Market Segment Watch: Great Britain -...
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21, rue du faubourg Montmartre 75009 Paris, France [email protected] Tél : +33 (0)1 78 76 57 04 www.cleanhorizon.com Market Segment Watch: Great Britain The largest European energy storage market in 2016 Clean Horizon, the European expert team on energy storage since 2009, released its new market segment watch on Great Britain. Due to the increasing share of renewables in Great Britain’s generation mix, the Transmission System Operator National Grid will contract 200MW of energy storage assets to stabilise the grid this year. These so-called Enhanced Frequency Response (EFR) contracts will represent one of the emerging revenue streams for energy storage systems. EFR is indeed particularly well suited for energy storage systems and puts Great Britain in the spotlight of the energy storage world. Additionally, the islanded country presents some growing opportunities for medium and small-scale storage systems. The aim of this study is to identify and quantify those interests, and to better understand how energy storage project developers work and what they lack in the developing Great Britain market. Therefore, more than 15 interviews with project developers and utilities were led, the results of which are presented in this report. In the first part of the report, the Great British electricity supply chain is explored to set the scene for the market study. Then, the different revenue streams a storage asset can pretend to are looked at. Among those relevant revenue streams, two are detailed, as Clean Horizon believes they are promising. Finally, the market study and its results are presented. Key questions addressed: § How does the GB energy market work? § What are the revenue streams for energy storage assets? § What are the emerging business cases for energy storage projects in GB? § What do project developers expect for their projects? § What are the needs of the technology end-users? Who needs this report? • Energy storage equipment manufacturers • Integrators looking at the GB market • Project developers willing to better understand the GB market • Investors willing to better understand the risks associated with storage and the revenue streams • Utilities looking for opportunities with energy storage • Commercial and industrial electricity consumers
Transcript of Market Segment Watch: Great Britain -...
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MarketSegmentWatch:GreatBritainThelargestEuropeanenergystoragemarketin2016
CleanHorizon,theEuropeanexpertteamonenergystoragesince2009,releaseditsnewmarketsegmentwatchonGreatBritain.Due to the increasing shareof renewables inGreatBritain’s generationmix, theTransmissionSystemOperatorNationalGridwillcontract200MWofenergy storageassetstostabilisethegridthisyear.Theseso-calledEnhancedFrequencyResponse(EFR)contractswillrepresentoneof the emerging revenue streams for energy storage systems. EFR is indeed particularly wellsuited forenergystoragesystemsandputsGreatBritain in thespotlightof theenergystorageworld.Additionally,theislandedcountrypresentssomegrowingopportunitiesformediumandsmall-scalestoragesystems.Theaimof thisstudy is to identifyandquantify those interests,andtobetterunderstandhowenergy storage project developers work and what they lack in the developing Great Britainmarket.Therefore,morethan15interviewswithprojectdevelopersandutilitieswereled,theresultsofwhicharepresentedinthisreport.In the first part of the report, the Great British electricity supply chain is explored to set thesceneforthemarketstudy.Then,thedifferentrevenuestreamsastorageassetcanpretendtoarelookedat.Amongthoserelevantrevenuestreams,twoaredetailed,asCleanHorizonbelievestheyarepromising.Finally,themarketstudyanditsresultsarepresented.Keyquestionsaddressed:
§ HowdoestheGBenergymarketwork?§ Whataretherevenuestreamsforenergystorageassets?§ WhataretheemergingbusinesscasesforenergystorageprojectsinGB?§ Whatdoprojectdevelopersexpectfortheirprojects?§ Whataretheneedsofthetechnologyend-users?
Whoneedsthisreport?
