Overview Of UK Balancing Services Market and the Potential for Battery Energy Storage

Overview Of UK Balancing Services Market and the Potential for Battery Energy Storage

Understanding the New Opportunities in the UK's Electricity Market

RELEASE DATE
10-Nov-2017
REGION
Europe
Research Code: 9AAE-00-47-00-00
SKU: EG01840-EU-MR_21076

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Description

This Frost & Sullivan insight provides a neat overview of the UK’s balancing services, with an astute focus on battery energy storage technology. This insight comprises analysis of the markets that are relevant to it. To begin with, an optimal balance between supply and demand is critical for any electricity grid to function at peak performance. Frequency, voltage, and power are the three key electrical components that indicate the quality of electricity flowing through the system. The balancing market exists to achieve continuous balancing supply and demand by maintaining frequency, voltage, and power within permissible limits. Hence the term balancing markets. While there a number of balancing services that exist currently, frequency response and capacity market fit for battery storage. This is mainly due to battery storage’s discharge capability, which when integrated with renewable generation plants, becomes an ideal solution to address the technology’s intermittency. Frequency response exists to address system frequency changes by injecting immediate generation onto the system, while capacity market exists to provide a back-up capacity to the system to address demand and improve capacity margin. The total commercial frequency response cost to National Grid amounted to £99.53 million for 2016/17, representing 9.25% of the total balancing services cost. This cost excludes transmission constraints. While substantial, this figure is likely to increase further with the introduction of the faster-enhanced frequency response reserve service. The key feature of EFR, being its response time which is less than 1 second. In this segment, battery storage secured 4-year EFR contracts for 201 MW of capacity in the concluded 2016 EFR auction totaling £65.95 million. Likewise, 501 MW of battery storage capacity secured 15-year capacity contracts under new build category in the concluded 2016 four year-ahead capacity auction. This clearly indicates that battery storage is here to stay and function in the UK system. This partnership is likely to witness increased applications of it in the near and far future given the significant battery storage investments made so far in the UK. In addition to balancing services, arbitrage opportunities exist for battery storage owners under the current market structure. Frost & Sullivan’s breakdown of market signals indicates a significant growth period for battery storage with chief revenue streams being Firm Frequency Response, Enhanced Frequency Response, and Capacity Markets. Actionable strategic action points and observations have been derived through data insights and are included in this insight. These points can be leveraged by battery storage companies to understand and enhance their participation in the market to achieve monetary returns.

Table of Contents

Definition and Abbreviations

CEO’s Perspective

Balancing Services Available to the System Operator

Reserve Services

Reserve Services (continued)

Reserve Services (continued)

Frequency Response Services

Frequency Response Services (continued)

Balancing Services Market, 2016–2017

Balancing Services Market, 2016–2017 (continued)

Battery Storage Market Potential

Frequency Response Services Market, 2016

Commercial Frequency Response Market, 2010–2017

Enhanced Frequency Response Market, 2016—A Perfect fit for Battery Storage

Summary of T-4 Capacity Auctions, 2014–2016

Battery Storage in Capacity Market

T-4 Capacity Auctions—New Build Battery Storage Contract Awardees

The Last Word—3 Big Predictions

Growth Opportunity: Disruptive Applications

Growth Opportunity: Investment/M&A

Strategic Imperatives for Battery Storage Companies

Legal Disclaimer

The Frost & Sullivan Story

Value Proposition: Future of Your Company & Career

Global Perspective

Industry Convergence

360º Research Perspective

Implementation Excellence

Our Blue Ocean Strategy

Related Research
This Frost & Sullivan insight provides a neat overview of the UK’s balancing services, with an astute focus on battery energy storage technology. This insight comprises analysis of the markets that are relevant to it. To begin with, an optimal balance between supply and demand is critical for any electricity grid to function at peak performance. Frequency, voltage, and power are the three key electrical components that indicate the quality of electricity flowing through the system. The balancing market exists to achieve continuous balancing supply and demand by maintaining frequency, voltage, and power within permissible limits. Hence the term balancing markets. While there a number of balancing services that exist currently, frequency response and capacity market fit for battery storage. This is mainly due to battery storage’s discharge capability, which when integrated with renewable generation plants, becomes an ideal solution to address the technology’s intermittency. Frequency response exists to address system frequency changes by injecting immediate generation onto the system, while capacity market exists to provide a back-up capacity to the system to address demand and improve capacity margin. The total commercial frequency response cost to National Grid amounted to £99.53 million for 2016/17, representing 9.25% of the total balancing services cost. This cost excludes transmission constraints. While substantial, this figure is likely to increase further with the introduction of the faster-enhanced frequency response reserve service. The key feature of EFR, being its response time which is less than 1 second. In this segment, battery storage secured 4-year EFR contracts for 201 MW of capacity in the concluded 2016 EFR auction totaling £65.95 million. Likewise, 501 MW of battery storage capacity secured 15-year capacity contracts under new build category in the concluded 2016 four year-ahead capacity auction. This clearly indicates that battery storage is here
More Information
No Index No
Podcast No
Author Vasanth Krishnan
Industries Energy
WIP Number 9AAE-00-47-00-00
Is Prebook No