What makes Kiwi Power an Energy Technology company?
In over 10 years of operation, Kiwi Power has delivered sustainability impact as a Demand-Side Response aggregator, as an energy storage developer and as a software provider. With the recent emergence of Energy Technology (or even ‘enertech’) as a buzzword, now is the time to explain why Kiwi is – and has always been – an Energy Technology company.
Just what is Energy Technology anyway?
Taken in the broadest sense, ‘Energy Technology’ could refer to a wide variety of disciplines, many of which look like traditional heavy engineering. The global energy system depends on sciences such as chemistry, geology, physics and meteorology. All of these have their own applied disciplines, such as combustion (for thermal power plants), mining (for fossil fuels), aerodynamics (for turbine blades) and weather forecasting (for wind and solar plants). As there is a good argument for describing technology as what you get when you apply science to a practical problem, these must all be energy technologies.
However, just as ‘fintech’ has come to mean the application of computer science to the finance sector, we use enertech to specifically describe the application of computer science to the energy sector.
Energy Technology, or enertech, is the application of computer science to the energy sector.
Advanced software and hardware platform
With this definition in mind, Kiwi is without doubt an energy technology company: we provide a software and hardware platform to meet our clients’ sustainable energy needs. Kiwi has always sought to apply the benefits of computing to the challenge of managing distributed energy resources, even before enertech was a ‘thing’. Over the years, we’ve developed some technology which we think sets us apart, even in this modern and fast-moving field. We describe this as Advanced Energy Technology.
So, what is it that lets us make that claim? To be ‘advanced’, something has to be noticeably ahead in development or capability. Kiwi is continuously developing its platform, so there are always new innovations to consider. However, even looking only at established capabilities, we believe that we have three main areas where we are ahead of the field:
• Secure, low-cost hardware
• Real-time visibility
• Analytical support
Let’s look at each of those in turn.
Secure, low-cost hardware
Kiwi’s Fruit device leverages cutting edge Internet-of-Things technology to provide our clients with a remote metering and control solution which is significantly lower cost than existing alternatives. It does this while achieving high levels of security, an important factor in persuading distributed energy resource owners to entrust the operation of their valuable assets to our platform.
Getting hold of useful energy data is such a significant challenge that some other energy technology solutions are happy to show users data that is over a minute old. With the move to increasingly dynamic energy markets, timeliness is more important than ever. Thanks to detailed attention to every stage of the signal chain, Kiwi is able to provide second-by-second data to all users of the platform, and to meet the sub-second response requirements of all major global flexibility programmes.
Rapid acquisition and processing of data is important for real-time decisions, but there is also huge value in being able to analyse events after the fact. When dealing with messy real-world data, it is important to keep track of revisions and re-statements such as the way in which a price forecast changes over time. To be able to analyse such situations, we need to know not only the latest data for each variable, but when we became aware of the data and the period for which it is valid. In fact, we need to track this meta-data for all previous values as well. Kiwi’s data warehouse does this, across the huge volume of incoming real-time data, and in a way that still allows high-performance queries.
What does this mean for me?
For electricity suppliers, distributed energy resource owners, grid operators and aggregators, this Advanced Energy Technology unlocks extra value from their distributed energy resources. Low-cost hardware lets you sign up a greater share of your customers to services which reduce the cost and carbon intensity of their power. Real-time visibility gives you confidence that assets are behaving as expected, and advanced analytical support unlocks actionable insights into how best to monetise your assets.
To put it simply, there is a daunting array of markets and services open to battery storage and DSR assets in the UK to help generate revenue. From the wholesale market – including the balancing mechanism – to frequency response and other ancillary services, it can be quite overwhelming trying to figure out how best to make assets pay.
No asset owner wants to leave money on the table, so revenue stacking has become an increasingly popular way to raise the rate of return – music to any investor’s ears. But what if there was a way to take this one step further? Enter co-optimisation.
What is co-optimisation?
