Aurora: Battery storage, DSR and peaking plant to hit 25GW


Consultancy Aurora predicts 10% year-on-year growth of flexible generation, taking installed capacity to more than 25GW by 2030.

While there are risks to that forecast, the firm believes that tight supply margins will create sufficient revenue opportunities for such a substantial volume of flexibility – which includes demand-side response (DSR), battery storage and decentralised peaking plant.

As such, it predicts compound annual revenue growth of 13% over the same period.

“The past few years has seen a substantial increase in flexible and distributed capacity in the GB power system. This is set to continue in the coming years due to the power market remaining relatively tight, combined with the growth in intermittent renewables,” said Ben Irons, executive director at Aurora Energy Research.

“We expect to see rapid growth in battery storage, peaking plant and demand response capability – reaching a total of 25GW installed capacity by 2030. Indeed, the rapid growth in battery storage capacity could quickly saturate the Frequency Response market, with prices falling significantly by 2020. Battery developers will need to look beyond this to alternative business models such as trading in the wholesale and balancing markets or co-locating batteries with renewables.”

Although FFR revenues are predicted to fall due to cannibalisation, arbitrage models which exploit market price volatility could become a significant value pool in the 2020s, according to the consultancy.

While price volatility varies from year to year, a typical peaking plant would have earned nearly three quarters of its annual profits during the 10% highest priced periods in in 2016/17, according to Aurora. Profit margins for peaking plants were four times higher in 2016/17 than the previous year due to a combination of tight capacity margins, cold weather and plant outages.

Whether future years continue to follow that pattern is an unknown. But Aurora said it expects de-rated capacity margins to remain low over the next ten years, decreasing from around 4GW today to just under 2.5GW in 2030.

Despite predicting gigawatts of flexible technologies coming on stream to capitalise on resulting price volatility, Aurora said its modelling suggests significant scarcity ‘uplift’ will remain in the market out to 2030.

While growth of flexibility will depend upon variables including the penetration of renewables and electric vehicles, as well as how smart EV charging infrastructure can be made, Aurora forecasts a flexibility market worth £3bn in annual revenues by 2030.

Although flexible technologies compete directly against each other, the consultancy said it was ‘not a winner takes all market’, with different technologies able to provide different services.

Aurora was one of the contributors to The Energyst’s new, free Battery Storage Report. Download it here.


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