Optimizing energy use with BESS
In part I of this series, we discovered the origins, intricacies, and applications of battery storage. Part II goes into the specifics of battery trading in the intraday markets. Storage is a crucial provider of so-called flexibility, which the International Energy Agency (IEA) defines as "the extent to which a power system can modify electricity production or consumpiton in response to variability, expected or otherwise."
The primary function of a battery energy storage system (BESS) is to store excess energy for later use, when energy generation can't meet energy demand. Batteries can participate in the power markets for monetary gain while supporting the grid. To maximize profitability, the charging and discharging of the battery asset must be modeled on the basis of a number of variables, including electricity prices, energy generation, energy consumption, and asset health.
Charging the battery provides negative flexibility while discharging and sending power back to the grid provides positive flexibility. Either way, the grade of the flexibility of a system depends on how quickly it can adapt generation or usage in response to external forces like peaks and valleys in demand or changing prices in the market.
BESS use cases
Electric grids must always balance demand and supply. Historically, large, centralized power plants generated electric energy (thermal or nuclear power), which was then transported over long distances to the final consumers using transmission and distribution grids. The onset of integrating decentralized renewables into this grid broke up this unilateral power flow from centralized power plants.
The amount of power generated by renewable sources can’t be adjusted to the demand or the market price other than through the wasteful practice of curtailment. Due to their capacity for flexibility, battery storage can help mitigate the intermittent nature of renewable energy generation and thus secure a reliable power supply even when the sun isn't shining or the wind isn't blowing. That's what makes BESS indispensible to a sustainable, reliable, and future-proof power grid.
As standalone assets, batteries can provide ancillary services or shift the energy in co-location with large solar and wind farms. Additionally, they can serve as a source of virtual inertia (resistance to changes in grid frequency), a factor that will see increasing importance as more thermal generators go offline. The increase in flexibility that comes with the widespread use of BESS also means peak loads can be handled more easily.
Marketing flexibility from battery storage
The flexibility from battery assets can be marketed on several different platforms:
Balancing markets (ancillary services) are the most well-known and were created to provide grid stability through flexibility. However, these markets are characterized by complex rules and high entry barriers. Pricing is mostly influenced by a few large market participants, and the market infrastructure is run directly by the grid operators, which gives them a great degree of control over your asset and available capacity.
The market where you can profit the most from your flexibility is the intraday continuous market (wholesales). By buying and selling up until just minutes before the physical delivery of the power, you can take advantage of price fluctuations. Trades happen on a well-organized exchange with friendlier rules and lower entry barriers. Compared to balancing markets, you have more freedom of movement, as you can trade back previously logged positions at any time if conditions change.
The most profitable commercial strategy is cross-market optimzation with a fully automated trading setup. For this, you need an experienced optimizer who navigates the complex market environment for you with a lucrative outcome.
Are you interested in maximizing the profitability of your BESS?
