Recording and presentations: Is the French battery market set for exponential growth?
31 October 2019
Automated transcription (it may contain errors)
Hello, everyone, as you can see from the Amish in your screen, you have joined the webinar Isa French battery market set for exponential growth.
So, what we want start quite yet, but I will take advantage of a couple of minutes that we have before they start to give you a few sort of housekeeping announcements. So firstly, you know, just to let you know that we will send you the recording and the presentations as well. But that’s no excuse for you to leave because this is your chance to ask questions through the three experts are
Today on the fringe battery market.
So that’s one thing beyond the reset you. You might be wondering if it’s the first time that you’re here, how would I ask questions? Well, there is a q amp a box at the bottom of the your screen, that’s where you should be, and you could send your questions through. But
the other thing I want to tell you is that we have a, almost like a tradition here at apa Insights that, like the start of every webinar, we encourage everyone to mention where they’re joining from. So I’m here with my colleague, Sally who is behind the scenes, and we’re connecting from Madrid, Spain. So please go to the chat box and just let us know where you’re joining us from.
So we’ll wait for another minute or so. And then
We’ll start this webinar to make sure that everyone who wants to see it can see from the beginning so
just wait for a few few more seconds.
Right I think it’s probably time to start and while we already have the first question says Good morning everybody. That’s not a question to you on that statement. So put that in the chat box please. But no well welcome video and so if right before we start or get the our presenters to just introduce themselves ready so Karen can Could you briefly in a couple of sentences damaged who you are and what you do
Good morning everyone. My name is Corinthian I work for Kino horizon. We’re consulting company dedicated to energy storage and data trends. So thanks a tear for for investing us and looking forward to discussing with with other experts on storage in France. Thank you currently and PI. Could you also introduce yourself briefly? Yes, sure. So my name is Kiana. I’m in charge of the French market analysis here at Orion energy research. So aura is modeling and analytic company, energy markets. And we are based in Oxford, Berlin and Sydney.
Shoot on if you could introduce yourself and also get ready to present.
Good Yeah. Hello, everybody. I’m Sharon green. I am part of ever rose, a technical and
Engineering consultancy, based in I’m based in France and Leon. And we also have offices in Paris, in London, Bristol, and most recently in Madrid. So I’ll start presenting.
Although I do hear you clearly, I hear you far away. So maybe if you Okay, microphone, that’s much better. Is that much better? Okay, great. Great. So, okay, let’s cut to the chase. I expect the most of you here to know if actually storage in France and I’m talking about metropolitan France here, if that’s an attractive investment, if you can make money out of it, because of course, if you can, then then we’ll see a lot of projects.
But first, who am I to talk to you about this, so
So part of arrows and arrows is an employee owned,
consultancy with around 50 energy professionals. And we specialize in solar, onshore and offshore wind and flexibility. And I’m based here in Leon, as I said, which some of you might know is the gastronomic center of France. And so we’re going to imagine this morning that your French battery project is a fatty unquote, which is a really nice pass a with a lovely buttery crust.
Yeah, but I can’t see your slides so you can see my slides.
Do you have a suggestion for right maybe?
Yes, let’s let’s try it.
At the bottom of the screen, there is a green box with an arrow pointing towards the sky. And if you press that, and
Back on your screen, you mean back on the webinar screen on the webinar screen. Okay, so if you press that, then it’ll give you the option to screen. There we go. Yep. Good. Okay, great. Sorry. I heard you’ve already seen my presentation. So you haven’t seen the photo of us. So this is who we are.
Right. So but I’ll get back to my Patreon cooter. And I’m sorry, you could make it full screen as well thing and it already is actually full screen. Ah, sorry. Yeah. The screens around.
It’s that good now. Perfect. Okay, great. Sorry about that. So, I’m going to share with you this morning a winning recipe for your Patreon. What I’m going to look at the main ingredient to extract maximum value from SEO. A complimentary ingredient to win and seven year capacity mechanism contract and for the crust will look at minimum
My thing network charges.
So main ingredient frequency containment reserve. So this is known in the French regulations as primary reserve. And it is a an active power response to frequency deviations on the grid.
And I’ve got some high level details of the product here. So full activation time of 30 seconds, so much slower than what batteries are capable of, but it’s the fastest reserved this procured here in France. And it has been very clear that there won’t be a market for a faster response than that.
And your battery needs to be sized so that it can sustain maximum power for 15 minutes in France, so depending upon your power level and your recharge strategy, that could be a battery of 15 minutes to an hour. So it’s the TSORT the procure this service
And they have joined the SCR cooperation program with seven other countries, the largest of which is Germany and France.
And one of the key things to know about this is that the product is in the process of being harmonized across those countries. So as I said, you have to be able to sustain your maximum power 15 minutes in France, if you’re in Germany, that would be 30 minutes and at the moment, there’s an important cost benefit analysis that will conclude on where between 15 and 30 minutes the product will will will finally sit so that will have an impact on your on your battery sighs.
