Industry insight: the role of batteries and VPP in changing power markets

Industry insight: the role of batteries and VPP in changing power markets

Industry insight: the role of batteries and VPP in changing power markets 900 899 Energy Storage Journal

Camron Barati
senior analyst for solar and energy storage at IHS Markit Technology spoke to ESJ about the role of battery storage and virtual power plants in the energy storage industry.

To read more about Virtual Power Plants visit our website at and email to sign up to Energy Storage Journal and receive the latest copy of each quarter’s edition.

Where does battery storage and PV sit in the overall US power markets and supply chain — for example, in the UK it’s understood that storage will only play a small part keeping the lights on as the country moves to a low carbon economy?

The US energy storage market has evolved from serving applications with a limited market volume such as frequency regulation in front-of-the-meter or provision of back-up power and peak shaving applications behind-the-meter.

Within the past few years, the value of energy storage for advanced grid applications such as providing peaking capacity, deferring T&D investments, and improving the use of renewable generation has increased significantly as the technology has matured.

Notably the US is now rapidly advancing its regulatory frameworks and is putting in place legislative support for energy storage to participate in energy markets, having identified it as a key technology for transitioning to a more distributed, low-carbon and reliable electricity supply.

With regards to the UK, it isn’t quite fair to say that energy storage is only playing a small part. In fact the potential of energy storage resources to provide system flexibility as renewable penetration increases and the electrification of transport continues has been widely recognized by the TSO, DNOs, the regulator Ofgem and the government.

What are the challenges companies face in monetizing storage and renewables in the current market?

The greatest challenge for monetizing storage and renewables is finding the right use-case for customers. Though the use-cases for storage are extremely diverse, it is important for energy storage to be able to stack value through multiple applications.

Every customer has individual needs and requirements both in the behind-the-meter segment and for front-of-the-meter applications. Accessible revenue streams that may be determined by local regulation and electricity tariff structures also vary from market to market or even on a more regional level.

Both lead to a difficult customer acquisition process, as well as creating steep learning curves as vendors and developers look to expand to new markets.

Additionally, taking advantage of available incentive programs is critical for the early-stage development of storage adoption in the market, which can vary significantly from market to market.

Will new technologies, economies of scale, and policy affect business models?

Technologies continue to emerge, ranging from hardware innovations related to battery chemistries and power conversion systems to software and communication systems.

Less commercially advanced battery technologies such as flow batteries will benefit from a general pivot in the market towards long-duration applications, as well as significant financial investment by large technology companies improving customer confidence and providing performance security.

Business model innovation will be key to maximizing the full potential of energy storage. For example, behind-the-meter C&I storage has been successful for mitigating demand charges, but residential customers will be more focused on improving self-consumption of solar and optimizing time-of-use rate schedules to generate value.

Within the front-of-the-meter segment new regulation such as the recent FERC Order 841 will lay the groundwork for enabling non-discriminatory access of storage systems to wholesale markets.

Arranging viable business models between grid operators and utility customers will also be key for unlocking the full value of energy storage and distributed energy resources.

How much of a disrupter will AI and data analytics be to the market, and will the affect be positive or negative?

AI and data analytics are already having a significant impact on the market. Transformative technology on the software side is pivotal in optimizing the operation of battery storage systems and ensuring intelligent dispatch to access multiple revenue streams.

Additionally, the potential to aggregate a portfolio of distributed energy storage systems to provide balancing services could also further disrupt the power market. Many of the leading companies involved in energy storage have embedded software at the heart of their operations.