Additional revenue streams are needed to make batteries attractive as they cannot be financed by day-ahead arbitration alone, Thema Consulting managing director Marcus Franken told delegates at the Austrian Energy Day conference in Vienna.
Batteries require "rather extreme" price swings to cover costs with day-ahead arbitration alone, according to Franken. This could lead to strong cannibalisation, as with more batteries in the mix there would be less price volatility, and hence the attractiveness of battery investments would decline. And co-location with renewables systems such as solar photovoltaic (PV) does not improve the economics, Franken said, as either the battery will charge or the solar will feed in.
Batteries have been very active in the frequency containment reserve (FCR) market, but the FCR market is too small to finance all new investments. Activation on the market is often limited, and in Germany in particular revenue is awarded by available capacity in MW rather than delivered energy in MWh.
The intra-day markets are of interest to battery investors, Franken said, having two advantages over the day-ahead market — the higher price spread for arbitration and asset-backed trading possibilities, with batteries in some cases not running unless the operator fails to achieve a net zero position. But the question is whether other markets are large enough to accommodate very large battery volumes before the margins there also decrease, Franken said.
And batteries alone cannot eliminate price volatility. Under Thema Consulting modelling, if Germany had 50GW of installed battery capacity and surrounding countries 40GW in 2025 — an extreme scenario, considering current installed battery capacity in Germany is around 10.8GW according to Fraunhofer ISE data — prices would still be volatile in the spring and summer, when PV generation is strong and demand drops in many countries. And this is using expected 2025 installed capacity — by 2030, Germany alone intends to increase its installed solar capacity to 215GW from 93GW as of the end of August. Around 70pc of solar PV installations do not respond to price signals currently, Franken said, meaning they flood the power mix when generating.