Another important element is on sizing being part of this cooperation program allows you to export and import the service from other members. So, France is National requirement is for STI is 570 megawatts, but
You know France could import up to 70% of that requirement and export of other 30% of that requirement. And that means that anytime
assets based within France could say SCR could be procured from somewhere between 171 and 740 megawatts of SCR from assets based in France.
seconds your your maximum overall market size.
So, in terms of the revenue from SCR, here I’ve got occurred of its of its revenues since the start of 2017. When, when France became part of this program, and as you see it varies quite a lot. It has a lot of seasonal variation. It’s a merchant market used to be procured and weekly contracts they’ve become daily since July this year, and next year that become for our contracts that you will bid for the day before.
And if you had a one megawatt projects,
providing a car all year round, then these the revenues that you could get if it was providing a car on its own, but I said here that the key ingredient is to extract maximum value. How can you do that? Well, one of the key ways is by aggregating your assets. So, aggregators are proposing to use your battery for a sort of a narrow band of that frequency variation, which means it will be solicited quite often. And then to use demand side management to provide the rest of the service. So the DSM will get solicited less often and because of that, the aggregators able to channel higher proportion of the value to the battery, which means that you can get up to 40% more revenue by having a contracts like this for the battery to be used in a pool.
Okay, so the second ingredient
When a seven year capacity market contracts, so if you’re not familiar with the capacity market, it is a contract whereby assets are required to be available to export energy for up to 10 hours a day in what’s called PP two days, which attend to 25, the days the year where, but as most demand on the network
and as in some other markets,
you can have a capacity mechanism contract for the same megawatts as your car contracts, you can be available for both and get the revenues of both from the same megawatts basically. So we’ve had a capacity market in operation since 2017. In France, this year is the first year that RT a contracting for long term contracts, which is seven year contracts, and they will now have an auction every year for those contracts. But there’s three reasons why
Yes contract is, well, this is auction is particularly interesting for batteries. So, the first reason is that there’s big volume procured this year than in future years because it’s a transition period. So RGA actually bundled four tenders into one for different starting years for your battery.
The second reason is because very few assets are eligible to apply for these contracts and they have to be new build. And there are limitations on a co2 emissions per kilowatt hour which, which excludes most most thermals and any renewable plants
are eligible if they have already got an A subsidy contract. So very few other assets. So competition levels,
you know, maybe quite low and a third and very important reason is because batteries
Can for this option get the full certificate value. So what I mean by that is, of course, if your battery is just a one hour battery, because it’s been sized to predominantly provide FCR, then it can still get a contract. But usually the value of that contract would be much lower, it could only get a proportion of the revenues, because it can only export for one hour and not the full 10 hours. But there is a particular exception to this, which is relevant in this auction whereby a battery can declare itself as being available for the full 10 hours, if it in parallel has this SCR contract. So So this means that usually in our business model, we be looking at a couple of thousand euros a year from the capacity market. These auctions could well deliver 10s of thousands per megawatt per year. So this is really key and obviously it’s a long term contract. So a great opportunity for batteries.
I’ll just touch briefly upon network charges. So unlike in Germany and France at the moment, you don’t get any abatement from paying network charges and taxes. So that can be an important element. And for this to get around this, there are various solutions that you could look at, behind the mesa co locating with with the generation plant and a certain sort of metering arrangement and contract arrangements can really save and this as well as otherwise looking at your your cap X and X values can can have a big impact on your project.
So out of all of that, Is it tasty?
Well, yes, the right baked project can certainly be tasty to the right kind of investor. And that kind of investor would be one that’s willing to adapt to the match market. So with this recipe,
The main ingredient is FCR. That’s a much revenue that’s going to put off any non-recourse Senior debt providers. But we’ve also baked in that seven year contract for the capacity market. And of course, depending upon the value of that, that could be really a key ingredient for attracting equity investors. So I want to just emphasize to you that, yes, they’ll be further yearly tenders for these long term contracts. But this year’s auction is going to be particularly attractive. And if you have potential projects that you’re looking at,
you should really consider looking at that very rapidly. It’s got a close deadline, it’s the 12th of December for the final bits. Although in a couple of weeks, you’d have to put in an initial expression of interest.
You don’t need a planning permit. You don’t need a grid connection. So there’s there’s very little information you just need confidence in your business model.
And we’ve done a full regulatory review of this. Certainly get in touch if you want to know more about that.
thank you very much. Very interesting presentation. So we already have a couple of questions being the q amp a box. So we’ll go with go back to votes. After all the presentations have been delivered.
Then next topic we can have up here, present.
Hi, everyone. Can you hear me? Well? Yes. Okay, great. And so maybe before I started jumping in the presentation, a few words about Laura. So can you jump into the next slide, please?
