The Energy Storage Report

Taking stock of the energy storage market in

Europe and the US as the buildout accelerates

energy-storage.news

Market Analysis Financial and Legal Design and

Tracking the UK and What you need to Engineering
European battery know about the IRA Battery augmentation
storage markets, and tax equity, strategies to manage
pp.8 & 10 p.23 degradation, p33
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 Introduction

W elcome to the first edition of

The Energy Storage Report, the
supplemental publication for Solar Media’s
The German grid-scale market also continues to rebound
after a quiet few years - read our coverage of the release of its
Energy Storage Strategy on page 20.
Energy Storage Summit EU and USA events. More interested in engineering? From pages 33 to 41 you
In it, you’ll find the best of our energy storage coverage from can read technical articles from Wärtsilä, Burns & McDonnell
Energy-Storage.news Premium and PV Tech Power over the and Italian engineering firm Benny Energia on augmentation,
past few months, as well as new articles produced for this energy density and a 200MW/800MWh BESS project they
publication, including an overview of where we are up to with designed, respectively.
battery storage deployments in the UK and continental Europe. For our US audience, see deep-dives into the recent project
Energy storage continues to go from strength to strength as “M&A mania” (page 27), virtual power plants (page 43), local
a sector, with the UK and California/Texas continuing to lead planning for storage projects (page 14), long-term project
on either side of the Atlantic but neighbouring markets close upgrades and retrofits (page 42) and a lawyer’s digest on
behind. everything you need to know about the Inflation Reduction Act
The booming UK grid-scale market shows no sign of slowing and tax equity (page 23).
down as you can see in an overview on page 8, using the latest And finally on the upstream side, we hear from
UK figures from Solar Media’s Market Research team. BloombergNEF on its recently-launched Tier 1 BESS provider
For the next year or two, Italy is a particular one to watch in list and talk to Freyr’s CEO about how Europe’s nascent
Europe. See how grid-scale deployments there will soar in 2024 lithium-ion gigafactory ecosystem is at risk from competition
in a feature on pages 10 and 11 looking at continental Europe’s elsewhere.
seven key markets, drawing on data from LCP Delta. So, from myself, Energy-Storage.news editor Andy Colthorpe
For UK-focused readers, see interviews and analysis on and the whole team at Solar Media, thank you for reading our
the implications of falling BESS revenues (page 12), the content, supporting our events and most of all for being part of
governments’ long-duration energy storage (LDES) consultation this exciting, game-changing industry.
(page 16), grid interconnection and new market mechanisms
(page 18) and BESS’ role in a major frequency event (page 21). Cameron Murray, senior reporter

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energy-storage.news | February 2024 | 3

 Contents
06-07 News
The latest from the global storage sector,
43
powered by Energy-Storage.news

08-15 Market Analysis

08-09 Utility-scale energy storage systems in the UK
remain on strong growth trajectory
21
The latest trends from the UK market
10-11 Grid-scale energy storage set to soar in Europe
28-32 Materials and Production
in the coming years 28-29 European developer/IPPs: Sodium batteries
Continental Europe’s storage leaders gaining ground but big LFP upgrades
expected
12 UK BESS project premiums, valuations down as Three companies offer their 2024 storage
revenue expectations drop predictions
Rising finance costs and falling revenues hit UK
battery storage market 30 BloombergNEF notes uptick in China-based
BESS providers as it launches Tier 1 list
14-15 Making local planners comfortable with energy BNEF’s latest list of leading BESS providers
storage in their communities
Evaluating energy storage project proposals 31-32 Freyr CEO on minimising European gigafactory
investment: ‘IRA has shifted the market’
Why Freyr is limiting its European investments
16-22 Policy and Regulation
16-17 UK: Developers welcome LDES cap and floor
but caution against ‘gaming’ and lithium-ion
33-42 Design and Engineering
exclusion 33-35 Augmentation strategies to manage long-term
Inside the UK’s long-duration energy storage battery degradation
strategy Wärtsilä’s strategies for successful augmentation
18-19 Field on grid and market mechanisms: ‘totally 36-38 Energy storage and energy density: an EPC’s
different picture to a year ago’ view
The UK developer on grid connections and Burns & McDonnell on designing for constrained
market mechanisms sites
20 Germany’s Electricity Storage Strategy ‘puts 39-41 Designing a 200MW/800MWh BESS project in
storage on political agenda for the first time’ Italy
Germany gets serious on storage Benny Energia on a grid-scale BESS in Italy
21-22 ‘Let batteries help’ says Arenko CTO after 42 ‘Every energy storage project’ will require regular
frequency event threatens Britain’s grid stability upgrades to stay in the game
How batteries could help stabilise the UK grid FlexGen CEO Yann Brandt on the need for
ongoing technology upgrades

23-27 Financial and Legal 43-46 Software and Optimisation

23-26 What you need to know about the IRA and tax
equity 43-44 Virtual power plants: A ‘critical resource’ for
What the IRA means for energy storage meeting rising electrification
27 US: Interest rate rises and longer development The future of VPPs
timelines causing project ‘M&A mania’ 45-46 The challenges for BESS optimisation firms
US storage projects face value dilution Maximising the value of BESS

Meet the team

Jessica Winch Andrew Colthorpe David Evans Adam Morrison
Business development manager Editor, Energy-Storage.news Associate publisher Account manager
[email protected] [email protected] [email protected] [email protected]

Ben Willis Cameron Murray Lili Zhu Carolline Marques

Consultant editor Senior reporter, Energy-Storage.news Account manager Marketing manager
[email protected] [email protected] [email protected] [email protected]

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4 | February 2024 | energy-storage.news

 Advertorial

Saving Millions By Self-Procurement

By: Daniel Crotzer, Fractal EMS Inc. Challenges of Self-Procurement
1. Multiple Negotiations and Agreements: Buyers need to
In the beginning, traditional integrators played an important role separately procure, negotiate and contract the equipment, EPC,
in the supply, installation and operations of battery systems. EMS and operations. This requires staffing and experience.
The supply chain was confusing and fragmented. Traditional
integrators provided a one-stop-shop with proprietary How Fractal EMS Enables Self-Procurement
equipment, software and services. Over time the supply chain 1. Competitive Procurement and Contract Support: Fractal
for equipment became easier to navigate. Similar to solar, consultants can assist Buyers with sizing the equipment,
the role of a traditional integrator has diminished because technoeconomic analysis and procurement via RFPs.
savvy buyers now purchase equipment direct from the OEMs 2. Universal Controls: There is an ever-growing list of new batteries
(self-procurement). Along with the emergence of third-party vendors, Fractal EMS can provide universal controls, reporting
Energy Management System (EMS) companies, a massive shift and HMI to monitor and operate a fleet of different equipment.
towards self-procurement has unfolded. 3. Equipment Deficiencies: Some battery OEMs may have excel-
lent pricing, but they may have deficiencies in protections,
Reasons for Self-Procurement BMS capabilities (SOC accuracy, p-limiting, etc.), balancing
1. Cost: Traditional integrators add a sizeable margin to the algorithms, and cybersecurity (easy to hack). Fractal provides
equipment and EPC cost. On a 100 MW / 400 MWh industry leading controls that compensate for these deficien-
project, integrators add 15% margin (up to 25% margin on cies.
smaller projects). 4. Warranty Protection: Each OEM has stringent requirements
2. Supply Chain and Price Fluctuations: Buyers should have for data to facilitate warranty claims. Fractal EMS provides
the ability to purchase cost-competitive equipment on a databases, dashboards, KPIs and alerts to track warranty and
project-by-project basis as pricing and supply fluctuate. off-taker requirements.
3. Visibility into Risk Exposure: Traditional integrators just 5. Technology Expertise: Fractal EMS has deep experience from
pass through the OEM warranties and guarantees. Once integrating over ten batteries OEMs and over ten inverter OEMs.
LD caps are hit, many integrators reduce support or walk 6. Cybersecurity: Fractal EMS implements best practices from
away altogether. NERC/CIP, NIST 800 and ISO 27001.
4. Availability: Buyers have become aware that most downtime 7. Ongoing Technical Support: Fractal’s 24x7 Remote Operations
is caused by inverters and battery thermal management. Center is just a phone call away for inquiries, issues, or trouble-
Instead of purchasing expensive performance guarantees shooting of all BESS equipment (inverters, batteries, thermal
(based on total equipment cost), it is more cost efficient to management, etc.).
mitigate this risk by oversizing or purchasing spare parts. 8. Features and Customization: Fractal can fulfill owners’ requests
5. Future Flexibility: Integrators that install proprietary for custom features, dashboards and KPIs that may not be
equipment and controls can hinder (or even prohibit) the available through a traditional integrator’s HMI.
ability to retrofit the EMS. Buyers prefer equipment that 9. Future Augmentations: Fractal EMS is built to facilitate augmen-
can be repurposed and retrofitted in case the original EMS tations (AC or DC) by integrating new equipment with the exist-
underperforms or becomes insolvent. ing equipment.

energy-storage.news | February 2024 | 5

 News
California solar-plus-storage project with world’s The scheme totalling €17.7 billion (US$19.5 billion) will
largest BESS fully online provide annual payments covering investment and operating
The Edwards & Sanborn solar-plus-storage project in California costs for those developing, building and operating large-scale
is now fully online, with 875MWdc of solar PV and 3,287MWh energy storage in Italy. It will be alloted via a competitive bidding
of battery energy storage system (BESS) capacity, the world’s process where developers with the lowest offer win out.
largest. Transmission system operator (TSO) Terna estimates Italy
The 4,600-acre project in Kern County is made up of 1.9 million will need 9GW/71GWh of new energy storage to integrate its
PV modules from First Solar and BESS units from LG Chem, growing renewables pipeline, an average duration of just under
Samsung and BYD totaling 3,287MWh of energy storage capacity. eight hours.
That makes it bigger than the current largest BESS in the world, Terna and its regulators have been busy updating the electric-
Vistra’s 750MW/3,000MWh facility at Moss Landing, also in ity market in Italy to facilitate the rollout of energy storage and
California, which also came online in two phases. developers and operators have been announcing gigawatt-
Engineering, procurement and construction (EPC) contractor scale pipelines of projects throughout 2023.
Mortenson started construction around three years ago and the
first phase, comprising about half of the total capacity, came online CATL battery storage unit disconnected at Marine
in late 2021. Corps installation amid ‘concerns’ about project
The project has an interconnection capacity of 1,300MW. Its Battery storage equipment manufactured by CATL and recently
offtakers include the city of San Jose, utilities Southern Califor- installed at a US Marine Corps facility has been disconnected
nia Edison (SCE) and Pacific Gas & Electric (PG&E), community after the raising of security concerns about the China-headquar-
choice aggregator (CCA) Clean Power Alliance, and coffee chain tered maker.
shop Starbucks. Reuters reported on 7 December that BESS equipment at
a solar-powered microgrid on Camp Lejeune Marine Corps
Credit: Mortenson/Terra-Gen

Base (MCB) had been switched off by Duke Energy, the energy
company tasked with building the project.
Duke Energy confirmed the accuracy of the report in a state-
ment given to Energy-Storage.news by company director of
communications and public affairs Kaitlin Kirshner, who said
Duke Energy did not believe the equipment itself posed a threat
but that the system has been switched off until the matter is
The Edwards Sanborn solar-plus-storage project in California
resolved.
According to Reuters, the decision was made following high-
LFP cell average falls below US$100/kWh as battery profile accusations by US lawmakers that CATL – the world’s
pack prices drop to record low in 2023 largest manufacturer and supplier of lithium-ion batteries – is
After a difficult couple of years which saw the trend of falling directly funded and enjoys support from the Chinese Commu-
lithium battery prices temporarily reverse, a 14% drop in lithium-ion nist Party.
(Li-ion) battery pack cost from 2022-2023 has been recorded by CATL, for its part, strongly refuted the allegations, publishing
BloombergNEF. a statement in early December 2023. It described the accusa-
On average, pack prices fell 14% from 2022 levels to a record tions that its batteries posed security threats as “false and
low of US$139/kWh this year. This reduction was driven by the misleading”.
dynamics of falling raw material and component prices, and
increases in production capacity. Northvolt and Altris develop ‘breakthrough’ 160 Wh/kg
However, despite the good news, BloombergNEF (BNEF) no sodium-ion battery for energy storage
longer expects to find average pack prices fall below US$100/ Gigafactory company Northvolt and sodium-ion battery technol-
kWh by 2024 (as it predicted in 2020), nor by 2026 (as it predicted ogy firm Altris have together revealed a battery with an energy
last year). It will however be likely to happen before the end of this density of 160 Wh/kg, designed for energy storage systems.
decade, with BNEF forecasting that the average pack will cost The firms revealed the battery’s energy density following a
about US$113/kWh in 2025, and decline in cost sharply to around research partnership and Northvolt’s investment in Altris in May
US$80/kWh by 2030. 2022.
Sodium-ion battery technology is widely seen to be the most
EU approves Italy’s €17.7 billion state aid for large-scale commercially mature electrochemical-based alternative to
energy storage rollout lithium-ion. For comparison, lithium-ion technology generally
The European Union (EU) Commission has approved a state aid has a Wh/kg energy density of between 120 and 260, accord-
scheme aiming to fund the rollout of over 9GW/71GWh of energy ing to the International Energy Agency (IEA) in its Global EV
storage in Italy. Outlook 2023.

6 | February 2024 | energy-storage.news

 News
The firms said the battery they have developed together will
provide the foundation for Northvolt’s next-generation energy
storage solutions.

Gotion’s first ‘Made in USA’ ESS battery packs roll off

Credit: Giga Storage

Silicon Valley production line
China-headquartered lithium-ion battery maker Gotion High-
Tech has produced the first battery pack at its new factory in
California’s Silicon Valley.
The company said that the first pack came off the produc-
tion line at its plant in Fremont – which is also home to Tesla’s A render of the Giga Storage’s ‘Green Turtle’ project being
developed in Dilsen-Stokkem, Belgium
main US automobile production plant and HQ – on 21 Decem-
ber. expect to commence construction in 2024. GIGA Storage
The factory is dedicated to products for the portable and aims to achieve the realisation of 3GW of battery storage in
residential energy storage system (ESS) markets ranging Belgium by 2030.”
from 3kWh to 30kWh. It has a planned 1GWh annual produc-
tion capacity, although the company did not mention in an Spain awards contracts to 1.9GWh energy storage in
announcement when it aims to ramp to this figure. first PERTE tender
The government of Spain, through the Institution for the
Calpine Corporation closes US$1 billion financing for diversification and energy savings (IDAE) has awarded
680MW California BESS 880MW/1,809MWh in its first tender for energy storage to be
Gas and geothermal plant developer and operator Calpine co-located with renewables.
Corporation has closed a syndicated financing for what could Among the companies awarded from the Spanish strategic
be one of the largest BESS projects in the US. projects for the economic recovery and transition (PERTE in
The credit facilities totalling over US$1 billion will finance the Spanish) programme are utilities Iberdrola, Naturgy, Enel Green
development and construction of a 680MW BESS project in Power but also renewables developer Fotowatio Renewable
Menifee, Riverside County, California, law firm and advisor to Ventures (FRV) among others.
Calpine on the financing White & Case said in early January Results were published in mid-November with in total 34
2024. projects awarded capacity in the auction across the entire
It will be built in five phases with construction already under- territory.
way, Calpine announced in December 2023 calling the project Grants will cover 40-65% of the project cost depending on
the 680MW ‘Nova BESS’. When completed it will be one of the size of the company applying, while nearly €160 million
the largest BESS in the US. ended up being allocated to the awarded projects. All the
The plan is to interconnect the project with the grid at a projects but one are targeted to be completed in 2025.
substation owned by Southern California Edison (SCE). It
will utilise battery storage technology (either lithium-ion, flow Startup Form Energy’s ‘100-hour’ iron-air battery
batteries or other technology) to store energy from the grid to tech attracts another US utility’s attention
be discharged when customer demand is high. Another utility agreement has been signed by Form Energy,
the US startup which claims its iron-air battery can provide
Giga Storage to start building 2,400MWh BESS in sufficient stored energy to ride through multiple days of low
Belgium in 2024 solar or wind production.
Netherlands-based BESS developer Giga Storage has Puget Sound Energy, an electric and gas utility serving 1.2
unveiled a 600MW/2,400MWh project it is developing in million electric customers in the Washington State region of the
neighbouring Belgium, one of the largest planned projects in same name, said on Friday (5 December) that it has signed a
Europe. memorandum of understanding (MoU) around Form Energy’s
Called ‘Green Turtle’, it would be located in Dilsen-Stokkem technology.
adjacent to a new 380kV high-voltage substation run by With Puget Sound Energy considering deploying a pilot
transmission system operator (TSO) Elia. The location is along project in its service area, the pair’s new partnership could see
a high-voltage line from Van Eyck to Gramme while also being them jointly develop one, which would be a 10MW system
connected to the grid of the Netherlands. with 1,000MWh capacity – equivalent to 100-hour duration.
In the announcement, Joeri Siborgs, general manager GIGA The key ingredients of Form Energy’s proprietary battery
Storage Belgium, said: “This project is being developed on an tech are iron and air. Basically, iron inside the battery is rusted
industrial site where there was a previous initiative to develop (oxidised) as the system charges with electricity, and then
a battery. The permit application has been submitted, and we de-oxidised as the battery discharges. „

energy-storage.news | February 2024 | 7

 Market Analysis

Utility-scale energy storage

systems in the UK remain on strong
growth trajectory
Mollie McCorkindale tracks the latest trends in the pipeline and deployment of
energy storage in the UK tracked in the ‘UK Battery Storage Project Report’

he UK energy storage market is now on a promising

T

Credit: Pacific Green / National Grid.

upward growth trajectory, with the total operational
capacity expected to reach 7.3GW/11.6GWh by the end
of 2024, potentially increasing further to 14GW/25.9GWh
by 2026-2027. The built capacity is consistently growing
year on year, following a substantial rise in submitted and
approved planning applications.

