TBEA expects 3 GWh demand for storage projects in Brazil’s 2025 capacity auction

Brazil’s planned 2025 Capacity Reserve Auction (LRCAP) – intended to contract energy storage to meet electricity demand during peak hours by evening out the supply of intermittently-generated renewable energy – could fire the nation’s large-scale energy storage market.

TBEA Sales Manager Daniel Lyrio has told pv magazine the company expects demand of approximately 3 GWh in the auction but it is worth noting an LRCAP planned for gas-fired thermal and hydroelectric plant capacity in 2024 never took place.

With Brazil’s energy storage market set to be worth as much as BRL 7.5 billion and 5 GWh of capacity through 2027, demand could be high for the 2025 procurement exercise.

pv magazine: What is the market potential for energy storage in Brazil, in megawatt-hours and investment value?

Daniel Lyrio: TBEA considers that Brazil’s market potential is estimated at 5 GWh for the next three years, considering that we have the auction in 2025, with an average market [battery project] value of BRL 1.5 million/kWh, the number to be invested is around BRL 7.5 billion.

Which applications should lead the adoption of energy storage in Brazil? Commercial alongside generation and transmission?

Commercial and industrial, [as] the use of storage for demand management and energy bill savings is a promising application, especially in companies with high energy consumption; along with generation and transmission, for grid balancing, power backup, and stability support. Energy storage, alongside renewable generation projects, is one of the main applications.

Curtailment and constrain-off [of excess renewable electricity] will also be two major innovative opportunities for the growth of storage systems, alongside renewable sources.

In what cases is energy storage economically advantageous? What could make other applications more competitive?

Backup for renewable energy. [Energy] storage systems combined with solar and wind generation reduce the impact of intermittency [in generation], making the solution economically attractive. Demand management for commercial and industrial users. Savings obtained by avoiding tariff peaks make storage a viable solution.

The LRCAP 2025 should require a minimum sizing of 30 MW/120 MWh for energy storage projects. What is the approximate investment required to deliver a facility with this capacity?

A storage project with this configuration requires a substantial investment. For lithium battery systems, for example, the cost per megawatt-hour [of storage capacity] can vary between BRL 1.5 million and BRL $1.8 million, totaling an average of around BRL $200 million, although this number will vary substantially according to the size of the project and the tax benefits involved.

What variables influence the competitiveness of projects and which configurations can be more profitable?

Some of the main variables are the cost and life cycle of the batteries. Batteries with a higher number of cycles are more advantageous in the long term. In addition, location-related and [wider], regional tariffs also impact the competitiveness of projects. Regions with higher energy costs are more suitable for [energy] storage.

Configuration with generation projects and the provision of [grid] ancillary services can also be profitable, with the provision of services such as capacity reserve and rapid response, to the market.

And, of course, strategic suppliers.

What is the expected demand for this auction?

We estimate 3 GWh.

What battery technology and configurations should be adopted in these projects?

The AC [alternating current] coupling technology must be adopted in the auction since, with the need to increase power in the system that is the object of the contract, DC [direct current] topology with coupling in new or existing solar plants will not meet this demand. As for the technology, large capacity and the long track record [of] lithium-ion batteries, type LFP [lithium ferro-phosphate] – with liquid cooling to increase the useful life – [will be] the star of this auction.

pv magazine webinar

On Dec. 11, 2024 pv magazine will discuss different scenarios for the expansion of battery energy storage in Brazil, with a realistic view of the viability of such projects. TBEA will bring case studies from large energy storage projects installed by the company around the world, showing the potential to replicate the model in Brazil. pv magazine will also look at the variables that can make these projects more, or less competitive. Register now!

From pv magazine Brasil.