UK and Italian capacity markets auction more than 2GW of battery storage systems

Energy consultancy EnAppSys has claimed that the award of contracts for more than 1GW of battery energy storage systems in the UK's recent new round of capacity market auctions is interesting news.

Industry media recently reported the results of the UK T-4 capacity market auction, which will be delivered from 2025/2026. The energy storage systems settled at an all-time high price of £30.59 ($41.03)/kW/yr, largely due to the decommissioning of some fossil fuel generation facilities and higher capacity demands.

March 09, 2022

Paul Verrill, business director at EnAppSys, said that while gas-fired power plants were the biggest winners, with 27,632MW of contracts out of a total of 42,364MW, grid interconnectors received less than 7GW and pumped hydro was awarded 2.5GW, but the biggest concern is the 1,093MW contract for battery storage.

Rendering of InterGen's planned 320MW/640MWh Gateway battery energy storage project, one of the projects to sign a 15-year contract in the T-4 capacity market auction.

“Contracts for battery storage projects were the most interesting news in this auction, with many new-build battery storage projects opting for the highest settlement price ever for the T-4 auction,” Verrill said. It’s been a huge boost in particular for energy storage developers who have secured long-term contracts.”

About 8.3GW of battery storage system registered capacity was auctioned in the market, although the total installed capacity was equivalent to 2.3GW due to the implementation of derating rules. Paul Verrill of EnAppSys said contracts awarded for these battery storage systems ranged from one to 15 years. (Note: The UK Department of Energy introduced a derating factor in the capacity market in 2017, placing limits on the lifetime of the energy storage system. According to its rules, the energy storage system must be able to cope with a power outage event of up to 4 hours, and Its energy storage capacity will be derated according to its continuous discharge time. The derating factor represents the capacity contributed by the energy storage system in the event of power system interruption to a certain extent, which will directly affect the energy storage system in the capacity market. income).

Another industry expert, Chris Matson, partner at LCP, an energy systems analysis and modelling group, said the UK plans to retire five nuclear power plants by 2025, as well as retire all coal-fired power generation facilities in its power system, which will create a power supply gap. , and newly deployed renewable energy needs to fill this gap.

Matson called the result a "watershed" as settlement prices broke the previous record of £22.50/kW/yr. He said the auction represented a transformation of the UK electricity network as battery storage accounted for most of the new capacity in contracts awarded (3.3GW in total, de-rated by 1GW).

Another research firm, Aurora Energy Research, said that the installed capacity of battery storage systems in the T-4 capacity market auction this year has increased by about 800MW compared to last year. More than 60 percent of battery storage systems have a duration of two hours.

Among the developers awarded 15-year contracts are the UK arm of Singapore-based Sembcorp and UK energy developer Intergen. Intergen, a relatively new market entrant, has so far been better known for traditional thermal power plants and wind power.

Sembcorp has been awarded a contract for the deployment of a 150MW/300MWh battery energy storage system, expected to be operational in 2023, as part of a planned 360MW battery energy storage system (BESS) project that will be deployed with the company in another UK facility. A 120MWh battery energy storage project is co-located together.

Meanwhile, InterGen's contract is the largest battery energy storage project contract awarded to date in the UK, the 360MW/640MWh Gateway battery storage project planned to be deployed near London, UK. The company said the capacity market contract will underpin the development and deployment of the project, which will cost around £200m and will start construction next year.

According to reports, energy storage technology company Fluence is the battery energy storage technology supplier for the project. InterGen said that the scale of the project may be expanded to 450MW/900MWh in the future. The company also said it was developing a number of projects, including plans to deploy a 550MW/1,100MWh battery storage system in Lincolnshire, northern England.

InterGen CEO Jim Lighfoot said: "We are delighted with the results of the capacity market auction, which represents a huge step forward for our Gateway battery storage project and the country's net zero goal. Our mission It’s about providing flexible power solutions in a low-carbon world that everyone can rely on, and battery storage can help do that.”

The installed capacity of the winning project in the T-4 auction is slightly lower than the target capacity of 43.6GW. The total investment in the contract award is £1.3 billion.

385MW battery energy storage system wins contract in T-1 auction

Earlier this month, the UK's T-1 capacity market auction resulted in a total of 4,996.224MW of derated capacity across 226 capacity market units (CMUs).

The projects were settled at a top price of £75/kW/year, the highest ever in the UK capacity market, and included 385MW of battery storage and 85MW of pumped hydro generation.

In a recent webinar hosted by Current± on the impact of the ongoing energy crisis on the dynamics of capacity markets, Paul Verill of EnAppSys said that the supply crunch of the crisis has led to price increases, but in turn the design of the capacity market can be considered to intensify tight production margins.

1.1GW battery energy storage system wins Italian contract

In the Italian auction, grid operator Terna awarded 34.1GW of capacity market contracts to existing energy assets, 3.8GW to new assets, and 1.1GW of battery storage systems, of which 3.8GW were awarded to new energy storage projects. The 500MW energy storage system will be deployed in southern Sardinia.

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