Page 56 - Energize March 2022

TECHNICAL

While the total ESS market is growing, months, meaning that past performance basis via day-ahead bidding. Whereas wind
the MWh installed total is growing faster may not be indicative of future results. and solar assets traditionally generate
than MW installed, which indicates an Among ESS projects that have been revenue for investors via long-term power
increase in the average battery storage operational for multiple years, the purchase agreements, ESS projects often
system duration. The reason is that as track record is mixed. Developers and generate revenue via ancillary services
ESS costs decrease, longer-duration ESS utilities have piloted multiple battery and capacity markets, which do not always
projects become cost-effective, which technologies and are discovering the offer long-term contracts. The market value
opens further markets for ESS. While strengths and limitations of various storage and procurement mechanism for these
the largest projects in 2014 and 2015 technologies. For example, to accelerate market services will change in unknown
were for short-duration ancillary services the progression of grid-scale storage, the ways over the life of the ESS asset.
markets, the largest projects in 2016 were DOE invested in an early project in the The PJM Reg D market is a cautionary
for longer duration capacity markets. We Electric Reliability Council of Texas (ERCOT) tale. PJM is a Regional Transmission
expect the trends of increased installations market, to demonstrate the capability of Organisation serving 165 GW of customer
and longer system durations to continue. advanced lead acid battery technology to load across 13 states in the Northeast US.
Both trends support a rapidly growing provide renewable firming and frequency In 2012, PJM instituted performance-based
installed base of ESS. regulation. The DOE’s interest was to obtain regulation, an ancillary service, through a
In terms of MWh of ESS installed, technical and economic data from the new automatic generation control signal
the market is forecast to roughly double project to prepare for future deployments. called Reg D. The Reg D signal recognised
in size year on year until 2019 and then Once installed, operators found that the the benefits that fast-responding ESS
continue growing at an annual rate of most lucrative application for ESS was could bring to PJM ratepayers. The Reg D
about 35 to 40%. The US ESS market size Fast-Responding Regulation Service (FRRS), signal had no ramp rate limitations but
was $320 million in 2016 and forecast a pilot programme in ERCOT designed was designed to be energy neutral over a
to rise to $3,3 billion by 2022. Globally, to take advantage of the capability of period of 15 minutes, recognising both the
the ESS market size was $1,5 billion in fast-responding resources, such as ESS, advantages and limitations of ESS when
2016 and forecast to rise to $7 billion to mitigate grid frequency deviations. paired with traditional regulation resources.
by 2025. Unfortunately, advanced lead acid batteries The faster response time of ESS allows a
While the ESS market is growing turned out to be a poor fit for the use case grid operator to reduce the total MW of
rapidly, a significant barrier to growth is and experienced extreme degradation, ancillary services procured, providing cost
financing risk. ESS assets are built to last which necessitated replacement, years savings for customers. With Reg D, PJM was
ten years or longer and storage investors before the expected end of system lifetime. able to reduce its regulation procurement
need ESS assets to deliver over the Another storage system using target by 30%, from 1% of peak load to
expected lifetime, to realize pro forma advanced lead acid batteries in Hawaii 0,7% of peak load. From 2012 to 2016, over
project returns. However, long-term caught fire. A third system, also in Hawaii, 250 MW of ESS capacity was installed in
performance data for grid-scale ESS does exhibited significant degradation after PJM, equivalent to a capital investment of
not exist. In addition, many markets for two years. Media reports in recent years approximately $200 million.
ESS face uncertainties that make revenue have also documented failures affecting As more ESS capacity entered
forecasting a difficult task. flow batteries, sodium-sulphur batteries the market, PJM encountered some
and flywheels. Li-ion battery systems, operational and market design challenges.
Risks to ESS owners which make up the vast majority of A contentious stakeholder process to
Risk 1: The track record of grid-scale ESS battery systems today, have more positive reform the market stalled, and PJM
projects is short preliminary performance results. However, unilaterally changed the Reg D signal
The US Department of Energy (DOE)’s with a limited install base, investors do not characteristics in January 2017. The new
Energy Storage Database shows that the have the long-term field data to prove that signal targeted energy neutrality over
median operating lifetime of grid-scale such systems will perform positively in all a 30-minute period and required an
battery energy storage systems is four project conditions. incremental energy throughput of greater
years and nine months. Globally, there are than 50% that of the previous Reg D signal.
only 14 grid-scale ESS projects that have at Risk 2: Market revenues of ESS are These changes adversely impacted
least ten full years of operating history. In uncertain all ESS projects in PJM. An ESS project
addition, many of these systems have been ESS assets have a usable lifetime of ten designed to provide a fixed amount of
run as pilot programs, designed to test or more years depending on the ESS power for 15 minutes cannot maintain
multiple applications rather than operating technology and usage profile. However, its power capacity or increase energy
full-time as mission-critical resources like many of the key electricity market services throughput without affecting battery
the systems being deployed today. Finally, that ESS provide are procured with short- performance, warranty terms and even
major equipment vendors release new term contracts. Other key market services safety considerations. A 10 MW system
energy storage products every 12 to 18 are procured on a completely merchant built for a 15-minute duration has 2,5 MWh

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