Batteries charging into the future? Techno-economical analysis of BESS participation on the Swedish frequency regulation market using a mixed method approach
(2023) FMIM01 20231Environmental and Energy Systems Studies
- Abstract
- As the penetration of variable renewable energy is increasing, the demand for flexibility in the electrical grid is on the rise. One way in which flexibility is needed is to provide frequency regulation. If electricity consumption and production momentarily are unbalanced there needs to. The Swedish TSO, Svenska Kraftnät, procures multiple different frequnecy regulation services to protect against these imbalances. As a result of falling costs, Battery Energy Storage Systems (BESS) are now a possible suppliers of frequency regulation. This thesis investigates the economic and technical feasibility for BESS on the Swedish frequency regulation market in its entirety, and which services are the most suitable for BESS.
A mixed method... (More) - As the penetration of variable renewable energy is increasing, the demand for flexibility in the electrical grid is on the rise. One way in which flexibility is needed is to provide frequency regulation. If electricity consumption and production momentarily are unbalanced there needs to. The Swedish TSO, Svenska Kraftnät, procures multiple different frequnecy regulation services to protect against these imbalances. As a result of falling costs, Battery Energy Storage Systems (BESS) are now a possible suppliers of frequency regulation. This thesis investigates the economic and technical feasibility for BESS on the Swedish frequency regulation market in its entirety, and which services are the most suitable for BESS.
A mixed method approach is employed in the thesis. After presenting background for central topics, both quantitative and qualitative data was gathered. Modelling of price and frequency data of 2022, as well as an interview study with 12 interviewees, was conducted. Cycling degradation and energy costs were included in the modelling. In a parallel manner the two data types are analysed, and integrated in the discussion and conclusion sections.
Through its result, the thesis shows that FCR-D and FFR are the most economically suitable frequency regulation services for BESS. With the price level of 2022, economic feasibility is high, with pay-back times of 1.6 years, and 64 \% IRR. The thesis further points out that the general price level is expected to drop due to an increase in supply. Simultaneously, regulatory changes are making BESS operation more independent and allowing for more liberal bidding strategies, increasing revenues this way. (Less) - Abstract (Swedish)
- I takt med att andelen förnybar el ökar så ökar även efterfrågan på flexibilitet i elnätet. Flexibilitet behövs bland annat för att tillhandahålla frekvensreglering. Om elförbrukningen och elproduktionen tillfälligt är i obalans kommer frekvensen i elnätet att avvika från sitt börvärde. För att skydda mot dessa obalanser upphandlar Svenska Kraftnät flera olika frekvensregleringstjänster. Som ett resultat av fallande produktionskostnader har batterilager (BESS) blivit en potentiell leverantör av frekvensreglering. Denna uppsats undersöker den ekonomiska och tekniska gångbarheten för BESS på den svenska frekvensregleringsmarknaden i sin helhet, och presenterar de tjänster som är mest lämpade för BESS.
Uppsatsen omfattar både kvantitativ... (More) - I takt med att andelen förnybar el ökar så ökar även efterfrågan på flexibilitet i elnätet. Flexibilitet behövs bland annat för att tillhandahålla frekvensreglering. Om elförbrukningen och elproduktionen tillfälligt är i obalans kommer frekvensen i elnätet att avvika från sitt börvärde. För att skydda mot dessa obalanser upphandlar Svenska Kraftnät flera olika frekvensregleringstjänster. Som ett resultat av fallande produktionskostnader har batterilager (BESS) blivit en potentiell leverantör av frekvensreglering. Denna uppsats undersöker den ekonomiska och tekniska gångbarheten för BESS på den svenska frekvensregleringsmarknaden i sin helhet, och presenterar de tjänster som är mest lämpade för BESS.
Uppsatsen omfattar både kvantitativ och kvalitativ data. Först presenteras den relevanta bakgrunden. Sedan initieras metoderna för de olika datatyperna och resultaten presenteras för respektive typ. För den kvantitativa datan modelleras intäkter för år 2022. Pris- och frekvensdata ligger till grund för den kvantitativa analysen, och cycklingsslitage samt energikostnader är inkorporerade i modellen. Den kvalitativa datan består av en intervjustudie med 12 intervjuer. Efter att den kvantitativa och kvalitativa datans resultat har presenterats parallellt slås de samman i diskussion och slutsats.
