Ireland may be an unlikely candidate to pioneer the world of renewables, but discussions at Solar Media’s Energy Storage Summit last week highlighted the country as an ideal incubator for early growth in the agile storage market, with mechanisms in place to ascribe specific value to ultra-fast response.
Much of this discussion focused on the EirGrid Group’s multi-year DS3 program – to “deliver a sustainable electricity system,” with 40% of electricity from renewables by 2020. Ireland is among the world leaders in terms of wind power’s contribution to its energy mix – it provided just under a third of the country’s power last year. DS3 aims to increase the acceptable amount of renewable generation at any one time to 75% over the coming years – from current levels of around 65%.
This level is referred to as System Non-Synchronous Penetration (SNSP), with non-synchronous generation referring to sources of intermittent output – such as wind and solar. With these sources subject to rapid volatility, the ability of EirGrid to increase SNSP beyond 75% largely hinges on the ability to provide flexibility through the implementation of fast frequency response (FFR) storage technologies, with rapid electricity supply on demand for ancillary services within under 10 seconds.
The purpose of this storage is therefore not primarily to store renewable energy or prevent curtailment per se, but to provide instant response to generation fluctuations that come as a result of increasing renewable capacity.
Promoting this technology is where Ireland stands out. Through multiple scalars for storage technologies, the DS3 essentially multiplies the price paid to storage operators for electricity if it reacts quickly. For a speed of response quicker than 2 seconds, ‘product scalars’ begin to apply, reaching a factor of 2 at 0.5 seconds, and hitting a maximum scalar value of 3 at a response time of 0.15 seconds.
This is the most influential factor in multiplying revenues for storage developers, although both locational and temporal scarcity scalars can also boost revenue multiples to over 6.3 at times of high demand.
These market conditions place a bias on front-of-the-meter lithium-ion batteries, which nearly monopolize the short duration energy storage market anyway. In most markets, lithium-ion batteries are most economical in supplying storage for between 2 and 3 hours, providing an internal rate of return (IRR) of nearly 13%. However, under DS3 it is estimated that this optimum region sits between 20 and 30 minutes, with limited value in assets that perform well outside this; assets are mandated to respond within 150 to 300 milliseconds at minimum, provide at least 20 minutes of storage, and offer at least 97% service availability (excluding periods of maintenance).
Early projects like Statkraft’s 11 MW Kilathmoy project are a key example of this market, using Fluence’s ‘world’s fastest grid-scale battery.’ Using LG Chem modules, the project is set to be fully operational early this year, located on the site of Statkraft’s 23 MW onshore wind project in the South-West region of the Ireland. Fluence claims that dynamic response will occur within the grid in under 150 milliseconds from triggered demand.
This is not Fluence’s first experience in the Irish market, having supplied the already-operational 10MW battery system for Kilroot power station in Northern Ireland, which has already demonstrated the technology’s rapid response capabilities.
With these incentives, the fast frequency response market is not a massive risk for developers in Ireland. Developers can enter the DS3 mechanism through one of two ways. Firstly, they can compete through the ‘volume capped’ route at auction, where six-year pay-as-bid contracts are awarded with revenues determined by live-market prices for electricity. Alternatively, through the ‘volume uncapped’ route – as adopted by Statkfraft – any developer can apply to receive a fixed-tariff payment providing they meet the DS3’s test criteria. The latter of these theoretically provides greater flexibility for asset owners but face the risk of seeing tariffs downgraded if the market becomes oversaturated. While this approach could see a faster build-out of storage in Ireland, storage assets may need to be adapted if focus is shifted away from fast response, and bottlenecks of grid connection will still be imposed by the country’s TSO EirGrid.
The DS3’s budget for 2019 was €235 million, seeing the initiatives first ‘volume capped’ auction award 110 MW of contracts between three large scale storage projects, to come online by June 2021. This was 30 MW short of the intended capacity of the auction, with several players within the industry citing EirGrid’s “sluggish organization” in connecting projects to the grid. The DS3 process is also fairly tough for developers, with projects only reviewed every six months, providing several cliff-edge deadlines, which if missed even by a single day, could see six-month’s worth of revenues disappear overnight. The future of the DS3 also remains uncertain after its scheduled end in 2023, but a further 200 MW procurement round is set for the near future. Other projects being developed through the DS3 program also includes Innogy’s 60 MW battery project in Monaghan.
Technical hurdles can also challenge developers’ abilities to meet these deadlines, largely centering around high-speed monitoring, metering and control.
There is also some risk of cannibalism within such a promising market. As developers flood in, a downwards revision of the tariffs could occur to protect Irish bill-payers from the high costs of fast response – similar to that in the fast frequency market in PJM, US.
PJM was the first market to properly incentivize fast frequency response, although similar schemes have been adopted since in the UK and Germany. Despite wind power producing nearly a third of Ireland power in 2019, the country has little-to-no large-scale storage installed so far. Through DS3 the country could reach 1.2 GW of large-scale battery installations by 2030, complemented by 500 MW of small-scale projects.
The UK market is currently prioritizing fast response through more incremental steps and will be keeping a close eye on the Irish market to see how effectively storage is deployed – it’s likely that similar incentives will be put in place through the country’s ED2 scheme, which is currently being developed by Ofgem. Australia will also take note, with South Australia requiring some renewables projects to secure FFR capability with a similar response time.