Co-optimisation takes a short-term view of the market – a month ahead at most – to decide which markets could perform best for that asset, whether the wholesale market or ancillary services. In essence this means having the asset in the right market at the right time. Rather than locking your asset into one market area, you keep a blend of markets open and available.
Sometimes it will make sense to place an asset in a market that is a month ahead to lock in revenue, other times it may be more prudent to wait, expecting far greater returns in closer to real-time markets.
The fundamental truth, though, is that frequency response all day every day won’t give you the best return for your asset over the long-term.
That is what co-optimisation is for: using forecasts, market value and other insights the decisions are made about which market to operate in and when.
How does co-optimisation work in practice?
There are multiple different markets with different bid-in windows – from Short Term Operating Reserve, contracted quarterly, to Dynamic Low High, which is weekly, down to the balancing mechanism, which is closer to real time. Ensuring these markets are accessed and valued correctly gives baselines of value which can then be compared to trading in the wholesale market. Then remains the question of finding markets that offer the right risk and reward profile.
Co-optimisation works best when you have access to a broad range of markets and know them inside out. Patterns and trends start to emerge, so it might be that frequency response is where you make most value for most of the night, but with eyes open to switching markets if other opportunities become more lucrative.
Taking this potential usage profile thinking further we can consider the role of Electricity Forward Agreements (EFA). Through EFAs, the day is broken down into four-hour blocks. These six blocks form the basis of our thinking for where the asset is best placed, but as electricity markets are settled in 30-minute windows, we’re always open to switching assets around in those windows.
Apply that structure across all the different markets an asset may participate in and over the course of 48 half hour settlement periods you have up to 17,500 distinct decisions to make a year.
That’s 17,500 decisions focused on ensuring the asset operates in the most valuable market at any given time. Sprinkle in a degree of price volatility, and these decisions can be the difference between tens of thousands of pounds over the year.
Why do co-optimisation?
As with many decisions, it comes down to the money.
Using the co-optimisation methods we have developed at Kiwi Power, we’d expect to make around 40% more revenue from an asset than just offering firm frequency response (FFR) alone. One of the greatest barriers to storage uptake remains cost, and even marginal gains can make a big difference to investment decisions – and a 40% gain is more than marginal. Co-optimisation transforms the long-term value proposition of a battery storage asset through short-term thinking.
The short-term focus required by co-optimisation means you’re also well placed to capitalise on market moves. For example, when National Grid introduced Optional Downward Flexibility Management in May 2020, assets we managed had the flexibility to capitalise on this market immediately.
Over the past few years, we’ve seen the renewable capacity on the grid grow rapidly, leading to the rise in flexible assets, and now the energy storage boom is set to take off. As competition grows, an effective DSR and battery management strategy will be key to ensure you maximise revenues and don’t restrict yourself to a single market where competition sees the price pressured. By engaging in co-optimisation, battery storage and DSR owners will position themselves to be in the right market at the right time as the grid continues to change and different flexibility services are needed.
Contact our team to find out more: email@example.com.
UK wind generation set a new record over the weekend, hitting 16GW during the early evening of Sunday 8th December. The abundance of renewable energy saw imbalance prices tip into negative territory for the longest period in UK electricity market history, from 0:00 to 13:00, with prices falling as low as -£88/MWh. The case for smart, flexible solutions has never been stronger.
We need more energy storage
The market has long believed building interconnectors alongside renewable generation will lead to the Continental market as a whole balancing itself appropriately with clean energy. But high winds across North West Europe highlighted the urgent need for more energy storage capacity so that we can capture clean, cheap renewable generation when it is plentiful rather than letting it go to waste. This will allow us to store clean energy when prices are low and use this energy when the market is constrained and prices higher.
We saw the flip side of renewable generation on Monday 9th December with prices spiking above £100/MWh between 4.30pm-6.00pm as CCGTs came on to meet demand and compensate for falling wind generation.