Energy storage deployment rates

In 2023, the UK added a record-breaking 1.3GW/1.9GWh Sosteneo Infrastructure Partners’ 100MW/100MWh
of utility battery storage. This brought the total operational Richborough BESS project in Kent, which came online in
December 2023
capacity to 4GW/4.9GWh. As widely expected for some
time now, the built capacity is increasing every year. Further- years (2021 and 2022), when only 20% of the projects had a
more, the operational megawatt-hour capacity is outpacing duration of more than one hour.
megawatt capacity due to the increasing duration of battery The majority of projects in the development pipeline are
storage systems. being planned to have at least two hours duration, as this now
Figure 1 displays the amount of built capacity in megawatts appears to offer better value for operators.
and megawatt-hours for each year, going back to 2014.
In 2023, a total of 33 utility-scale energy storage projects The significant rise of the energy storage pipeline
were brought online. Two of them were 100MW each and had Over the course of one year, the total pipeline for battery
a duration of one hour, while 16 were 50MW each. Among storage in the UK has more than doubled. A year ago, the
these projects, seven had a duration of one hour, while the pipeline was at 61.5GW, but has since grown to 125GW. This
remaining nine had a duration of two hours. Interestingly, over figure is expected to continue increasing due to the ongoing
50% of these 33 projects had a duration of more than one planning of transmission projects for 2030 completion (and
hour, a significant increase compared to the previous two beyond).

Figure 1. In 2023, the amount of energy storage capacity

added to the grid in the UK reached a record-breaking level Figure 2. There is currently 3.3GW/6.7GWh across 53 sites
of 1.3GW/1.9GWh slated for completion in 2024

8 | February 2024 | energy-storage.news

 Market Analysis

Figure 3. A record-breaking 9.6GW of capacity was approved Figure 4. Built capacity is likely to rise substantially in the
in planning in 2023 near future

Figure 2 is a visual representation of the project pipeline The submitted capacity started to increase again in 2021
analysis with a focus on projects scheduled for completion in and, therefore, so did the approved capacity; partly due to the
2024. increase in the 50MW planning threshold, and because devel-
With reference to Figure 2: initially, we filtered out small opers gained more experience in the services available, leading
sites with a capacity of less than 5MW. Then, we removed to more attractive revenue streams.
any projects that have not yet submitted a full application. In 2022, the total capacity of newly submitted projects
After this, we only considered the projects that have obtained reached a record high of 23GW. These projects were approved
planning approval, and among those, we filtered out the ones in 2022 and 2023, with most of the capacity given the green
that have not yet been awarded a capacity agreement; this light in 2023. This is because there are more large-scale
gives all the Short-Term Prospects. projects and these generally have a longer planning process.
The Short-term Prospects are any projects that have an The total amount of capacity that has now been approved
application approved and have also been awarded a capac- in planning, since the market began, is at 32.9GW across 957
ity agreement. The 2024 site prospects are already under sites.
construction and are expected to be completed during this
year. The pattern of submitted, approved and built
By the end of 2024, the operational capacity of energy capacities
storage is likely to increase by 3.3GW/6.7GWh, bringing Looking at the rise of submitted, approved and built capaci-
the total capacity to 7.3GW/11.6GWh. By 2026/2027, this ties, there is a clear (linear) relationship between submitted and
figure has the potential to reach up to 14GW/25.9GWh. This approved capacity. This is evident from the data presented in
includes 11 projects of size 100MW and larger – including one Figure 4.
as big as 500MW – with a duration of at least two hours. Although the build-out of these projects started slowly, there
is still some linearity between the approved and built capac-
How much capacity was approved in planning last ity, but it is not immediately obvious. However, in the previous
year? graphs in this article, there is a similar pattern between the two.
Last year (2023), a remarkable 9.6GW capacity was granted Therefore, the built capacity is likely to soar in the very near
approval in planning, out of which more than 50% was from future.
projects exceeding 100MW in size. It is worth noting that such In conclusion, everything points to a rapid increase in the
projects of this magnitude have only recently been initiated. operational capacity of energy storage in the UK going forward.
Only since 2022 have projects of this size really started to This is evident from the year-on-year increase in built capaci-
come into play. ties, the upcoming short-term prospect sites that are expected
Figure 3 shows the approved capacity of battery storage, by to be completed in the next few years, the increasing amount
project size and by year. of capacity approved in planning, and the linear relationship
The first surge in 2017 was due to a significant increase in between submitted, approved and built capacities. „
the number of applications submitted for battery storage that
year. The success of some projects in the Enhanced Frequen- All data and analysis shown in this article comes from
cy Response (EFR) auction in 2016 motivated many develop- our in-house market research at Solar Media Ltd.
ers to submit more applications. However, after this surge, the Full details on how to subscribe to our ‘UK Battery
rate of submitted capacity slowed down, resulting in a similar Storage Project Database Report’ can be found at
trend in the yearly approved capacity. bit.ly/ukstorage

energy-storage.news | February 2024 | 9

 Market Analysis

Grid-scale energy storage set to

soar in Europe in the coming years
Although still some way behind the UK, several other European storage markets are
starting to show serious growth. Cameron Murray reports on continental Europe’s
leaders, drawing on figures supplied by consultancy LCP Delta

hile the UK has been the early mover in deploying

W short-duration energy storage resources, other major
economies in Europe are also set to ramp up their deploy-
ments over the coming few years.
France, Italy, Spain, Sweden, Germany, Belgium and
Poland together had 2.2GW/3.1GWh of BESS online by
the end of 2023, according to data from LCP Delta, with
750MW/1.15GWh of that coming online over the past year.
Both of those figures are a little over half of the UK data
cited in the previous article, but deployments on the continent
in both megawatts and megawatt-hours will be outpacing
those in the UK from 2024 onwards.
This is largely being driven by increased renewable energy
deployment targets in line with RePowerEU, the move by
the EU to end reliance on Russian fossil fuels by increasing domestic renewable production. The aims have been codified
by member states’ revised national energy and climate plans
(NECPs), released over the last 1-2 years.

Italy
As readers of Energy-Storage.news will know, Italy is set to
become one of the busiest grid-scale BESS markets in the
coming years.
Following growth in its renewable energy goals and deploy-
ment pipeline, transmission system operator (TSO) Terna has
spent the last few years consulting with the industry on how to
facilitate energy storage on its grid, projecting that 9GW/71GWh
needs to come online by 2030.
The business case for storage will be built around the capacity
market and energy arbitrage, including through a new dedicated
Note: all data refers to the grid-scale segment
platform launched by Terna where storage owners will be able
to sell ‘time-shifting’ of energy to renewable energy owners, plus
ancillary services. Projects will generally be four hours-plus.
All this will be supported by a €17.7 billion (US$19.1 billion)
EU-backed grant support scheme to cover part of the invest-
ment and operating costs for grid-scale storage, approved by
the EU Commission in December 2023.
A whopping 2.6GW/8.9GWh is set to come online in 2024
with an average duration of around 3.4 hours, LCP Delta said.
A big chunk of that is around 1GW that utility and independent
power producer (IPP) Enel is building, much of which it won
long-term capacity market contracts for in 2022.
Deployments will continue at a slower pace thereafter, and by
the end of 2027, 4.8GW/14.7GWh should be online.

10 | February 2024 | energy-storage.news

 Market Analysis

The business case will primarily be around shifting solar

PV generation into the evening hours, and a recent grant
scheme from the government through its Spanish strategic
projects for the economic recovery and transition programme
(PERTE in Spanish) will help kickstart the market.
Some 880MW/1,809MWh of energy storage projects were
granted contracts in the PERTE tender in December 2023.
The bulk will come online in 2025, reflected in LCP’s data,
which shows 1.7GW/4.1GWh coming online that year.

Belgium

Germany
Germany was at one time the leading market for grid-scale
BESS in Europe, even ahead of the UK, before the ancillary
service markets which supported that growth were saturated
in 2018.
Starting in 2021 and 2022, ancillary service and energy
trading opportunities have come back, and BESS deploy-
ments have subsequently picked up. ‘Innovation Tender’
grants for co-located projects have also given a boost to the
market.
The government released its Electricity Storage Strategy
in December 2023, aimed at supporting the scale-up and Although Belgium has less BESS online today than larger
integration of energy storage on its grid, putting the technol- neighbours France and Germany, it is notable for having
ogy on the political agenda for the first time. already seen some large-scale, multi-hour-duration deploy-
By the end of 2023, there was 937MW/1,322MWh online in ments.
Germany and another 485MW/681MWh is set to come online Two 25MW/100MWh projects were deployed in the
this year. last few years (by Nippon Koei Energy Europe and Nala
Renewables respectively) and January saw Dutch devel-
Spain oper Giga Storage claim it would start construction on a
The Spanish market has been a challenging one, with anecdo- 600MW/2,400MWh project there, one of the biggest in
tal evidence of ‘over-development’ of solar PV projects and Europe, in 2024.
other challenges perhaps explaining why just 5MW/10MWh A big driver of the multiple hours’ duration and scale of
came online last year. these projects is the country’s capacity market, through the
Deployments are set to pick up, however, with a new energy Capacity Remuneration Mechanism (CRM), which can be
storage deployment target of 22GW by 2030 as part of its stacked with ancillary service opportunities to create a strong
revised NECP (which also includes 76GW of PV by that year). business case.

Poland, Sweden and France

Poland is another market due to soar from a negligi-
ble starting base today, with capacity market contracts
again playing a huge part. Deployments are really set to
kick off in 2026 and 2027, with 600MW/2,282MWh and
1,300MW/4,550MWh coming online respectively, with 2027
the start of obligations for the first capacity markets that
awarded BESS contracts (in late 2022).
The 2024-27 trajectory for Sweden and France would
more aptly be described as ‘slow and steady’, with
300-400MW coming online each year with durations between
one and two hours, with business cases built around a mix of
energy arbitrage, capacity and ancillary services.

energy-storage.news | February 2024 | 11

 Market Analysis

UK BESS project premiums, valuations

down as revenue expectations drop
Rising financing costs and falling revenues have prompted a drop in company valuations
and developer premiums in the UK battery storage market, reports Cameron Murray

ompany valuations and developer premiums for project

C sales have come down in the UK battery storage market
amidst rising financing costs and plummeting revenues.
Project premiums have fallen 15% in the last few months, a
source told Energy-Storage.news, while the share prices of the
three big listed energy storage funds have fallen 40-50% since

Credit: Harmony Energy

the start of the year.

Falling revenue expectations and higher financing costs

The UK market for short-duration battery energy storage system
(BESS) projects has boomed in recent years to become the
largest in Europe with over 3.5GW now online, with projects
Harmony Energy’s 99MW Bumpers BESS in Buckinghamshire,
benefiting from high ancillary service market prices, particularly UK, which came online in October 2023
in 2022.
Saturation of those markets was always expected for 2023 UK: Gresham House Energy Storage Fund (listed under the ticker
but revenues may have fallen more sharply than expected as the GRID), Gore Street Energy Storage Fund (GSF) and Harmony
wholesale energy trading opportunities, such as in the balancing Energy Income Trust (HEIT).
mechanism (BM), haven’t materialised to make up the difference. Since the start of the year to the time of writing, HEIT is down
This has led to a fall in both the valuations of those companies 40% to 75p, GSF is also down 40% to 68.06p while GRID is
developing and operating projects, and the prices that purchasers down nearly 50% to 88p. The FTSE 100 meanwhile is up 1-2%
are willing to pay for early-stage or ready-to-build (RTB) projects. in the same period.
“Development premiums have come down 15% in the last few All three are diversifying internationally to mitigate against an
months as revenue expectations have fallen,” a BESS finance increasingly saturated UK market, with GSF buying projects in
source told Energy-Storage.news, speaking anonymously. the US and Germany, HEIT’s manager Harmony Energy targeting
This is also partially to do with the rising cost of capital. The various European markets and GRID acquiring in California.
effect of rising interest rates is felt in the debt space instantly, In a recent LinkedIn post, Gore Street Capital wrote: “As the
but with debt typically 20-40% of BESS financing at most the #GreatBritain (GB) market suffers from market saturation and
effect on the cost of equity, which takes longer to be felt, is more the lack of wholesale #trading as a material revenue in place of
significant. ancillary services, our diversification strategy continues to deliver
Both of these factors have been partially offset by falls in the for shareholders.”
cost of BESS equipment seen this year as the supply-demand “Our international fleet under management now accounts
imbalance closed after 2022’s supply chain shock, which saw for over 62% of the Company’s operational capacity and drove
BESS costs rise by 25% and led to the untimely fall of some firms estimated weighted average revenue of £18.9/MW/hr during the
in the engineering, procurement and construction (EPC) sector. September-end quarter. This is against the £6.6/MW/hr estimat-
“Because the cost of raising these investment funds has gone ed average accrued by the GB portfolio.”
up, people will want to make more return on their equity. So, if I Perhaps not coincidentally, this period of falling revenues,
was happy to invest in this and get 9% return before, now I want falling revenue expectations and falling valuations has coincided
an 11% return. So the price they will be willing to pay is going to with a flurry of acquisitions of both listed and privately held BESS
drop,” a separate source said. developer-operators in the UK by global asset managers.
In the Spring, ready-to-build (RTB) projects were still selling for Global infrastructure investor Brookfield bought Banks
north of £100,000/MW (US$121,000) in the UK market but that Renewables last week, private equity firm KKR acquired Zenobe
has now come down. in September while asset manager Searchlight acquired Gresham
A separate way to take the temperature of the market is to look House, the manager of GRID and other clean energy vehicles, in
at the share prices of the listed vehicles investing in and operating July 2023. Energy-Storage.news has been told that more deals
energy storage projects, of which there are three main ones in the are coming. „

12 | February 2024 | energy-storage.news

 Advertorial

Advancing Resilience: The Shift Toward

Prolonged Energy Storage in Texas
By: Rahul Verma, Fractal Energy Storage Consultants greater resilience and the diminishing returns of short-duration
ancillary services due to market saturation.
The Energy Reliability Council of Texas (ERCOT) is a formidable
player in the energy storage arena, boasting a capacity of around Significant Market Rule Changes
4,000 MW - one of the highest in the U.S. Historically, ERCOT NPRR 1096 mandates sustained two-hour and four-hour
has leveraged this capacity to provide critical ancillary services capabilities for ERCOT Contingency Reserve Service (ECRS)
like Frequency Regulation and Responsive Reserve Services and Non-Spin, respectively, influencing procurement strategies
(RRS), while also capitalizing on the differential between off-peak and revealing a trend toward more lucrative revenue models
and peak pricing periods. compared to RRS. Prescribed rules for the newly added
Dispatchable Reliability Reserve Service (DDRS) similiarly requires
A Shift in Market Dynamics that an asset can operate at its High Sustained Limit (HSL) for at
Despite ERCOT’s significant power capacity, its energy storage least four consecutive hours.
duration falls short compared to other regions. A whopping 77%
of its operational capacity can only sustain up to 2 hours of Shifting Focus to Energy Arbitrage
continuous power, contrasting sharply with areas like California As the ancillary service markets approach saturation, the focus
and New York, where energy storage systems typically offer a is pivoting to energy arbitrage. If the future holds many more
minimum of 4 hours of capacity. seasons like the 2023 summer, energy storage resources can
provide immense value by arbitraging between frequent peaks
Most of the currently planned capacity in ERCOT will also sustain and troughs in the energy markets.
less than 2 hours of output at their maximum output capacity.
Project developers planning for less than 2 hours of storage The Influence of Decreasing Storage Costs
capacity can future proof their assets by designing projects The dominance of 1 to 1.5-hour duration storage was largely
capable of expanding storage capacity in the future. because the benefits of longer duration storage did not exceed its
cost in the past. However, as markets outside Texas have highly
Shorter Duration Batteries To Date skewed the demand for 2-hr and 4-hr batteries, the suppliers of
Three core factors shape Texas’s inclination toward shorter- 2-hr and 4-hr batteries have achieved better economies of scale.
duration energy storage: These suppliers can offer lower cost per hour of energy storage
1. Absence of a Capacity Market: ERCOT doesn’t operate a capacity as compared to battery suppliers that offer shorter
capacity market, which in other markets often necessitates duration battery chemistries. The difference in per hour cost of
longer-duration storage. storage capacity leads to a disproportional increase in revenue
2. Dynamic Ancillary Services Market: The lucrative quick- as compared to the increase in cost.
response services and the efficient management of charge
states during downtimes favor shorter-duration solutions. Conclusion
3. Complementary Renewable Profiles: The robust wind The transformation of ERCOT’s energy market is a complex
energy infrastructure in ERCOT effectively balances the load interplay of supply, demand, regulatory influences, and market
after the decline in solar production, mitigating the need for dynamics. The anticipated shift in energy storage within ERCOT
prolonged peak-time energy supply. points to a blend of responsive and long-term energy solutions,
underpinned by a strategic pivot to energy arbitrage and
Transitioning to Longer Duration prolonged storage capacities. This evolution is set to redefine
Market forces are increasingly favoring storage solutions with Texas’s energy landscape, paving the way for a new chapter in
minimum 2-hour capacities, driven by regulatory initiatives for sustainable energy solutions.

energy-storage.news | February 2024 | 13

 Market Analysis

Making local planners comfortable

with energy storage in their
communities
Andy Colthorpe speaks with Pacific
Northwest National Laboratory analyst

