Potential utilization of Battery Energy Storage Systems (BESS) in the major European electricity markets

TL;DR

This paper evaluates the potential of Battery Energy Storage Systems (BESS) in European markets, finding limited feasibility for energy arbitrage but high potential for frequency support services, especially where remuneration is available.

Contribution

It introduces a general payoff model for BESS operation and assesses its profitability in European markets using real market data, highlighting applications with high potential.

Findings

BESS is generally not feasible for energy arbitrage in most European markets.

BESS shows high potential for frequency support services, especially with remunerated frequency containment reserves.

Potential profitability of BESS is near 100% for FCR-N in Denmark from Jan to Sep 2021.

Abstract

Given the declining cost of battery technology in the last decade, nowadays BESS becomes a more attractive solution in electrical power systems. The objective of this work is to analyze the potential utilization of BESS in the major European electricity markets. A general payoff model for BESS operation is proposed to correctly address the operational flexibility of battery systems. Utilization factors such as potentially profitable utilization time and rate are calculated for common applications including energy arbitrage and frequency support services using real market information. The result shows that under the current empirical estimation of the battery cost and lifetime, BESS is not feasible for energy arbitrage in most of the European electricity markets. However, BESS shows clearly and significantly higher potential in providing frequency support services. The result suggests that, when the frequency containment reserve is remunerable, the potentially profitable utilization of BESS has become already accretive in most of the European countries. For example from January to September 2021, the potentially profitable utilization rate has reached almost 100% for the FCR-N service in the Danish market. Comparing the regional electricity markets in Europe, BESS has shown significant potential in becoming a feasible solution in Central Western Europe and parts of Northern Europe by providing frequency regulation services. Meanwhile, in the British Isles and some other islanded local markets, a remarkable level of scarcity of flexibility has been revealed by the investigation, and the potential of BESS would also be considerably encouraging.