And then the next one.
are a modeling and analysis company that provides provide specialized insights into the energy market. So we serve clients in mainly three ways. So the first one is research and publication where we provide for market forecasts, we’ve all main variables of interest to the market. So such as capture prices, based on prices for a mix, generation mix, and so on. We have a more bespoke way of working with clients, which is effectively consulting. And here what we do mainly is 84 80% of what we do is transaction support. And the rest is policy engagement and policy,
policy management. And the last way in which we serve our clients is software as a service. So we use our tools to automate most of the valuation that we have in the markets. And now, all those forecasts rely on the model that we have a Torah which is a pan European model, basically
That’s emulates the power agree that we have been level. Right.
Could we go on the next slide, please? So that’s just a subset of clients that we work with so many utilities, the financial sector policy and regulators. And then we also have an oil and gas practice because we also do or internal forecast of gas and commodity prices, we have a general equilibrium model to do that. And we battle tested with
companies in the sector such as shell and DP, or which we provide outlooks. And can we go for to the next one? Yeah, let’s keep this one.
The next slide, please. Also, let’s keep it to. Yeah. Okay, so now, let’s talk about the role of batteries in the French for markets. So first, I want to present a bit the French market, the overall picture of what’s up what’s changing in the market since January after the end
announcements of the PP, which is the multi multi annual energy strategy that the government has been raising our consultation at the beginning of the year. And so could we go to? Yeah. So, the government has been releasing that strategy document which basically sets the objectives for the next 10 years to the next decade, on how we should
base how the market will evolve. And here we present the main six objectives that will have an impact on the foreign markets. The first one is the basically reduction of the share of nuclear to 50% by 2035. The second one is carbon neutrality by 2050. And here, we can already see that basically, reducing nuclear while
ensuring that emissions go go down is quite a tricky conundrum.
few other objectives are keep closing for consumers, especially after the yellow vest movements. This is really important for the government’s ensure security of supply phase article and avoid avoid building new thermal plans. And can we get to the next slide please? So, the last three objectives are quite tricky to square with nuclear reduction, because if you phase out a lot of firm capacity in the system, such as nuclear capacity, the remaining coal plants and you state assists, specifically that you don’t want to build new thermal plants in the system, then you will have a security of supply problem and this is what I show here on the right hand side. So if you look at the total series is capacity that the French market has today. So by total directly capacity, aim in the capacity that’s effective for security of supply. So for instance, a gas plants would have really
Hi, there eating factors. So roughly 90% of its capacity is providing security of supply, whereas a solar panel would not provide that Secretary of supply. And that’s really important because if you decommission a lot of firm capacity, and you install a lot of more of renewables, you will need some backup capacity. And that could be in most countries, what would people do they would install CC GTS, but since France as their stated objective of avoiding of building new thermal plants, you will have to find alternative solutions and batteries. This is where a battery is coming, basically. So great. Can we go on to the next slide.
So the government plan is to increase a lot of renewables in the next decade. So the announcements has been controlling officer capacity by 2030 tripling of onshore wind capacity and then ramping even more offshore wings after a successful Dunker auction. And now at aura we don’t believe
Those deployment rates because for different reasons that I won’t go through here, and we adopt a more sensible viewing or central forecast, which sees basically a slower ramp up of renewables
Can we move on to the next slide? So now,
why is that important for batteries everything that I mentioned? Well first, in terms of security of supply,
I will show here on the left hand side, the ability of the power system or the evolution over the next 15 years of providing for the peak, and what we can see is that if we decommission 11 reactors of sorry, 14 reactors, nuclear reactors by 2035, we decommission the four remaining coal plants. We installed a lot of renewables but those renewables don’t provide a lot of secretive supply. And then we had also a given amount of interconnectors. Well, we can see that
The total amount of directed capacity by then will be lower than what it is today.
And that’s quite important because if you think about electric vehicle penetration in the system, well, they made add up to the peak demand. And it means that in a context where you don’t build thermal plants, you will need some new technologies to provide that peak
capacity. Now, there’s different factors which are important here. And I decompose the curating of interconnectors because interconnectors are inherently
volatile in terms of circuit security. Typically, it depends a lot on the capacity mix in different countries. And we are evolving towards a more a world with more renewables, meaning that the directing factor that you will apply to interconnector could vary substantially from one year to the next. So today to rating is around 56%, but maybe it’s likely that is going to go down
quite substantially in the coming years.
Okay, so I’ve mentioned the ability of the system to provide for peak demand. And I think there’s some space here for for batteries to help with that regard. The second part of the equation is the system flexibility need will increase. And that’s
basically the results of more renewables in the system, meaning that you’re picking and ramping needs will will increase in the system. And as you deploy more renewables demand is more versatile and based basically your residual demand. So total demand minus your intermittent renewal production
goes down, but the volatility of it increases and this is what I’m showing you here. And again, batteries are really flexible and could provide for this service.
