For developers and investors who are ready to start talking about solar + energy storage projects, there are some interesting and not so straightforward decisions on asset size. Siobhán Green is the head of battery storage at Everoze Continental Europe. He focuses on different sizing methods and how to choose between them. In particular, she evaluated the "life cycle" factors of size and discussed how to plan for the degradation of the income stack and potential life cycle resets.
The 4.7 MW battery facility was built at the Renault factory in Douai, France. As a relatively young energy storage market, investors in the country hope that batteries can provide the same benefits throughout the life of the project-the most common are frequency control reserves and capacity market services.
The main motivation for juxtaposition of utility-scale storage with solar energy in a well-connected location today is to optimize capital expenditures (grid connection costs) and operating expenditures (grid usage system costs), rather than generating excess revenue through storage and time shifting solar energy generation. The size of a battery energy storage system (BESS) is unlikely to be used to store excess solar energy because the revenue that can be utilized from it is relatively small compared to the cost.
In most areas of Europe, storage's target revenue is ancillary services, especially the frequency response and capacity markets. In this case, the size of the battery is usually driven by (1) adjusting the power size to optimize the use of the grid connection and (2) the size to meet the requirements of the target auxiliary service. But this does not solve the size problem, because the battery capacity will decrease over time and the source of income may change.
When it comes to the "best" method of "lifetime scale", the jury is out. On the one hand, those who prefer to have large battery assets in advance to obtain a long-term and comfortable life. Others advocated the use of "excellent" methods, planning to expand or even re-power supply as needed in the future. But who is right? This is complicated because size affects many different aspects of storage project development and operation.
These strategies are not mutually exclusive; in fact, during the life cycle of a project, two or more are often combined. In other words, when we talk about battery size, we need to be clear about the services to be provided (current and future, basic situation and possible) and in what time period.
There are two common goals, and they are usually combined. First, predict degradation. The MWh capacity of the battery will inevitably decrease with time and usage, so the cost of dealing with this problem must be considered in the basic situation of the project. Second, many projects seek to retain the option of increasing the energy-to-power ratio in the long-term. Unlike degradation compensation, this is not a basic goal. On the contrary, this is a future-oriented consideration, which may be the basic situation or the upward situation.
Too large is usually only proposed as a solution to downgrade; it is not often used for income stack resetting, because too large a scale requires a certain amount of upfront capital expenditure, and resetting is a possibility rather than a certainty. In contrast, boosting and re-supplying can be expected by downgrading or by resetting the income stack or both.
Each strategy strikes a different balance in the trade-off between short-term cost and long-term technical complexity. Let us take enhancement as an example: advantages include deferred capital expenditures and the ability to take advantage of expected battery cost reductions. In addition, the increase means you only pay for the capacity you need, in case your revenue stack resets never happens. However, to perform the enhancement correctly requires hands-on owners. The old battery and the new battery need to be placed on different battery strings, which has an impact on the inverter, wiring, layout, and energy management system. If additional containers are required, there may be planning risks. Outages should be predicted and quantified. What is less common is that the "excellent" system will also experience faster degradation due to cycling and charging patterns.
In short, there is no single "right" strategy, so we provide some pragmatic guidance. The key drivers of the sizing strategy should be (a) investors' confidence in the future flexible market, and (b) investors' risk appetite. But we noticed that other parameters may also have an impact. See the summary matrix above.
With more than 2 GW of energy storage projects in our core markets (UK, Ireland, France and Belgium), we have seen some clear trends. They largely depend on the market in which the project is located.
The UK has a strong ancillary service market and a relatively attractive energy arbitrage market. Investors are generally confident in the market and have a high risk appetite. Here, we see that many projects are completed on the first day and can provide targeted ancillary services for at least 10 years, but there is also a solid plan to increase capacity even in the first few years to allow projects to target energy arbitrage.
In the French mainland market where commercial storage has developed earlier, we have seen investors believe that batteries will continue to provide today's revenue stack-the frequency control reserve and capacity market. They do not expect "revenue restructuring" because there are no strong substitute competitors today. This is also a relatively young market, and investors are getting rid of the complexity of enhancing technology. Therefore, a classic approach is to scale up so as to be able to provide today's income stack in the last year of the asset.
This is not a "anything will happen" situation. Far away. Although the decision depends on the specific circumstances of the market and the project, it is clear that every project should take this into consideration from the beginning. For example, if your original design did not anticipate this in its layout, inverter configuration, and wiring route, then the spontaneous enhancement in the 5th year will cause a real headache.
In short, you need a plan that is technically sound and consistent with the financial model. The decision on scale strategy is also a question of "financing capacity". The choice should be considered not only from a technical point of view, even from a technical and economic point of view, but also from the perspective of investors who have a broader view of the market and their own risk appetite.
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