Monday also saw negative pricing on the Day-Ahead auction for the first time. This volatility was the first opportunity in the UK for an energy storage asset to charge for free or get paid to charge and then monetise a £80-90/MWh spread against prices later in the Day-ahead auction. This relatively risk-free strategy shows investors merchant revenues are there with a partner who manages revenue opportunities against asset cycle costs – typically in the region of £30-40/MWh.
The last 48 hours have been the perfect example of how energy storage can balance the grid in a high renewable system. Energy storage has to be built out so consumers are not penalised by high prices when there was an excess of clean, cheap energy only a few hours earlier. The ability to take advantage of these kind of price arbitrage opportunities – which are expected to become more frequent as our energy mix continues to change – and manage merchant risk is key to bringing forward more investment in energy storage projects.
Battery storage costs continue to fall
Recent analysis by Imperial College London suggests Britain needs at least 30GW of energy storage to meet its 2050 net zero climate goals, up from 3GW today. RenewableUK research puts the current pipeline at 10.5GW.
The good news is prices continue to fall. Lazard’s 2019 Levelised Cost of Storage Analysis puts bids from battery suppliers at record lows of $280/kW, particularly for the largest front-of-meter projects. This should support the continued expansion of investor interest we have witnessed in recent years, backed by sharpening price signals in wholesale and imbalance markets.
Kiwi Power’s distributed energy platform enables energy storage investors to respond to these changing opportunities, simplifying their participation and maximising asset value for global sustainability impact. Get in touch to find out how we can help your business optimise energy storage for long-term, sustainable value.
Any questions? Get in touch.
John Goodenough has long been recognised as the perennial nearly-man of the Nobel Prize for Chemistry. The announcement of this year’s prize—for the development of lithium-ion batteries—therefore came as a welcome shock for many; not least of all Goodenough and his co-laureates Stanley Whittingham and Akira Yoshino.
After Whittingham’s initial demonstration of a rechargeable battery based on lithium-ion intercalation into a titanium disulfide cathode with a metallic lithium anode, Goodenough improved the cathode to cobalt oxide. The final step in creating consumer-ready batteries came in Yoshino’s replacement of the metallic lithium anode with one based on petroleum coke.
An electric revolution
These energy-dense rechargeable batteries have revolutionised personal electronics, and transformed modern life around now-ubiquitous portable devices.
Their ability to provide a repeatable, rapid response means batteries are now laying the foundations for renewable energy systems globally – providing vital resiliency and flexibility to enable wind and solar power to be integrated at scale. Simultaneously, through the electrification of transport, they offer the potential to finally wean humankind off its addiction to oil.
batteries are…laying the foundations for renewable energy systems globally – providing vital resiliency and flexibility to enable wind and solar power to be integrated at scale
Kiwi Power was charged with optimising the UK’s first grid-scale battery at Leighton Buzzard in 2014, and we now manage a 60MW portfolio of lithium-ion batteries on behalf of our clients. In that time batteries have come to almost completely dominate UK frequency response markets, where a combination of speed and controllability make them an ideal asset.
The August blackout highlighted the importance of ultra-fast response to renewable electricity systems. The synthetic inertia batteries provide can slow the Rate of Change of Frequency and help to avoid generation disconnections which otherwise exacerbate the problem.
Of course, there’s more to managing batteries than simply charging and discharging in response to different grid or price signals. Batteries are built to deliver a certain number of cycles and there is a cost-benefit to every action. Maximising value requires a detailed understanding of a system’s characteristics and means constantly evaluating the revenue opportunity against its impact on lifespan.
Benefit for humankind
Analysis suggests that meeting the UK’s 2050 carbon targets will require more than 100GW of new wind and solar generation over the next 30 years, balanced by 30GW of short duration storage, so for those that can compete and deliver the best outcomes, there is a huge market opportunity.
It goes without saying that Kiwi Power were delighted to hear of the recognition of the laureates behind this transformational technology. In his will, Nobel famously created the prizes to be awarded to those who confer “the greatest benefit on mankind.” It is hard to think of three more deserving recipients.
Keep up with global energy industry trends and Kiwi Power’s developments in our Resource Centre.