Great, can we go to the next slide
Want to talk about frequency regulation here? but more about arbitrage? Are we trying to comics or batteries? And how does that stack up today? Can we go to the next one. So one of the direct effects of more renewables in the system is price volatility is going to increase. And that’s really important for batteries. Because as volatility increases, the daily spreads increase. So what we shown here is the P 95, and p five, evolution of the wholesale price. Those are the lines that you can see here on these tribes. And you can clearly see that
the difference between those two lines increases in the forecast horizon. Now, on the left hand side, I’ve also plotted what’s the distribution of prices, I’ve been the prices between different brackets and you can clearly see that as as you go, and you install more renewables in the system.
can see prices will divert, you have more instances of prices are basically above 80 euros per hour and more instances also have prices of under 20 euros per megawatt hour. Again, that’s really interesting for batteries because arbitrage profits will increase in such a world. Now, the overall trend of the market is conditioned by two things. So in the 2020s, we have basically French export strategy, a lot of renewable capacity added up not so many reactors that are the Commission’s because most of them with the commission in 2013. So that basically means that prices would would be roughly stable increasing your bid due to commodity prices. And then in the 2030s, as you decommission more nuclear reactor and gas and commodity prices, because then you would see an increase in the base with price. Can we go on the next slide. So now here, I want to
What’s the impact of braces on an arbitrage case for a two hour battery? As I mentioned before, the direct implication of a more volatile system is that your daily spreads are increasing and this is what I show on the left hand side here. So, what you see here is a distribution of the data spreads between 2030 sorry, between 2025 and 2035. And we can see that the spread increases and that translates in operation revenues increasing throughout the forecast horizon. So we forecast at our in our central scenario and increase off 100% between 2020 and 2030 of net operational profits
here and this
this calculation only takes into account
the day ahead market, another balancing market, so few words trading and balancing markets, as well. You would have higher revenues than that.
To that you can sum up has mentioned before the CM capacity contract the seven year contracts, which is very interesting for batteries. Also, because since it’s a seven year contract This will reduce financing costs.
And can we go to the takeaways? So I think the main takeaways are well, the French foreign markets provides a really secure system as of today. But as nuclear will retire, we will see a growing need for backup Flexible Capacity and batteries are a good technology to provide for this given the context of not building new thermal plants. And as you increase renewables in the system, price volatility increases and that’s make makes a better case for the battery battery business case. And finally, as mentioned earlier, the new long term sim auction will help to build batteries because as mentioned,
Previously also in the first presentation ready, a few plants can participate in this auction given the limits of 200 grams per kilowatt hour of emissions, which means that basically, batteries can participate in DSR mainly. And we think that this will have battery to come into the French system.
Great. So if you have any more question there about or poor market focus for France, or specific topics, don’t hesitate to contact me or put the email here.
Thank you. Thank you very much.
So again, more questions coming in. So I want I’d like to remind everyone who’s watching these webinar that you can ask questions, just go to the q amp a box and pose your questions. And then next up will have current theme. So if you could share your presentation contain. Yep.
You start going down
I can hear you perfect. Can you just one one more thing? We will definitely send you the slides. I’ve seen it asked a couple of times and we’ll send them to you.
early next week. Okay. Over to you for anything. Sorry. Yes, Goddess, can you She may say, Well, ladies play fine. Yeah. Okay. Okay. Okay, fantastic. Right. So thanks, everyone. And thank you, Sharon Germania for sharing. It’s really interesting to see. I mean, we’re free consulting company that we’re looking at started and we have three different us. So very exciting, excited to chat this and points in my presentation that you’ve already tackled. So I’ll probably go faster in them and I get a chance to spend bit more time on on other other other years.
Well, essentially, I had keynote rising in two words, is a consulting company that the only energy storage since it was
created 10 years ago and we do two things. One is marketing.
analysis. And the other thing is technical consulting. So you can see us as a small Bloomberg on info storage. That’s the market analysis part. And technical consulting means we help customers size design and storage projects and do the due diligence.
We have an efficient berries and we have an efficient moment since last year to mainly reach the Caribbean and Latin American market.
Right so I had done to talk about four different things today. So first, during a very, very short brief of the status of the market. Then I’ll take on something which is a kind of the historic market for France, as good as a souvenir.
There’s too much on the third year to collate and get into the fence which has been tackled. So it’s been this time on that item. And then you can Ingber teaches for storage.
Just looking at France overall, there’s two real markets in France for storage. One in the is the container to market and the other one is the islands. So the islands is actually for Esther, the French market is the first market. It’s started in 2012 with the first people storage auctions, and I’ll get get to it a bit later and now is there’s when there’s also when storage projects. There’s also centralized storage projects without renewables in the French islands. And then in France. There’s the projects that you can see on the right hand side of the screen, which are for some demo demonstration projects. So not really a commercial based and like the LT projects. You have some other demonstration projects and the first commercial projects, which have been installed earlier this year. By all to provide frequency regulation in the Bay Area.