Credit: Andrea Starr/Pacific Northwest National Laboratory

Jeremy Twitchell, one of the authors of a
report on how communities can evaluate
energy storage project proposals

he enormous and rapid growth of the US energy storage

T market is there for all to see, but what the industry is
quickly realising is that storage adoption is not always going
so smoothly at the local level.
Storage deployments have multiplied seven times over since
2020, with recent figures from S&P finding the US closing in
on 15GW of utility-scale battery energy storage system (BESS)
projects and rival research firm Wood Mackenzie forecasting
55GW of new grid-scale storage deployments from this year PNNL fire safety expert Matt Paiss explains operations and
through 2027. safety aspects of large-scale Li-ion battery storage facilities
Yet there are many cases of battery storage projects failing
to find support from the authorities having jurisdiction (AHJ) – storage circles as a former firefighter turned subject matter
public bodies such as fire departments and town planners – that expert, Twitchell authored ‘Energy storage in local zoning
ultimately have the final say on behalf of their communities if a ordinances’. Prepared for the Department of Energy (DOE) and
project goes ahead. funded by the department’s Office of Electricity, it aims to provide
Some towns have enacted moratoria on the development technical assistance to states, including state utility commis-
of new storage facilities, most prominently in New York. That is sions and energy offices as they wrestle with new questions and
perhaps understandable to an extent, given that the state has demands around battery storage.
seen several high-profile fire incidents this year, though thankfully “A couple of years ago, we were doing some work with
no injuries have been reported and property damage (including several states, and kind of all at once, several states started to
to the BESS themselves) limited. point out that this was an issue that they were encountering:
Concerns over fire safety and explosion risk appear to be the that there were energy storage projects that developers wanted
most commonly cited concern. While it is perhaps tempting for to build but were running into significant challenges at the local
the industry to try and swat away those concerns with statistics level, at the state level in the siting and permitting process,”
around the rareness of large-scale battery fires and explanations Twitchell says.
of the safeguards in place to prevent escalation of incidents, the Quickly recognising it as a growing issue, PNNL found that
messages filtering down to the public are affecting real projects while on a big picture level, storage is gaining traction, with
and ultimately slowing the adoption of renewable energy. gigawatts of storage in utility planning processes and intercon-
“We have tried to provide an objective and factual reference for nection queues, the local zoning and planning officials that
local planners and zoners for local communities, and hopefully, ultimately make the decisions sometimes don’t have enough
they will find it useful as they navigate these challenging process- information to act.
es,” says Jeremy Twitchell, PNNL energy research analyst. “They live in a complex world of planning and zoning and
It is not fair, PNNL’s report concluded, that local authorities and ordinances and conditions and legal requirements, and now a
planners are increasingly having to put themselves in the position storage project comes along, and we’re asking that they’ll be
of being energy experts as well as handling their already complex energy experts as well. That’s not really fair.”
workloads.
Together with PNNL colleagues Devyn Powell, an energy Filling information gaps for communities
policy research analyst, and Matthew Paiss, a technical advisor The report seeks to fill information gaps for the likes of local,
on battery materials and systems who is well known in energy municipal and county-level planners who might suddenly find

14 | February 2024 | energy-storage.news

 Market Analysis

themselves looking over proposals for a 200MW BESS plant that “You cannot build a battery that is guaranteed to never enter
might, for example, be planned next to a commercial or residen- thermal runaway. Some thermal runaway is going to happen,
tial district. although those incidents are fairly rare. What you can do is
Due to the perhaps unique modular nature of battery storage, engineer a battery that will not explode, that will not spread to
there’s a lot more flexibility in terms of where a facility can be sited other batteries.”
versus traditional power plants, but that sometimes also leads Codes and standards that are now in place that mean even
to what Jeremy Twitchell refers to as “a level of potential conflict in the worst-case scenarios where thermal runaway occurs,
with energy storage that we haven’t necessarily seen with other systems are designed and engineered to limit the failure to just
energy infrastructure”. one unit.
One thing that stands out from the dozens of news reports So again, while local officials shouldn’t have to be experts in
about local opposition to battery storage projects is that the battery fire safety, what they can do, with PNNL’s new paper as
members of communities that speak to the press very often a basis, is ask questions about which codes and standards an
mention that they are in favour of renewable energy and in favour energy storage system is certified to.
of energy storage to enable its growth.
But at the same time, a typical quote will then go on to ask Entering new zones
why the storage system could not be sited somewhere else, A lot of the local authority acceptance issues come back to
where it will not present a potential eyesore or even a fire or just how new grid-connected energy storage is as a concept.
explosion risk. For example, zoning ordinances often don’t have BESS
Developers are not choosing energy storage sites at random, developments as a consideration when it comes to determin-
nor are they choosing sites just because land is available. Mostly, ing whether a storage site can be classified as an industrial
it is about proximity to grid infrastructure, which can dictate how use of land.
strategically useful to the network a BESS asset can be, as well PNNL’s researchers investigated where in the country, and to
as mitigate the need to build out more and more transmission what extent, local zoning ordinances included consideration of
and distribution (T&D) lines, which in themselves can present storage, which Twitchell said was not an easy task given that
development challenges. there are no central repositories of those ordinances to refer-
“If you are close to a substation, you’ve got a lot of lines ence against.
coming out of a substation. If you can tap into that substation, “What we found is that very few municipalities had an
you can provide service and support over a lot of lines, you can ordinance in place. We identified a few different kinds of
support a larger segment of the utility system. If you’re out at the ordinances. The most common version is a municipality had a
end of a particular line, a distribution line or transmission line, you zoning ordinance in place for solar energy and they modified it
don’t have that same level of visibility, you don’t have that same to just say, ‘solar and storage’.”
level of support to the utility system,” Twitchell says. “Obviously storage is a different resource with different
“Substations are like the hubs of the electric grid, and the characteristics and a different risk profile. We also identified a
closer you can be to a hub, the more benefit you can provide, the handful of ordinances that are more proactive [and] provide
better value of the services that you can provide.” specific guidance and regulations around how and where
storage can be built,” Twitchell says.
Elephant in the room However, PNNL was only able to identify “about a dozen
Still, while the technical and economic benefits of certain sites such ordinances around the country”, and many of those were
may be explainable in this way, it might not be enough to elimi- created in response to a specific project proposal, meaning that
nate other concerns. finding municipalities that have proactively addressed the issue
There will always be NIMBYs, who simply do not want anything is rare, although there are some.
built near them or built in a particular area. That is one (possibly Again, asking municipalities to set aside the time and
small) set of people, but frankly, the elephant in the room is safety resources to do that legwork is a big ask, and so PNNL hopes
and the public need to be reassured as well as educated. its report will provide guidance on that. The PNNL energy
Many learnings have been made on safety and incorporated storage team the authors are part of will next be working on a
into industry best practices and standards. Incidents like the follow-up report specifically around “the anatomy of a zoning
2017 fire and explosion at AES’ McMicken BESS project in ordinance,” Twitchell says.
Arizona and the handful of more recent incidents in the US will be “What are the components of it? What are the things that it
thoroughly investigated for their root causes, providing valuable should address? And what are some of the options in terms of
feedback to the industry. how you construct it and some of the requirements? We’ll be
“One of the things we tried to do in the report is point out how drilling down into those topics at a level deeper than we did in
the industry has learned from those incidents, how codes and the latest report.” „
standards have evolved to specifically address the safety risks of The report ‘Energy storage in local zoning ordinances’ can
energy storage,” Jeremy Twitchell says. be downloaded from the PNNL website, www.pnnl.gov

energy-storage.news | February 2024 | 15

 Policy and Regulation

UK: Developers welcome LDES

cap and floor but caution against
‘gaming’ and lithium-ion exclusion
Cameron Murray hears from UK battery storage developer-operators and long-duration
energy storage (LDES) technology firms on the government’s recently released LDES
consultation, which has proposed a cap and floor scheme to kickstart investment

T he long-duration energy storage (LDES) consultation,

which was launched in mid-January 2024, followed
months of discussions with the industry on creating a mecha-
revenue certainty, which will in turn help to secure financing for
these assets.”
Provost also said that a cap and floor for LDES would
nism to incentivise investment into LDES technology, defined complement existing shorter-duration assets. The UK already
as six-hour-plus duration, which most agree is needed for the has 3.9GW/4.8GWh of operational battery energy storage
UK to get to net zero. systems (BESS) and the near-term pipeline is 60GW/92GWh
The chief proposal is a cap and floor mechanism for LDES pipeline (figures from Solar Media’s UK Battery Storage Project
projects which would guarantee a minimum and maximum Database Report).
revenue for projects, with the government funding any shortfall “A cap will discourage LDES assets from seeking the
and receiving any money back above the cap. absolute peaks and troughs in the wholesale market which
“The cap and floor mechanism for LDES is a sensible evolu- unsupported assets can chase and a floor will encourage LDES
tion from the simpler strike price model of a Contract for Differ- assets to provide energy security during periods of lower whole-
ence (CfD), which has proven to help get less mature technolo- sale volatility,” Provost said.
gies off the ground,” developer and operator Balance Power‘s
commercial manager Nick Provost told Energy-Storage.news. Lithium-ion exclusion ‘should be reconsidered’ for
“It’s likely to benefit consumers as asset operators will be LDES
able to gain more revenue before breaching the cap, compelling The aspect of the consultation that has been most widely
them to pay this extra revenue to the government. This should opposed by industry figureheads is the proposed exclusion
help provide downward pressure on the cost of the floor which of lithium-ion as an eligible LDES technology for the cap
is good for electricity consumers.” and floor scheme. The government said this is because it
Luke Gibson, COO at another developer-operator Field, is already commercially viable and being deployed at scale
similarly told us: “We welcome the launch of this consulta- without any subsidies. Indeed, lithium-ion technology is being
tion. It’s reassuring to see the recommendation for a cap and used for the vast majority of energy storage projects being
floor mechanism that – price dependent – should give greater deployed in the UK.
However, Field’s Gibson said: “The exclusion of existing
lithium-ion technology at six-hour duration should potentially be
reconsidered if the goal is consumer savings. LFP (lithium iron
phosphate) batteries remain cost competitive at this duration.”
Analytics firm Modo Energy’s Ed Porter has also opposed
excluding lithium-ion but for the opposite reason – that it is not
currently commercially feasible at a six-hour duration.

‘Absolutely crucial to police gaming as a priority’

Credit: Drax Power

Balance Power’s Provost also discussed the risks of ‘gaming’

and operators exploiting the system for financial gain. Other
industry sources have previously opposed cap and floor
regimes for energy storage.
Provost: “It’s absolutely crucial that the policing of gaming is
Cruachan Dam, Scotland, an existing 440MW pumped hydro prioritised in the final design of any LDES support and we are
energy storage (PHES) facility, one of only four in the UK.
PHES is the most commercially mature LDES technology, happy this is considered within the consultation. This is for a
with a duration typically between four and 20 hours couple of key reasons.”

16 | February 2024 | energy-storage.news

 Policy and Regulation

“The myriad of trading opportunities available with storage “We are keen to ensure that the
will provide differentiation between competitors and will
provide consumer benefits through innovation. However, this mechanism is applicable for all LDES
will make transparency harder to achieve and increase the
technologies and at the various
potential for operators to exploit the system for financial gain.”
“The ultimate requirement for LDES is driven by the techni- scales needed to support the overall,
cal need for energy security during periods of low renewable
increasingly distributed, energy
energy generation [i.e., as coined in the German language
expression dunkelflaute/‘dark lull’]. Therefore, there should be system”
a mechanism to compel LDES-supported projects to deliver
power during periods of dunkelflaute. Intuitively market signals
should be enough but may not be sufficient under all circum- support mechanisms to initiate the LDES market are needed.
stances.” In principle, we agree with the proposal for the cap and floor
“However, gaming concerns are not unique to the proposed mechanism. We are keen to ensure that the mechanism is
cap and floor model and will exist in any subsidy regime for applicable for all LDES technologies and at the various scales
storage as revenue is dependent on multiple components needed to support the overall, increasingly distributed, energy
within a volatile market.” system. We will be responding to the consultation in due
course.”
LDES technology firms react positively Scott Bolton, executive VP global policy & regulatory affairs
LDES technology firms have generally reacted positively to the for advanced compressed air energy storage (A-CAES)
government proposal. Stephen Crosher, CEO of proprietary technology firm Hydrostor added: “We’re pleased to see
‘high-density’ pumped hydro energy storage (PHES) technol- this proposal from the UK government, which will go a long
ogy firm RheEnergise, said: way to support the decarbonisation of UK electricity markets
“We welcome the commitment to long-duration energy while also adding flexible firming capacity. We look forward to
storage from the UK government and the recognition that reviewing the proposal in further detail.” 

Turning hills into batteries – RheEnergise’s High-Density Hydro

RheEnergise’s Stephen Crosher outlines how his 21st century innovation to hydropower
can accelerate the deployment of long duration energy storage on a global scale.

What is High Density Hydro®? What’s the technology?

High-Density Hydro® is a long duration energy It’s like traditional pumped hydro, where water
storage solution which matches variable consumer is pumped up a mountain when energy is cheap
demand with intermittent energy supply. It has and released to generate electricity when
the potential to create baseload power from prices rise. Rather than using water we use an
renewables. As energy prices drop towards zero or environmentally benign fluid, 2.5 times the density
below, the energy is stored, just like a battery, until of water. It means projects are smaller or can be
energy demand rises again. It means that the low- on lower elevations and still perform. Projects
price generation from renewables is passed back can be hidden within small hills turning them into Where do you see a concentration of early projects?
to consumers, without the use of fossil fuels like gravity batteries. Our demonstration scheme is in the UK, but we
gas and without polluting the air and the planet. HD The basis of our solution has been around for anticipate that the first larger concentrations
Hydro fills the gap between generation and demand, over 100 years, so the technology is largely de- of commercial-scale projects are likely to be in
it creates value for generators and lower costs to risked, and the supply chain already exists. Australia, Chile and the USA.
consumers.
As the world shifts to more renewable energy, You are fundraising, what sort of investors are you Investing in early stage businesses involves risks,
storage is vital. McKinsey estimates that the storage looking for? including illiquidity, lack of dividends, loss of
market is going to be worth US$4 trillion by 2040, We are fundraising, a pre-series A convertible- investment and dilution and it should be done only as
and RheEnergise® has a solution that can address a loan, with a 30% discount on the series A price. The part of a diversified portfolio. It is targeted exclusively
sizable percentage of this global opportunity. terms have been set by a leading UK investment at investors who are sufficiently sophisticated to
understand these risks and make their own investment
fund and we had a first close in December a second
decisions. You will only be able to invest once you have
Why does it stand-out as the go-to LDES (long is planned in February (where we have two further
confirmed you are sufficiently sophisticated.
duration energy storage) solution? investors are already committed), and a third close
We offer much better value than other storage scheduled for March. This advert was initially printed on 20 February 2024 by
solutions. Compared to a Lithium-Ion battery, for We are seeking investors who like climate Solar Media with an accidental omission: a paragraph
an 8-hour storage solution we are around 50% technologies, who want to get in early to see many about the inherent risk of investing in early stage
of the cost (on a levelised cost of storage basis). multiples of their initial investment on businesses, which had been provided by RheEnergise.
Compared to Compressed Air, we are around 30% exit, and we especially like investors who can offer This edition has been updated (26 February 2024) to
cheaper, and hydrogen is probably three times as us input and expertise in technical and project include that paragraph.
expensive. We are the most cost-effective solution. development.
Advertorial

energy-storage.news | February 2024 | 17

 Policy and Regulation

UK developer Field on grid and

market mechanisms: ‘totally
different picture to a year ago’
Cameron Murray speaks to Chris Wickins, technical director at UK-based battery
storage developer-operator Field, about how the grid interconnection question and
market mechanisms are developing in Europe’s most advanced energy storage market
Credit: National Grid

National Grid’s Lovedean substation

ield was founded in 2020 by CEO Amit Gudka, previ- and how can we maximise their usefulness. Across Europe
F ously head of retail utility Bulb which collapsed and was
acquired by Octopus Energy in 2022 (it was the largest utility
it’s definitely an earlier picture,” Wickins says, with the firm’s
experience in Italy so far providing a useful comparison.
in the UK to tumble in the face of soaring natural gas prices).
Field primarily operates in the UK where it has a 20MWh Grid: backlogs, queue management and smart
battery energy storage system (BESS) project online in planning
Oldham, northern England, and several more under construc- As Energy-Storage.news‘ sister site Current has written exten-
tion across the country. It is also targeting Spain, Germany and sively, one of the big challenges in the UK market is long wait
Italy. times to connect projects to the electricity grid. There are more
In this interview, Wickins discusses two important parts of BESS projects being developed and put into the queue than
how the UK market and the approach of transmission system grid connections, network capacity or engineers to integrate
operator (TSO) National Grid are developing: grid interconnec- them, Wickins says.
tion and market mechanisms for energy storage. “This overflowing queue has been born out of a couple of
“There’s lots of appetite in the UK market and the conver- things. It’s been very cheap to apply to connect to the network,
sation has moved on, rightly so, to how we facilitate getting you’ve really had to do nothing in advance of that – the devel-
to our deployment goals as a country. Particularly questions oper approach has been to secure a grid connection then do
around how can we connect all these new assets to the grid everything else,” he says.

