One of the key debates on the topic of batteries revolves around its ownership. In this context, ownership could be defined, as the right to own, develop, manage and/or operate batteries. In the recent months, several industry associations have come out with position papers on ownership of battery storage (see for instance the joint statement by CEDEC, EDSO-Smart Grids, GEODE and EUROBAT[1]). The European Parliament[2] too expressed a position in the debate. It called upon the European Commission to allow TSOs and DSOs to invest in storage, arguing that it should be considered as a separate asset class. Others have expressed strong concerns that this would distort the market. In this post, some key aspects of the debate on battery ownership are discussed.
Balancing services
TSOs are required to balance the system in real-time to ensure operational security by keeping the frequency and voltage within the prescribed limits[3]. Batteries are a valuable resource for providing these services. In a balancing market, the TSO is the single buyer of balancing services consisting of demand and/or supply resources that are available to respond in real-time to any signal variations in the system[4]. In some countries, TSOs are permitted to own assets (such as batteries) that could provide balancing services. In this way TSOs may mitigate any market power issues that could occur when the system is stressed. However, if TSOs are allowed to own batteries, how can they at the same time be a neutral market facilitator and single buyer of these balancing services? A similar debate may follow at the DSO level due to increasingly decentralized power systems.
Locations specific grid services
Unlike frequency which is a network wide parameter, voltages occur across points in the network and can be considered as local parameters[5]. Therefore, by definition, any voltage problem in the grid needs to be addressed locally. Moreover, in some parts of Europe, DSOs have been unable to follow the connection requests of wind mills and rooftop PV installations. As a consequence, distribution grids are now facing congestion and voltage problems.
System operators can solve such problems by procuring location specific services. For example a TSOs sometimes pay market parties to keep a power plant running in a certain location to support the voltage, even if the plant is out of the market. As market parties that provide location specific grid services have significantly more market power than those that provide regular balancing services, competition in the market will not work. Thus there is a case for permitting DSOs-TSOs ownership of assets for providing local grid services until these markets mature. Batteries which are modular, quick to install, and mobile are well-suited to deal with these local problems. However, the costs and benefits of TSO-DSO ownership of batteries vis-à-vis the current approach needs to be evaluated very carefully.
What does the “Clean energy for all Europeans” package say?
The “Clean energy for all Europeans” proposal includes provisions under which the regulatory authorities may allow TSOs and DSOs to invest in storage only under exceptional circumstances. TSOs and DSOs may invest in storage when no market party expresses interest to own, develop, manage or operate storage facilities in a competitive tendering process. TSOs and DSOs may also be allowed to invest in storage when the regulatory authority assesses it necessary to facilitate efficient, reliable and secure system operations. However, the proposal also include that the ownership of the asset should be limited in time, subject to consultation[6].
Batteries are a jack of all trades, and who will master them is one of the heated debates that will continue in the coming months as the “Clean energy for all Europeans” Package Proposals follow the approval process of the EU institutions.
[1] http://www.edsoforsmartgrids.eu/wp-content/uploads/Joint-statement-on-storage_EDSO_28102016-2.pdf
[2] http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2015/2322(INI)
[3] https://www.entsoe.eu/major-projects/network-code-development/system-operation/Pages/default.aspx
[4]More information: http://www2.nationalgrid.com/uk/services/balancing-services/
[5] More information: http://www2.nationalgrid.com/uk/services/balancing-services/reactive-power-services/
[6] Proposal for a regulation of the European parliament and of the council on the internal market for electricity (recast) 2016 – Article 36 and Article 54.
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