New and NW energy you also have the announcement of funnel so that’s really related to the congenital French market that will discuss a bit later and the islands they also call the zoo none none interconnected in an interconnected zones who said and I very often and and these are these are these two markets today
right so I get it get a few minutes on the French islands there’s two opportunities to install storage co located with renewables in the French China’s. The first one is period for storage the first auction was back in well, and what storage does here is that it smooths the PD production and it provides some deep power so it means that you have two hours in the evening where the battery injects power into the grid and gets actually a bonus of 200 euros to begin with our to promote
Disco. And it does also some ramp rate control. And there is some voltage regulations. There’s a very, very specific tender framework for this, which is very specific to the island because they plan to go health, renewable by 2030 from correct or 2025. And that’s very ambitious plan and they need it’s changing for the islands, the French islands to integrate renewable energy. And there’s also a lot of forecasting requirements in the PDP storage auction.
This auction is a is made on a regular basis and it’s a historic market. Another opportunity in the franchise is to win plus storage DRF. It’s one of the last feeding terrorists in Europe, actually, which is a 250 euros per megawatt hour for onshore wind. So that’s quite a good tariff. It’s been set up a while ago and it’s it will probably be revised or cancelled someday. So this
is, is still is still there, but it’s endangered because the territories are seen by the regulator as too expensive.
Essentially what storage does for when is that it’s a bit like peeling, meaning it helps ETFs SGI, which is the utility in the islands to forecast winter generation. And that’s what you can see here. There’s a corridor essentially, around when the forecast which is, depending on the year between 1510 or 20% of the forecast and storage helps the generation match the forecast. So when you go out of these forecasts, you just paid for penalties. So sometimes if there’s two long deviations that were not forecasted, you will pay for penalties.
So that’s, that’s it for these two opportunities with renewable storage. Once again, very specific to the area and
And to their very ambitious renewable targets.
And the PDP storage tenders here you have them so the first one was in late 2011. And there’s been free since and two new new tenders have been published this year. So in June, for two people storage auctions one, so, the volumes are relatively constants 50 megawatts usually 60 megahertz here. And there will be two new ones to one which is you submission December’s and 19. And once you do submission in June 2020 with 50 and 89 million worth of TV to give you an order of magnitude. The minimum requirements for when we go with a period in this RFP is 0.5, megabit up storage, 0.5 megawatt hour of storage. Actually what people tend to build is one almost when we get with our storage 0.8 when we go with us
storage for omega with a P. So that’s to help you relate from PV volumes to storage contest. So that’s a very good opportunity and includes very well businesses, for stakeholders, quest used to this. So that that’s a historic, historic market for storage with very long term contracts. We’re talking about 20 to 25 years contract with a DFS API, which is, I mean, which is very bankable, and you can get a lot of debt within these projects, and very competitive with very good economics.
Right. The second opportunity in the French Island is not renewable storage, but its storage standalone. So what the regulator has actually fought in the franchise and that’s it’s not very good to actually have storage being locked in a contract for 20 to 25 years in the renewable PPA because the battery might not provided during the whole lifetime of the project. What’s been
For the island, meaning if you get a 20 years run a forecast, maybe in 20 years, the battery will not be requested to inject a big power, maybe the big power will have changed. Maybe we won’t need any more in Europe rate control. So what the regulator said is that they will make and they have done actually some centralized storage auctions with services, which this services will be provided to the utility and the owner. And there’s two kind of services one is frequency relation. And the other one is arbitrage, which was very different from the renewable people storage and storage is that he reads the UTG that is piloting the project and its private investors that will get the project. So here you have we received the results of all islands earlier this year. We just have met when we could go to the island of my yet.
And here you have this beat of the project and who’s won which projects
airlines for both services in terms of megawatt of battery capacity.
And that will represent quite some volume because that’s 66 megawatt hour stories that were awarded. I am not sure if my it’s included in that I’d have to check. But
that that’s standard standalone, and you get a paid by the regulator based on your investments, essentially. So it’s very applicable as well.
Right. I’ll go probably a bit more quickly on Canada, France. Sure. Ben did a great job of explaining the the frequency regulation market, which is called FCR, for frequency containment reserve. So indeed, the French market is approximately 600 megawatt plus, plus imports. And this is a tender done on the common auction. And what’s interesting to see here, is that maybe tapping on a question that I’ve seen already in the TED books, which is why
Why are the prices different in the different zones? The reason for that is these interconnection limits can result in markets being decoupled. So what you can see, for instance, is that the Netherlands would be would have a higher FCO price than other very often because it’s the interconnection is saturated and
do the market prices higher Same for Austria, Switzerland, which tend to have lower prices than other countries.
