In the current context of global energy transition, it is essential to promote the flexibility and resilience of the electricity grid; in the supply of energy, reducing dependence on fossil fuels. Battery energystorage systems (BESS) are a solution to this end, for example by maximising the use of renewable energy, storing it during peak generation periods (e.g. on sunny and windy days) and then using it at peak consumption times (e.g. when we get home at night and there is no sun/wind), optimising the balance between energy supply and demand.
These systems can also be implemented to reserve capacity on the scale of the energy distribution network, in contingency situations where it is unavailable and restoration is necessary, or as part of microgrids (local energy supply networks that can operate in isolation from the main electricity network), ensuring autonomy and continuity in energy distribution in areas specifically affected by network constraints.
In this sense, EY’s new global study – Is it time to invest in battery energy storage as a standalone asset? – analyses the commercial viability of battery storage systems on a stand-alone basis, i.e. without being part of solar or wind farms, as well as the main business models. The study draws the following conclusions:
1. it is expected that by 2030, the global market for battery storage services will be 10 times larger than it is today.
2. The three main business models, associated with around 90 per cent of total revenues globally, correspond to:
a. System Services, in which batteries provide services such as frequency regulation and voltage control, contributing to the stabilisation of the electricity grid;
b. Price arbitrage, by storing energy in batteries at a lower cost and injecting it into the system when the price is higher, taking advantage of the spread between prices;
c. Capacity markets, with the conclusion of energy contracts resulting from the promotion of storage system capacity auctions to meet the potential future needs of the electricity system.
3. The analysis suggests that a typical stand-alone system (20 MW, in 4-hour cycles) with the provision of multiple services (revenue stacking) has the potential to achieve a profitability of 9-10%.
Battery energy storage plays a crucial role in the energy transition
Leading the growth of this market are countries such as Australia, with projects in operation such as the Victorian Big Battery, associated with a storage capacity of 300 MW – enough to supply energy to more than 1 million homes in the State of Victoria for 30 minutes without interruption – and the United Kingdom, with the start-up of the Pillswood project – the largest battery energy storage system in Europe.
In Mozambique, the GET FiT (Global Energy Transfer Feed-In Tariff) programme, introduced in 2022 by the Ministry of Mineral Resources and Energy, provides for specific auctions of solar photovoltaic capacity hybridised with battery storage systems. These auctions, currently under development, represent an important milestone in the decarbonisation of the Mozambican energy sector, stimulating investment in projects of this type and subsequently leading to the diversification of the national energy matrix – however, in order for this market to develop in line with the trend seen in other countries, it is essential to bear in mind that:
1. Clear and granular regulations are key to investment decisions, allowing for more comprehensive tariffs and frameworks for these assets than at present
2. Revenue stacking, with the possibility of supplying multiple services, is critical to the economic viability of these systems, enabling a return on investment.
Energy storage in batteries plays a crucial role in the energy transition, leading to a better match between electricity supply and demand and opening up a range of financial and strategic opportunities for the Mozambican energy sector. Are we facing the advent of this market? The evidence shows that we are.
You can read the EY study here: https://www.linkedin.com/posts/ey-parthenon_battery-energy-storage-systems-bess-activity-7201841263808012292-jHqg