Regulation challenges for batteries and cost-effectiveness analysis
Abstract
In the near future scenario of decarbonization, electrification of the economy and increase in
urban population, the provision of flexibility will be key for the evolution of the power sector
functioning. Lowering prices in energy storage solutions and the evolution of communication
technologies are opening new business opportunities for the power sector industry. There is a
need for both private and public stakeholders to understand the energy storage options, the
possible opportunities they can offer and the main challenges they have to face.
This report will try to provide answers on (i) the state of the art, a comparison of storage
technologies, the services they can provide, the business models that can be built and the main
regulatory challenges they have to face; (ii) how to analyze a regulatory framework to identify
aspects that facilitate the development of energy storage and how to apply it to leading markets
such as USA, the EU, Germany, UK, California and New York State; and (iii) present a costeffectiveness
analysis with real parameters of an hypothetical battery connected to a windfarm in
Spain.
The results present how energy storage performance in the electricity sector can be analyzed in
based on three key aspects: (i) speed of discharge, (ii) energy capacity and (iii) round-trip
efficiency. From a technical point of view, Li-Ion batteries, show very good performance thanks
to their modularity, high energy density (~200Wh/l), fast response (<1sec) and efficiencies of
95%, being able to provide balance services for the network, firm capacity and arbitrage
opportunities for the integration of renewable energy, and small-size services to end consumer.
Pushed by the research in the electronics sector and the growth on the electric vehicle industry,
Li-Ion batteries are expected to reduce their costs by 50% in the next ten years and increase their
energy densities up to 10 times from current values.
Main regulatory barriers for energy storage can be classified in three groups: (i) the existence of
a clear definition in the regulation, so it can be treated in a non-discriminatory way and subject to
appropriate fees and benefits, (ii) the adaptation of wholesale, reserve and balancing markets to
shorter settlement periods, integrating the constraints such as state of charge and rewarding its
fast speed response capability, and (iii) the public support of the industry by creating financing
programs, research, reference standards and targets. The USA is leading regulatory measures
to integrate storage in their markets with the recently approved FERC Order 841 and with the
specific targets and financing programs the States are developing. The EU is seeking full
integration of storage technologies in power markets through the approval of the “Clean Energy
for All Europeans” Package, with Germany and the UK leading the path either benefiting storage
with incentives for renewables, creating specifically tailored products or including them in capacity
auctions. The remuneration of FCR has been key for the utility level battery development in these
regions.
Finally, the cost-effectiveness case developed for Sierra Moncayo in Spain shows that under
current operation hypothesis, the installation would not be profitable. Nevertheless, the exercise
shows the need of stacking revenues from different sources is necessary to justify large storage
investments, the lack of attractiveness in secondary regulation participation, the constraints the
state of charge impose and the still need of financing support for new projects.
Trabajo Fin de Máster
Regulation challenges for batteries and cost-effectiveness analysisTitulación / Programa
Master in the Electric Power IndustryMaterias/ UNESCO
33 Ciencias tecnológicas3306 Ingeniería y tecnología eléctrica
330609 Transmisión y distribución
53 Ciencias económicas
5312 Economía sectorial
531205 Energía
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