Indeed, there are two two important things to notice on that one, which should been said which is the getting everyone together and the rules in terms of duration in terms of capacity. And the second one is that there is there are the regulators are considering an inertia criteria. Is is necessary for the for the country’s to handle the stability
So this market is quite new compared to the franchise and we said franchise and not starting 2011, France joined the FCM Corporation in 2017. And the rules, the accurate tools for batteries were on the issue the first draft last year. So it’s a it’s just a starting market to give an order of magnitude, there’s three or 400 megawatt of storage in Germany that provides this service. So we can expect that some reasonable capacity will be deployed in France. However, the prices decrease and I will go further on that. But because you’ve seen this this exact same here, so it’s great we can see we have the same results so I mean, it’s positive different consultants have a similar similar views on the projects and then the revenues and of course, the capacity market contracts which are which are very interesting
thing to handle and to get, take all the decreasing FCR prices
Finally attach on the what’s next for storage. So we’ve we’ve discussed the franchise and concerns of fans of car and capacity market but there’s a very close opportunity which is the seven year contracts because in France to know it was one year contracts for the capacity market this year that will be for auctions. So because it’s going to be t minus for auctions for those who are familiar to the, to the UK capacity market, it’s kind of similar, but this year because it’s the first auction we will provide a T minus one so when your head that you made is due to your head that you ministry in tomatoes for so that’s that’s for actions, and there will be tomatoes for each year in the coming years.
There’s other services that we’re looking at that are interesting for storage, that might not be as
as important so it might be that it’s only secondary revenue streams and that we have
FCR always being the heart of the revenues, but in terms of secondary revenue streams will it’s interesting to look at what it what the cheer so Etienne energy is the DSO distribution system operator are doing, they’re essentially in the process of, of the delivering public their, their congestion on the grid, and putting some services
therefore, for that storage could provide some services for flexibility. But now we’re talking about local flexibility. Whereas if car there’s no value for location here with the value for location to help the distribution and transmission system a beta with with look with their condition and the network essentially.
So RT the these auctions can only take place in 2024 because that’s when the renewal projects we go with end its experimental barrier and they will be
should be commercial. So that time they should have defined what these products could be.
Right. So I think that’s it for my slide. Thank you very much for your attention. And feel free to to reach out to discuss any of these topics further and happy to answer your question.
Thank you very much Korean painting for your presentation. Very interesting. So, well, we have had a few questions come through the q&a box, I can see that you have been
you guys been responding some of them?
So, you know, I have one question myself, which is on the, on the, on a broader scale, which he said about the renewable targets and how the renewable deployment will actually affect demand for batteries in the French market. So what are your views on beats and I know that Dr. Manuel has always
Except that he thinks that the actual deployment will be slower. Any other views on these on these aspect of the of the storage? market?
Okay, sure. You want to start? We can Yeah. Thank you,
gentlemen. Um, so yeah, so that the the synergy between renewables and batteries
in the regulations is not there really at the moment. I mean, there’s there’s an allowance for for PV plus storage a mainland France, but
but that the synergy isn’t there at the moment, but there are some important steps that are happening to
to work on that. So this recent roadmap by the regulator, the core, has some details of this. For example, great connections for forward
Miracles coach, but they’ve festival they’ve confirmed that those great connections about your projects will not have to pay a special sort of one off payment that is required for renewables. And also that if you are hybridize in a plant,
you may be able to get lower connection costs as a result of that.
And there’s a lot of discussion about clarifying the relationship between wind and and batteries. So I think
the colocation of the two at the moment is just it’s a bit of a mess in France, and there’s not a particular incentive to do it. But there well could be an incentive in the future. And I wouldn’t be surprised if we move towards a system where you’re actually required to provide certain services when you build a renewal plant. So I think the two will, will become more hand in hand but at the moment that the pathway to get there is not very clear because the regulations
That they’re not fit for purpose amendment to do that.
Yeah, I think a word servant said that if I can add, indeed today there is no really business case for storage to to be doing anything we renewable except that we see that it it will be complicated, but naturally to to be used to integrate when your votes just complicated because developers will have their side they might have a interconnection they might save on the on the grid feeds. So you will see storage being co located with renewables. But today, there’s no real, real possibility and real interest for this beyond the existing benefits of CO locating these two assets. And indeed, the good things. The good thing that renewables deployments for storage are what it will increase the
The volatility in the markets I think Germany did a good job showing that of course when you when you increase renewable on the market it increases volatility so there’s much more possibility for storage to to provide arbitrage. However, the French market on se to provide arbitrage the way we see it is that it’s me it’s not a very good opportunity today.
Happy to have you comment on this, but the revenues you showed in terms of US per megawatt per year, are still very low. And we still very have a lot of new jobs today. So maybe it will change the future. But for now, it’s not a very positive outcome for storage in terms of revenues.
Yeah, I think I agree that revenues are still low in today’s market. I guess one point to mention is, is that here I only looked at the wholesale market did not have the balancing market which is more moving from one with a different strategy in terms of charging
advancing market, which is more risky, you could get higher profit there. But yeah, I agree with your your stance.
Yeah, we’ve done some, some early analysis of revenues from balancing markets and also look to degradation factors, because, you know, in the UK market there there is an interest in doing arbitrage. Is that true? So we’ve, we’ve been involved in some throughput analysis of those and discussing with manufacturers the increase degradation. And the initial figures we’ve got, basically suggests that in today’s market, the revenue could get from arbitrage is roughly equal to the degradation basically, the additional capacity you’re going to need to add to compensate for the degradation. So there’s really no market for it at the moment.
