Strategically-sited Large-scale Storage
Dutch developer Eneco and Japan’s Mitsubishi have formed a 50/50 joint venture called Enspire ME and are developing a battery designed to compete against coal and gas in Germany’s “primary reserve” market* (which can be highly lucrative). NEC will provide and integrate the battery system, including the power conversion system and controls.
* Transmission system operators (TSOs) are required to secure a certain amount of capacity reserve to prepare for sudden power loss events. These reserves are procured through market transactions, with the services offered varying according to the degree of urgency and duration of charge/discharge. Battery systems have an advantage over some competing options in being very fast responding.
Surplus wind production will be stored in the battery and then used to compete within the primary reserve market (which is where transmission network operators purchase capacity to keep the grid running at 50 hertz).
Schleswig-Holstein is one of the leading German states contributing towards the ‘Energiewende’ in Germany – wind and solar generated about 84% of the state’s power in 2016. It is also a location where large amounts of electricity generated by wind farms is collected and transmitted to the rest of Germany.
The specific location is strategically important, being a nexus for offshore wind energy transmission, but is one where other alternatives, such as pumped storage or compressed air energy storage would not be suitable. The battery can also play a role in reducing energy (efficiency) losses at the substation.
It is a good example of using battery storage to help deal with the variability of wind, and adding value to the produced energy, but sited at a grid node which provides the optimum grid utility and revenue generation opportunity – which may not be at the point of energy generation (i.e. at individual wind farms).
The battery plant will have power and energy capacities of 48 MW and 50 MWh and will be situated next to a substation in Jardelund, Schleswig-Holstein, close to Germany’s border with Denmark.
The battery will use Li-ion technology, with claimed efficiency of 97-98% and >9,500 cycle lifespan (to retain 80% of initial capacity). It will come with a 15-year warranty.
Eneco has experience elsewhere in storage, though at smaller scales, aggregating residential battery systems to assemble virtual power plants in the Netherlands and Germany, using Tesla Powerwall batteries. Their relationship with Mitsubishi goes back to 2013, when the companies inked a partnership to develop offshore wind plants in Europe.
A permit for the project is already granted, construction is expected to start at the beginning of June 2017, and the plant plans to be up and running by December 2017.
No costs for the project were available, although a spokesman said that it “will cost less than 100 million euros” ($107 million). Other sources have suggested a lower (and more likely) cost closer to €40m. As much as 2 million euros will come, via the state government, from an EU regional-aid fund. Besides this small subsidy element, financing was described as being “via bank loans”. The investment payback time is expected to be 5-6 years.
The head of the joint venture described the project as “a very expensive technology, but somebody has to be the first to try it out”. Falls in battery costs had made the project viable, after a few years of consideration. The company expects further falls, along with government phaseouts of coal and gas plants in future, to make further projects more profitable.
Future Revenues? A Pilot project
With the support of the German federal state of Schleswig-Holstein, a pilot project will also begin, involving the connection of nearby wind farms to the battery system. This pilot will enable wind farms to temporarily supply their electricity output to the battery system when there is surplus production or an overload on the grid – where otherwise production would be curtailed. As well as reducing load on the grid, owners of the wind farms will be able to sell the stored electricity, on the reserve capacity market, at a more favourable time (i.e. at a higher price). This will ultimately boost the value of the project partners’ own jointly run offshore wind farms.
Finding additional sources of revenue for this and other battery systems, and testing how multiple applications can be managed (“revenue stacking”), will be an important aspect of future storage business models – not least because analysts expect that lucrative-but-small markets such as primary reserve may become saturated quite quickly. The latter also provides a reason why project developers like Eneco/Mitsubishi may choose to be a first-mover in that market, even though waiting would see further falls in battery costs. Delay too long, and the market opportunity may pass.
Other Notes: Storage in Germany
As of March 2017, about 50,000 residential energy storage systems had been sold in Germany in the previous four years. It is a relatively mature market with regards to small-scale residential storage, but much less so at utility scale. That’s another reason why this project is so notable (at the time it has claims to be Europe’s largest).
Challenges for further large-scale projects include questions of ownership and operation – who should do this? TSOs (transmission system operators), DSOs (distribution system operators), utilities, power generation companies or independent developers? Policy regimes in some countries may preclude one or more players from storage projects, not least due to its dual role: storage can play in the market as both a generator (when discharging) and a source of electricity demand (when charging).
There can also be issues around technical specifications for some grid services, which could be more clearly laid out, for example in terms of required response times and storage durations for frequency regulation.
[last update April 2017]