18 | February 2024 | energy-storage.news

 Policy and Regulation

“In Italy, it’s different – you can’t apply for a grid connection Wickins says, adding there is good work being done in some
until you have some land secured for your project. That’s more areas and work still to do in others.
onerous and might take you three to six months to secure that One area where Wickins says National Grid is leading the
so it turns the development process the other way around, but world on with BESS is inertia, through its Stability Pathfind-
it slows down the connections being applied for as you won’t ers tender.
get people applying without adequate land.” Other areas need more work. After complaints earlier in
“National Grid is now changing the rules and you’ll need a 2023 about BESS’ treatment in the Balancing Mechanism,
short letter from a landowner saying they are in discussions a revenue stream many hoped would make up for falls in
with you about a project on their land, though we at Field think frequency service prices, Wickins says there is “good visibility
it should go further. Something like a legally binding option of progress” there as well as the introduction of the Open
agreement for the land or at least exclusivity terms having Balancing Platform.
been agreed, for example.” One current problem is that National Grid doesn’t have a
The other aspect of getting projects into the ground more signal telling it the state-of-charge (SOC) of a BESS or how
quickly is around queue management; ensuring projects within long it can be used for, and if this was rectified the TSO
the interconnection queue are assessed based on how likely would be using BESS with a lot more confidence.
they are to be built and not just who joined the queue first.
“There’s been positive movement recently in the direction
of queue management too, in terms of telling projects that “Generally speaking, we’re in a very
aren’t moving forward to get out of the queue and to let those
behind them that are moving forward to come forward. Queue
good position when it comes to
management is really important and we at Field are very providing frequency services. There’s
supportive of what’s been done in the last few years.”
A final aspect of the solution is called ‘construction planning been a big overhaul of that market and
assumptions’, which is about not treating energy storage like it it seems to be working well”
is always exporting when modelling its effect on the grid.
“National Grid is changing these assumptions to treat
batteries in their analysis more in line with how they will Reactive power, which means providing power to help
operate, and that should free up the potential to connect manage voltage, is a market which exists at the transmis-
batteries earlier,” Wickins adds. “These things mean it’s now sion level but not at the distribution level, something Wickins
a totally different picture to if we had had this conversation calls a “missed opportunity” as there are BESS which could
around grid a year ago. Lots of good work has been done provide that service.
over 2023 on this.” A 100MW, transmission-connected project from developer-
National Grid recently appointed global assurance and operator Zenobe Energy claimed to be the first to do this.
risk management provider DNV to assess the potential of A market mechanism for large-scale BESS seen elsewhere
taking out energy projects in the interconnection queue it has that has caught Wickins’ eye is so-called Grid Boosters in
deemed “high-risk”, totalling 29GW. DNV will assess projects Germany, Lithuania and elsewhere. The basic principle of this
and how likely they are to get built, which will involve asking idea is setting up large BESS either side of a high-voltage
developers if they have achieved certain milestones. transmission line to mimic the power flow of the line if it
Wickins says: “It will be interesting to see how that works ever goes down, reducing the need for a second, expensive
in practice. You can imagine National Grid liking the idea that backup line.
someone independent will make the judgement. And if you are “It’s an exciting idea that is not really being talked about in
a developer trying to cling on to your project you’ll argue tooth Great Britain (GB). It’s complicated and there’s some really
and nail that you are nearly there on X, Y and Z. It’s going to detailed power system engineering that’s gone behind it
be a hard job, but DNV is used to doing this sort of thing.” because things happen on a very short timeframe, and what
they are doing in Germany is quite impressive,” Wickins says.
Market mechanisms: frequency, reactive power, BM, “It may be possible that if we had 2.6GW of batteries
inertia and Grid Boosters in Scotland and 2.6GW in England maybe National Grid
The discussion moves on to how market mechanisms need to wouldn’t be turning off 2.6GW of wind today, which is
be further developed in the UK to facilitate the deployment of happening as we speak.
the energy storage the country needs. “These wouldn’t even need to be dedicated BESS but they
“Generally speaking, we’re in a very good position when would need to be the right type of very fast-acting batteries.”
it comes to providing frequency services. There’s been a Wickins adds that he wouldn’t see a contract for difference
big overhaul of that market and it seems to be working well, (CfD), or other cap-and-floor, or feed-in tariff as appropriate
National Grid has driven down prices quite successfully,” market mechanisms for energy storage. „

energy-storage.news | February 2024 | 19

 Policy and Regulation

Germany’s Electricity Storage

Strategy ‘puts storage on political
agenda for the first time’
The world’s first significant solar market, Germany, has been slower to embrace
storage. But a strategy published in late 2023 shows encouraging signs that storage is
firmly on the political map, writes Andy Colthorpe

ermany’s Federal Ministry for Economic Affairs and Climate

G Action (BMWK) published a strategy for electricity storage in
at the end of 2023, aimed at supporting the ramp-up of electricity
storage and achieving “optimal integration” of storage into the
electricity system.
BMWK said higher shares of electricity storage will be needed
to integrate the German renewable energy targets compris-

Credit: Fluence.
ing 215GW of solar PV and 145GW of combined offshore and
onshore wind by 2030. The ministry identified 18 separate areas
it considered appropriate for promoting storage deployment.
Those include electricity storage’s role in the context of the
national Renewable Energy Sources Act (EEG), acceleration Rendering of a 250MW transmission-connected BESS
of network connections, promoting the production of battery supporting the German transmission network, currently
under construction.
cells and system components, identifying obstacles to the
development of pumped hydro energy storage (PHES) and
network charging schemes. trajectory, but not at anything like the levels believed needed.
While the strategy doesn’t yet spell out specific actions, its According to recent analysis from the Fraunhofer Institute
release puts electricity storage on the German political agenda for Solar Energy (Fraunhofer ISE), the installed base of battery
for the first time, said Lars Stephan, senior manager of policy storage close to doubled last year, going from 4.4GW/6.5GWh
and market development for Fluence on LinkedIn. of cumulative installs by the end of 2022 to 7.6GW/11.2GWh
Fluence and four other energy storage-related compa- by the end of 2023. Pumped hydro connected to the grid,
nies active in the German market recently commissioned totalling 6GW, remained unchanged.
a report analysing the projected need for energy storage Frontier Economics said it expects the growth of energy
on the country’s grid. Authored by consultancy Frontier storage in Germany to mirror the success of solar, and it and
Economics, it found that with a supportive policy framework BMWK both pointed out that, unlike the early days of the solar
in place, Germany’s capacity of deployed storage will rise to boom, storage systems are being deployed on an unsubsi-
15GW/57GWh by 2030 and to 60GW/271GW by 2050. dised basis. The market could go much further, the consul-
Frontier Economics also found that those levels of storage tancy said, but with measures including the storage strategy,
deployment could provide around €12 billion (US$13.04 billion) in Germany needs the right framework in place.
economic benefit by the mid-century and lower wholesale electric- Fluence’s general counsel EMEA and managing director
ity prices by, on average, €1/MWh between 2030 and 2050. Markus Mayer said far fewer large-scale storage systems are
“Without the flexibility provided by storage, the country will being built than in other markets such as the UK, US or Australia.
face higher economic costs caused by increasing gas imports There is a “great potential” for increasing the uptake of utility-
and expensive curtailment of renewable generation” Frontier scale storage, but uncertainties in the regulatory and political
Economics director Dr Christopher Gatzen said. space “cause unnecessary delays for our customers and their
Frontier Economics and the companies which funded the projects, for example, during the approval processes or obtain-
study (Fluence, developers Baywa r.e., Kyon Energy, ECO STOR ing network access”, Mayer said.
and optimiser/trader enspired, recommended two main actions “The flexibility provided by storage is fundamental to the
to be taken including a national deployment target for storage success of the energy transition and must become an urgent
and setting aside “corridors” for energy storage facilities. point on the political agenda... The energy storage strategy ...
The German battery storage market is already on an upward gives us hope for positive regulatory changes.” „

20 | February 2024 | energy-storage.news

 Policy and Regulation

‘Let batteries help’ says Arenko

CTO after frequency event
threatens Britain’s grid stability
Credit: National Grid. id

One of National Grid’s IFA Interconnectors

with France tripped to cause the incident

Roger Hollies, CTO of UK-based Arenko, tells Andy Colthorpe why a frequency event
on Britain’s power network highlights the need for batteries to play a bigger role in
helping stabilise the grid

frequency event that nearly caused major disruption of the 30GW to 35GW of total generation on Great Britain’s grid
A of the electricity grid in Britain could have been more
effectively dealt with had network dispatchers called on more
(GB – the UK would include Northern Ireland, which shares its
grid with the Republic of Ireland).
of the country’s battery storage. The interconnector trip therefore took about 3% of total
That’s the view of Roger Hollies, CTO at UK-based energy power off the network in one go.
storage optimiser and trader Arenko, who spoke to Energy- “This is a reality of the new interconnected grid that we’re
Storage.news about the event in late December 2023 in which operating. With traditional power stations, big loads do not
the operating frequency of the Great Britain (GB) grid dropped tend to drop off instantaneously, whereas interconnectors do.
to 49.2Hz. A big generator will wind down very slowly unless there’s a
Had it dropped any further, the results could have been catastrophic event, but the interconnectors quite often seem
serious, with blackouts and other disruptions to supply as well to trip very large loads off of the system,” Hollies told Energy-
as potential damage to infrastructure. While it isn’t yet clear Storage.news.
exactly what happened in the chain of events, it was precipi- “So, you’ve got this situation where you’ve got high renewa-
tated by a loss of 1GW of load from the IFA Interconnector bles and then a good really big chunk of the system got lost
between the UK and France. instantaneously.”
It came during a couple of days of high renewable genera- The UK has two arms to its electricity network operation.
tion, with a record-breaking 21GW of wind on the system; the One is National Grid, which is the transmission system operator
previous day, there was around 19GW of wind – well over 50% (TSO), physically operating and managing the grid infrastruc-

energy-storage.news | February 2024 | 21

 Policy and Regulation

ture, while the other is National Grid Electricity System Opera-

“What we have to do as an alternative
tor (National Grid ESO), managing and coordinating supply of
electricity in real-time. industry is to replace and provide the
In that context, it’s the ESO that offers markets for grid-
services that fossil fuel companies
balancing services such as frequency response and it is currently
reforming the balancing reserve products available. The rollout of provide, better and cheaper. We’re
its dynamic frequency services as part of this, includes Dynamic
Containment, the ancillary service which Hollies said is the post-
seeing that with frequency response,
fault service, and “the thing that’s supposed to really catch these that’s been done, batteries now
big incidents, when there’s a huge, quick frequency deviation”.
“And it looked like it worked. In the first instance, the 1GW
dominate the market”
dropped off, you saw the initial frequency response dropped to
about 49.5Hz. But then something else happened – we had this
really deep, deep dip to 49.2Hz.” Roger Hollies said the UK is leading on a lot of energy transi-
The fact that disaster was averted and the frequency was kept tion issues, and he acknowledged that the ESO has a difficult
within the boundary of 49.2Hz means that the safeguards in job to do and is taking steps in the right direction, such as the
place ultimately worked. A serious blackout event did happen in recent launch of the Open Balancing Platform for dispatching
2019 after a frequency drop to 49.55Hz that happened in fewer the Balancing Mechanism and other services.
seconds than was the case this time. It’s a good news story in Indeed, National Grid ESO is doing “really good work”,
that respect but Roger Hollies said it was, “really, really close, according to the Arenko CTO, faced with the intertwined duties
probably a lot closer than they were expecting”, in the ESO of keeping the electricity grid online and reforming the grid’s
control room. balancing services simultaneously.
However, the ESO needs to communicate their problems
‘Batteries do it cheaper, and better’ to the industry and the industry to apply its “incredible minds,
The GB grid experiences high levels of volatility in its frequency, incredible resources” to figuring out the wider role or roles that
due to the high penetration of renewables and its islanded situa- BESS can play in keeping the lights on.
tion.
Battery storage has been able to compete widely in its ancil- ‘Gas’ contribution to reserve will erode this year’
lary services markets since 2016, when National Grid (prior to a Batteries are gradually coming in and replacing the grid’s
split into two separate entities) launched a world-first competitive traditional support systems, and Hollies points to various
tender for 200MW of enhanced frequency response (EFR). studies that show they can do so considerably more cheaply
Since then, the UK has raced into a leading position for than those legacy technologies. That’s already been seen
battery storage deployment ahead of its continental European with frequency response: eight years ago, there were no
neighbours and an installed base of more than 4GW of large- batteries providing frequency services to the GB grid, now
scale battery energy storage system (BESS) assets. they dominate. The groundwork now needs to be done
Hollies said in a post to LinkedIn prior to our conversation that for that to extend into reserve and other services, Hollies
due to the reduced value of frequency response markets, only argued.
about 80MW, or a third, of a portfolio of assets the company “There’s a really positive message of batteries coming in
manages on its Nimbus software platform was contracted to replacing traditional fossil fuel generation,” he said, noting
deliver the grid services needed. that he and Arenko recently attended COP28, where his main
More importantly perhaps, Hollies noted that the post-fault conclusion was that “fossil fuel companies are not going to
correction which was dispatched through the Balancing move quickly enough [on climate], because they just won’t”.
Mechanism – through which the ESO matches supply and “It’s their business. So, what we have to do as an alternative
demand in real-time – featured little to no instructions for industry is to replace and provide the services that they provide,
batteries to step in. better and cheaper. We’re seeing that with frequency response,
In other words, there has been enormous investment into that’s been done, batteries now dominate the market.
BESS in the UK (including Northern Ireland) since 2016 and “Reserve is a huge volume of market and I think we’re going
much of that has directed resources into providing frequency to slowly see this year particularly, batteries are just going to
regulation. erode gas’ contribution to reserve massively and that’ll hopefully
While that investment enables batteries to participate in trigger another investment push into batteries in the UK.”
maintaining the frequency day-to-day, much less regard has An open transparency forum was due to be held after the
been paid to what batteries can do during more critical events time of writing, which Hollies said would hopefully shed some
and in post-fault correction such as following what happened at light and give the industry food for thought in how it could put
lunchtime on 22 December. its ideas forward. „

22 | February 2024 | energy-storage.news

 Financial and Legal

What you need to know about the

IRA and tax equity
The Inflation Reduction Act brought a sense of confidence and certainty to the
business of clean energy. Lawyers Adam Schurle and Morten Lund at Foley Lardner
take a closer look at what that means for tax equity financing of energy storage, while
exploring some of the questions still to be answered

he Inflation Reduction Act of 2022 (IRA), enacted in basis to 10% over the course of several years, and standalone
T August 2022, had the potential to flip on its head the
manner in which solar and battery energy storage system
BESS was not eligible for the ITC.
Solar projects and BESS also benefit from bonus depre-
(BESS) projects were developed and financed, in particular ciation. The owner of a project placed in service in 2023
how tax equity financing is utilised in the industry. is permitted to deduct 80% of the cost (after reduction for
Now that we’re over a year removed from the passage of one-half of the ITC) currently, rather than over five to 12 years.
the IRA, it’s a good time to revisit whether some of the predic- Bonus depreciation is set to phase down over the next few
tions, hopes and fears attendant to tax equity financing and years, but it still offers a significant financing enticement.
the IRA have been realised. The ITC has always been something of a double-edged
sword. On the one hand, the ITC has without a doubt been
Double-edged sword the most significant financial incentive for solar energy in the
The investment tax credit (ITC) is a one-time US federal US and has attracted immense amounts of capital investment.
income tax credit based on the cost basis of certain eligible On the other hand, the nature of the ITC as a tax credit has
property, including solar energy systems and BESS. As a excluded many funding sources and introduced potentially
general rule, the ITC is claimed by the owner of the property detrimental artificial incentives to the industry.
for the taxable year in which the property is placed in service. Between the ITC and depreciation, the tax incentives have
Prior to enactment of the IRA, the ITC for solar energy always been too big to ignore. The basic 30% ITC, plus bonus
systems was subject to a phase-down from 30% of eligible depreciation returning almost 20% of project costs as immedi-

Credit: The White House

President Biden signed the Inflation Reduction Act on 16 August 2022

energy-storage.news | February 2024 | 23

 Financial and Legal

ate deductions, means that roughly half of the project value For energy storage, the impacts have been more severe.
lies in tax benefits. Building a project without considering the Pre-IRA, BESS were not eligible for the ITC on a standalone
ITC is not a viable strategy. At the same time, the ITC and the basis. Instead, BESS were eligible for the ITC only if paired
depreciation together create a tax benefit so large that it is with other ITC-eligible electricity-producing property, such as a
essentially impossible for a project to generate enough taxable solar energy system. There were also significant limitations on
income to fully utilise its own tax benefits. how the BESS could be used. To qualify for the full ITC, under
what are known as the dual-use equipment rules, BESS had
Nothing is certain, except taxes to be charged only by the associated solar energy system or
To utilise the ITC, a significant amount of income subject to other ITC eligible property through at least the first five years
US Federal income tax is required, and the claimant gener- after the BESS was placed in service.
ally must be a US taxpayer. Except under unique circum- Any charging from the grid or other ineligible property, and
stances, the ‘US taxpayer’ requirement excludes many the ITC was subject to reduction; and if the total energy input
potential investors and customers: foreign companies, for the BESS from non-ITC eligible property was greater than
government entities, and tax-exempt entities – including 25% then no ITC was permitted with respect to the BESS.
most universities, schools and hospitals. Due to other (more These restrictions made standalone BESS much less attrac-
complex) requirements, individuals are in most cases also tive, and most storage systems installed pre-IRA were part of
excluded from claiming the ITC. hybrid systems – i.e., combined solar and storage projects,
Prior to the IRA, the ITC was not transferable. Depreciation or wind and storage projects. BESS within hybrid systems
is not transferable. As a result, and because project devel- are inherently limited in functionality, and do not utilise the full
opers typically can’t absorb all the tax benefits themselves, potential of the storage technology.
outside financing is generally required to realise the value of The IRA significantly changed this landscape, for both solar
the ITC and depreciation. and storage. The full ITC rate was reinstated to 30%, and
The structures used to monetise the ITC are complex. standalone BESS were added to the list of facilities that are
The most common are partnership flip and sale-leaseback eligible for the ITC, meaning that BESS now no longer need to
structures; some tax equity participants use inverted lease be paired with other ITC-eligible generating property. The IRA
structures, but those are less common. These complex struc- extended the window for ITC eligibility for projects that begin
tures come with high transaction costs. Transaction costs for construction no later than 2033, and possibly longer.
a single tax equity financing frequently exceed a million dollars. The IRA also introduced several ITC adders, such as a 10%
Even for a simplified and streamlined transaction, the total adder for facilities located in certain ‘energy communities’, a
transaction cost will almost certainly exceed US$250,000. 10% adder for facilities that satisfy certain ‘domestic content’
requirements, and a 10-20% adder for wind and solar (and
Solar and storage markets shaped by tax credits associated BESS) facilities located in certain low-income
These requirements combine to create a set of circumstanc- communities, that collectively have the potential to increase
es where there is a fairly small pool of possible ITC investors. the ITC to 70% of the eligible basis of a facility.
In practice, most tax equity investors are banks and insur- In addition to the extension, the IRA added new eligibil-
ance companies. ity requirements. On a going-forward basis, any facility that
This has impacted the shape of the solar energy industry in is over 1MWac must satisfy certain prevailing wage and
the US. Third-party ownership structures are common. Small apprenticeship requirements (although projects on which
commercial projects (less than ~300kW) are very difficult construction began before January 29, 2023, will be exempt
to finance, and therefore are quite rare. Generally speak- from these requirements). These prevailing wage and appren-
ing, larger projects are favoured. Bundled financings are ticeship requirements generally require that in the construc-
favoured – combining multiple projects into single financings. tion, repair or alteration of a facility the taxpayer, contractors,
This effectively requires a developer to have multiple projects and subcontractors must pay wages at local prevailing wage
ready for financing in the same year, which can be difficult for rates published by the US Department of Labor and a certain
smaller developers. percentage threshold of such work must be performed by
Solar has to be structured and financed separately from qualified apprentices.
other assets, even if part of a larger project. This complicates If an otherwise eligible facility is subject to but does not
and discourages including solar as part of general develop- satisfy these prevailing wage and apprenticeship requirements,
ments. Most large solar manufacturers are generally unable the credit rate for the facility drops to 6%, rather than 30%.
to own projects, as most are not US companies and do not Further, for projects placed in service beginning in 2025 that
have significant US taxable income. This removes vendor didn’t begin construction before then, a new rule will require
finance as an option for manufacturers to encourage adoption that those projects have an anticipated greenhouse gas
of their products, which in turn makes it more difficult for new emissions rate of not greater than zero.
competitors to enter the US market. The IRA also made solar facilities eligible for the production

24 | February 2024 | energy-storage.news

 Financial and Legal

Prior to the act, energy storage would only be eligible

for the ITC if sited with, and charged from, solar.

