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Battery energy storage systems (BESS) are becoming a key technology in the global transition to renewable energy. In the UK, government support and successful projects, such as the CfD AR6 program, are driving the growth of BESS. These projects, including a 300 MW battery at the Hornsea III offshore wind farm, show that BESS is becoming an increasingly viable and bankable investment.
BESS projects can generate revenue from multiple sources, including short-term trading and balancing services. They are especially useful in managing the intermittent nature of renewable energy sources like wind and solar. However, some investors have faced challenges in recent years, including reduced income from ancillary services and lower volatility in the wholesale market. Despite this, experts are optimistic about future prospects, citing higher price volatility and the continued growth of renewable energy projects.
To mitigate risks, some developers are turning to tolling agreements, which provide guaranteed revenue by shifting trading risk to external parties. This shift reflects the maturing BESS market, where stability and predictable income are becoming more important. Technological advancements are also driving the growth of BESS. Costs for large-scale storage have dropped, with further reductions expected in the coming years. Longer-duration BESS, capable of storing energy for hours, are proving more profitable and better suited to the UK’s renewable energy mix. By 2040, BESS capacity in the UK is expected to reach 50 GW, with even larger projects on the horizon.
While lithium-ion batteries currently dominate the market, new technologies like iron-air and sodium-ion batteries are emerging, which could challenge lithium-ion’s dominance in the future. Overall, BESS is a critical part of the global energy transition, and developers will need to adapt their strategies to maximize profitability as the market continues to evolve. |
