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ANALYSIS: ENERGY STORAGE FOR THE GRID 400 350 300 Millions (£)

storage pilots, around the world, about how well battery storage systems on the grid perform in terms of different tasks or services, but comparatively little on business cases for these types of assets. (See chart for conventional and once proven successful calculations.) A 6MW/10MWh lithium battery storage system in the town of Leighton Buzzard, about 70km outside of London, is trying to prove the value of storage over a 10 year period. Primarily the battery system, operated by distribution network operator (DNO) UK Power Networks, will defer conventional network reinforcements. Like many urban areas outside of big cities like London, Leighton Buzzard’s energy demand among the local homes, services and businesses are rising, albeit gradually and steadily.

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200 150 100

Total Cost Over Lifetime Revenue Over Lifetime

50 0 Small Capacity

Large Capacity STOR

Small Large Capacity Capacity Fast Reserve

Li-ion battery: comparison of total costs against revenue over 15-year lifetime • Source:UK Future Energy Scenarios 2014

3,500 3,000

Costing projects

2,500 Millions (£)

Before the storage project began, there were plans for the construction of a 20km cable to ensure the network could handle local peak demand in the coming winters. Works would have had to have started about 18 months from now. The cost of doing the cable work is about £6 million ($10 million), though the analysis used by the DNO is based on net present value pricing — what it would be if works had begun in 2016 — so this cost is calculated at £5.1 million. Again, based on net value pricing, the energy storage project cost is £16.8 million. Over two thirds of the funding has come from Ofgem through its Low Carbon Network Fund scheme. The project is a first of its kind. If the system were to be built as a real, commercial grid investment, in 18 months from now, with all the necessary software and other development work completed and without the various associated research and dissemination aspects UK Power Networks estimates the project cost to be £11.5 million. However the analysis also factors in further cost reductions of £3 million related to technology that are expected to occur between doing the installation in 2014, versus carrying out the installation in at the latest point in time when intervention would be needed. Still, building the storage system solely for works deferral is a more costly alternative to building a 20km cable. To help pay for itself the asset has to be able to generate revenues from grid services. Over the course of a typical year, in the winter months more of

250

2,000 1,500 1,000

Total Cost Over Lifetime Revenue Over Lifetime

500 0 Small Capacity

Large Capacity STOR

Small Large Capacity Capacity Fast Reserve

PHES: comparison of total costs against revenue over 60-year lifetime Source:UK Future Energy Scenarios 2014

the battery bank’s capacity is used for peak shaving. However, during other parts of the year more of the batteries’ capacity is freed up for providing grid services. These are primarily frequency control demand management, fast response and STOR. UK Power Networks has compared costs of doing these different services and also fast reserve only, where revenues are expected to be higher, in the region of £3.6 million for the 10 year period. For providing the mix of services equally the revenues are calculated at £2 million. The risk of providing one type of service is the likelihood of missing contracts. Part of the project is to understand how the batteries have to be operated to be able to move between supplying these different services. Estimates of the revenues are conservative and they may well be higher over the next decade. Over the course of the project, which ends in 2016, it is expected that the value of different services will change, which can give

a more accurate sense of what they will be over the 10 year period. These changes will be reflected in progress reports published every six months, with the next one due in December. If the system can be used to play a part in supporting transmission system-related activities such as helping to manage frequency stability with voltage control, further system cost savings in the region of £2.5 million are also possible. The system can also provide other services, collectively known as tolling, where the energy supplier in the project, Smartest Energy, provides UK Power Networks, the storage system operator, with an operating profile over a time period and the storage asset follows the profile for a fixed fee. The tolling package can include, for instance, arbitrage and triad – demand — charges by the National Grid to customers. These are not as significant as the revenues from ancillary grid services so are not included in the analysis but further show how storage systems can have multiple revenue

Batteries International • Fall 2014 • 31

Batteries International — issue 93  

UPS embracing the latest technology — The global implications for energy storage of the latest UK TSO report — The changing rules on transpo...

Batteries International — issue 93  

UPS embracing the latest technology — The global implications for energy storage of the latest UK TSO report — The changing rules on transpo...