Credit: IHI Terrasun.

tax credit (PTC), which is a tax credit available to the owner of a There have been some changes. We have seen interest in
facility based on electricity produced by the facility for a 10-year tax credit transfers, and some transactions have already been
period beginning when the facility is placed in service. The signed up. Many direct pay transactions involving tax-exempt
statutory rate for the PTC for new facilities in 2023 is 2.75 cents entities building solar and BESS projects that they will own
per kWh and is subject to inflationary adjustments. As with the are in the works, and more are expected as more such
ITC, a taxpayer generally must satisfy the prevailing wage and entities dip their toes into renewable energy investing.
apprenticeship requirements to claim the full PTC, and similar
rules apply to greenhouse gas emissions rates beginning in Third-party tax equity financing here to stay
2025. The PTC was likewise extended through at least 2033. What we have not seen is any movement toward abandon-
ing third-party tax equity financing. There are two principal
Transferability, direct pay options reasons for this. First, a tax credit transfer is itself a form
Aside from the extensions to the ITC and PTC, new eligibility of tax equity financing. While these transactions have the
requirements, and adders described above, the more signifi- potential to be less complex and costly than other tax equity
cant two other changes had the potential to reshape how solar financings, they still add significant complexity and cost to
facilities and BESS were financed. the project.
For the first time ITCs, PTCs, and other renewable energy Moreover, the tax credit purchaser is subject to the same
credits can now be sold to taxpayers on the open market. qualification requirements and general limitations as any
Second, tax-exempt entities, including many universities tax equity investor, so the pool of eligible investors has
and hospitals, state and local governments, and tax-exempt not grown, although there will certainly be some tax credit
organisations, are now entitled to claim direct cash payments buyers that would not be willing to participate in traditional
from the US government for the tax credits they otherwise tax equity. Taxpayers without experience in traditional tax
would have been eligible to claim (but could not use due to equity might be hesitant to make the leap to buying credits.
their tax-exempt status). This reluctance could be eased by third-party brokers of tax
These changes – transferability and direct cash payment, credit purchases, which the transferability guidance expressly
respectively – left some within the renewable energy industry permits, but that is a nascent marketplace at this time.
hoping (and others concerned) that we would soon see a day Second, and more significantly, only the tax credits
when the complexity of tax equity financing would be no more. themselves – the ITC and the PTC –are transferable. The
One year on, it is clear that neither those hopes (nor the fears) depreciation benefits cannot be sold. With a potential value
have been fully realised. of roughly 20% of project cost, this by itself is often enough

energy-storage.news | February 2024 | 25

 Financial and Legal

to justify a full-on tax equity financing. While smaller projects fore no surprise that we have seen a substantial increase in
may elect to forgo the depreciation benefits (because owners standalone projects in states where standalone storage was
don’t have taxable income to utilise depreciation), this is not already growing (principally California and Texas), but no
a realistic option for larger projects. A similar effect is in place apparent impact in jurisdictions where other obstacles remain.
for tax-exempt entities: the direct pay option only applies to This is where we are, and where we expect we will remain.
the ITC. Depreciation benefits are forever lost if a tax-exempt Some projects are now financeable that were not before the
entity is the tax owner of the project. IRA. Other projects can now choose to forgo outside tax
It is perhaps not surprising that what we are seeing so far equity financing. But the era of complex tax equity financings
is analogous to what happened during the Section 1603 cash is not over. To the contrary, the IRA all but guarantees that tax
grant programme in the wake of the 2008-2009 economic equity financings will continue for at least another decade. „
crisis. Then, as now, some small projects took the cash
grant and used what they could of the depreciation without Authors
outside financing. But for larger projects (and larger bundles),
Morten Lund is Of Counsel at Foley & Lardner LLP’s
tax equity financing was still an easy choice. This effect may San Diego office, and a member of the firm’s Energy
become more pronounced as bonus depreciation phases Sector. For more than 25 years, has advised develop-
ers, lenders, investors, and other project participants,
down, but tax equity financing will continue so long as there is
with a particular focus on solar energy and energy
any additional value to be extracted. storage projects.
On the storage side, the story is similar, but for different
Adam Schurle is a Milwaukee-based partner in
reasons. An ITC for energy storage (without solar) removed a Foley’s Tax Practice Group. A significant portion of
major hurdle to widespread adoption of standalone storage his practice is focused on tax advice for developers
and financial institutions in wind, solar, hydroelectric,
projects. Other hurdles remain, however. biomass and other renewable energy finance transac-
There are significant regulatory hurdles to standalone tions. He helps these clients qualify for federal, state,
and local tax incentives and implement transaction
storage in many states, and there are only a few states structures that maximise the value of those incen-
with active markets for energy storage services. It is there- tives.

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26 | February 2024 | energy-storage.news

 Financial and Legal

US: Interest rate rises and longer

development timelines causing
project ‘M&A mania’
Agilitas Energy CEO Barrett Bilotta tells Cameron Murray about the impact of higher
interest rates on the economic case for renewable energy projects

nterest rate rises and longer development timelines have

Idriven a fall in the value of early-stage projects in the US clean
energy and energy storage market and a flurry of sell-offs,
developer-operator Agilitas Energy has told Energy-Storage.

Credit: Business Wire.

news.
“Renewables as an asset class is definitely going through a
rejig as interest rates increase the need for projects to have a
really strong economic case,” Agilitas CEO Barrett Bilotta said.
“Renewables at scale has only ever lived with near-zero interest
rates and a lot of what’s been developed in the industry were An Agilitas Energy BESS project in Rhode Island being
inaugurated in April 2022.
marginal projects.”
Agilitas Energy is a solar and storage developer and operator credit incentives for clean energy deployments “turbo-charged”
based mainly in the New England market, where the grid operator it further.
is ISO-NE, but has recently expanded into ERCOT. The trend Developers that have recently been very publicly marketing
Billotta discussed mirrors what is happening in the UK according project pipelines include Solvent Energy and Granite Source
to sources interviewed by Energy-Storage.news. Power, mainly in ERCOT, Texas.
Higher financing costs increase the value dilution that happens The trend has been noted by renewable energy asset buying
between greenfield origination and commercial operation, like the and selling platform LevelTen Energy. In its H1 2023 M&A outlook
interest payments on the financial assurances you need to post to report it said that buyers are now exhibiting a more balanced and
keep your place in an interconnection queue, Bilotta explained. disciplined approach as opposed to the “land grab” seen in the
Along with interest rates, US project development timelines last few years and that the “sellers market” has abated. Projects
have also gone up due to longer grid connection queues as grid with a firm and near-term timeline for interconnection are better
operators’ books have become flooded with interconnection placed, its report said.
requests, increasing that dilution. Agilitas recently brought a 4.8MW/23.7MWh battery energy
“What’s happened is the market as a whole has realised that storage system (BESS) online in New York, a project for which it
development assets that were on a spreadsheet saying that it won a 10-year contract with local utility Con Edison to discharge
would get built in Texas in 2026 or California in 2028, a lot of the during peak demand periods.
time there is no real value anymore. Or the value is diminished Bilotta added that the pricing for lithium-ion BESS project
because the cost to get that project to NTP is so dilutive because equipment is down 30% per kWh – across batteries, transform-
of interest rates,” Bilotta said. ers and inverters – versus last year which he attributed to lower
“That is where we are seeing the most opportunity, where demand because fewer of those ‘marginal’ projects are going
developers are looking to sell off development assets at their ahead, and that this offsets some of the increased costs from
current condition to get capital to potentially salvage their financing and long development timelines.
others, and clear down their books as they can’t fund all of But more primarily the interest rate environment has switched
them. That’s what’s leading to a lot of the M&A mania right now the focus in the market from development shops to being a fully
from a project standpoint.” integrated developer and independent power producer (IPP), he
“In our realm of distributed generation of 5-20MW project sizes, claimed. Developer-IPPs in Europe have said the same thing to
we’re seeing values for those early-stage projects come down Energy-Storage.news, expressing scepticism about early-stage
about 70% from their peak in mid-late 2022. It’s a big move.” pipelines and the ‘develop-and-flip’ model.
The peak in project valuations in mid-late 2022 came when Bilotta estimated that the current dip in valuations for projects
the market was peaking anyway in the middle of the year and and companies in the space is “bottoming out” and will reach a
the passing of the Inflation Reduction Act and its increased tax trough in Q1 2024. „

energy-storage.news | February 2024 | 27

 Materials and Production

European developer/IPPs: Sodium

batteries gaining ground but big
LFP upgrades expected
Cameron Murray speaks to Aquila Clean Energy EMEA, Kyon Energy and BayWa r.e,
three major Europe-based developers and operators, for their 2024 energy storage
technology predictions

his article follows a broader Year in Review piece at

T the start of January in which energy storage executives
from Aquila Clean Energy EMEA, Kyon Energy and BayWa
r.e looked back on the year just gone and ahead to 2024. In
their responses to a question about technology, published
separately here, all three highlighted sodium-ion as one to
watch out for.
Kyon is primarily active in Germany where it has brought
nearly 700MW of battery energy storage system (BESS)

Credit: Altris AB.

projects to the ready-to-build stage, including 195MW sold
to investor Obton last year. Kyon’s managing director Florian
Antwerpen shares his views for this article.
Aquila was one of the first movers in the Belgian BESS
Altris is based in Sweden and has developed a proprietary
market and launched its first operational project in Germany in sodium-ion battery technology.
December, a solar-plus-storage system in Lower Saxony with
a 6.9MWh BESS, while actively targeting Italy and Poland and See the technology predictions from the developers in
Australia. We hear from its director for energy storage Kilian response to Energy-Storage.news’ question below.
Leykam.
For BayWa r.e., recent projects it has progressed include a Energy-Storage.news: What are some major trends in
three-hour 171MWh BESS project in the UK and a solar-plus- energy storage technologies that readers should keep
storage-plus-hydrogen project in France. Head of storage an eye out for?
Julian Gerstner rounds off the trio of contributors. Kilian Leykam, director, energy storage, Aquila Clean
Although the three companies agreed on the growing impor- Energy EMEA
tance of sodium-ion technology, Aquila and Kyon Energy both We are expectant about the upcoming technological enhance-
said that upgrades to lithium iron phosphate (LFP) lithium-ion ments for lithium-ion when it comes to degradation, efficiency,
battery (LIB) cells are expected too, while BayWa said sodium- cost and longer-duration systems. We are also seeing new
sulphur‘s share in the market could increase, while not getting players entering the utility-scale market with a different techno-
to the scale of lithium-ion or sodium-ion. logical perspective. So, there is more to come with regard to
Their answers coincide with a press release from Dongguk lithium-ion, and particularly LFP. In terms of other technolo-
University in South Korea following research from a group of gies, we expect that sodium-ion will continue to be rolled out
scientists into the recent advances in sodium-ion battery (SIB) by major market players, but the technology still needs to be
technology. proven in the field.
Research leader Professor Kyung-Wan Nam said: “While the
cost of SIBs might be (only) slightly lower and comparable to Julian Gerstner, head of storage, BayWa r.e.
LIBs, the availability of sodium and the use of less toxic materi- Storage technologies are always evolving, so you should keep
als makes them a great alternative. In the long term, SIB can an eye out for the development of sodium-ion batteries, which
complement LIB technology, rather than being a competitor.” can be one of the few technologies able to achieve a market
It also comes after European lithium-ion gigafactory firm share comparable to lithium batteries, in the short term.
Northvolt claimed a “breakthrough” in the sodium-ion battery They’re still largely in the research and development stage,
technology development it is doing with Altris in November but I expect to see them become a popular choice for battery
2023. storage systems in the near future.

28 | February 2024 | energy-storage.news

 Materials and Production

There is an additional technology with sodium-sulphur progress will lead to increased performance and capacity of
batteries available. A high-temperature battery, which has the storage systems, all achieved within the confines of the
been commercially available for over ten years and with a same footprint. The potential for improved efficiency and
proven operational track record. I believe this technology performance makes LFP a focal point for innovation and
could be a hidden champion. Not reaching the volume of progress in energy storage.
Li-ion or sodium-ion (Na-ion), but I believe market share will • Sodium-ion batteries as complementary technology:
increase. The spotlight is also shifting toward sodium-ion batteries, as
Recycling will also be a big trend, especially in Europe they are slowly becoming more marketable. As the technol-
where regulations require the circulator of the battery, or the ogy of sodium-ion batteries matures, their integration into
OEM, to take back batteries and recycle them accordingly. the energy storage landscape could offer a compelling
Further, nearly all major battery cell manufacturers are working supplement to existing technologies such as LFP.
on recycling factories, or are partnering with the recycling • Rise of multi-hour storage: The relevance and viabil-
industry, because everyone wants to have their raw materi- ity of multi-hour storage (3, 4, 5 hours) may witness a
als back. We’ll certainly see a circular economy for storage notable increase with complementary technologies. This
developed in the coming years, eliminating recycling issues for synergy has the potential to enhance the dependability and
batteries in the future. economic feasibility of extended-duration energy storage
solutions.
Florian Antwerpen, managing director, Kyon Energy • Price dynamics of lithium-ion batteries: The trajectory of
In the dynamic landscape of energy storage technologies, lithium-ion battery prices is a crucial factor to monitor. As
several key trends are poised to shape the industry’s future. advancements continue and economies of scale come into
From the Kyon perspective, these are some noteworthy devel- play, there is a compelling question of whether the cost of
opments: lithium-ion batteries will continue to decline. A decreasing
• Higher energy density with new LFP battery cells: It price point could render multi-hour storage with lithium-ion
is expected that the energy density of new lithium iron batteries increasingly attractive, opening new possibilities
phosphate battery cells will increase in the future. This and applications. „

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energy-storage.news | February 2024 | 29

 Materials and Production

BloombergNEF notes uptick in

China-based BESS providers as it
launches Tier 1 list
BloombergNEF (BNEF) has launched its
Energy Storage Tier 1 list of providers,
noting growth in new players from the

Credit: Kehua Digital Energy

China market. Cameron Murray reports on
the latest findings

he Tier 1 ranking of battery energy storage system (BESS)

T providers was released earlier his month. While its names
have not been disclosed publicly, Energy-Storage.news can Projects that Kehua, a Chinese firm which is on the list, has
reveal that Fluence, Tesla, Powin, Wärtsilä and Hithium are worked on in Brazil (top left) and China (other three)
there, while other major players such as Sungrow, Nidec, BYD,
Samsung SDI and LG Energy Solution are likely to be too. cells to Powin, the pair announced this week.
One notable new entrant is China-based Kehua (Xiamen “The advantage of being fully integrated is that there can
Kehua Digital Energy Tech), primarily a power conversion be cost savings with the logistics and product development,”
specialist but increasingly in the BESS market with its most Sekine said. “Being a BESS-only system integrator is an advantage
notable project outside China being one in Brazil, the country’s when there is oversupply in the market, allowing those companies to
largest. It is the only company to officially announce its inclusion. purchase lower-cost cells when they are abundant and likely lower
Its place on the list is emblematic of the trend of China-based than if they were to manufacture it themselves (current situation
companies increasingly gaining global market share in the BESS now). Investing in cell manufacturing is a high-cost and highly skilled
space, which was also recently noted by S&P Global and Wood endeavour, not all companies are willing to go that far upstream.”
Mackenzie, and on which Yayoi Sekine, head of energy storage The current market appears to be in a state of oversupply,
for BNEF, commented to Energy-Storage.news. with the price of both BESS and battery cells coming down
“While there are quite a few notable incumbent suppliers in the substantially after the spikes of 2022. In research notes by
energy storage space (e.g., Fluence, Tesla, Wärtsilä, BYD, Samsung S&P Global and Wood Mackenzie mentioned earlier this was
SDI, LG Energy Solution within others), we’ve seen a significant attributed primarily to growth in BESS manufacturing from
uptick of lesser-known suppliers, especially from China,” Sekine said. China stemming from an increasingly competitive domestic
“The Chinese domestic market has picked up and battery market there.
manufacturing competition is leading a lot of those companies to
integrate systems to provide to downstream customers. Many Methodology
integrators are going upstream and manufacturing their own The analysis is based on BNEF’s 9,000-strong database of
batteries.” projects. While the list is not public, BNEF has released its method-
Another notable inclusion is vanadium redox flow battery ology for drawing up the Tier 1 list. To be included, companies:
(VRFB) provider Invinity Energy Systems, most likely the only • must have supplied, or be firmly contracted to supply,
non-lithium manufacturer on the list. products to six different eligible projects in the last two years
Tier lists for clean energy technology providers exist primarily and those projects:
for purposes of bankability of projects. Benchmark Mineral Intel- o must be larger than 1MW or 1MWh (whichever is higher);
ligence has the most notable tier list (1-3) of lithium-ion battery o must be owned by companies that are not affiliated with
cell manufacturers, while BNEF already has a Tier 1 list for PV the energy storage provider (in other words, the purchaser
suppliers and tier lists also exist for inverter brands. of the energy storage system must be a third party);
Sekine also commented on the benefits of being fully o cannot be built to meet renewable energy project integration
integrated with battery cell production versus being a pure-play mandates (such as those in place in many Chinese provinces);
system integrator, since the list includes both types of compa- • cannot have filed for bankruptcy or insolvency protection or is
nies. Hithium is vertically integrated while Powin is a pure-play in default of major financial obligations;
system integrator, for example, and Hithium is selling battery • must own a manufacturing plant. „

30 | February 2024 | energy-storage.news

 Materials and Production

Freyr CEO on minimising European

gigafactory investment: ‘IRA has
shifted the market’
Freyr has built a lithium-ion gigafactory in Norway,
where it plans to build battery cells using the
SemiSolid battery platform from 24M Technologies.