Right, very, very interesting discussion. So let’s answer some of the questions from the audience. So one of them is really reads as the reason why the three announce projects have the same
capacities. Well 24 megawatt hours. Okay, maybe I take it because I think it’s a nice slide. Yeah, there’s a good reason for that is that it’s a LT the friendship tier. So who has a plan to deploy free storage systems to experiment and greet congestion. So the project is called renewal. If you aren’t happy to I’m happy to share more information on that as well. But essentially, it’s free demo sites, which are exactly the same Well, actually, the megawatt hour are not exactly the same, because it depends on the technologies for different many manufacturers that provide each of these sites and the idea of the big constraint for the chair. So in Europe is that they can not inject nor withdraw power from from the grid at any point in time. So this means that all injections and we impose rules of decides need to be net zero. So if you want a battery to
So that’s why they call it virtual lines.
So that if a battery somehow one battery withdrawals, 12 megawatts of power from the grid, the two other batteries, some of power will have to get to these 12 megabytes so that it’s not zero.
Another question from the audience. So what of audience per year expected to be procured in the capacity markets?
Yeah, maybe I can jump in here.
volumes. Yeah. us think that’s a key thing I should have talked about and I and I sort of avoided the question for a reason because the, the demand it’s not as simple as that. Basically, the the demand curves for the procurement won’t be known until after the auctions, so the government and RT will release them after the auctions. All that we have been told by our team
recently is that
They will look to attend approximately 2500 megawatts at nonzero values. So they haven’t told us the exact curve to getting there. We don’t know how, how low they will. So basically a demand curve is they’ll say I’m willing to procure this number of megawatts this price is number megawatts of this price. And as long as your bids when the bid stack up, they are below that they get accepted. As soon as the bids ordered by increasing price exceed that level, then they won’t accept the bids, and they will go into different types of auctions. So so that curve, we don’t know and all we know is approximately 2.5 gigawatts of nonzero values, but what they could reach to what those first couple of hundred megawatts could be accepted at. That’s information we won’t know until after after the auction closes.
If I may, I was there was also another question that was asked about the mega
megawatt hour for this for this auction as well. And I and I mentioned in their response that I would that I would answer it verbally so.
So you would,
in this sort of that there are many different ways of making up a project right for especially for storage when it can do so many wonderful things. But if you follow the sort of quite classic recipe that I’ve put forward, you would dimension your battery to provide SCR. And for that you’re for one, you know, per megawatt of SCI, you’re looking at a bit more than one megawatts maybe like
one point 15 1.1 point 20
megawatts in power, and an hour or a bit less than an hour in in capacity. The I won’t talk you really through the details of the certification process that that actually sort of finalize those numbers but that’s roughly what it is.
And there is in a typical auction for the couple
The market is just not going to give you enough value for you to size your battery to provide the whole response at 10 hours. I mean, that’s just not valuable. But
so so basically your sizing will be dictated by the car requirement, and then you’d get whatever you could get from the capacity markets. What I’ve said here is that there’s a small window of exception of this where you can get the full value, even though you can’t be available for the full 10 hours, because obviously, all your battery will be drained within one hour. So So at the moment that there’s a there’s a clause that’s allowing you to be exempt from that. So basically, a battery is going to be around one hour battery.
Right. Okay. Thank you very much. So, another question. So what are the incentives or behind the meter energy storage, on grid behind the meter dollars, we bundled with grid frequency and capacity services
can be maybe a
Southern this one, there’s a there’s one thing for for beyond the meters to today, which is a self consumption tender and their batteries are explicitly mentioned in the standard. However the burners so that is given to, to to,
to be theirs to consume electricity from the battery is very low. So in other words, there are some self consumption tenders or bidders that do have deliver storage or systems. But this the economics for this on that very good. So this is this is one incentive and it’s happening. Some industrial sites and friends are bidding for this and having these are behind the computer storage systems. There is also that’s one second there is some some a transmission fees which is called TURP. European in France. incentives for some large sites, and there are some possibilities for a couple of sites to reach
use their transmission fees by getting a better split in terms of utilization of the of the grade in terms of our situation. But that’s very specific. It’s not a very large incentive.
And lastly, so that’s two, there was two in the last thing you can do. From behind the meter action, you can provide all the application that you can provide in front of the meter. So FCR, with mentioned capacity market, all of this you can do from behind the meter. And you can have reduced reduced charges, because you’re already on an existing site, which really pays for the fees depending on a new site. So there’s indeed an opportunity to have a storage system behind the meter to deliver the same services. We mentioned FCR capacity market, and adding a bit of electricity bill management.
Thank you very much.
corrupting. So, I think we are well, I think we have time for one more question. So let’s speak it wisely. So, right, they say, question by David, I hope in the UK after the blackout nice August, it seems that they want to promote PB waiting for storage and all the ESS to help balance the Greek is that the case and cranz all the word opportunities for the man responds. Key is energy storage solutions. So I know you have already mentioned that co locating projects is not a normal thing in France is not. There’s not enough incentive to do that.
