While global energy systems undergo a dramatic change, driven by the growth of renewables, it impacts the flexibility in the energy system and changes the way we meet demand and keep our systems in balance
Many countries are retiring their traditional ‘flexible’ energy sources – such as coal-fired power stations, and introducing more and more ‘inflexible’ renewable sources, like wind and solar. Unlike traditional power stations, the output from wind and solar is intermittent and can change second by second. As a result, we need new ways to ensure that we maintain sufficient flexibility in the energy system to respond to changes in demand.
For the past 100 years or so, we have controlled generation to meet demand. Increasingly, we must control the demand to meet supply. This trend is opening up valuable opportunities for flexible energy assets such as storage. Energy storage is part of the solution to create new sources of flexibility in our energy systems, alongside efficient flexible generation and better control of demand assets. Grid operators are beginning to value energy flexibility and pay asset owners to provide flexibility through various market mechanisms such as the ancillary services market.
While energy storage is an important source of flexibility, emerging demands on electricity grids, such as electric vehicles and the electrification of domestic heating, means that we need to deploy storage intelligently to get the best out of it. There are several alternative energy storage technologies in varying states of maturity. Different storage technologies have different response times, durations and costs, which make them suited to different applications.
It’s also important to consider how new energy storage projects can be funded. In the UK, for example, storage no longer benefits from subsidies and long-term contracts with guaranteed revenue streams. This means that these projects can raise limited debt and require putting expensive equity at risk. However, energy storage offers a versatile technology that can tap into multiple value pools and be deployed in many markets including ancillary services and wholesale trading.
Deploying intelligent real-time technology to utilise different storage technologies in an optimal way is key to getting the best value from them; such technology can help investors better understand the risks and opportunities associated with new storage projects and generate optimum value for them.
With advances in technology, intelligent, automated control enables operators to continually and efficiently dip into those valuable pools of revenue for an asset or group of assets. Advanced analytics and forecasting can enable more accurate, more reliable decision-making and the ability to automate when and how to use an asset, including providing faster responses to value opportunities such as in ancillary services markets and balancing mechanism.
Technology can model and simulate expected prices in the different submarkets and quantify and measure associated risks and opportunities. After assets have been committed to specific submarkets, technology can also be used to ascertain the most cost-effective way of meeting the relevant commitments.
The potential for energy storage is growing, however, there remain some key challenges when it comes to advancing storage systems as part of the infrastructure for a sustainable energy future. Capital costs need to continue to fall. New, optimal ways to monetise these energy assets need to be continually sought. Governments need to ensure that regulatory frameworks keep pace with the capabilities of our modernised, digital energy systems.
Asset owners, operators and investors must look to develop and monetise high-quality asset deployment by utilising automated, real-time optimisation technology that enables them to build future-proof, sustainable business models.