Credit: Freyr Battery

Cameron Murray speaks to Birger Steen, CEO of lithium-ion gigafactory company
Freyr Battery, about its recent decision to minimise European investments in light of
the Inflation Reduction Act (IRA) and a potential policy response

reyr Battery, a NYSE-listed firm, has taken the drastic “When you have something that costs around US$100
F decision to minimise all further investments in its
flagship Giga Arctic project in Mo I Rana, Norway, as well
per kWh to make (lithium-ion battery cells) and one conti-
nent is giving a US$35 per kWh tax credit to anyone building
as other European projects. Instead, it will only focus on gigafactories, you’ve basically shifted the market. Everyone
scaling in the US for now, where it is developing a gigafac- here has been working to get their head around what it means
tory project in Georgia. Freyr has an ambitious 200GWh but no government in Europe has come up with an adequate
2030 production target across its gigafactory projects in response.”
Europe and the US. “It’s why you are seeing lots of projects migrating to the US
The company’s share price has been falling since July but or Canada; it’s hard to get project-level financing for these in
tumbled some 40% after its Q3 report in which it spelled out Europe. Those pools of capital are global. Why would they do
the decision. It sits at US$1.66 at the time of writing, 90% it in Europe when you can do it in the US for 35% cheaper?
down from a year ago. For now, all our scaling will happen in the US.”
We asked Steen whether, assuming the company went
IRA has “shifted the market” ahead with its European projects as planned, the electric
Put simply, the IRA’s 45x tax credit for battery manufactur- vehicle (EV) and energy storage system (ESS) industry would
ing, which is paid directly, has made it much harder to justify be nonetheless willing to pay a premium for locally made,
investing in Europe’s industry, as Steen explained to Energy- greener battery cells.
Storage.news. He responded, tersely: “If that was the case, why would

energy-storage.news | February 2024 | 31

 Materials and Production

the US do the IRA (and its generous tax credit for battery is feasible and will drive the green transition. The question now
manufacturing)?” is can we kickstart this industry.”
On the ground in Norway, the company is close to complet-
ing the commissioning of its customer qualification plant Freyr still “very focused on ESS market”
(CQP), a smaller-scale production facility for customers to test Freyr has always been notable for targeting the stationary
batteries made using the proprietary semi-solid lithium iron ESS market more than other companies building lithium-ion
phosphate (LFP) technology Freyr has licensed from technol- gigafactories and as such has featured more prominently in
ogy company 24M. Energy-Storage.news’ coverage.
Alongside pausing its European investments, Freyr has Interviewing the then-CEO Tom Jensen in March 2022, he
begun “cost rationalisation initiatives” to halve its use of said the company could sell half of its long-term production
cash compared to 2023, including laying off employees and into the ESS market.
contractors especially relating to the Norwegian gigafactories.
It expects to exit 2023 with US$250 million in cash with a
runway of two-plus years. “The PV market provides all the data
and experience you need to understand
“Mutually attractive policy solution needed”
The Giga Arctic gigafactory building next door will be complet- what will happen to batteries and
ed but will remain a shell, ready for a “hot start” but waiting
other green technologies. Is that kind
for a “mutually attractive policy solution” from Norway and
Europe, the company has said. of dependence and exposure in the
The pause in investment in Giga Arctic will “allow for
current geopolitical realities something
continued technology development at the CQP while FREYR
continues to work with stakeholders in Norway and Europe we want? It is the same plot, the same
to establish competitive regulatory framework conditions for
scaling battery manufacturing”.
movie”
When asked what those competitive conditions and policy
solutions would look like, Steen pointed to the example of Recent events do not change its focus on ESS; Steen said:
the EU’s Temporary Crisis and Transition Framework (TCTF), “We’re very focused on the ESS market and building a system
adopted by the bloc in March this year to foster support integration to build containerised BESS products. Given the
measures for sectors key to the energy transition. Energy- softening EV demand and strong ESS demand, this focus has
Storage.news has reported on substantial grant schemes for been a sensible choice. The specifics of the 24M tech also
ESS deployments using it in Slovenia and Hungary. means a C-rate more amenable for ESS.”
Though note that Norway is not in the EU but is closely The firm’s main route into the ESS market is a joint venture
linked through the European Economic Area (EEA). with system integrator Nidec ASI, finalised in December last
“World trade has been seen as a good thing and trade barri- year, whereby Freyr will build cells and modules based on
ers have been seen as a bad thing, and there is a notion in Nidec’s IP which Nidec will use to build the full containerised
Europe that this still needs to be the basic rule. But, the TCTF battery energy storage system (BESS) solution.
provides a loophole within those world trade rules,” Steen
said. Conventional technology partnership with Sunwoda
The firm has also asked for an “IRA-matching” package Some have questioned Freyr’s big bet on 24M’s technology
from the Norwegian government comprising export guaran- platform which has not yet been industrialised at giga-scale.
tees, loans and buybacks worth a total of NOK9.5 billion In June, the company announced it had entered into a
(US$870 million). heads-of-terms agreement with China-based lithium-ion
Steen added that by not matching the IRA, Europe risks battery cell manufacturer Sunwoda (a Benchmark Miner-
remaining totally dependent on China for batteries and its als Intelligence Tier 1 battery firm) to “expand business in
battery industry going the same way as the PV module the western hemisphere based on Sunwoda’s conventional
manufacturing one did. technology”.
“The PV market provides all the data and experience you Steen wouldn’t discuss this in any detail, but the company
need to understand what will happen to batteries and other has said an option is to include a development track as part
green technologies. Is that kind of dependence and exposure of its Giga America project for conventional production line
in the current geopolitical realities something we want? It is the equipment – i.e. building conventional lithium-ion battery cells.
same plot, the same movie,” Steen said. The advantage of building a plant using conventional
“We have lithium in Finland, graphite in Norway. Developing lithium-ion technology is that there is no need to build a pilot
this industry at giga scale from mining all the way to DC blocks plant or CQP. „

32 | February 2024 | energy-storage.news

 Design and Engineering

Augmentation strategies to manage

long-term battery degradation
Giriraj Rathore of battery storage system integrator Wärtsilä Energy Storage
& Optimisation explores some of the main strategies for successful battery
augmentation, a key means of offsetting the impacts of system degradation

nergy storage is the backbone of the renewable energy

E transition, able to offset periods when the wind isn’t
blowing, and the sun isn’t shining. With broad market
recognition that energy storage is key to catalysing a future
powered by zero-carbon energy sources, the sector is
experiencing robust growth. Energy storage deployments in
2023 are on track to double those of the year prior. By the
end of the decade, total capacity is set to expand tenfold,
surpassing 400GWh.

Credit: Wärtsilä
All battery-based energy storage systems degrade over
time, leading to a loss of capacity. As the energy storage Augmentation will become
increasingly important as battery
industry grows, it’s critical that project developers proactively systems age
plan for this inevitable ‘degradation curve’. Failing to do so will
not only limit potential revenues but could even jeopardise the storage systems lose capacity. This is significant considering
role of energy storage as a key enabler of grid stability and, by nearly 60% of installed energy storage systems were used
extension, the energy transition. for price arbitrage in 2021 — a number that is expected to
As the initial wave of grid-scale energy storage deployments continue to grow.
begins to mature, managing the effects of battery degradation Degradation rates also differ by battery type. There are
will emerge as a key strategy for developers looking to future- several kinds of lithium-ion battery chemistries being used in
proof assets and accelerate renewable energy adoption. Many the energy storage market today, and each comes with its
industry experts suggest that augmentation is poised to be the respective benefits and drawbacks. Nickel manganese cobalt
solution of choice, allowing developers to take advantage of (NMC) had historically been the dominant chemistry for energy
declining battery costs and technological advancements. storage, but this is quickly changing. By 2030, lithium iron
phosphate (LFP) is expected to be the dominant chemistry
Understanding battery degradation — growing from a market share of 10% in 2015 to more than
Battery degradation in energy storage systems is a natural 30% in 2030. The primary benefit of LFP battery technology is
phenomenon. Just like portable electronics wear out to that it enables a longer lifespan compared to other lithium-ion
become less efficient over time — think of how long your old chemistries.
phone can hold a charge — the amount of energy that can be Temperatures, both hot and cold, can have a significant
stored and dispatched from energy storage systems gradu- effect on battery degradation. Higher temperatures may
ally declines. Whereas the average rate of battery degradation increase energy storage system performance in the short
in electronics or electric vehicles is generally predictable, it’s term, but eventually lead to higher degradation rates and a
harder to calculate the decline of energy storage systems with diminished lifespan. Once temperatures surpass 100 degrees
similar accuracy. The rate of degradation and capacity loss is Fahrenheit (approximately 38 degrees C), degradation in
influenced by a variety of factors, including frequency of use, lithium-ion cells quickly accelerates. Prolonged exposure to
operational pattern, battery chemistry, and ambient operating extreme cold can also impact battery performance. When
environments. temperatures drop, internal battery resistance increases,
Energy storage systems that engage in heavy arbitrage are which requires more effort to charge. This, in turn, lowers the
particularly prone to rapid degradation. Arbitrage strategies system’s overall capacity.
involve purchasing and storing energy when prices are low
and selling and discharging it when the demand for energy Managing degradation through oversizing or
increases. Optimal charging and discharging intervals often augmentation
run contrary to preferred arbitrage opportunities, meaning Battery degradation in energy storage systems is
developers have limited visibility into the pace at which energy inevitable. But it can be managed with careful planning and

energy-storage.news | February 2024 | 33

 Design and Engineering

consideration. It can even present opportunities for developers

to improve the profitability and efficiency of energy storage
facilities.
Traditionally, developers have accommodated battery degra-
dation by oversizing their installations at the initial outset of the
project. This approach involves installing more battery capacity
upfront than needed and typically consists of site preparation,
wiring, and system integration. The excess capacity enables
developers to offset the expected degradation losses over the

Credit: Wärtsilä
years, allowing them to maintain the contracted capacity over
the project’s lifetime.
A key advantage of oversizing is that it doesn’t require site
mobilisation, permits, additional labour, or the commission-
The choice of augmentation method depends on the type of
ing of new hardware down the line. By fronting the installation system, its grid connection and the services it provides
process, developers can keep their energy storage systems
operational even as they contend with degradation. There’s no for potential risk and reward. Still, the likelihood of further cost
need for assets to be shut down — either partially or entirely reductions — especially considering the already low price of
— for weeks or longer to perform retrofits. lithium-ion battery technology — makes augmentation particu-
Oversizing also enables developers to lock in capital expen- larly alluring.
ditures at the project outset, mitigating future cost uncertainty
and helping to improve forecasting. As the cost of lithium-ion Choosing between augmentation strategies
batteries continues to fall to new lows, however, developers There are two primary methods of augmentation — alternating
may lose out on significant savings by taking this approach. current augmentation (AC) and direct current (DC) shuffling —
Alternatively, developers may choose to offset degrada- that developers can choose between based on their system
tion by augmenting the capacity periodically throughout the type, grid connection, and needed services.
project’s lifetime. In this case, there must be extra physi- AC augmentation focuses on improving the interplay
cal space with adequate electrical configuration in the initial between the energy storage system and electrical grids,
project layout to add new hardware. Proper planning is critical enhancing system stability, and enabling grid support
to minimise downtime and risks associated with augmenta- functions. With AC augmentation, new physical infrastructure
tion. is added to the project, including inverters and Power Conver-
In 2013, one kilowatt-hour (kWh) of lithium-ion battery sion Systems (PCS), which are responsible for making AC
technology cost more than US$730. Flash forward to 2021 electricity usable in downstream devices like energy storage.
and that price had come down to US$141/kWh — a marked Alongside the PCS, new protective enclosures are installed
reduction of more than 80%. Had a developer opted to to house essential components, including the batteries
oversize their system back in 2013 as opposed to augmenting themselves and associated safety, control, and monitoring
it years later, they would have paid almost twice as much while equipment. The added capacity of AC augmentation can be
missing out on important technological advances that offer installed without requiring significant modifications to exist-
greater efficiency. Of course, battery prices do occasionally ing equipment, minimising disruption. It also offers significant
tick up — like in 2022 as a result of inflationary pressures and system flexibility, allows for incremental sizing, and presents an
supply bottlenecks — but these can be seen as an exception extremely low risk of technical complications.
to a much wider trend. However, there are a few drawbacks associated with AC
Suppliers have since rebounded from 2022’s difficulties augmentation that developers should keep in mind, particularly
and battery prices are once again trending downward. Costs for grid-connected energy storage systems.
are further expected to fall as battery manufacturers ramp Adding new PCS equipment — while relatively straight
up production. By 2030, lithium-ion battery capacity is set to forward from a technical standpoint — requires permitting and
more than double, which will go a long way towards alleviat- regulatory approval when connected to the grid. This process
ing supply shortages. Furthermore, the US National Renew- is cumbersome, time-consuming, and extremely compli-
able Energy Laboratory suggests that the costs of lithium-ion cated, slowing down the ability of developers to augment
energy storage systems could decline by up to 47% by 2030. their systems. These limitations don’t impact energy storage
As prices continue to fall, augmentation is becoming an systems that are independent from the grid, however. Islanded
increasingly attractive way for developers to mitigate battery microgrids can forgo lengthy bureaucratic approvals, making
degradation and capacity loss. It may not be right for every them well-suited for AC augmentation. For grid-connected
situation, though, as each energy storage project is unique energy storage systems, DC shuffling is the more suitable
and different augmentation strategies depend on the appetite augmentation strategy.

34 | February 2024 | energy-storage.news

 Design and Engineering

DC shuffling prioritises the internal distribution of energy compared to NMC batteries. Improperly integrating these
within battery stacks to ensure balanced charging and technologies can lead to potential repercussions, including
discharging of individual cells and modules, which is vital for voltage imbalances that could trigger thermal runaway. Moreo-
prolonging battery lifespan and maximising overall system ver, developers that incorporate battery modules from different
efficiency. manufacturers run the risk of software incompatibilities, which
Whereas AC augmentation primarily focuses on external could impact monitoring and controlling processes and risk
interactions between energy storage systems and the grid, DC overall system performance and safety.
shuffling optimises energy distribution within battery stacks, To mitigate these issues during augmentation — whether
delivering greater internal efficiency and resiliency. AC or DC shuffling — developers should look to leverage
By reconfiguring battery enclosures from one string of complementary technologies wherever possible. The careful
batteries and transferring them equitably throughout the selection of augmentation equipment and the utilisation of
system, DC shuffling leads to a more balanced distribution of advanced software solutions can help ensure the successful
energy across the battery stack. and safe augmentation of energy storage systems.
A new string of enclosures is then introduced behind the
PCS from which the existing batteries were shuffled. This Battery degradation management will remain
addition guarantees that the overall system retains its power important into the future
capacity and that the number of PCS units and the nominal The energy storage landscape may be dominated by lithium-
power of the plant remain unchanged. This allows DC shuffling ion battery technology today, but that could very well change
augmentation to bypass permitting and regulatory approval, in the future. There are a range of emerging technologies
as there are technically no new connections being made to the including sodium-ion (Na-ion), hydrogen, and long-duration
grid. energy storage (LDES) that have significant potential.
DC shuffling also benefits from lower equipment costs Na-ion batteries, for instance, offer a reduced environ-
relative to AC augmentation, as there’s greater repurposing of mental impact and safety benefits relative to lithium. Hydro-
infrastructure. DC shuffling is well suited for grid-connected gen, lauded for its high energy density and versatility, also
ESS, though it may not always be possible due to technical holds great promise as a clean and flexible storage solution.
limitations, from auxiliary load breaker and busbar limita- Meanwhile, LDES technologies offer extended discharge
tions to short circuit ratings. Consequently, developers must periods, addressing the need for sustained power during
diligently evaluate the specific technical and operational prolonged lulls in renewable energy production.
aspects of their systems before deciding whether to invest in These technologies, while promising, have not yet been
AC or DC augmentation. deployed at scale. They will have to prove themselves individu-
ally at the grid level before developers have enough faith
Bringing it all together in being able to use them for augmentation. But as these
There may not be a standardised rate of battery degradation in up-and-coming storage technologies mature, they have the
energy storage systems, but software can provide invaluable potential to reshape the augmentation landscape, provid-
insights, helping inform augmentation decisions. Sophisticated ing developers with an array of options that can enhance the
energy management programs, such as ES&O’s GEMS Digital resiliency, efficiency, and sustainability of their energy storage
Energy Platform, can gather operational data over a period to systems.
inform recommendations on capacity enhancements that can With hundreds of gigawatts worth of battery-based energy
result in significant monetary gains. storage systems operating at a global scale, mitigating capac-
Energy management software is not only useful for making ity losses will become a central part of managing projects
data-driven decisions, but it’s also key to seamlessly and cost- for developers and integrators in the years to come. Careful
effectively implementing augmentation strategies. Software battery degradation management practices including augmen-
optimises the dispatch of augmented energy storage systems tation will enable developers to drive greater performance,
and harmoniously integrates the new and existing equipment. lower lifetime costs, and keep the renewable energy transition
Energy management software must be flexible and power- moving forward. „
ful enough to incorporate disparate battery technologies and
capacity levels. In cases where new equipment differs signifi-
cantly, a software system’s ability to coordinate and control Author
these diverse technologies is indispensable.
Developers must also consider the importance of comple- Giriraj Rathore, in his role as the business strategy
manager at Wärtsilä Energy, harnesses a blend of
mentary augmentation technology. Augmenting with batteries technical expertise and strategic acumen to drive
of different capacities can introduce significant complexities innovation in energy storage solutions. His educa-
tional background includes a bachelor’s degree in
that need to be handled with the utmost care. LFP batteries, mechanical engineering, complemented by an MBA
for instance, require different thermal management strategies specialising in international business.

energy-storage.news | February 2024 | 35

 Design and Engineering

Energy storage and energy density:

an EPC’s view
Energy density is becoming a key tool in optimising the economics of battery energy
storage projects as suitable sites become harder to find. Ben Echeverria and Josh
Tucker from Burns & McDonnell explore some of the considerations of designing
projects on constrained land

hen transmission authorities in the USA first began

W to realise that utility-scale storage facilities would be
necessary to help manage the intermittency of renewables
being connected to the grid, land availability was not a
concern. With Arizona, California and Texas leading the way,
land was readily available for large project footprints.

