There are plenty of places you can put lithium-ion batteries. Most of us carry them around on our wrists and in our pockets, in our watches and mobiles phones. A growing number of us have them in our cars and some of us may even have them as sources of backup power for our homes.
On the grid, too, the lithium-ion battery is a versatile beast. Used behind the meter, batteries can help improve self-consumption of on-site renewables, and store low-cost grid supplies for use when the price of electricity rises.
On the main electricity network, meanwhile, they can help overcome grid constraints, regulate frequency and voltage, and perform energy arbitrage operations, among other functions. And there is one further area where lithium-ion battery stationary storage systems can have a valuable role: next to renewables.
Renewable energy plants pose an interesting challenge for developers and asset owners because although they are nowadays relatively easy to build, they are not much use without a grid connection. Being allowed to connect to the grid is one of the most challenging parts of any renewable energy project, so the connection is gold dust.
But once you have it, the chances are the link will not get used much. A wind farm, for instance, will only use the full capacity of its grid connection if all its turbines are maxing out. A solar plant, meanwhile, will not use the grid connection at all at night and might only use a fraction of it on a cloudy day.
Utilisation will be even lower when faults, curtailment, sub-optimal production and planned downtime are considered. But for a rough idea of how much a grid connection could be used, it is enough to look at capacity factors, or the percentage of a plant’s total annual potential output that is achieved in practice.
In Europe, typical capacity factors can be up to around 30% for onshore wind and between 10% and 17% for solar. This means that a solar plant developer could go to great lengths to get a grid connection and realistically only use a tenth of its capacity, on average, for the life of the project.
10-20% Greater capacity
Or they could choose to install battery energy storage systems (BESS) alongside the renewable energy plant.
That way, if production is being curtailed—for instance because the grid is already flooded with renewable energy—the plant can continue producing anyway, with the electricity being stored in the batteries for delivery to the grid later.
Even better, the renewable energy plant can be built so its total capacity is greater than that of the grid connection—say by 10% or 20%—with the aim of storing overproduction at times of peak output and then delivering the stored electricity after production falls.
Both options can help keep the grid connection busy even when renewable production has dropped, and this improves the economics of clean energy plants. According to consultancy Timera Energy, for example, adding a battery system to a solar farm can improve the internal rate of return of the project by up to 2%.
Co-location with wind farms is less popular because the unpredictable nature of generation means there might be times when it is blowing at the same time as it makes economic sense to discharge the battery, resulting in a need to curtail one of the assets. But it can still be worthwhile if wind energy is likely to be curtailed anyway.
And as one might expect, the value co-location is often greatest in places where there is already a lot of renewable energy on the grid, as this increases the likelihood of curtailment and the premium on grid capacity.
Which are the best markets for battery co-location?
In June 2024, UK-based Aurora Energy Research published a report on the best markets for battery co-location that confirmed this thinking—although it also contained an unusual finding. According to the research, the top four markets for renewables co-location were Germany, Great Britain, Ireland and Poland.
The first three in this list are not surprising. Germany has the fourth-highest grid penetration of wind energy in the European Union, and the fifth-highest percentage of solar.
“Co-location in Germany offers attractive revenue stacking opportunities, low grid fees and mitigation of significant cannibalisation risk for RES [renewable energy sources], despite recent less appealing innovation auctions,” said Aurora.
Great Britain got 40% of its grid supplies from intermittent wind and solar in August 2024, and unlike Germany it is an island so its options for balancing energy generation with nearby countries are limited.
“Great Britain stands out due to favourable regulation, granting co-located assets access to multiple markets and offering faster grid access for co-located RES projects,” Aurora commented.
In Ireland, which got 33% of its grid supplies from wind in 2022, the options for exchange are even more limited.
“Resulting from high curtailment risks to renewables and beneficial legislation facilitating faster grid access, the Ireland I-SEM [Integrated Single Electricity Market] is rated high for co-locating RES and battery storage,” noted Aurora.
And then there is Poland. The country got 23% of its electricity from wind and solar in 2023—a worthy achievement for a country traditionally powered by coal, but nowhere near the 67% level seen in Denmark, the 41% of the Netherlands or the 40% of Germany.
Instead of high renewables penetration, the reason for the Poland’s ranking in Aurora’s study was that “Poland boasts a strong subsidy environment with cable pooling and access to long-term capacity market contracts,” said the research firm.
Poland’s long-term capacity market revenues and novel cable pooling rules made it one of the top five European markets for co-location in terms of in terms of policy and regulation, Aurora said.
Beyond Poland were Hungary, which introduced mandatory co-location for solar PV assets above a certain size, and Ireland and Great Britain “due to the variety of available revenue streams for projects and potential benefits in terms of grid access and curtailment risks.”
Furthermore, “France is additionally considered an attractive market for the co-location of solar PV and BESS assets, as co-located solar PV can participate in French contract-for-differences auctions, which have historically cleared at high strike prices,” the research firm said.
Aurora also cited two markets to watch.
These were Spain, where recent announcements regarding potential capital expenditure support for co-located batteries “could offer a substantial boost to business cases,” and Netherlands, where talks concerning storage obligations and potential reductions in grid fees “could also enhance business cases and project pipelines.”
Publish date: 06 January, 2025