A techno-economic assessment of battery business models in the UK electricity market. (January 2021)

• Record Type: Journal Article
• Authors: Martins, Jason; Miles, John
• Is Part Of: Energy policy. Volume 148:Part B(2021)
• Publication Date: 2021-01
• Subjects: Balancing market -- Energy arbitrage -- Ancillary services -- Capacity market -- Grid-scale batteries -- Renewable energy generation; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2020.111938
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: The UK's transition to a zero-carbon economy is inevitably leading to an electricity grid with a high penetration of intermittent renewable energy generation, resulting in the need to install grid-scale energy storage systems at an accelerating rate. This study has taken the perspective of a business owner to assess the profitability of deploying battery technologies in the UK electricity market by analysing arbitrage in electricity markets, capacity market auctions, and ancillary services (frequency response and reserve). Additional work was conducted for integrating battery arbitrage cycling with solar and wind generation, comparing the utilisation of a linear programming model against a simplistic threshold cycling model. An overall economic assessment of value streams found that the lowest payback periods for premium ancillary services were 3.3 years (advanced lead-acid battery providing fast reserve) and 6.6 years (lithium-ion battery providing frequency response). Moreover, this research has demonstrated promising returns on investment for stacking short-term operating reserve with arbitrage in the balancing market. In the near future, battery systems will likely attain accelerated deployment due to reforms in ancillary service structures, cost reductions in battery technologies, greater price volatility in the balancing market, and effective policy incentives introduced by the UK government. Highlights: Policy incentives for energy storage needed for accelerated deployment of batteries. Balancing market arbitrage becoming a lucrative revenue stream for batteries. Viable business models for batteries will require revenue-stacking. Capacity market price uncertainty is a deterrent to profitable battery businesses.