Credit Burns & McDonnell

Given both space and favourable market conditions,
buildout was not an issue and, as a result, those three states
currently contain more than 75% of today’s battery storage
capacity nationwide.
Those early market conditions are no longer the reality.
Sites with large amounts of available land near transmission
interconnections are becoming increasingly scarce, and that Higher battery racks is one option for increasing energy
can make today’s project sites more challenging, especially density as battery sites become more constrained
as demand for these facilities continues to grow. A range of
federal tax incentives and state mandates is creating more ogy is another common battery chemistry, but it is much less
momentum for decarbonisation efforts than ever, further energy dense. More recently, however, LFP has made gains in
increasing the demand for large-scale battery energy storage this area, with some believing there is significant opportunity
systems (BESS). for this chemistry to attain densities close to NMC and NCA.
Sites may still be available near interconnection locations, These lithium-ion technology advances, including energy
but they typically have much smaller footprints, and as a result density, are largely driven by demands from the electric vehicle
of constrained supply and high demand, land prices in these (EV) industry for improved ranges and performance charac-
situations are increasing. As a consequence, developers are teristics for batteries installed in vehicles. Because the power
seeking to significantly increase the amount of energy storage industry holds such a relatively small share of the lithium-ion
per acre. This drive to optimise project economics is being battery market, the reality is that advances in utility-scale
pursued by seeking more energy-dense batteries while also BESS installations will likely move in lockstep with the auto
optimising the available site footprint. industry. Supply chains, manufacturing advances and general
use cases for battery technology are all heavily weighted
What is energy density? toward meeting auto industry demands.
The volume of energy contained in each battery cell can play On the horizon, it seems that very large, energy-dense
a pivotal role in project economics. The standard definition of battery cells will be developed to produce more energy from
volumetric energy density is the amount of energy a battery increasingly small volumes. With new and improved electro-
can store in proportion to its volume (specific energy density lytes, anode advancements, and cathode evolution, ranges for
is stored energy in proportion to its weight). To be clear, we EVs and output for storage facilities can be greatly improved.
will be referring to energy density in this article as volumetric
energy density. The industry has progressively improved upon Building up, not out
battery energy density, with lithium-ion batteries increasing the In densely populated metropolitan areas like Los Angeles, New
energy available in the same footprint by about 10-12% over York City and Boston, decarbonisation efforts are creating
the last year. unique challenges for battery energy storage projects.
Of the most common lithium-ion battery chemistries used New York is an interesting case example. Though actual
today, nickel manganese cobalt oxide (NMC) and nickel cobalt numbers will vary by the time of season, it is generally
aluminium oxide (NCA) battery technologies are the energy assumed that approximately 70% of the power load within
density leaders. Lithium iron phosphate (LFP) battery technol- the state of New York is centred around demand from New

36 | February 2024 | energy-storage.news

 Design and Engineering

York City. As New York utilities move toward meeting regula- The tonnage that can be feasibly transported to land-
constrained sites is one consideration to make
tory mandates for reduced or zero-carbon emissions, thermal
generation systems are being ramped down or retired. Renew-

Credit: Burns & McDonnell

able energy backed by storage-based power systems will be
needed to fill the gap.
It is logical to locate these renewables and storage
systems within the city. In New York City, smaller facilities in
the 5-20MW range are being planned and developed. As
deadlines for decarbonisation grow closer, it seems likely that
these smaller projects will fall short of demand and larger enclosed and open-air systems go beyond rack storage or
projects will be needed. purpose-built solutions.
However, the reality is that within large, dense urban areas,
only small plots of land are available. The only realistic and Other options for density
economically viable option is to design these projects vertical- Battery suppliers are modifying cell and module designs and
ly, either with batteries installed in enclosed building structures footprints, along with enclosure designs, to maximise battery
or with vertically stacked battery enclosures. If the building is density and decrease spacing between enclosures. Numer-
the preferred solution, this may involve stacking multiple racks ous creative designs are currently in development to make
to increase total rack heights up to 15 feet versus the conven- maximum use of space, thus increasing energy density for the
tional 7-foot racks. This could involve the building having project site.
multiple stories of these taller racks. One realistic constraint is the tonnage that can be feasibly
With this configuration combined with higher energy density transported to the job site and then lifted into place either by
within battery modules themselves, the overall energy capacity crane or forklift. This becomes a logistics challenge that starts
will come close to meeting higher energy demands of these as a total turnkey operation from the original manufacturer
metro areas. (primarily in Asia), transport to a container ship, offloading to a
truck, transporting to the project site and final offloading to be
Going vertical is more complex set in place.
Though numerous projects are now on the drawing board, it Planning for these highly energy-dense facilities must also
must be noted that no high-rise BESS facilities are currently factor in degradation of battery performance over time. The
operational. operations and maintenance strategy should incorporate a
That’s because going vertical requires careful evaluation of workable installation process to augment battery capacity over
operations and maintenance impacts, including installation time as the overall system degrades, and/or to overbuild the
of robust safety systems. These analyses shift the focus from system from the start to extend the time frame when augmen-
performance and design of modules toward a holistic look at tation is to occur and thus reduce the amount of battery
the entire site. Considerations will be given, for example, to the augmentation required.
broad operational effects of utilising heavy mechanical equip-
ment in compact spaces that must operate safely. What about safety?
Operating conditions for vertical BESS projects — as well Thermal runaways start as a short circuit within or external to
as conventional projects — must be evaluated for each site. the battery cell that triggers an exothermic reaction. These
Storm and flood risks, relative humidity, seismic considera- reactions produce enormous heat and explosive gases that
tions and prevalence of salt within coastal air are among the can lead to fires and/or explosions if the event occurs within a
environmental factors that can affect how the site will be contained space that is not ventilated.
designed and operated. The development of an operations The amount of heat and gas emitted during a thermal
and maintenance programme should include evaluating toler- runaway event is dependent on several factors including the
ances of all critical battery chemical processes in parallel with battery’s state of charge. That means that as battery cells are
design, safety and equipment decisions. designed to store more energy, thermal runaways can become
There are a range of battery storage enclosure design more intense. Thermal runaway events within NMC and NCA
options available, but all must account for the challenges batteries generate more heat, which in turn causes a greater
of airflow, thermal management and accessibility for routine chance of propagating to other cells and modules. NMC and
maintenance. NCA battery chemistries also tend to have a flame associated
Enclosing a BESS facility in a multilevel steel structure may with a thermal runaway event that can burn off the explosive
have advantages in accommodating equipment and incorpo- gases that are emitted from the battery.
rating critical safety systems. Alternatively, an open-air design, LFP technology does not emit as much heat during a
similar to a mezzanine, can create an accessible internal layout thermal runaway event due to the chemistry and metals
with systems on different levels. Many innovative variations of utilised, and thermal runaway events for LFP can have a lower

energy-storage.news | February 2024 | 37

 Design and Engineering

risk of thermal runaway propagation. However, this chemistry to provide many gigawatts of round-the-clock baseload power
can pose another set of risks. leave the market, use cases for long-duration storage will
Due to lower heat values lower and lack of flame during increasingly come to the forefront. Though market dynamics
a thermal runaway event, LFP chemistry can create more currently favour lithium-ion BESS facilities, that could change if
explosive gases that can raise the risk of explosions for these these facilities were needed to provide round-the-clock power
batteries located in contained spaces. output.
Fire suppression systems for all lithium-based technologies
currently aim primarily to protect the building and related enclo- No project is identical
sures. There is no silver bullet for stopping thermal runaway Energy density has become a priority for both operational
within the lithium-ion technology group, simply because it is a and financial reasons, but to date, most of the advances have
chemical reaction that is hard to stop once it begins. come primarily from the batteries and secondarily from space
Effective thermal management programmes may utilise optimisation within enclosures, along with creative enclosure
HVAC (Heating, Ventilation, and Air Conditioning) or chiller configurations.
systems that aid in maintaining operational stability while lower- Energy density has become a priority for battery OEMs to
ing the risk profile for batteries to go into thermal runaway due help reduce total project cost and fit more capacity within
to thermal abuse. For example, direct expansion air handling small footprints. However, as the grid continues to change
units using refrigerant liquid are an option. Though these and the market shifts to deeper decarbonisation, it is unclear
are reasonably cost-effective to install, it must be noted that whether energy storage technologies will advance enough to
efficiency decreases over time. Central utility plant designs meet the demand for baseload power. Ultimately, money is the
incorporating large centrifugal chillers are another option that driver within any market, and with the reduction of capital it
can be used to distribute cooled water across large interior may be that planners and policymakers begin to conclude that
spaces. This proven technology offers the potential for redun- it is imperative to adjust policy or regulatory drivers to keep
dancy and greater operational flexibility. Placement of racks pace with continued increases in capital cost or to provide
in vertical configurations can add another element of thermal further incentives to advance the development of lithium-ion
management by creating different heat zones and hot and cool technologies and other technologies.
aisles. One possible sign to indicate the technology advancement
for the energy storage market is shifting is the development
Other battery chemistry options of battery cell types geared specifically to meet the needs
Though there are a number of non-lithium technologies in of the power industry. The energy storage market previously
development, none to date can compare to the energy densi- used battery cells generally designed for the EV market and
ties, better efficiencies and lower capital cost of lithium-ion not necessarily designed with a use case for the storage
batteries. market. By optimising the cell design for storage applications,
Several non-lithium battery technologies are proven but are improvements in degradation and cycle life (i.e., life of the
unlikely to unseat the dominance of lithium-ion anytime soon. battery) can be achieved. Some manufacturers are starting to
Unless a technology emerges with the scale and economic offer a 25-year performance guarantee (one cycle per day) for
viability to support a robust supply chain, we are unlikely to see certain battery types.
another dominant technology emerge in the utility-scale energy As more fossil-based thermal generation exits the market,
storage market in the near term. that capacity must be replaced by other sources along,
If it weren’t for the demand for batteries generated by energy storage playing a key role. As these energy storage
the automotive industry, it’s difficult to predict what type of systems are moving into more urban areas, energy density
storage technology would be emerging to meet the chang- and land availability will be topics of great interest for the
ing demands of the power industry. The known alternatives foreseeable future. „
currently provide only a fraction of the energy density available
from the primary lithium-ion battery technologies. The round- Authors
trip efficiencies — defined as the percentage of electricity put
Josh Tucker is engineering manager for the Energy
into storage that is later retrieved (i.e., the higher the round-trip
Storage Department at Burns & McDonnell. He is
efficiency, the less energy is lost in the storage process) — are responsible for all engineering for the energy storage
not as high with alternative battery and other storage technol- business.

ogies at present.
Flow battery technologies, for example, offer certain advan-
Ben Echeverria, energy storage regulations and
tages such as longer output duration and longer cycle life, but compliance at Burns & McDonnell, is responsible for
are hampered by lower round-trip efficiencies. assisting the EPC project teams on energy storage
projects globally, focusing on the safety, regula-
The market dynamics will change as more thermal power tion and overall compliance of the interconnected
plants are retired. As dispatchable power units with capacity systems.

38 | February 2024 | energy-storage.news

 Design and Engineering

Designing a 200MW/800MWh BESS

project in Italy
Engineering firm Benny Energia provides us exclusive insights into a 200MW/800MWh
project they developed in Italy, where grid-scale deployments are set to soar over the
next few years

Project overview:
• Battery energy storage system (BESS) project in
Friuli Venezia Giulia, Italy, designed by Benny Energia
• Power installed: 200MW
• Energy capacity: 800MWh
• Charge and discharge hours: four hours

I n the last two centuries, there has been a significant

increase in the global demand for energy. However, the
consequence of this growing demand is the uncontrolled
use of fossil fuels. Fossil fuels have played a significant role
in the increase of greenhouse gas emissions, triggering a
severe environmental crisis.
Human activities contribute to the accumulation of green-
house gases, causing a rise in global temperatures. This, in
turn, leads to changes in snow and precipitation patterns, an
increase in average temperatures, and a higher frequency of
extreme weather events such as heatwaves and floods.
TSO Terna’s 150 KV transmission network across Northern
In order to address climate change, the European Parlia- Italy.
ment has voted in favor of the European Climate Law, raising
the target to reduce net greenhouse gas emissions by at least production with demand when they are not simultaneous and
55% by 2030, compared to the current 40%, and proposing storing excess energy to prevent wastage.
the legal obligation to achieve climate neutrality by 2050.
To achieve its ambitious goal of climate neutrality by 2050, The project
the European Union is promoting the decarbonisation of the Given the importance of energy storage systems in the context
energy sector by gradually replacing fossil fuel energy sources of the energy transition, Benny Energia has developed the
with renewable sources such as wind, solar, and biomass. largest battery energy storage system (BESS) in Europe, to be
A significant added value in the decarbonisation process is located in Friuli Venezia Giulia, Italy.
provided by “sector coupling”, which increases the need for The project, submitted for approval in December 2021, is
flexibility and reliability while reducing the overall costs of the expected to be operational by the end of 2024.
energy transition. The design of a BESS, the subject of this article, involves
Sector coupling involves two complementary scenarios: determining a suitable area for the system. The chosen area
the electrification of final consumption and the integration must meet criteria defined by customer’s guidelines.
of energy networks and vectors. The first scenario ensures
a strong penetration of renewable sources and a push for Location and suitability of land
energy efficiency but requires a high need for flexibility in the Firstly, the area must be close to the substation, and its
network and the enhancement and extension of undersized dimensions must allow for the placement of all containers and
transmission and distribution networks. auxiliaries. The connecting roads between the airport and the
The second scenario involves supplementing renewable site, as well as access roads to the area, must be suitable for
electricity with other energy vectors such as biogas, biometh- the transit of vehicles needed for the transport of goods.
ane, and hydrogen for applications in sectors difficult to Additionally, the maximum slope of the site must be below
electrify [1]. In both scenarios, energy storage systems play a 15% to optimize design.
fundamental role, allowing the matching of renewable energy Subsequently, after an analysis of the area within the region-

energy-storage.news | February 2024 | 39

 Design and Engineering

The analysis determined that the identified area fell within a

zone with a slope of less than 5% and was therefore suitable
for the installation of the BESS system. To determine the
suitability of the area, it was verified that the chosen area for
the BESS system did not interfere with landscape and environ-
mental constraints through overlays of the examined area on
maps of the main constraints.
The operation of a BESS project over the course of a week.
Firstly, Landscape Constraints under Legislative Decree
42/2004 were analysed as well as interference with landscape
protection zones such as riverbeds and archaeological areas.
The examined area does not interfere with landslide scenari-
os and/or seismic events in the territory and complies with the
flood risk constraint.
In fact, the area does not fall within flood risk zones and
no interference was detected between the area of the BESS
system and protected areas.

Configuration of the BESS project

The operation of a BESS project through the day. The design of the BESS system involved a layout sized
according to the availability of land use making possible a
al territorial plan, it is necessary to assess urban and territorial plant having an installed capacity of 200MW.
compliance through an analysis of landscape, archaeological, The plant layout consists of multiple of containers grouped
and hydrogeological constraints. These are essential to evalu- into base units each equipped with its own Power Conver-
ate the risk of possible landslides or seismic events that could sion System (PCS). Within the area, control cabinets neces-
lead to ground collapse. sary for supervision of the transformers in the area, control
The area identified for the 200MW BESS project is adjacent of measurements (voltage, current, frequency) and optimal
to one of the main Terna substations in Friuli Venezia Giulia working temperatures of the batteries were set up.
Region. In addition, the connection wiring diagram describing the
Using the QGIS software, an open-source Geographic Infor- connection of each individual container of the entire plant
mation System (GIS), the slope of the area and its non-interfer- to the Terna Station stall was made. The single line wiring
ence with constraints have been evaluated. The slope analysis diagram was equipped with all the necessary control and
within the QGIS software can be performed using a Digital protection systems.
Elevation Model (DEM). The design difficulties that Benny Energia encountered and
The DEM used, obtained from distinct DEMs of individual overcame during the plant design phase were the presence
administrative regions of Italy, was provided by the Pisa within the area of an overhead HV power line, the need to
section of the National Institute of Geophysics and Volcanol- maintain distances congruent with current fire prevention
ogy (INGV) and pertains to the elevation of bare terrain, also regulations, and finally the need to keep noise below an
known as the Digital Terrain Model (DTM) [2]. The DEM is acceptable threshold.
loaded as a layer and can be used to determine the slope of
the area, resulting in a temporary layer automatically overlaid The BESS containers
on the DEM that generated it. In the BESS container, secondary lithium-ion batteries are
housed, assembled in strings of batteries connected in series,
installed in parallel to form modules. These modules, in turn,
are connected in strings of modules in series and are housed
in rack mounting structures.
The battery racks are connected in parallel to meet the
nominal energy capacity and are arranged inside the battery
container.

Lithium-ion battery technology

Lithium-ion batteries represent the most advanced technol-
ogy in the field of electrochemical storage systems due to
The composition of a BESS project, including BESS, PCS and their high specific power. However, their main disadvantage is
energy management system. the high cost due to the need to implement safety systems to

40 | February 2024 | energy-storage.news

 Design and Engineering

temperature signals and monitors these parameters to achieve

cell balancing and prevent battery damage. Finally, it deter-
mines cell and pack levels, such as State of Charge (SOC) and
State of Health (SOH).
The container structure considered is self-supporting, metal-
lic, for external installation, built with profiles and insulated
panels and is designed for outdoor use. Profiles and insulated
panels are used. This design allows the entire system to be
How the batteries connect to the grid via DC, low-voltage AC transported and installed without the need to disassemble the
and medium voltage AC connections. various components of the container, except for the battery
modules, which could be disassembled and transported
separately if necessary.
The containers have standard dimensions. Each container
is equipped with environmental sensors, including those
for temperature and humidity, to constantly monitor internal
conditions. If required, the containers have an air condition-
ing and ventilation system to ensure optimal environmental
conditions for the proper functioning of various components. A
liquid cooling system is also present.
To prevent emergency situations, the internal temperature
Energy losses occur to some degree during all stages of a
of the container is monitored using thermocouples, especially
BESS activity.
for detecting possible fire residues. The container is protected
prevent overcharge situations. against the entry of dust and water jets from various direc-
Despite the existence of a wide range of lithium batteries tions, providing a safe and secure environment for the energy
with different cathode compositions, they share a common storage system. 
basic structure. These devices include an anode generally
made of graphite and a cathode made of a metal oxide, and Authors
their assembly creates a layered or tunnel structure to facilitate
the insertion and extraction of lithium ions. Eng. Diego Margione is technical advisor for
Benny Energia for the scouting and development
The electrolyte, both liquid and polymer, serves as a link of Renewable Energy Plants. He has 20 years of
between the positive and negative electrode, which are experience in the field of mechanical engineer-
ing as a designer, consultant, and developer in
separated by an electronic insulating layer, usually made of renewable energy.
polyolefin. The electrochemical reactions vary depending on
Dr. Andrea Giulio Barone, founder and CEO of
the type of cell, but the open-circuit voltage ranges between Benny Energia, has more than 20 years of experi-
3.6 and 3.85 V. Lithium batteries are high-energy systems and ence in structured finance and 10 years in the
financial, economic, and managerial sectors of
require extremely cautious handling.
renewable energy.

