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Current± Predicts: The energy transition in 2022, part one

Batteries will be a key too for managing volatility said ​Steven Meersman. Image: Zenobe.

Batteries will be a key too for managing volatility said ​Steven Meersman. Image: Zenobe.

Steven Meersman, co-founder and director of Zenobē

Continued energy price volatility

We can expect current trends of high, volatile energy prices to continue. The underlying issues driving international gas price spikes have not gone away. If new wind generation continues to outstrip new storage capacity, we will remain exposed to market risks associated with intraday volatility. This is the new energy paradigm, and we need new risk management instruments to handle it. Batteries are key tools for managing emergent electricity price fluctuations, and their importance is only going to grow.

Increasing merge between electricity and transport sectors

To deliver the changes we need to decarbonise transport, separate government departments must learn to work together. The electricity and transport sectors are merging – but government still treats them as separate entities. This worked for the fossil fuel age, but we need a new approach to get us to net zero. We need to enable EVs to support the grid through demand-side response, and we need to simplify the grid connection process. Unless key government departments coordinate better, a lack of clarity and dynamism on these issues will slow EV uptake.

More focus on the circular economy of batteries

Expect to hear more about the circular economy and supply chains for critical minerals. As the energy transition gathers pace, demand for the raw materials we need for low-carbon technologies is soaring. This will drive up prices. In our current linear economy, we habitually waste valuable materials that are key to the energy transition. The economic and social case for recovering and re-using these materials is getting stronger. We are excited about the huge potential for expansion in the second-life battery market.

Aaron Lally, managing partner, VEST

Battery assets will increasingly use forwards, futures and other derivative trading markets to hedge asset revenue ahead of the Day Ahead auction. Battery asset owners will move away from floor price structures, used to secure long term revenue certainty, to trading in electricity derivative markets, giving themselves greater flexibility, revenue certainty and greater overall revenue generation potential. This will reduce the merchant risk for battery assets when compared to floor prices and will spur a wave of new debt investment into the space (as we have seen historically with other electricity assets that use the derivatives markets to lock in long term revenue certainty).

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