The Value of Energy Storage?

Greetings, and welcome to our blog, or indeed welcome back.

In this article I aim to give an explanation of how battery storage creates value on the system. Many people see battery storage systems as being like the old economy seven storage systems. If you’re as old as I am then you can probably remember the giant brick filled radiators which heated up with overnight nuclear powered electricity during the night and warmed your house during the day. Of course during the seventies and eighties insulation was not what it is today, and power was relatively cheap from fossil sources of generation. Nevertheless these forms of heating system were relatively commonplace. People even had dual rate meters, one for night time power (the heaters), and one for day time consumption.

Time and technology has moved on of course. There are a few basic things which have changed in the world today which allow us to deliver this principle in an improved way:

  1. The internet in many homes means data gathering, and control can be much more refined and much more widespread

  2. The market (since 2000) now operates with a half hourly frequency, which means prices exist for each half hour period, rather than the daily price, or peak, off peak of the pool.

  3. Significant intermittent generation (wind and solar) on the system means that the balance between generation and demand are not easy to control in any one period. This means that the system needs more capability to balance generation and demand

  4. Generation margins have been eroded over time. During the days of the CEGB the target was to keep 20% overcapacity at all times. This pushed up bills, but meant we always had generation when it was required. These days new plant build is in private hands, but making the case to build new power stations is extremely difficult given the uncertainty of new renewable build.

  5. Thanks in the main to the solar revolution inverters (to convert dc power to ac power) have become both very cheap, and very efficient (although not always at the same time). This means that we can take energy from roof top solar, or from batteries in storage and turn it into ac power (synchronised to the grid) with very few losses. Back in the 70s these losses would have been around 50%!

  6. Another thank you, but this time to the EV industry for driving down the cost of high capacity batteries. Unless you want a battery pack the size of a sofa then it seems to me that only a lithium, or possibly sodium (in the future) battery will provide an energy density which will suit most houses. Lithium ion batteries remain the most economical in terms of space, and Lithium Iron Phosphate provides safe thermal properties. Battery prices have been driven to the point of grid parity with flexibility from gas and coal fired generation. Diesel generators provide cheap flexibility, but at the cost of significant pollution which is not covered by the EU ETS scheme.

  7. The wires network has evolved and grown significantly over the years. As per power generation we require an overcapacity of wires to allow us to flow enough power at peak times. We need more electricity at 1700 for the cooking, and that means bigger flows of current, which means significantly more power (P=I2R). Clearly building wires is a large and expensive investment. So usually wires are significantly over specified (built bigger than required). We are reaching a time where the current network needs new investment. Peak flows, or the potential for peak flows has got too big, and this means significant investment for DNOs and system operators. This investment is paid for by all system users (including you!!) through system charges (DNUoS, TNUoS etc).

So where could a battery benefit the system? And how could we extract the value from a battery on the system today?

  1. Hourly Arbitrage – We can use batteries to charge during the cheapest hours when the wind blows and the sun shines, and discharge during the most expensive periods when everyone is using power. If we can meter the operation of the device, and prove the changes in consumption at any point on the grid then we should be able to turn this change into money. Effectively we buy the cheaper power, store it in the battery and sell it back at the more expensive time. We may perform this cycle up to 12 times a day (an hour to change and an hour to discharge). However because of the way prices tend to behave its more likely that the battery will charge and discharge once, or possible twice during the day/night cycle. However the hours where charge and discharge occur may well change and be driven by wind, or solar effects.

  2. System Charges – The system charges consumers more for using power at peak times. By reducing consumption during peak hours these charges can be avoided, and the bill for the energy supplier be dramatically reduced. This is the same principle employed for embedded generation like wind or solar power.

  3. Transmission losses – By embedding batteries at point of use (in the home or factory) we can reduce the peak flows (peak current) through the wires on the network, and hence reduce losses through the wires (as heat).

  4. Trading benefits - By buying and selling periods in the market we can extract value from the batteries without ever actually cycling them. If from period to period a price for a specific period moves higher relative to another then hedge positions can be adjusted adding incremental value to the battery, without cycling the battery, or stressing components.

  5. Ancillary and Grid Services – Once an economic dispatch has been performed for our battery devices we may then sell services to grid which might increase or decrease the load provided to the grid. These changes to the dispatch can be priced economically as we know exactly how much this change will cost us versus our hedges. This meanswe can accurately price what I call ‘last ditch’ services for the grid.

  6. DNO Services – The DNO provides the wires and manages the grid in the local regions (eg. Cornwall or Wales). The challenges faced by the DNO are usually local and specific to the region. Here services could be provided to turn all the devices on or off in a specific street or region if required. Services like this don’t exist today, so the price and value of these services are only something we can imagine.

Of course only the first few of these revenue streams are bankable. And both of these require a supply business at the current time to capture them.

Most storage business models seem to focus on grid services in some form for their primary source of revenue. Relying primarily on grid services isn’t the best approach in our view because i) you are at the mercy of those who write the contracts and ii) you miss out on most of the value which accrues due to having batteries at the lowest voltage on the grid and hence saving transmission costs during peak times.

Of course having a market based pricing approach, and optimising batteries versus the grid doesn’t preclude you from offering grid or DNO services. To the contrary a market based optimisation allows you to be far more competitive in the price at which you offer these services. They can be explicitly priced as an opportunity cost against your current dispatch.

Where does ChargeSync fit in with all of this? Well our StorQube, and our control platform (built using Microsoft Azure) will mean that you can relax in your home while energy is sourced more efficiently for you from the market place.

Well, I hope that helps explain how we think things work. There are of course barriers to entry, and ways in which the market can be improved. I’ll cover those what I call lobbying points very soon.

If you have any thoughts, comments, or concerns on this article, then please feel free to email me at