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.
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