Uppsatsens resultat visar att FCR-D och FFR är de ekonomiskt mest lämpliga frekvensregleringstjänsterna för BESS. Data från 2022 visar att den ekonomiska genomförbarheten är hög, med återbetalningstider på 1,6 år och med 64 \% IRR. Uppsatsen pekar vidare på att den allmänna prisnivån förväntas sjunka på grund av ett ökat utbud. Samtidigt gör regeländringar BESS-verksamheten mer oberoende och möjliggör mer liberala budstrategier, vilket ökar intäkterna på detta sätt. (Less) - Popular Abstract
- The move towards more sustainable electricity production is important to fight climate change. With the transition, however, new challenges arise. As a larger share of intermittent energy is introduced into the grids, the need for flexibility is increasing. One of the ways in which flexibility is needed is through what is called frequency regulation. In Sweden, hydro power has traditionally been providing this service. However, through lower production costs, Battery Energy Storage Systems (BESS) are now potentially suitable for the same frequency regulation.
This thesis investigates if it is economically and technically feasible to use these batteries for frequency regulation. It does so by providing analysis of both quantitative and... (More) - The move towards more sustainable electricity production is important to fight climate change. With the transition, however, new challenges arise. As a larger share of intermittent energy is introduced into the grids, the need for flexibility is increasing. One of the ways in which flexibility is needed is through what is called frequency regulation. In Sweden, hydro power has traditionally been providing this service. However, through lower production costs, Battery Energy Storage Systems (BESS) are now potentially suitable for the same frequency regulation.
This thesis investigates if it is economically and technically feasible to use these batteries for frequency regulation. It does so by providing analysis of both quantitative and qualitative data. The quantitative data analysis is conducted by creating a Python program to model revenues and costs. Modelling was based on data from 2022 and the feasibility of the battery is then projected based on the results from 2022. In the model, grid frequency and frequency regulation prices are the inputs. To compliment the quantitative data, an interview study was conducted. The aim of this study was to give another perspective to the analysis. An interview study can give insight about the future that the quantitative data is unable to display. The two data types were analysed in what is called a Convergent Parallel Design. This means that their respective results were presented individually, and only in the discussion and conclusion of the thesis were the two data types combined.
The result of the thesis is that it currently highly profitable with BESS investments for frequency regulation in Sweden. FFR and FCR-D are the services that both the quantitative and qualitative data point to as being most suitable for BESS. Furthermore, it is expected that profitability will go down in the coming years due to more parties entering the market.
In the final part of the thesis, it was concluded it is hard to predict when and how quickly the profitability of investments in BESS will decrease. Furthermore, it was concluded that new opportunities will arise for BESS performing frequency regulation in Sweden, for example through regulatory changes. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9131602
- author
- Rosengren, Theodor LU
- supervisor
-
- Lars J Nilsson LU
- Hannes Sonnsjö LU
- organization
- course
- FMIM01 20231
- year
- 2023
- type
- H3 - Professional qualifications (4 Years - )
- subject
- keywords
- Battery Energy Storage Systems, Frequency Regulation, FCR-D, FFR, economic feasibility, Sweden
- report number
- LUTFD2/TFEM—23/5196–SE55
- ISSN
- 1102-3651
- language
- English
- id
- 9131602
- date added to LUP
- 2023-07-03 08:03:20
- date last changed
- 2023-07-03 08:03:20
@misc{9131602,
abstract = {{As the penetration of variable renewable energy is increasing, the demand for flexibility in the electrical grid is on the rise. One way in which flexibility is needed is to provide frequency regulation. If electricity consumption and production momentarily are unbalanced there needs to. The Swedish TSO, Svenska Kraftnät, procures multiple different frequnecy regulation services to protect against these imbalances. As a result of falling costs, Battery Energy Storage Systems (BESS) are now a possible suppliers of frequency regulation. This thesis investigates the economic and technical feasibility for BESS on the Swedish frequency regulation market in its entirety, and which services are the most suitable for BESS.
A mixed method approach is employed in the thesis. After presenting background for central topics, both quantitative and qualitative data was gathered. Modelling of price and frequency data of 2022, as well as an interview study with 12 interviewees, was conducted. Cycling degradation and energy costs were included in the modelling. In a parallel manner the two data types are analysed, and integrated in the discussion and conclusion sections.
Through its result, the thesis shows that FCR-D and FFR are the most economically suitable frequency regulation services for BESS. With the price level of 2022, economic feasibility is high, with pay-back times of 1.6 years, and 64 \% IRR. The thesis further points out that the general price level is expected to drop due to an increase in supply. Simultaneously, regulatory changes are making BESS operation more independent and allowing for more liberal bidding strategies, increasing revenues this way.}},
author = {{Rosengren, Theodor}},
issn = {{1102-3651}},
language = {{eng}},
note = {{Student Paper}},
title = {{Batteries charging into the future? Techno-economical analysis of BESS participation on the Swedish frequency regulation market using a mixed method approach}},
year = {{2023}},
}