Confused by the potential grid revenue opportunities for battery asset owners in the UK market? That’s no surprise. The UK is arguably one of the most advanced battery markets in the world and system operators have created a multitude of market openings where batteries can participate.
But you need to know where those openings are, because revenue stacking is the name of the game in the UK energy storage market. Currently there are at least six markets that batteries can operate in, covering wholesale, balancing, ancillary services, time-of-use, stabilisation and infrastructure.
Most of the market structures open to battery operators are run through the national electricity system operator (ESO), National Grid ESO. One way to think of these structures is as three layers of service: wholesale, balancing and ancillary services, and restoration and stabilisation.
In the latter tier, we find services such as black start, which involves the procurement of resources to restart the grid in the event of a blackout. National Grid ESO published a procurement methodology for this service in May. The chances of black start services being called upon are few.
As well as procuring the availability of black-start assets, National Grid ESO buys capacity to make sure available generation is within medium-term forecasts. There are two such capacity market auctions, called T-1 and T-4.
These address the need for capacity one and four years away, respectively. This year, the T-1 auction looked to procure 2.4 GW of capacity for 2021-22, while the T-4 aimed to secure 40.1 GW.
On a daily basis, meanwhile, there are day-ahead wholesale energy auctions to make sure there is enough electricity to cover demand in 24 hours. This is complemented with intraday trading to tighten up the match between supply and demand every day.
Around 95% of the electricity needed to meet system demand is allocated in these forward markets. Once they have closed, National Grid ESO looks to match supply and demand on a 30-minute-interval basis using a tool called the Balancing Mechanism.
Finally, any imbalances that occur in real time are resolved through spot market trading. This in theory covers all the electricity needs of the system but isn’t the end of the story as far as battery services are concerned.
As well as energy, National Grid ESO needs to procure a range of ancillary services to maintain grid stability. All grids have to operate within certain frequency and voltage ranges, which are usually determined by the rotating masses of thermal generators such as coal and nuclear plants.
And it is important that any deviation is corrected as soon as possible. Until recently, National Grid ESO did this by procuring firm frequency response (FFR) capacity on a monthly basis. FFR came in three flavours, with a minimum reaction time of 10 seconds.
However, as the amount of thermal generation has decreased in the UK, National Grid ESO has started moving to an even more granular model of frequency control.
In October last year it launched the first of a trio of new services, called dynamic containment, as “a fast-acting post-fault service to contain frequency within the statutory range of +/-0.5Hz in the event of a sudden demand or generation loss.”
Dynamic containment services need to take effect in under a second, making them a prime application for battery storage. National Grid ESO is also preparing to launch two related services, dynamic moderation and dynamic regulation, before the end of March 2022.
Furthermore, last October saw National Grid ESO and UK Power Networks collaborating on what was said to be a world-first trial allowing distributed resources such as batteries to deliver reactive power services for voltage control.
“The team has now built an end-to-end integrated system that can enable automated reactive power services, creating more capacity on the national transmission system and a potential new income stream for energy generators including wind, solar and battery resources,” said UK Power Networks.
Last but not least, National Grid ESO is looking at three Network Option Assessment Pathfinder projects, covering high voltage, stability and constraint management. All of these could lead to interesting new opportunities for batteries and other renewable energy technologies.
Having more potential income streams is great news for battery asset owners and operators. But it is important to bear in mind that the amounts that can be earned from different services can vary widely.
Currently, for example, dynamic containment represents a big revenue opportunity for battery plant owners. But getting into the market involves meeting a range of stringent technical requirements.
Hence, it is important not only to know how much you can gain from a particular market but also whether you can actually operate in it.
The sheer complexity of the UK energy market means that while there are riches to be made, it isn’t easy to identify where you can make the most money—and the situation is changing rapidly. For that reason, it is important to get expert help with your battery projects.
At Pacific Green, we have experience covering the installation of 383 MW and 1.3 GWh of energy storage across 31 countries, and the UK is one of our biggest markets. So to find out more about how you can profit from your battery system in the UK, contact us now.