In Germany, triple-digit growth figures illustrate the recent interest in large-scale battery systems. The Federal Network Agency (Bundesnetzagentur) has registered 169 sites larger than 1 MW, the oldest of which dates from 2014. They have a production of 1.26 GW and a capacity of 1.43 GWh.
Norwegian company Eco Stor AS and its German subsidiary Eco Stor GmbH plan to add 1.4 GWh in just three projects. Eco Stor is planning 300 MW/600 MWh batteries in the southwestern state of Rhineland-Palatinate and in Saxony-Anhalt in the northeast. A 100 MW/200 MWh battery will be installed in the northern state of Schleswig-Holstein. The company wants to have 20% of a growing market, with the Bundesnetzagentur tracking 123 projects with a production of 1.55 GW and a capacity of 2.4 GWh in the planning phase.
Some are behind schedule, but with more announcements expected in 2024, Germany expects a 190% increase in energy storage capacity from planned and under-construction batteries.
Storage capacity ratios are also increasing, from a typical figure of 1:1.1 between output and capacity to 1:1.6. Today’s 1:1 one-hour batteries generate most of their revenue from avoided network costs and compensate for minimal grid fluctuations within seconds, in a service known as ‘primary control energy’. However, the latter is only linked to tenders for approximately 555 MW of battery capacity and avoided revenues from grid charges have not been paid to locations that have been put into use since January 1, 2023.
Two hour trend
Large batteries can participate in the day-ahead energy markets and the five-minute continuous intraday market. Electricity transmission system operators (TSOs) also pay for secondary balancing energy services, which are available within five minutes, instead of primary control energy.
Nevertheless, “If I only do intraday in the future, I would prefer to build a two-hour storage system,” says Hans Urban, renewable energy consultant at Eco Stor.
Broader applications for longer-duration storage and increasing renewable energy generation bring a need for regulatory action, and batteries operating in concurrent short-term markets must be properly managed. “That’s the point where people come into the electricity market with their business,” Urban added.
For example, they decide whether a gas-fired power plant should cover short-term demand and at what hours a pumped storage power plant absorbs and releases energy. With the advent of large batteries, such decisions have become more complex and faster.
Electricity is typically traded in units of 100 kW. Each of the ten units supplied by a megawatt capacity battery can provide primary control energy in the morning, and secondary control energy in the afternoon, and then be used in the day-ahead market. German energy balancing tenders typically have four-hour slots, but 15-minute slots are also available depending on the submarkets and trading platforms.
Software, not people
Munich-based startup Entrix typically records 200 transactions per megawatt per day. That’s 20,000 transactions per day for a 100 MW battery. Unsurprisingly, this requires software because, as Urban said, transactions are “so fast that they can no longer be done manually.”
It may be that “much trading in the electricity market is still executed manually,” said Bastian Hechenrieder, head of product development at Entrix, but the goal is to fully automate battery storage market functions with an algorithm that monitors relevant markets around the world. clock and making trading decisions. As a result, companies are now offering battery storage trading as a service.
Those concerned about battery degradation may be alarmed by the sheer volume of trades involved, but a large battery’s trading day is relatively uneventful, with typically two full cycles per day. Most transactions do not affect the battery at all. As with certain trades on the stock exchanges, profits are made simply by the fact that a particular product has a lower price at the time it is purchased than at another time when it is resold.
The fundamental difference with high-frequency trading on the stock exchange is that everyone involved benefits from algorithm-driven trading on the electricity market. As Urban noted, arbitrage operators “simultaneously dampen the price fluctuations from which they actually profit.” The electricity market functions according to the principle of supply and demand. If there is enough electricity, and therefore cheap, traders are happy to buy, causing the price to stabilize again. When electricity is scarce and therefore expensive, everyone wants to make money and a greater supply will reduce prices.
Virtually virtual
The trick of a well-written algorithm is to complete as many transactions as possible without actively using the battery storage at all. At Entrix this is called ‘virtual trading’.
For virtual trading, it is essential that a trader can also execute the transaction that is currently pending. If they have agreed to supply a megawatt hour and cannot obtain this on time at an affordable price, they must still honor the agreement. This huge number of rapidly changing options makes up a large part of traders’ work. Lennard Wilkening, CEO of Hamburg-based startup Suena, said he is often asked whether the share of virtual transactions can be quantified with a fixed price. That’s not easy, he said, because the range is “three to 10 times what physically goes through the battery.” With the returns achieved with a large storage facility, the share of these types of transactions is much lower due to the low margins.
At Entrix, the non-physically realized part of the trading volume can account for “more than 90%”. Despite lower margins, this is an important statement for customer acquisition, because the battery only serves as a backup. It makes its money in its ‘sleep’, so to speak, and therefore the transactions do not affect the battery itself in terms of battery wear and tear. It is also essential that a battery is used as gently as possible. Entrix’s Hechenrieder explained that there are “different degrees of freedom” that depend on a manufacturer’s specific warranty terms, local conditions and a battery operator’s specifications.
Commercial storage
The potential for storage systems below the 1MW threshold to leverage automated trading is now being put to the test by Levl Energy, a spin-off of Enpulse Ventures, a subsidiary of German energy company EnBW set up to promote energy startups.
The Levl concept focuses on commercial storage systems with a capacity of several tens to several hundred kilowatt hours. These must be able to continue to fulfill their original purpose of limiting peak loads or optimizing self-consumption without restrictions. The software developed by Levl allows commercial storage units to be integrated into the network without additional hardware.
As operating time increases, the calculations become more accurate. In this way, commercial batteries, combined into one balancing group, can be transferred to a marketer and used for arbitrage transactions. Levl could therefore bridge the gap between companies like Suena, Entrix and other battery marketers and commercial storage operators. Cooperative grid operators are currently being sought.
The number of parties involved in the layered and rapid marketing of electricity from battery storage systems could increase significantly through players such as Levl. The requirements for the software used in this market won’t get any easier, but the industry is optimistic. Suena CEO Wilkening said there should still be “an option for manual intervention,” not only for technical reasons, but also in the event that a lucrative trading opportunity arises that the algorithm does not recognize – paradoxically, with the aim to prevent this. in the first place.
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