FlexAbility: How Battery Storage is Advancing the Energy Transition
Regardless of the ever changing perspectives of the debate on the energy transition, i.e. whether the current talk of the town is about achieving full supply with 100% renewable energies as quickly as possible or about what to do when PV and wind don't generate enough electricity for a couple of days or even weeks, whether it is about the right path for shutting down conventional power generators or about ramping up renewable technologies: experience shows that sooner or later we always end up with the topic of flexibility options.
What do we do when the sun doesn't shine and the wind doesn't blow? Or when too much energy is fed into the grid that nobody takes off? Or when there are short-term forecast deviations? In this first part of our series on new flexibility options, we shed light on the role of batteries and new storage concepts for the energy transition. But why do we need more flexibility in the first place? The parameters that are already clear today can be quickly outlined. When hard coal-fired power plants and natural gas-fired power plants leave the electricity systems one day, two relatively flexible electricity generators that can provide more or less electricity on demand and at short notice will permanently go off the grid. In addition, base-load power generators that use lignite (and in some countries also base-load capacity from nuclear power) will be shut down and replaced by volatile generators such as photovoltaics and wind power, which will further increase the need for flexibility in the power grid. The previous system built around base-load power plants supplemented by peak-load power plants will no longer exist. In addition, electricity consumption will increase in the emerging all-electric society, in which we will also use electricity to heat our homes, drive our cars and produce steel.
At this point, a reflex often takes hold that proclaims the end of civilization or at least of industrial societies. Why, actually? Renewable energies already contribute more than 50% to the electricity supply in many countries of the world. Take Germany, where so far more than 55% of power generated this year comes from renewables, but nonetheless power cuts in the German grid are even rarer than wind turbines in Bavaria. Electricity shortages and thus record electricity prices were indeed observed last year in many parts of Europe, but the reason was not the volatility of wind and solar but the import stop for Russian natural gas and the notorious unreliability of the French nuclear fleet. In addition, new flexibility options have already entered the energy market in the last ten years, bioenergy for example, but also demand response of industrial electricity consumers and increasingly also of residential consumers. In addition, the ongoing European integration of electricity markets and grids is creating positive balancing effects.
But, you may ask, will all this be enough for the new electricity system in which all of our power is 100% green and available as well as dirt cheap? It is hard to find robust assessments of the global need for flexibility in energy systems that will be run on 100% clean electricity, for once because the future (renewable) energy mix is not determined yet. So the development of flexibility will need to follow the build-up of volatile renewables in specific geographies while at the same time the existence of enough flexibility in a grid can be seen as the prerequisite for a further build-up of more volatile generation. A conundrum if there ever was one. What we can do, though, is to look at the national level to learn more about the necessary flexibility in markets with high shares of renewables. Let’s take Germany again.
The German Federal Network Agency itself does not precisely quantify the future need for flexibility, but clearly points to an expected increase in volatility and the need to tap into new flexibility potentials. A study by the Fraunhofer Institute for Solar Energy Systems from 2021 concludes that largely new flexibility options - stationary and mobile batteries, heat pumps, methanisation, power-to-liquid and hydrogen electrolysis - will have to absorb and store between 274 terawatt hours (TWh) and 413 TWh of energy per year in a fully decarbonised energy system in 2045, depending on the scenario, or convert it into heat or storable energy carriers such as hydrogen. Undoubtedly a Herculean generational project!
The electricity market will (have to) decide which of these new technologies will be used when and to what extent to close the gaps left by wind power and photovoltaics in the course of the day and week. Storage technologies will make an important contribution to closing this gap - from stand-alone battery energy storage solutions to behind-the-meter applications. But how strong is their market penetration already and how high is their potential for the required scaling? And what role do they already play in our virtual power plant and thus in the electricity market?
Grid-Scale and Residential Battery Storage
Most of the global energy storage capacity still comes from pumped-storage hydropower – by a far stretch. But since the mid-2010s, a steady increase in lithium-ion battery storage can be observed worldwide, which has again accelerated massively since the end of the decade. According to the International Energy Agency (IEA), the global installed capacity from grid-scale battery energy storage systems (BESS) already grew five-fold between 2015 and 2020.
Stationary large-scale storage systems are increasingly expected to take over the role of large-scale thermal power plants in voltage and frequency control and also buffer intraday power increases and reductions from photovoltaics and wind power. These power shifts of several gigawatts of electricity generation capacity occur within a few quarters of an hour or hours and would massively endanger the security of supply every day if left unaddressed. As the "sprinter" among the flexibility options - quick on the uptake and a specialist for the short haul - battery technology is ideally suited to avert this danger every day. The same applies, with some reservations, to residential storage systems, which primarily serve to increase self-consumption of self-generated solar power, but can also serve the grid.
Current Global Expansion of Stationary Battery Storage
Compared to the required storage energy capacity in the future, today’s already commissioned fleet of battery energy storage is minuscule. Around 25 gigawatts of grid-scale BESS capacity is installed world-wide today. Most analysts (see IEA, BNEF, LCP Delta) expect a very sharp increase in global BESS capacity already within the next few years. Until 2030, Bloomberg New Energy Finance expects to see a 15-fold growth of battery storage deployment (utility-scale and residential combined), reaching 411 gigawatts. The IEA even expects a global fleet of 680 GW of battery energy storage until 2030 in its Net Zero Scenario. This would mean that battery energy storage would pass pumped-hydro (today at 160 GW) as the primary flexibility option world-wide very shortly.
Most of the new BESS installations are currently commissioned in China, the US, and Europe, with South Korea following suit.
