Profitability Analysis of Long Duration Grid-scale Battery Storage Assets in the Nordic Spot Market and Ancillary Markets

Abstract

The growing proportion of green energy in the electricity grids brings with it a growing need of grid stabilizing resources to counteract the inherent intermittency of renewable energy resources. This is where the grid scale energy storages come in handy. They efficiently offset the intermittencies of solar, wind etc. resources by energy arbitrage and peak shifting.
This thesis looks into the economic performance of energy storage assets in the Nordic energy markets by analyzing their income potential from the day-ahead market, intraday market and ancillary services market. It tries to assess whether an investment in a battery storage project will be profitable considering various cost and earnings estimates over the lifetime of the battery. The thesis investigates the business cases for batteries of 1-hour, 2-hour, 4-hour and 6-hour duration and also of various technologies, e.g. lithium-ion battery, redox flow battery and sodium-ion battery. It strives to formulate a simple bidding strategy based on the price patterns in various market segments.
After the analysis the study finds out that a battery participating in any one of the mentioned energy markets cannot be profitable. Even a bidding strategy where a battery participates in various markets at various parts of a day is not profitable, given the battery cost and price forecasts available. However, the price forecasts might be inaccurate, therefore a number of sensitivity analyses are performed that gives the price levels that will make the investment profitable.
Among various battery technologies, sodium-ion batteries are found to be most attractive economically, followed by lithium-ion batteries. Moreover, the longer duration batteries are found to be relatively more attractive investment than 1-hour batteries.
Keywords: Energy arbitrage, BESS, Frequency containment reserves, Elspot, Elbas, Bidding strategy

Popular Abstract

The looming threat of the climate change is triggering a green transformation of the energy systems worldwide. For the electricity sector this means more and more renewables coming into the grid. Among various renewable energy sources solar and wind energy are particularly popular. Although quite friendly for the environment, these energy resources are quite intermittent and unpredictable in nature. In an interconnected electric power system, the increasing proportion of such resources can pose a formidable threat to the grid stability. This is where large energy storages like pump storage plants and battery energy storage systems (BESS) come handy. A BESS system coupled with a renewable generation has the capability to supply the grid with constant electric power.

This thesis looks into the economic viability of energy storage projects in the Nordic electricity market. It uses some historical price data and a set of forecasted price data to judge the potential income of a BESS project over its lifetime. Batteries of various sizes e.g. 1-hour, 2-hour, 4-hour, 6-hour etc. and of various technologies, e.g. lithium-ion battery, redox-flow battery, sodium-ion battery etc. are studied. The potential income from various electricity market segments are assessed, e.g. day-ahead spot market, intraday market, ancillary services market etc. A business case is prepared by feeding in the costs and revenues of a BESS project as inputs. Some reasonable assumptions are made.

After the analysis the study finds out that a battery project is not looking profitable, given the price forecasts being used. Relative profitability increases if a battery participates in more than one markets instead of dedicating itself to a sole market segment. However, the price forecasts might be inaccurate and the battery costs are projected to reduce gradually over the next few years. Therefore a number of sensitivity analyses are performed that gives the price levels that will make the investment profitable. Among various battery technologies, sodium-ion batteries are found to be most attractive economically, followed by lithium-ion batteries. Moreover, the longer duration batteries are found to be relatively more attractive investment than 1-hour batteries.

• author: Das, Ranadip
• supervisor: Max Collins; Benjamin Berg
• organization: Department of Energy Sciences
• course: MVKM05 20241
• year: 2024
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: Energy arbitrage, BESS, Frequency containment reserves, Elspot, Elbas, Bidding strategy
• report number: LUTMDN/TMHP-24/5589-SE
• ISSN: 0282-1990
• language: English
• id: 9166321
• date added to LUP: 2024-06-24 13:03:28
• date last changed: 2024-06-24 13:03:28