But you know, what are your views and weeks?
So I guess there’s a differences between maybe a verbal level between France and God. So first gap is much less interconnected.
interconnected with neighboring countries and France, so that the need for this is much lower. If you look at at interconnection in France and also the fact that we have a lot of hydro, they’re simply completely different markets.
So, yeah, that would be my my answer.
Yeah, I mean,
so the blackout in GB really raised the question about
inertia speed of response, whether or not all those recently built battery projects actually worked.
The and this is Yeah, quite quite a different issue in France than it is in in GB in GB. The batteries did actually kick in very well, after that response.
There were there was some very particularities that the cause that blackout particularly on the offshore wind farm
We’re whose settings weren’t correct. So it basically made the made the generator trip off when it when it shouldn’t have tripped off. So there was some bait, you know, some particularities there but whereas in the UK they are looking for alternatives to procure a very quick acting and NASA type response in France RT have been very clear that they don’t need this but i think
i think we could have changes there in the future when we look at phasing out. I mean, it’s, you know, it’s one of the elements of this phase out of, of nuclear, we’re not wanting to build new core power stations that PI was talking about, its, you know, for the foreseeable future know, if you look at the graph of frequency deviation in France, it’s a very, very lovely narrow band around 50 hertz. If you do the same thing for Ireland, which they’ve just actually closed, their first tender for for very fast acting batteries. And you look at the same the UK you see quite a quite a wide spread in in frequency.
So they’re much more vulnerable to
two blackouts caused by Yeah, by systems dripping by the frequency dipping too quickly. In France, they don’t have that. And we’re probably looking
well, we’re looking to 10 years in the future until that’ll probably be an issue basically, until that until enough nuclear power stations come offline.
And ligament and that that exactly. I mean, we’re in you can see us in continental Europe as being all so much interconnected and sharing the same inertia sharing the same frequency whereas Great Britain is DC is connected for DC links. So they don’t have the same frequency as we do in the dissemination. But what happened really is my understanding of it having taking a look at the the reports is that there’s two following summer lightning there’s two plants that have kicked out the wind power plants and the CCTV plus some demons
The summer generation that will do this on the distribution system. And actually, if you send all of the plans that get disconnected because of issues and they’re under connection in their settings, it’s larger than one gigawatt. One gigawatt is the amount of freezers carried in the UK, because it is the largest power station of the UK, it says will be. And what happened here is really
the batteries, the oxygen, so there’s 400, I think, and 17 years of battery that kicked in to respond to this frequency bias. But it was just not enough reserves that were being procured to deal with this constraint because no one had ever imagined the system is not sized to deal with more than we’re getting bigger, worthless. So here we had more than one gigabit loss. I think it’s one point for the year worth of loss overall. So in France and Europe, it’s figure what the maximum reserve sizing criteria which is for all of us.
Europe interconnect in Europe. So in France is 500 megabit. So essentially what happened is not is not an issue with
with the services provided, it’s an issue with how the the system is sized, and how the reserve criteria is designed. So it’s just as if tomorrow we were maybe the UK would increase its reserve criteria, or double check all the settings of all the plant but it’s an operational constraints rather than an equipment constraint, it doesn’t mean necessarily that you can need more batteries just means that it needs more frequency response or better settings in their power plants to ensure this doesn’t happen that several power plants drop off in the same time
going, according thing, thank you very much for your answer and
Yvonne. I think, unfortunately, we need to end the webinar now because we run out of time. Thank you very much.
for being here and thank you for all of you that cnet’s today Do you have any parting words for the audience in Torrington you fast if your microphone is on?
Okay, well, yes the concluding words I mean, the French is a so in Europe there’s in terms of large markets Germany was the first one to kick in the game 716 the year for tender and now has the largest amount of storage in Europe and France, France is is the next one it’s a very interesting option so happy to discuss any projects any revenue streams and savings.
Thank you. Nice you bought any last words for the audience? Yeah, I mean
you know, batteries just keep surprising us don’t know if anybody’s been following the Irish auction. They’ll be you know, amazed again at how low those battery prices can come in. And I you know, what low revenues that they can, that they can they can provide some
This is that so, you know, it’s really exciting to see a few opportunities open here in France and a lot of activity regulation wise going on, a lot of things are in motion that, that neither content or I have had the time to, to, to express in it, you know, it’s so much more detail that’s an opening of secondary markets and things like this. And,
and I really think now we just need some people with guts to come in and kind of build some projects here.
Thank you. Yeah. So I think I give you both us We definitely start to see batteries coming in the French market and for different reasons, we will see them growing in the future. So I think it’s quite exciting to to start thinking about batteries now. French market.
Great, thank you very much. Well, as I told you before, so you will get the presentations and you will get the recording. So don’t worry, you’ll get it early next week. And thanks
you very much for being here. You can always go to apa Insights, calm and see the webinars that we have coming up we have one on a very different market on the battery market in India. So if you’re interested in that, go to our website and sign up. So, see you here next time and have a good day. Bye
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