Opportunities in Battery Energy Storage Systems
Crimson Energy Storage Project

Opportunities in Battery Energy Storage Systems

Major investments in battery energy storage systems will be needed to ensure grid supply as renewable energy[…]

Client: NTT DATA
Assignment: White Paper

(Download the white paper here or from the NTT DATA website.)

The large-scale integration of renewable power sources marks a significant transition in the energy landscape and plays a central role in advancing Europe’s Net Zero ambitions.

But the inherent variability for these sources makes the management of the grid much more challenging if the targets set by the EU and US governments for demand coverage by renewables are to be met.

In the EU, the Renewable Energy Directive was recently revised to raise the EU’s binding renewable target for 2030 to a minimum of 42.5%, up from the previous target of 32% and almost double the share that currently comes from renewable sources.

To meet these ambitious targets while ensuring supply reliability will require major investment in digital technologies and new assets to provide more flexibility in power generation and meet demand requirements. By 2030, the EU predicts €170bn will need to be spent on digital technologies to upgrade European grids. Within this scenario, Battery Energy Storage Systems (BESS) have emerged as a leading business opportunity.

Operational challenges driving demand for BESS

In May 2022, for the first time ever, more electricity was generated in the EU from wind and solar power than from fossil fuels. But the obvious drawback of this growing dependency on renewable sources is the problem of intermittency.

As their output and capacity factor depends on weather conditions, daily, and seasonal variations, it is difficult to imagine a future where 100% of the demand is satisfied by renewable power sources as this will require huge oversizing.

Renewable sources cannot be used to meet constant electricity supply needs, nor can they be relied upon to respond to peak demands. For that reason, legacy CCGT power plants continue providing flexibility services (e.g. peaking), despite the EU’s desire to reduce its dependency on imported gas and evolve to Net Zero.

In addition, renewable energy projects are often located in remote areas and transmitting power from these distant locations to demand sites leads to congestion problems in some nodes. As a result, investments in transmission grids will be needed, but they are costly and project implementation times are lengthy, so alternative solutions will also be needed.

Both generator and grid operators can deploy various energy storage solutions to address challenges associated with providing power on demand, flexibility services, grid stability, and overall system reliability. These include traditional pumped storage hydroelectric, compressed air energy storage, power-to-gas systems or flow batteries.

In this paper we will focus on Battery Energy Storage Systems (BESS), which are usually based on lithium-ion batteries and whose adoption is growing rapidly. Consultancy Wood Mackenzie forecasts that 89GWh of grid-scale BESS capacity will be installed in Europe by 2031 – a 20-fold increase over 2022. The UK, Italy, Germany and Spain are the four largest markets for BESS in Europe.

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