As battery owners and operators seek to maximise the returns from their assets, they simultaneously face the Herculean challenge of managing degradation. This remains one of the most prominent challenges in the industry, where assets are expected to last around 15 years before reaching End-of-Life (EoL).
Degradation manifests itself in several ways leading to reduced energy capacity, power, efficiency and ultimately return on investment.
Put simply, battery degradation is a serious economic problem which will vary according to how the battery is used. It is therefore essential to monitor factors which drive degradation. These include temperature, ramp rate, average State of Charge (SoC) and Depth of Discharge (DoD).
Analysing the impact of these factors is vital to assessing the cost-benefit of decisions to charge or discharge a battery in response to different market signals.
This is especially important as single/multi-service batteries have the option of participating in a variety of markets, such as frequency regulation or the Balancing Mechanism (BM), and each market can have a different risk level according to the asset’s load profile and cycling behaviour.
Back to basics: what ‘exactly’ is a charge cycle?
Unfortunately, and confusingly, the industry has different definitions for what ‘a cycle’ actually is. In commercial documents, such as warranties, a cycle is calculated via energy throughput. This tallies the energy going in/out of the battery and divides total energy throughput by capacity. Even though this is a relatively simple calculation, it actually only tells you the number of ‘Equivalent Full Cycles’, or EFCs.
EFCs do not quantify DoD, which factors how deep charge cycles are. As can be seen below, EFCs would be unable to distinguish 1 cycle of 100% DoD vs 2 cycles of 50% DoD vs 10 cycles of 10% DoD. Cycle depth is completely ignored in EFCs! For this reason, Kiwi Power utilises the Rainflow algorithm as a tool for profiling each ‘real cycle’ in terms of DoD.
DoD is one of the biggest contributors to battery degradation. As an example, a Lithium-ion battery has ten times more degradation when operated at near 100% cycle DoD compared to when operated at 10% DoD for the same amount of charged power. It’s likely in the future that DoD measurements will be included in warranties. This will be especially the case as batteries move from frequency regulation, which has shallow cycles, to other programmes such as trading in the BM which requires deeper cycles.
The Rainflow tool and how it can be used for battery profiling
The Rainflow cycle counting tool is an algorithm used for DoD calculation. It takes irregular load profiles and quantifies every cycle’s DoD, mean SoC and time period. This helps to paint a picture of how the battery is behaving and enables the operator to make informed decisions.
As you can see below, a typical load profile can be very noisy and cycle counting manually is near impossible. The Rainflow histogram makes sense of the data by categorising the cycles according to their DoD and mean SoC.
More importantly, the tool tackles the battery degradation problem by identifying cycles with a high DoD or with cycles that are outside an acceptable SoC range.
Energy trading in the UK’s Balancing Mechanism (BM) market
Energy trading will require deeper cycling. Kiwi Power’s analysis suggests DoD is typically 20-30% higher for assets in the BM compared to firm frequency response (FFR). Average SoC on the other hand, will vary enormously depending on the price points set in the BM model. Without a SoC management plan in place, active pricing strategies will result in an asset having a very low average SoC (often <20%) while passive pricing strategies will result in an asset having a high average SoC (often >80%).
As battery business cases increasingly rely on wholesale and BM participation, these figures demonstrate the need to select a battery management system that captures these insights to mitigate degradation risk and optimise revenue.
Kiwi Power’s expert team use our intelligent technology, deep market insight and unparalleled asset knowledge to do just this. Since connecting the UK’s first grid-scale battery at Leighton Buzzard in 2014 our portfolio has grown to over 50MW of behind-the-meter and grid-scale energy storage systems which we monetise on behalf of asset owners and investors. Our novel approach to measuring battery load profiles and analysing charge cycles is one way we’re able to ensure our client’s assets deliver maximum value and life expectancy.
Any questions? Get in touch.
National Grid’s report into the UK blackout of August 2019 points to the almost simultaneous failure of two large generation plants.
As the UK continues its net zero carbon transition creating a smarter, more flexible energy system with widespread deployment of energy storage and demand side response is a must.
