Flexible and distributed energy sources in the UK will reach 25GW by 2030 according to Aurora Energy Research, which has forecast potential annual revenues close to £3 billion as batteries, ‘peakers’ and demand-side response (DSR) come to the fore.
The market research firm has claimed the rise of intermittent renewable energy sources could result in traditional, large baseload generators becoming unprofitable, despite being able to deliver ‘firm power’.
This will result in the market turning to small-scale, flexible technologies capable of ramping up or down quickly to balance the grid and fill the role left by a reduction in backup generation. Flexible capacity will therefore grow by a rate of 10% per year, almost tripling from current levels by 2030.
According to Aurora’s head of research Richard Howard, there will be 1GW of installed battery capacity by 2020, alongside significant growth in peaking plant and DSR. This forecast contrasts strongly with the near 6GW expected by National Grid by the end of this decade, and would represent slow growth from at least 300MW of large scale battery projects expected to complete by the end of February 2018.
However, Howard added that battery storage capacity would pick up significantly during the 2020s, particularly from mid-decade onwards “as battery costs fall and energy arbitrage business models become viable”.
While these technologies do often compete with each other, such as in capacity market auctions, Aurora claims it is not a 'winner-takes-all' market as battery storage, peaking plants and DSR can all provide different services to the market, allowing them to thrive over the next decade and beyond.
Ben Irons, executive director at Aurora Energy Research, said: “The past few years has seen a substantial increase in flexible and distributed capacity in the GB power system. This is set to continue in the coming years due to power market remaining relatively tight, combined with the growth in intermittent renewables. We expect to see rapid growth in battery storage, peaking plant and demand response capability.”
Much of this change in the energy system is already underway, with 2017 proving to be a landmark year for large scale battery energy storage in particular. The grid services market is becoming ever more over-subscribed as many of the technologies named by Aurora vie for National Grid contracts, particularly firm frequency response (FFR).
The monthly service tenders for the service are rapidly being dominated by aggregators backed by partnerships with energy storage projects, resulting in rapidly lowering prices. For example, the most recent auction saw Limejump secure FFR contracts covering the two years to January 2020 using battery projects developed by Anesco.
Uncertainties cast shadow over growth
Despite this growing presence in the UK power sector, Aurora has warned that a number of emerging features could pose as much of a risk to flexible technologies as they do potential opportunities.
The emergence of subsidy-free renewables creates a significant level of uncertainty around now much intermittency the grid will have to tackle. While flexible assets go hand in hand with renewables, with one allowing for more market share of the other, questions around the amount of unsubsidised renewable capacity makes it difficult to forecast the growth of flexible assets.
Aurora claims subsidy-free renewables could arrive in the mid-2020s, with Irons predicting at Aurora’s Battery Storage and Flexibility conference yesterday that subsidy-free solar deployment would reach 6GW by 2025 and 9GW by 2030.
But a number of projects are likely to be completed will before this, with Anesco expecting to build nine subsidy-free solar projects by the end of 2019 using battery storage, in addition to the Clay Hill project it completed in September – the UK’s first subsidy-free solar farm.
The research firm has also pointed to uncertainties around price volatility as a potential risk for the rise in flexible assets, with revenues for such technologies varying considerably in recent years. While increased volatility will prove advantageous for flexible generation, particularly for storage where arbitrage and energy trading will become more valuable, Aurora modelling suggests significant scarcity ‘uplift’ will remain in the market out to 2030.
Finally, the growth of electric vehicles is expected to hold considerable sway over the prospects for these emergent technologies. Aurora claims that the use of ‘dumb’ chargers which do not interact with the grid will require significant levels of flexible capacity to deal with peaking demand.
However, the government recently stated in its Automated and Electric Vehicles Bill that all chargers sold in the UK, across both the domestic and public access markets, would have to be ‘smart’ to address such issues. Aurora claims such action would weaken the business case for flexible capacity, claiming just 2GW of grid scale battery storage capacity would be needed by 2035.