Innovative business cases for home storage systems: provision of balancing power
Home battery storage systems are on the verge of a breakthrough with an estimated cost-cutting potential similar to solar panels. Innovative products and services might create attractive additional sources of revenue for prosumers with storage systems on top of self consumption. By simultaneously feeding electricity in or drawing electricity from networks virtually pooled home storage systems could provide network operators with valuable – positive or negative – balancing power. But the “War For Prosumers” has only started in Germany with these recently announced “swarm solutions”. Many players will fight for prosumers for various „goods“:
Battery storage systems: suitable for positive and negative primary and secondary balancing power
The costs for residential battery storage systems are in most cases still higher as their benefits. Companies are therefore working on solutions to raise the profitability. One focus is the provision of balancing power. The network operators need balancing power for the network control – and pay for it. Service providers offering balancing power are paid twice: for providing “stand by”-power (in kW) and for feeding in (positive balancing power) or drawing (negative balancing power) electricity from the network (in kWh).
So far, balancing power is mainly provided by fossil power generation. Electric storage systems have some advantages compared to them: they can react in milliseconds and do not consume energy in “stand by” modus when no energy needs to be fed in or drawn from the grid, different from coal plants for example. Hence, they are well suitable to provide positive and negative balancing power. But as provisions require high minimum quantities providers of balancing power need to pool a large number of storage systems (“swarm”).
A handful of solutions has been announced so far – only one has been approuved by TSO though. They vary a lot especially with regard to the following aspects:
- Type of balancing power: primary, secondary and tertiary; positive and negative
- Technical implementation: metering scheme, multi-player communication
- Legal implementation: “self consumption versus balancing power”, several prosumer (=consumer!) contracts
- Costs for prosumers: hardware, member fees
- Benefit for prosumers: free electricity, flatrate, revenue share
Technical, regulatory and economic challenges
The provision of balancing power by aggregated battery storage systems is an innovative business case the current regulatory framework is not made for. As a consequence, some questions concerning their profitability or even the feasibility remain unclear. And the complexity of the processes to provide balancing power through aggregated battery storage systems is high as well as the risks of fluctuating prices and changing regulatory provisions.
Energy democracy and Energiewende
Nevertheless, the new approaches to pool residential battery storage systems in order to provide grid services are promising for various reasons. They increase the storage system´s benefits for prosumers and the whole energy system. Prosumer become more and more important players on the energy market boosting energy democracy. And – partly – replacing fossil power plants not only with regard to generation but also with regard to grid services these solutions contribute to the energy transition.
Many prosumers are open to use their storage systems not only for self consumption but also for new business cases like the provision of balancing power – not only for economic reasons but also to support the energy transition. But the current solutions are technically, legally and economically still very complex and hence (too) risky. Therefore, one of the main challenges for companies “recruiting” prosumers will be to offer simple, fair and transparent products and services.
“Fight, flight or innovate”!
There are three options for companies on the energy market: fight, flight or innovate. The ones that opt for opposing the rise of renewables and prosumers will very probably not survive the energy transition. The ones that chose “flight” won´t probably make it either. Only the ones that innovate and position their company to benefit from renewables and prosumers by creating new technologies and new business models will make it.
Some companies have begun to understand that beyond their purchasing power prosumers offer a great variety of worthy flexibility that is strongly needed on the future energy market. The recently announced products “balancing power from virtually pooled storage systems” is such an innovative approach. But small scale PV and storage is not the only horse in the race: electric vehicles, CHP and heat pumps also have a promising potential for more prosumer business cases.
Big data, blockchain, internet of things, smart home …
The „War For Prosumers“ will also take place for other „goods“. It will be particularly tough among blockchain-based platforms. Such Airbnb-like platforms are very likely to be developed for electric vehicle charging infrastructure, P2P-energy trading or simple metering and billing services. There will be several public (open) or private (permissioned) platforms but they will all need prosumers.
Whereas it remains to be seen which companies will prevail it is very likely that prosumers will be one of the winners of energy transition. Fair enough!