Britain's market for battery storage and flexible, distributed gas power will grow by approximately £6 billion between now and 2030 to bring an extra 13 GW of generation and storage assets online, according to Aurora Energy Research.
The firm predicts that balancing and ancillary power markets will double in size in the next 12 years, to approximately £2 billion per year, largely driven by the buildout of renewables, meaning that flexible assets such as reciprocating gas engines and battery storage will have new revenue streams.
Key emerging opportunities will be the direct trade in balancing and wholesale markets for developers and the coupling of batteries and renewables or electric vehicle charging off-grid, according to Aurora, although the firm recommended investors diversify between renewables, batteries and gas generation to avoid overexposure to individual risks such as varying solar or wind output, plant outages and commodity prices.
"Investors can protect their returns by adopting a mixed portfolio of renewables and flexible generation assets such as gas engines and battery storage," Felix Chow-Kambitsch, Aurora's head of flexibility and battery storage, said in a news release. "Gas engines and renewables provide a natural hedge to one-another — lowering the volatility of investor returns on a year to year basis."
Flexible and distributed assets are becoming an increasingly larger part of power systems in other places as well due to the need to integrate and balance intermittent renewable generation. Gas engines and batteries currently provide 40% of frequency response contracted by U.K. transmission system operator National Grid PLC, according to Aurora.
The firm also highlighted recent developments that have impacted the business case for flexible and distributed assets in the country, including low clearing prices in capacity mechanism auctions, declining prices in the frequency response market and a drop in payments to small embedded generators.
"Ongoing reforms will soon allow the participation of small-scale distributed generation in the GB-wide balancing mechanism — opening up this market to a number of new participants," Aurora said. "Similarly, ongoing reforms led by National Grid will open up access to ancillary service markets — enabling stacking of revenues across multiple markets."