Safety measures Eng. Marta Maiolati, development manager, has

over 10 years of experience in the design and
Electrical, mechanical, and thermal abuses can cause development of renewable energy plants, and
problems in their operation such as thermal runaway that has worked on over 300MW of solar PV and
3.5GW of BESS.
damages the cell and, in the worst cases, can lead to gasifica-
tion and the release of flammable vapors containing solvents Eng. Filippo Onori, PhD student at Marche
Polytechnic University, worked on a thesis for a
present in the electrolyte. master’s degree in mechanical engineering on
For safety reasons, the cells are often contained in robust the design and management of the 200MW BESS
plant.
metallic containers. One of the most critical aspects of
lithium-ion cells is their degradation over time, which leads to
a progressive reduction in capacity compared to factory data,
References
even in the absence of charge/discharge cycles.
The system is equipped with a Battery Management [1] E. Rodrigues, R. Godina, S. Santos, B. A.W., J. Contreras e J.
System (BMS) capable of monitoring cell-to-cell variations Catalao, “Energy storage system supporting increased penetration”,
Energy, Volume 75, 2014, pages 265-280.
over time: diagnosing errors, detecting safety hazards, and
issuing warning signals. It records signals from the battery [2] S. Tarquini, I. Isola, M. Favalli, A. Battistini e G. Dotta, “TINITALY,
un modello digitale dell’Italia con una dimensione della cella di 10
pack and individual cells, storing data related to the battery’s metri (Versione 1.1),” Istituto Nazionale di Geofisica e Vulcanologia
lifecycle history. Additionally, it measures voltage, current, and (INGV), 2023.

energy-storage.news | February 2024 | 41

 Design and Engineering

‘Every energy storage project’ will require

regular upgrades to stay in the game
FlexGen’s Yann Brandt tells Andy Colthorpe why changing market dynamics mean energy
storage systems will need to be upgraded many times over their operational lifetimes

t is a “certainty” that all grid-connected energy storage

I systems will require upgrades to their software, although the
reasons for upgrades will be varied, Energy-Storage.news has
heard.
Yann Brandt, chief commercial officer (CCO) at software-centric
battery storage system integrator FlexGen told us that in his view,
“every single project around the world is going to need upgrades

Credit: FlexGen.
at some point”. Brandt gave an interview following a FlexGen
announcement a couple of months ago that the system integrator A BESS project
had carried out a number of upgrades to customer battery energy integrated by FlexGen
storage system (BESS) assets in the ERCOT, Texas, market.
In addition to providing commissioning, engineering and of FlexGen’s rival system integrators – on the need for BESS asset
procurement services for utility-scale BESS, FlexGen also operators to respond to changing energy market rules. It examined
onboards projects with its energy management system (EMS) and how Fluence’s Mosaic automated bidding platform was used to
digital controls platform, Hybrid OS. adapt the market participation of a 720MWh BESS in Califor-
Over in ERCOT, FlexGen carried out upgrades to Hybrid OS for nia’s CAISO market to changes in market rules. Fluence product
its customers’ sites to meet changing power market regulations as manager Drew Skau explained how the BESS’ owner, utility PG&E,
well as new utility standards. The company claimed that through was able to optimise the battery’s performance and revenue
field experience and application of R&D work at its new laboratory potential in the face of those changes.
and compliance centre facilities, it has managed to reduce the time
required for such upgrades by about 75%. Creating new value with upgrades
That matters, Brandt said, because whether asset owners and One interesting difference between CAISO and ERCOT is that
investors are aware of it or not, their BESS project too will be in line CAISO expects to manage state of charge in batteries connected
for the upgrade treatment, sooner or later. to its grid, while ERCOT does not, although state-of-charge
“The reality is: energy storage projects are going to be upgraded monitoring has been proposed in ERCOT recently.
many times over their lives, no matter which ISO you’re in because FlexGen’s EMS is capable of providing good state-of-charge
regulators are going to change the way that batteries have to data, Yann Brandt said, due to in-built data analytics capabilities.
operate in the grid, power markets are going to change, revenue That’s an advantage in markets like CAISO where that’s a necessity
opportunities are going to adapt, and some projects are going to of market participation and has a multitude of other purposes.
enter into different financial relationships, whether it’s corporate “Having an analytic system embedded into an EMS allows you to
PPAs, or some other hedges or tolls,” Brandt said. be able to make real-time decisions based on what you’re seeing
In this particular case, it was that grid and wholesale electricity from the asset, versus what should have happened with the asset
market operator ERCOT implemented some new ancillary services against the theoretical, digital mirror image of that site,” Brandt said.
products, Fast-Frequency Response (FFA) Advancement and The energy storage market is still at its early stages, but is
ERCOT Contingency Reserve Service (ECRS). already “roaring”, because the fundamental need for energy
To keep up with revenue opportunities, BESS assets need to storage is converging with the market reality that money can be
remain in compliance with the codes and parameters governing made from it, the FlexGen CCO said. In all of that excitement,
those opportunities. That necessitates upgrades, and in some of asset owners perhaps don’t think too much about what happens
the more fast-acting markets, those will be more frequent. “It’s just a little way into the lifetime of a project, and perhaps aren’t aware
a fundamental necessity that you need to update your systems,” that there may come a time when they want to, say, swap out an
Brandt said. EMS or change which optimiser takes their asset into the markets.
“Hopefully by telling this story, people will at least think about
BESS market adaptation the reality of: ‘What will I do when I need to do upgrades due to
There will be lots of different reasons for upgrading. In December compliance?’ That’s definitely something we want more people to
2023, Energy-Storage.news hosted a webinar with Fluence – one think about when they’re building sites.” „

42 | February 2024 | energy-storage.news

 Design and Engineering

Credit: Image: Businesswire.

Virtual power plants enable operators to pool customer-sited
resources into a whole greater than the sum of its parts, as
illustrated in this graphic by SolarEdge

Virtual power plants: A ‘critical

resource’ for meeting rising
electrification
Andy Colthorpe speaks with Jennifer Downing, senior advisor to the Loan Programs
Office at the US Department of Energy (DOE) and author of a recent report into virtual
power plant technology

irtual power plants (VPPs) have existed since the electricity networks built around large-scale power plants.
V latter part of the 20th century, as a form of demand
response technology. Large energy users at industrial or
Customer-sited DERs, like rooftop solar PV, electric vehicle
(EV) chargers, heat pumps and, of course, battery storage
commercial sites have been incentivised to turn down their systems, all have a role to play in today’s virtual power
electricity use at the request of utilities or grid opera- plants.
tors during peaks, while in some cases, the use of other However, the potential use of VPPs as a grid flexibil-
energy-intensive equipment like water heaters has been ity resource is largely untapped. That led the DOE’s Loan
managed to help mitigate peak demand. Programs Office (LPO) to identify VPPs as a technology area
However, how we look at the term has changed radically that, like long-duration energy storage (LDES), green hydro-
in the past 10 years or so, as it has come to encompass gen and other emerging low-carbon resources, could use
different models of aggregated distributed energy resources some help in educating the market.
(DER), pooling their capabilities to provide grid services or A September report in the DOE’s ‘Pathways to commer-
energy capacity. cial liftoff’ series for emerging climate tech highlighted the
In this way, VPPs can disrupt the centralised model of potential of VPPs, as well as the challenges ahead. Report

energy-storage.news | February 2024 | 43

 Design and Engineering

author and LPO senior advisor Jennifer Downing told Energy- versus utility-scale, you’re ignoring the fact that Americans
Storage.news a while back that battery storage is perhaps are buying these resources for a different reason in most
the most versatile resource available to VPP operators. cases than doing grid services.
What follows is our conversation with Downing, where People are buying electric vehicles because it’s a superior
we explore some other areas of the LPO’s research into the car, or they’re buying a smart electric water heater because
technology and the associated business models. it’s going to save them overall on their energy bill, or it’s
going to decarbonise their home, and a lot of folks are
A variety of factors have been holding VPP technologies buying behind-the-meter batteries for backup power.
back from widespread adoption. What were some of the So, the cost to the customer is justified by the primary
reasons why the DOE identified this as an area to write function of the DER. Then, we’re taking the fraction of the
about in the ‘Pathways to commercial liftoff’ series of capacity that is flexible and using that for grid services.
reports? That’s where you get the cost-effectiveness. You have to
From a high-level view, we are experiencing an increase in split the total cost of a distributed storage system versus
demand at a pace and magnitude that we have not seen in when you are comparing it to the cost of a utility-scale
decades, and that is thanks to the electrification of vehicles, resource.
industry, heating, and data centres… it’s really increasing the If you’re just looking at storage, if those behind-the-meter
peak demand on the grid that we need to solve. batteries were not used for that homeowner’s backup power
We think about this at the Department of Energy as really at all, then maybe yes, you then add up the cost of every
needing three pillars of investment. Powerwall and compare that to the cost of a utility-scale
One is more generation, two is grid-enhancing technolo- battery, and that’s a relevant comparison. But people are
gies that increase the capacity of the lines to deliver the buying these Powerwalls for their own backup power so
electrons, and three: demand flexibility or virtual power plants it’s unfair to count the whole cost of the behind-the-meter
that allow us to flex demand with the same level of dexterity battery and compare that to a utility-scale battery.
as, traditionally, we’ve only used to flex supply.
That is why we wanted to shine a light on virtual power Behind-the-meter resources can have a ‘double
plants because they are so critical in meeting demand needs source of value’
on the timescale that we need to electrify. If you look across So what we’re talking about there is recruiting people
those three pillars, VPPs can be among the fastest solutions. that would have installed DERs anyway. But I’m wonder-
If you have a customer-sited resource, you are not waiting ing how closely the need for VPPs will correlate with
in transmission interconnection queues for three, four or five areas where people might already be buying battery
years. If you look at the timeline to build a small modular systems, and conversely, we’ve seen virtual power plant
reactor, it’s a lot longer than ramping up your capacity via programmes and pilots where customers in constrained
solar and storage systems on commercial rooftops, for load pockets are encouraged to buy battery systems
example. that enrol into VPPs. Will scaling up VPPs be possible
We’re going to need ‘all of the above’, but we wanted to by enrolling customers who would have bought batteries
make sure that people weren’t discounting demand flexibility anyway, or will it also require incentivising new custom-
as we think about serving higher load. And really, it’s about ers as well?
using the infrastructure that we have more efficiently. The short answer to your question is that it will require both
types of customers. A really good example is Swell Energy’s
I’ve heard people comment that you could build a single- battery VPP in Hawaii, where they recruited people who had
site battery storage project that’s perhaps 100MW, and batteries already and offered them monthly payments plus an
that could be somewhere between one-hour to four- export credit for the use of their batteries. They also expand-
hour duration. Whereas to build that same amount of ed the capacity of the VPP by going to households and small
battery storage across residential or even commercial businesses that didn’t have a battery before and offered
VPPs takes a lot of individually sited systems. I guess them somewhere between a couple of hundred dollars and
their argument is that building large-scale is effectively US$1,000 per kilowatt of flexible capacity. The provider is
cheaper than aggregating behind-the-meter systems, but always preserving 20% to 50% [of the stored energy], maybe
what’s your take on that view? depending on your needs, for your backup power.
It’s a couple of things. One is that customer-sited resources They recognise that that flexible capacity is valuable for
don’t require the same kind of land and construction. I also the grid, and that’s why they’re offering that signup bonus
mentioned the need for speed, and if you have distributed payment. You see that, too, with Green Mountain Power,
energy resources on the distribution grid, you don’t face the where they are offering these batteries at a low cost to the
same kind of transmission interconnection hurdles. homeowner, and, again, the homeowner is willing to pay that
Then also when you’re looking at the cost of distributed because they’re getting backup power. „

44 | February 2024 | energy-storage.news

 Software and Optimisation

The challenges for BESS

optimisation firms
Cameron Murray investigates the different approaches being taken by BESS
optimisation specialists to help customers maximise their revenue

Credit: Pexels / Саша Алалыкин.

hile the demand for third-party battery energy storage
W system (BESS) optimisation services looks set to grow
substantially, challenges for companies specialising in those
Energy trading in the day-ahead and real-time markets is likely
to become a bigger part of what BESS does is the coming
years.

services remain. decide the extent to which they bid into ancillary services, the day
In this piece we interview Habitat Energy, one of the most ahead energy market, or save capacity to capture real-time volatil-
well-known optimisers, Enertel AI, which provides AI-modelled ity,” says Enertel cofounder David Murray.
price forecasting but not optimisation, as well as independent Firms can either simply provide price forecasts to enable
sources in the wider market. in-house decision-making, like Enertel, or go one step further and
The past possibility of successfully monetising a BESS by offer to take over management of the BESS, as Habitat does,
having it simply sit in one or two different ancillary service while sometimes each part may be offered by a different third
markets is fast disappearing, with those markets’ saturation party. No model is without its challenges.
forcing a rapid diversification of the revenue stack. That diver-
sification requires a more sophisticated trading strategy, most Optimisation firms’ lack of transparency
likely with the help of AI-based forecasting, which is where BESS The first, which Energy-Storage.news has written about exten-
optimisation firms’ value proposition comes in. sively, is optimisers’ lack of transparency into the AI algorithms that
“Energy price forecasts, especially with confidence intervals, forecast the prices underpinning trading decisions, and even the
will increasingly be used as inputs for batteries as they must forecasts themselves, which typically won’t be provided either.

energy-storage.news | February 2024 | 45

 Software and Optimisation

This is, according to some, because of a fear that providing Preference for in-house control of assets
the pricing forecasts to customers will allow those customers It’s fairly obvious that if you can make the same returns on
to reverse-engineer the optimisers’ algorithms – their ‘secret your BESS asset, you would prefer to keep the management
sauce’ – and steal their competitive advantage. of it in-house.
The lack of transparency might be fine for some develop- Larger asset owners won’t want an automated solution
ers who are happy for “results to speak for themselves”, as because of over-reliance on a software provider when they
one optimiser Gridmatic put it to Energy-Storage.news a few have GW+ of capacity and will want to retain agency over
months ago, but won’t be for others. optimisation decisions, Enertel’s cofounder David Murray
Habitat Energy cofounder and director Ben Irons says claims.
the company takes a similar approach to managing BESS However, Irons says that even as asset owners get larger
projects: “With our model, you give us the keys, and we’ll and more familiar with BESS, there will still be plenty of value
generate the revenue. Transparency isn’t as much of an issue for third-party firms to add. It takes around 2GW of operational
as long as the revenue comes in. The project owners don’t capacity before the in-house model gets even remotely cost-
necessarily need reporting on a day-by-day basis since they competitive and even that is with some significant caveats,
are not the ones pushing the buttons.” Irons says.
There obviously need to be conversations with the asset “If you’re a battery owner or developer, your skills are in
owner on their specific requirements around BESS’ lifetime raising money, procurement and EPC. Do you really want to
warranty, and any physical constraints that might bring, as well have to go and hire data scientists and compete with Silicon
as their risk-return appetite, he says.
“But once the asset goes live, we give regular performance
updates, but we resist letting them get involved in trading “There’s no code to crack. Everyone’s
because that’s a responsibility they’ve assigned to us.”
Irons says that it’s actually when you separate the forecast-
trying to make as much money as
ing and optimisation pieces to separate third parties that possible by sticking their battery in
the lack of transparency becomes a big issue, which is why
Habitat only offers the wrapped service and not just forecast- whatever revenue stream makes the
ing alone. most sense on a given day. That’s not
“If you’ve got one company sending a stream of instruc-
tions saying you should discharge at 4pm, and the other a secret”
company which is receiving those instructions and respon-
sible for pushing the buttons thinks it should be at 5pm,
you can see why tension arises. The trader will call up the Valley by creating a tech team within your asset ownership
forecaster and ask for some transparency behind the recom- company? You’d need to be very committed and confident to
mendation, and the forecaster will say, ‘that’s our suggestion, do that.”
take it or leave it’.” He also points out that many large asset owners, like UK
Habitat’s own forecasting and trading desks work very energy storage fund Gresham House, use many different
closely with each other to this end, Irons says. optimisers in order to see how each is performing.

Giving away ‘secret’ strategy Commoditisation of BESS optimisation

Another potential challenge is related to the need to keep Some sources have suggested the widespread use of
a distance between owner and optimiser. One source said third-party optimisation for BESS can be seen as a form of
project owners have the conundrum of wanting to work closely commoditisation, but Irons refutes this, saying there is still
with an optimiser to come up with a good trading strategy for a very wide range in performance of as high as 50% more
their BESS portfolio, only for the optimiser to then apply that revenues.
strategy to other assets in its portfolio. “I think we will see consolidation in the BESS space and
Irons doesn’t see much in this, though: “There’s no code to that raises the question about whether we will start to look
crack. Everyone’s trying to make as much money as possible more and more the same over time. Quite possibly because
by sticking their battery in whatever revenue stream makes the that process will remove all the low performers so the differ-
most sense on a given day. That’s not a secret.” ence between the top and bottom performers will reduce.”
“It ultimately comes down to your forecasting, your trading There are as many as 20-25 companies offering third-party
team’s experience and your ability to switch in and out of these BESS optimisation in the UK, for example.
services. And it’s changing all the time, from week to week and Habitat Energy was founded in 2017 and acquired by
day to day. We can all see this trading performance anyway. If Quinbrook Infrastructure Partners in 2021, and is currently
something was a secret briefly, it wouldn’t stay so for long.” active in the UK, ERCOT (Texas) and Australia. „

46 | February 2024 | energy-storage.news