How to qualify for energy storage grants in Spain

Jon Ander López Ibarra tells pv magazine about the obstacles to, and cost-effectiveness of storing energy in Spain and about how energy storage can be the first step toward a more robust grid. The Jema representative also discussed the criteria laid down by Spanish government body the Institute for the Diversification and Saving of Energy (IDAE) for participating in an energy storage grant program.

pv magazine: Do you think that, given the current situation, energy storage is profitable in Spain?

Jon Ander López Ibarra: Currently, energy storage in Spain is not profitable on its own, especially in standalone projects, due to the high investment cost and limited revenue from energy arbitrage [charging energy storage from grid when the electricity price is cheap to discharge when it is high]. Although batteries are cheaper, [the limited returns are] because the Spanish electricity grid currently lacks the means to extract benefits from the various grid services [offered by energy storage sites].

Profitability is only achieved if [energy] storage is integrated with renewables, receives public subsidies, or participates in markets such as [grid-strengthening] ancillary services. For it to be viable on its own, a stronger regulatory framework and greater integration are needed.

Is it more profitable to operate standalone energy storage or hybridize sites with a renewables plant?

In general, hybridizing with a renewables plant is often more cost-effective than operating [energy] storage in standalone mode, especially in the current context of the [Spanish] electricity market and energy transition policies.

Hybridizing with a renewables plant allows:

• Better use of generated energy: It allows for the storage of surplus renewable energy production, avoiding curtailment (for example, [of excess] solar or wind [power]).
• Optimization of infrastructure investment: Components such as the [grid] connection point, electrical installations, and, in some cases, the inverter are shared, which reduces capex [capital expenditure] and opex [operating expenditure].
• Improving the overall profitability of the project: By being able to sell stored energy during peak-price hours (arbitrage), the value of renewable energy production is maximized.
• Access to system service revenues: Hybrid plants can participate in [grid] balancing, capacity, and other [grid] flexibility services markets, enhancing project revenues.

Standalone [energy] storage can be profitable in the provision of grid services (frequency regulation, backup [power], voltage control); in participation in day-ahead and intraday [electricity] markets, through pure arbitrage; and in strategic locations where there is grid congestion or high demand for ancillary services.

Is there any way to optimize energy storage, from an economic point of view?

The key to economically optimizing an [energy] storage system is to consider market arbitrage: participation in intraday markets but also in multiple primary, secondary, tertiary [grid power], and other regulated markets.

Additionally, another issue to consider is battery life management, as it represents the largest single cost in the facility’s capex. It is critical to adhere to this life management within the correct time horizon, tied to the plant’s business model. Maximizing life isn’t always optimal; optimizing operations with multi-objective optimization that integrates battery life is the right approach.

IDAE is supporting several ‘strategic projects for economic recovery and transformation’ (PERTE), focused on energy storage. How are the requirements for this support met? Does every project meet them?

No, not every project qualifies for IDAE grants within the PERTE focused on [energy] storage. To qualify for these funds, projects must meet very specific criteria established in the regulatory bases of each call [for applications for funding support]. These include minimum technical requirements – such as [energy] storage capacity, minimum discharge duration, or integration with renewable [energy] generation – as well as administrative, environmental, and economic viability requirements.

Furthermore, the project must be aligned with the objectives of the renewable energy, renewable hydrogen, and [energy] storage (ERHA) PERTE, which implies providing innovation, [positive] impact on the energy transition, and clear socioeconomic benefits. Therefore, meeting these requirements requires solid technical preparation and it is not enough for the project to simply incorporate [energy] storage; it must demonstrate that it adds value to the energy system and the country’s strategic objectives.

What would you say is the main challenge of hybridizing renewable energy projects with BESS?

The main challenge of hybridizing renewable energy projects with [energy] storage systems (BESS) is achieving efficient technical and economic integration in a constantly changing environment. Proper system design – in terms of sizing, power control, and [grid] connection point sharing – requires detailed planning and dynamic operation. The variability of renewable [energy] generation requires precise coordination of energy flows to the grid, [energy] storage, or consumption, without generating cost overruns or lost opportunities. Furthermore, technical constraints such as inverter capacity, energy management system (EMS) response, and battery degradation over time must be properly managed.

Added to this is the complexity of the regulatory framework, which is still being adapted to fully recognize the role of hybridized [energy] storage. Uncertainties exist regarding how stored energy is compensated, what limits apply to joint operations, and how to access the various electricity markets. The business model also requires sophistication: optimizing revenue by combining arbitrage, [grid] adjustment services, and [excess electricity] spill reduction requires advanced prediction and control tools. Overall, the challenge is not only technical but also regulatory and strategic.

From pv magazine España.