between participating in different markets.
Lastly, LCP said that Capacity Market clearing prices are forecast to increase in the future and that longer duration storage will benefit more from high de-rating factors and will therefore achieve higher revenue compared to shorter duration.
Rajiv Gogna, partner at LCP, said that it’s important to consider the depth of the markets, with LCP seeing some opportunities for batteries being “cannibalised away while others grow with the system” as battery deployment increases.
“It’s crucial that investors work with optimisers and traders who can switch between these markets effectively when opportunities arise, and have access to the best tools and forecasts to trade effectively,” Gogna added.
