Although renewable development is necessary and desirable, it brings with it a few problems of which the most important is the growing risks of inadequacy and interruption of the electricity supply due to a significant reduction in the programmable capacity available for the electricity system. Storage systems are the most suitable solutions and in this framework the batteries, in addition to long-lasting application of pumped hydro, are the main technological enablers thanks to their technical characteristics: TSOs, DSOs, energy producers and investment funds are increasing their activity in investment evaluation in a market that is expected to boom in the coming months. The batteries market is predicted to experience exponential growth worldwide in the electrochemical storage market, quantified at more than 1,200 GW in the next 20 years. Europe and the UK alone are expected to have some 5 GW of batteries installed in 2023. In this context, while waiting for the price curve of battery modules to continue decreasing at a pace of 6-7% in the coming years, the regulation to come at national and international level is fundamental.
A multi-disciplinary and multi-client study to analyze different points of view
Hence the idea to tackle the market with a multi-disciplinary team to address the issues relevant to batteries: market, regulatory, authorization/permitting, together with the development of business cases with the proper technical configurations. This was possible thanks to a great synergy at Fichtner Group level, in particular leveraging the know-how of head office in Stuttgart as well as the experience available across the Group thanks to a track record of more than 800 MW in BESS, and thanks to two expert firms participating in the study: Storage Solution Provider, a battery service provider located in Italy, and Legance, an international law firm very effective also in terms of permitting issues. The ability to cover a broad perimeter of analysis was a key factor in allowing us to set up a multi-client study that gained the interest of eight top tier participants in the Italian market under the umbrella of “Elettricità Futura”, the main association of the Italian electric sector, accounting for some 700 firms including manufacturers, distributors, wholesalers and service providers in the energy industry. An executive summary of the study has been distributed to all the associates. The discussions held during several workshops showed how useful it is in general to share different points of view coming from the stakeholders who joined the study. Knowledge sharing and agreement on assumptions has certainly been a distinctive element of the study itself.
What is the context of battery storage in Italy and what are the expected services?
One strong booster element in Italy is the new “Fast Reserve” concept established by Italian TSO ‘Terna’, similar to the one already existing in the UK that provides frequency regulation service in less than one second. The final regulation is expected in April 2020, and auctions will follow in the summertime. We are convinced that this opportunity will greatly support chances for investors to bid in the Italian market, also because, as anticipated in the preliminary text, the Fast Reserve service will be required only for 1,000 hours, leaving the possibility in all the remaining hours to use “revenue stacking” by adding more services. Some examples are “behind the meter” applications such as time shifting and curtailment reduction, but other services to be offered to the market have also been investigated, such as primary and secondary frequency control. The potential range of battery services is quite big, and the opportunity will become more and more effective in terms of battery price reduction and regulatory development, not only regarding market rules but also referring to specific provisions to allow a well-defined procedure for the permitting and authorization phase.