Britain’s power market will need investment of 6 billion pounds ($7.9 billion) between now and 2030 in flexible generation and storage such as batteries to support the transition toward an economy that emits less carbon, a study showed.
There will be a need for 13 gigawatts of flexible generation and storage assets to help balance the grid and integrate increasing flows of intermittent renewable power, according to a report by Aurora Energy Research Ltd. published Thursday. Investors should look to spread their investments across small gas engines, renewables and batteries to protect themselves against market uncertainties.
Investment in renewable energy is expected to grow as European nations move towards a 27 percent target for green power in electricity demand by 2030. Grid operators will need access to more flexible, quick-start generation as well as storage to harness excess green power.
“There has been a visible shift in the way such technologies are being regarded and what may once have been seen as a high-risk investment, is now considered a strategic long-term investment, that has benefits across many levels,” said Steve Shine, executive chairman of battery operator Anesco Ltd.
Despite this message, prices signal have been in decline as batteries flood areas of the 600 million-pound ancillary services market. They’re especially prevalent in serving fast-frequency response, where the requirement is to start up in less than a second. Investors that once counted on frequency response as a revenue stream are now looking for earnings in other areas such as the balancing market.
Aurora expects the value of National Grid Plc’s balancing and ancillary services market to double in size to about 2 billion pounds by 2030.
Opportunities are emerging for batteries to earn additional revenue through off-grid bilateral agreements, alongside renewables or electric vehicle charging, or for developers to trade directly in the balancing and wholesale markets, according to Aurora.
Profit margins from gas engines and battery storage vary from year to year, depending on factors such renewables output, plant outages and commodity prices. Investors can protect their returns by adopting a mixed portfiolio approach, according to Felix Chow-Kambitsch, head of flexibility and battery storage at Aurora.
“Gas engines and renewables provide a natural hedge to one-another — lowering the volatility of investor returns on a year to year basis,” he said.