A Closer Look: The Situation in Germany
As of 1 April 2023, 7.1 gigawatt hours (GWh) of battery capacity from around 675,000 stationary systems (i.e. excluding battery capacity in electric cars) were reported in the Federal Network Agency's “market master data register” in Germany. The addition of new battery storage capacity has been increasing sharply since 2019: as of 1 April 2019, just over 1 GWh of stationary battery storage was reported. In four years, the available storage capacity from stationary batteries in Germany has thus increased sevenfold. By way of comparison, the capacity of all German pumped storage power plants is now around 39 GWh.
The vast majority of German stationary storage capacity - almost 80% - does not come from large-scale storage, but from home storage with a storage capacity of up to 30 kilowatt hours (kWh). However, the share of large-scale storage has been increasing in recent months. Over 98% of stationary battery storage relies on lithium-ion technology.
Now let's get out the crystal ball: How will the deployment of BESS in Germany unfold? Before we try to identify the drivers and obstacles of the rapid and mass scaling of stationary storage, we should know the target for the ramp-up of the technology. As said before, this is almost impossible in a dynamic project like the energy transition, which is subject to strong political and macroeconomic volatility (pun intended) and which also takes place in a liberalised energy market that knows no planned economic parameters. The scientists at the Fraunhofer Institute for Solar Energy Systems nevertheless attempted to do this in the study mentioned at the beginning of this article on the basis of mathematical modelling and came to the following conclusion for battery technology:
"Another important element of flexibilisation is stationary battery storage, for which an installed capacity of between 50 GWhel and 400 GWhel in 2050 results for the different scenarios."
A linear continuation of the growth path taken since 2019 in the expansion of stationary electricity storage would thus just achieve the lower of the two targets listed in the study. After all, that’s not too bad. As we know from other areas, such as photovoltaics, the penetration of a new technology after a certain inflection point no longer progresses linearly, but exponentially. Particularly due to the sharply falling costs of lithium-ion battery storage, it can be assumed here, too, that growth will be exponential and, incidentally, obviously already is. Reaching the target of 400 GWhel thus does not seem utopian.
Other reasons that may hinder the rapid scaling of a new technology are
• lack of available land/locations
• lack of grid connection
• lack of regulation
• lack of investment/refinancing
• lack of resources
Only the last point - the availability of the necessary resources for the construction of battery storage on a large scale - is still causing headaches for the experts. The other points listed can either already be ignored today (the NIMBY phenomenon is not known for stationary storage, at least not so far) or are subject to constant change anyway, which has not slowed down the introduction of the technology so far.
It is not surprising that the consultancy Wood Mackenzie, for example, predicts a twenty-fold increase in capacity from large-scale storage in Europe by 2031 alone. For the German market, too, researchers continue to assume strongly growing capacities, both in the residential and utility-scale storage sector. The current drivers of this development are high electricity prices, which can be dampened by the use of battery storage in households, but also in commerce and industry, especially by increasing self-consumption of self-generated solar power. In addition, spreads, i.e. the differences between particularly cheap quarter hours and particularly expensive quarter hours, can be used in intraday trading on the spot exchange to operate large-scale storage systems economically.
Benefits of Stationary Battery Storage for the Electricity System
Stationary electricity storage systems are ideal for short-term storage of electricity - not for seasonal storage over weeks or months. For optimal economic efficiency, stationary batteries should not hold the stored electricity for too long. They usually have one to two full cycles per day. This means that they are fully charged and discharged once or twice a day. Accordingly, it is the extremely short-term electricity markets where battery storage is already refinanced today.
These include the primary control reserve market (FCR in Europe) as well as the secondary reserve market and the spot markets of the electricity exchange. It should be noted that it is not only utility-scale stationary storage systems that participate in these markets, but also residential storage systems. Battery systems are therefore already successfully contributing to keeping the power grid stable through frequency regulation and cushioning power fluctuations from solar and wind power. The volume of new battery projects already announced worldwide suggests that the responsibility assumed by battery storage systems in the overall energy system will continue to increase enormously.
Other areas of application for stationary battery storage systems include hybrid systems with large-scale PV systems (via the so-called innovation tenders in Germany, for example), but also grid boosters to avoid local grid bottlenecks or even battery systems which serve as black start units.
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Market Access for Battery Storage Systems
Anyone who wants to make the flexibility of battery storage available to the energy system and generate revenue on the energy markets usually works with a flexibility trader. It is important that the available flexibility from stationary batteries should be placed on as many markets as possible in order to be able to react to price shifts between the different markets at short notice. The cross-market optimisation that we offer through our Virtual Power Plant enables more stable revenues than targeting a single market segment. Accordingly, stationary battery storage systems are also playing a growing role in our Virtual Power Plant, which already networks a total of more than 15,000 decentralised systems of various technologies.
Stationary battery storage systems participate in the balancing energy market via our control system. In addition, our electricity traders use the flexibility of the battery storage systems in the virtual power plant to exploit fluctuations in electricity prices through arbitrage transactions. If there is a lot of wind power or solar power in the system, prices fall in intraday trading on the spot exchange and the networked battery storage units are charged at low prices. If photovoltaic or wind power output drops during the course of the day (for example, when the sun goes down or a wind front has moved on), electricity prices rise again and the battery storage systems feed the stored electricity back into the grid.
From a technical point of view, the enormously high, fast and precise controllability of battery storage systems should be emphasised. This makes it possible to fulfill the flexibility requests of the transmission grid operators, as well as arbitrage schedules, extremely quickly and reliably.
From our perspective, the economic macroclimate remains cheerful for battery energy storage: the retirement of conventional flexibility options as well as the further expansion of fluctuating power generators increases the need for new suppliers for balancing fluctuations in the electricity grids and thus in the electricity markets.
Disclaimer: Next Kraftwerke does not take any responsibility for the completeness, accuracy and actuality of the information provided. This article is for information purposes only and does not replace individual legal advice.
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Julian Kretz
Project Manager