• Energystorageequipmentmanufacturers• IntegratorslookingattheGBmarket• ProjectdeveloperswillingtobetterunderstandtheGBmarket• Investorswillingtobetterunderstandtherisksassociatedwithstorageandtherevenue
streams• Utilitieslookingforopportunitieswithenergystorage• Commercialandindustrialelectricityconsumers
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Tableofcontents
Executivesummary 1
Introduction 5
1 TheelectricitysupplychaininGreatBritain 61.1 Generation 61.1.1 UKelectricitymix 61.1.2 Theelectricitymarket 71.1.3 Renewabletargets 71.1.4 Small-scalerenewablessupport 91.1.5 Large-scalerenewablessupport 9
1.2 Transmission 101.3 Distribution 111.3.1 TheDistributionNetworkOperators(DNOs) 111.3.2 Issuesonthedistributionnetwork 11
1.4 Supply 121.5 Consumption 12
2 Revenuestreamsforenergystoragesystems 132.1 Powerintensiveservicestothegrid 142.1.1 EnhancedFrequencyResponse(EFR) 142.1.2 CommercialFrequencyResponse(CFR) 152.1.2.1 FrequencyControlbyDemandManagement(FCDM) 152.1.2.2 FirmFrequencyResponse(FFR) 15
2.1.3 Fastreserve 172.2 Energyintensiveservices 172.2.1 ParticipationintheBalancingMechanism(BM) 172.2.2 ShortTermOperatingReserve(STOR) 192.2.3 DemandTurnUp(DTU)service 19
2.3 Distributionnetworksupport 202.4 TheCapacityMarket(CM) 202.5 Embeddedbenefitsforcommercialandindustrialapplications 222.5.1 Transmissionfeesavoidance(TNUoScharge) 222.5.2 Distributionfeesavoidance(DUoScharge) 23
2.6 Residential 242.6.1 Residentialstoragesystem 242.6.2 PVplusstorage 25
3 ThepromisingrevenuestreamsforstorageaccordingtoCleanHorizon 253.1 Ancillaryservices 263.2 Transmissionanddistributionfeesavoidance 263.2.1 Marketsizetodoubleinthecomingyear 263.2.2 Increasingcharges 27
3.3 Emergingbusinesscaseforstorage:combiningservices 283.4 Riskslinkedtothoserevenuestreams 29
4 Presentationofthecustomersurvey 304.1 Structureandaims 304.2 Resultsandrecommendations 304.2.1 Currentlevelofimplicationregardingenergystorage 30
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4.2.2 Storagetechnologiesconsidered 314.2.3 Applicationsconsidered 324.2.4 Whatwouldfacilitatestorageprojectdevelopment 324.2.4.1 Regulatorychanges 334.2.4.2 Technicaladvisors 334.2.4.3 MarketandBusinesscasesintelligence 33
4.2.5 Favouritepartnersofprojectdevelopersforenergystorageissues 344.2.6 Solutionsthatprojectdevelopersbuy 344.2.7 Guaranteesprojectdeveloperslookfor 354.2.8 Financingthechosensolutions 364.2.8.1 Criteriaforthechoicebetweenprojectfinanceandcorporatefinance 374.2.8.2 Criteriaforthechoicebetweenequityanddebt 384.2.8.3 Bankabilityissues 38
4.3 Listofrecommendations 384.3.1 Recommendationsforvendors 384.3.2 Recommendationslinkedtofinancing 38
4.4 Listofparticipatingcompanies 40
Conclusion 41
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ListoffiguresFigure1:GrossUKgenerationmixevolutionfrom2012to2014 6Figure2:Wholesaleelectricitypricesontheday-aheadmarketfrom2013to2015 7Figure3:Linkbetweenrenewableenergysourcespenetrationandenergystorage 8Figure4:ImplementationoftheElectricityMarketReform(EMR),fromROtoCfD 9Figure5:Electricitytransmission 10Figure7:UnplannedSAIDIincludingexceptionaleventsin2013intheUK 11Figure8:Non-HHmeteredprofileclassesandtheircharacteristicsasofMarch2016 13Figure9:Tworemunerationstrategiesforenergystoragesystems 13Figure10:EFRproductcharacteristics 14Figure11:CommercialFrequencyResponseproductscharacteristics 15Figure12:April2016amountofdynamicFFRrequired 16Figure13:April2016amountofstaticFFRrequired 16Figure14:Balancingmarket-netimbalancevolume(longandshortsystem) 18Figure15:Monthlyaveragesystempriceoverthelastyear 18Figure16:Transmissionzonesandfeesonthe1stApril2016 23Figure17:Tablesummarisingthedifferentrevenuestreamsforanenergystorageasset 26Figure18:BreakdownofenergyusersbymeteringtypeasofDecember2012 26Figure19:BreakdownofenergyusersbymeteringtypeasofMarch2016 26Figure20:NumberofHHMconsumersandannualenergyimported 27Figure21:HistoricalandexpecteddemandtariffforTNUoS 27Figure22:EstimatedfutureTriadaveragedemand 28Figure23:Triadsduringwinter2015/16 30Figure24:InvolvementofprojectdevelopersregardingenergystorageinGB 31Figure25:Technologiesconsideredbyprojectdevelopersfortheirprojects 31Figure26:Applicationsconsideredbydevelopers 32Figure27:Missingelementsaccordingtoprojectdevelopers 33Figure28:Favouriteinterlocutorofprojectdevelopers 34Figure29:Solutionsprojectdeveloperslookfor 35Figure30:Guaranteesprojectdeveloperslookforbeyond2yearspartsandlabour 36Figure31:Financingsolutionschosen 37Figure32:Twodifferentreasoningpatternsregardingthefinancingmethod 37
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