AleaSoft and Deloitte: Spain on the brink of a battery boom

Reducing the cost of batteries and co-locating them with renewable energy generation facilities will be key to increasing the profitability of clean energy projects, according to Madrid-based AleaSoft Energy Forecasting and Deloitte.

AleaSoft said batteries will also firm up grids and reduce the curtailment of excess clean energy, adding that will be “essential to further boost the development of renewables,” particularly in Spain.

“In Spain, the National Energy and Climate Plan (NECP) sets a target of 22.5 GW of [energy] storage capacity by 2030, of which approximately 9 GW will correspond to batteries,” AleaSoft has stated. “Currently, requests for access to the grid, for [energy] storage, are around 20 GW, of which 11.8 GW of projects have already received authorization although they have not yet been installed. In addition, in Spain, aid has recently been granted to 41 battery projects, of which 35 are autonomous plants connected to the grid. This indicates that the sector is ready to develop batteries although it awaits greater profitability, especially in the case of autonomous projects.”

Regulatory support such as grid capacity payments, which already exist in the United Kingdom and are expected in Spain in early 2025, could help increase the profitability of battery projects, said AleaSoft. However, most battery revenue will continue to come from energy arbitrage – charging batteries when electricity is abundant and discharging during peak demand periods – in Spain, the analyst added.

“The first battery projects to come online will also generate revenue through participation in [grid] ancillary services, although these revenues will be limited by increased competition, given that these markets are small in volume,” said AleaSoft.

Financial services giant Deloitte has published internal rate of return analysis using different price-spread scenarios.

A solar and battery system with a capital expense (capex) cost of €150,000 ($163,000)/MWh of capacity would start generating positive returns with intraday electricity price spreads of between €40/MWh and €45/MWh, estimated the accountant. In the case of standalone projects, the capex of the 35 projects that have recently received aid in Spain was estimated to be around €250,000/MWh, before grants with an average value of €50,000/MWh. That makes for a capex, after grant support, of around €200,000/MWh. For a project with that level of capex to start generating positive returns, intraday price spreads of around €70/MWh to €80/MWh are needed.

AleaSoft and Deloitte say the Spanish market will experience five years of intense BESS development, similar to the current demand for solar projects. Initially, BESS demand will be driven by solar-plus-storage sites before developing into a strong standalone BESS market, the two organizations predict.

From pv magazine Italia.