Battery energy storage in particular can provide the ultra-fast capacity needed to help decisively manage the kind of short-term supply loss seen in August.
Distributed energy systems are inherently more reliable with less large single points of failure. Kiwi Power’s portfolio of distributed energy assets responded in real-time, reducing demand and exporting stored energy to help mitigate the shortfall in supply and stabilise the grid.
Rapidly scaling these technologies requires competitive markets that provide a level playing field for new technologies to compete with incumbent generation, and a regulatory regime that incentivises low carbon solutions.
Most urgently, National Grid needs to facilitate greater access to the Balancing Mechanism (BM), which is currently dominated by large-scale, centralised fossil fuel generation and only accessible to businesses with a supply license. National Grid’s Wider Access to the BM roadmap is a positive step and it will be interesting to see how it is implemented.
With the right markets, flexibility providers can rapidly bring forward fast-acting, flexible capacity to help National Grid avoid a repeat of August’s blackout and create a smarter, cleaner, more resilient energy system for everyone.
Kiwi Power’s Head of Optimisation Thomas Jennings joined a fantastic session hosted by Energy Storage News at Solar & Storage Live in 2019.
Participants and pioneers of UK energy storage – and solar – gave their perspectives on everything from the right technologies and what they can do, how financiers view the market today, to how we can all join together to create a modern, clean and sustainable energy sector.
- Moderator: Andy Colthorpe, Editor, Energy-Storage.news
- Thomas Jennings, Energy Storage Lead, Kiwi Power
- Mark Turrell, Asset Finance Business Development Director, Wyelands Bank
- Ed Porter, Energy Assets Director, RedT
- Roberto Castiglioni, CEO, Ikigai Capital
‘Yes, there’s merchant risk, but as intermittent renewable generation increases, if we look at what the world has to look like [to accommodate that], it has to include fast-responding flexibility assets’ – Thomas Jennings, Head of Optimisation, Kiwi Power
Any questions? Get in touch.
At 16.52 on Friday 9th August the UK electricity grid experienced its worst blackouts in over a decade. National Grid’s preliminary report states the incident was caused by a lightning strike, followed by the almost simultaneous failure of two generation plants – one gas, one wind – totalling almost 1.4GW, which saw frequency plummet to below 48.8Hz.
While National Grid’s systems kicked in and frequency was restored by 16.57 the country experienced severe disruption for many hours as transport and road networks were affected throughout the evening rush-hour. A full report is due by Friday 6 September.
There are undoubtedly lessons to be learned from this event, but one thing of note is that of the 1,240 MW of response National Grid instructed to help stabilise the system, 475MW came from battery energy storage.
These batteries, both behind-the-meter and grid-scale, responded in milliseconds to provide flexible capacity when it was most needed, and in the process earned valuable income for their owners. Forecasts by Solar Media suggest that by the end of 2019 National Grid could have up to 1.2GW of operational energy storage to call upon in the UK – almost enough to have dealt with the whole event.
The rise of battery energy storage is part of a wider transformation underway in global energy systems, driven by four major economic trends – often referred to as the 4Ds. These are:
- Decarbonisation – climate change requires rapid growth and adoption of renewable energy worldwide, which requires greater flexibility at a system level
- Digitalisation – the evolution of smart tech allows complex systems to be operated remotely
- Decentralisation – the energy landscape is moving from a centralised system to a distributed network of assets
- Democratisation – distributed energy systems empower individuals to control their consumption and participate in the energy network
The democratisation of energy arises from the first three Ds and is only really now starting to gain momentum, but there is huge potential to be unlocked, and stationary energy storage of the kind described above is only one piece of the puzzle.
Electric vehicles, self-generation and the ability to connect, control and optimise all kinds of energy-consuming assets means consumers – whether at the businesses or domestic level – have a huge role to play in the energy transformation.
As one of the UK’s longest-standing Demand Side Response aggregators, and a provider of Distributed Energy Resource Management Systems (DERMS) to utility partners worldwide, Kiwi Power has been at the forefront of this movement since 2009.
