Market intelligence firm Modo Energy said a few days ago that the high returns in the UK energy storage market over the past six to 12 months are unlikely to continue in the future as capital expenditures increase and the ancillary market saturates.
However, Robyn Lucas, chief analytics officer at Modo Energy, and Alex Done, head of research, respectively, said future new services entering the market and opportunities in the commercial sector of energy trading could offset some of the drop in ROI.
Dynamic containment (DC) services send UK energy storage market revenue soaring
The UK is widely regarded as one of the hottest energy storage markets in the world, with 1.7GW of grid-scale battery storage systems deployed today and 13.8GW planned (from a UK report published by Solar Media). Battery Storage Project Database Report). According to Modo Energy survey data, the average revenue of grid-scale battery storage systems will increase from £63,000/MW in 2020 to £123,000/MW in 2021, mainly due to the growth of ancillary services Dynamic Containment (DC).
But in 2022 and beyond, with the cancellation of Enhanced Frequency Response (EFR), another grid service, and increased competition from other services, energy storage may not be as lucrative.
Robyn Lucas, chief analysis officer at Modo Energy, said: "The really high returns we've seen over the past six to 12 months are not necessarily sustainable, although market volatility doesn't appear to be spreading quickly. Frequency regulation services make up a large portion of revenue. , and its rate of return declines as storage capacity increases. We do not expect to see the same returns in the future as in 2021. Combined with the increasing capital expenditures for these battery storage systems and the difficulty of connecting to the grid , which means it's not necessarily going to be smooth sailing, but we're still seeing more deployments coming."
At the beginning of 2021, it was believed that battery storage systems were unlikely to generate more revenue through wholesale market arbitrage than dynamic containment (DC) services. But as recently reported by the industry media, energy storage systems in the UK market provide Dynamic Containment (DC) services only 23 days of the year.
Alex Done, director of research at Modo Energy, agrees that increasing competition will drive down prices and revenues for ancillary services, but revenue streams in this area may materialize in the future. He presented the use case for Dynamic Containment (DC) and how Dynamic Containment (DC) could double the revenue of the UK energy storage industry by 2021.
He said, “There are a lot of external policy factors here, and there are a lot of new markets getting involved. UK grid operator National Grid is trying to build a variety of new services with a view to building markets in the future, such as voltage control or inter-trip constraint management. But the reality is that when the market encounters adversity, the energy storage system just does what it has always been doing and needs to find a new market to take on and essentially dominate because it has very unique characteristics, whether it is Wholesale markets or balancing mechanisms.”
Lucas added that wholesale markets or balancing mechanisms are both business opportunities for energy storage systems, confident that UK energy storage systems will receive more revenue from merchants this year than in 2021. The increasing duration of UK energy storage projects suggests growing revenue opportunities.
However, both Done and Lucas said it may be difficult to pinpoint exact numbers for this shift because merchant revenue is difficult to incorporate into precise forecasts, and not all of this is publicly available data.
There are also two new frequency response services, Dynamic Modulation (DM) and Dynamic Control (DR), which will be available in the UK in 2022, but both are relatively small compared to Dynamic Containment (DC).