The opportunity for businesses
In the UK we work with large energy users of all kinds – from hospitals, universities and hotels to water utilities, metal manufacturers and mining companies. We use our technology and expertise to analyse, operate and optimise their energy assets to maximise cost and carbon savings from a range of markets and programmes.
These assets include chillers, pumps, air conditioning units, standby generation, Combined Heat and Power (CHP), heat pumps and of course, battery energy storage systems.
Internationally we work with utility partners who license our technology platform to deliver their own Distributed Energy Resource (DER) products and services to their end user customers. Collectively we manage over 1GW of DERs on behalf of our partners in over 10 countries.
Ultimately the driver for large energy users is money. With many spending tens of millions of pounds on energy each year, finding smarter ways to manage and control energy use can make a huge difference to a company’s bottom line.
At its simplest, this can just be a matter of reducing demand when electricity is at its most expensive and shifting load to cheaper times of day. More sophisticated is thinking about how an asset can ‘stack’ revenue streams by participating in multiple markets, for example, providing ancillary services to the system operator at certain times of day while also responding to peak prices signals and seeking arbitrage opportunities in wholesale energy markets. Ultimately, the best approach is a holistic view which operates across a company’s assets and sites to determine the most optimal outcome, which may involve managing generation, storage and consumption assets in unison.
Either way, our experience has shown us that the key considerations for businesses remain the same. How easy is it to integrate the technology? Can I trust my aggregator not to affect my asset or processes? Can I see what my asset is doing? Can I build a reliable business case?
Key to the last point is whether markets and regulation are fit for purpose. Most countries have built their energy systems around large, centralised assets funded over 20-year time horizons with minimal competition. They have not been designed to accommodate many thousands of DERs able to respond autonomously at different speeds for different durations.
Scaling the opportunity
The UK Demand Side Response market is probably one of the most mature markets of its kind, and it is still grappling with a lot of these issues.
Energy users are becoming increasingly sophisticated, so most now understand the concept of demand side response and how a smarter, more flexible approach can benefit them, but the current state of play means many have been left wondering whether the pain is worth the gain.
While the technology exists to seamlessly connect and operate assets, markets, regulation and customer propositions need to catch up. Too often DSR providers find themselves trying to operate within the rules of a game skewed firmly in the favour of large incumbents or trying to navigate disjointed policy reforms, while end users find the complexity of the different programmes off-putting.
In the UK for example, reforms to network charging look likely to remove the incentive to shift demand out of peak periods, while National Grid’s Balancing Mechanism is still only accessible to businesses with an electricity supply license, a huge barrier to entry.
The good news is reforms are coming, and incidents like August’s blackout show just how big a role DERs can play in helping system operators to ‘firm’ renewable generation and balance supply and demand. For utilities, DSR provides an opportunity to cement the customer relationship and add value to their proposition. Energy-as-a-Service packages, which deliver cost savings for a bundled offering can give end users the certainty of savings they need without the hassle factor of understanding different DSR markets and programmes.
One thing is for certain, with global DER capacity forecast to reach over 500 GW by 2028 – and outpace the deployment of new centralised generation capacity from 2024 – the democratisation of energy looks set to continue.
Navigant Research Global DER Deployment Database 2019
The UK’s first coal-free fortnight is a sign of the country’s continued transition towards a low-carbon economy.On-site generation, energy storage, demand flexibility, and electric vehicles are changing how consumers interact with the electricity network – creating new challenges and opportunities – for how it is run.
Distribution Network Operators (DNOs) sit at the heart of this transition. They are responsible for operating the local energy network and delivering electricity securely and reliably to our businesses and homes.
Traditionally DNOs have managed demand for capacity on the network through expensive reinforcement measures – essentially more copper in the ground – that are passed through to consumers. But now they have other options.
As network customers alter their consumption behaviour to reduce costs and carbon emissions, DNOs are transitioning into Distribution System Operators (DSOs), creating a smarter, more flexible network suited to the growth of local energy. The industry body that represents DNOs, the Energy Network Association (ENA), states that DSOs will be:
“A neutral facilitator of an open and accessible market that will enable competitive access to markets and the optimal use of Distributed Energy Resources on distribution networks to deliver security, sustainability, and affordability in the support of whole system optimisation.”
What is Constraint Management?
Over recent years the GB electricity system has seen an increase in intermittent renewable generation which requires additional flexibility to balance the system. Traditionally this flexibility has been provided by fossil-fuelled power stations. However, as they continue to close and electricity generation becomes more distributed this “flexibility gap” needs to be addressed from the demand-side.
In the same way that Demand Side Response has helped National Grid to balance GB supply and demand, Constraint Management can perform a similar function at the local distribution network level.
All six UK DNOs are tendering for this service across the irrespective networks, offering distributed generators or consumers a chance to earn extra revenue through demand-side balancing solutions.
WesternPower Distribution (WPD) and UK Power Networks (UKPN) began procuring capacity for Winter 2019//20 earlier this year and in May 2019, WPD commenced its first summer scheme. WPD has awarded contracts across 7 Constraint Management Zones (CMZ) with a total capacity of 21.5 MW.
UKPN undertook their pre-qualification and tendering process via the energy market platform PicloFLex. They have awarded 18.2 MW across 8 CMZ for winter 2019/20. The remaining 4 DNOs have all announced their appetite to procure flexibility for the winter of 2019/20 via PicloFlex but haven’t confirmed when this will start. PicloFlex is operated by Piclo and offers an online independent market place where DNOs can advertise and procure flexible services from aggregators and directly from large energy users.
A New Revenue Opportunity
For end users the ability to participate is defined geographically according to the requirements of their local DNO. At Kiwi Power we have worked closely with our clients to identify those with assets in relevant CMZs and understand how participation can benefit them. As a result,we are one of the first DSR aggregators in the UK to deliver client revenues from active Constraint Management services.
Formerly, Kiwi Power has been one of the only aggregators to participate in Constraint Management trials with UKPN and WPD such as Low Carbon London (LCL), Active Network Management (ANM) and Project FALCON (Flexible Approaches for Low Carbon Optimised Networks).
Since May 2019 we have been providing capacity within WPD’s Plymouth and South Hams CMZ, and Centrica’s LEM Cornwall programme, responding regularly to reduce strain on the network at times of peak demand and delivering a rapid response to unforeseen network issues.
Businesses benefit from payments for availability and utilisation,with revenues ranging from around £300/MWh for peak load management (DemandTurn-up or Down) to £600/MWh for a ‘Restore’ service responding to unplannedfault conditions.
Local energy future
Constraint Management may be in its infancy but the need for smart, local flexibility is only going to grow as DNOs adapt to changing network demands. In June 2019, the Energy Networks Association (ENA) published six steps for delivering flexibility services.
David Smith, ENA CEO commented, “Expanding Local energy markets will bring big economic and environmental benefits, and continue to deliver the world-class energy system we rely on every day”.
Flexible services have the potential to be worth £8 billion per year to consumers by 2030 and participating will bring economic and sustainability benefits as the UK sets a path to net zero carbon emissions by 2050.
James Johnston Co-founder & CEO of Piclo commented “Distribution networks will play a crucial role in the timely decarbonisation of the UK economy. Their commitment to procure flexibility from aggregators like Kiwi Power to manage local constraints is a clear signal that local flexibility markets are here to stay. Over time, DNOs will open up markets even further – to allow for and incentivise capacity trading between flex participants themselves – ultimately unlocking £billions of savings for bill-payers and GWs of new renewable capacity through better utilisation of the grid.’
To discuss how Kiwi Power can help you earn new revenues from Constraint Management and how this can complement participation in other DSR programmes please get in touch
As the New Year starts everyone is asking us the same question: ‘How can I maximise value in the battery energy storage market in 2019?’
Before I turn to 2019, I think it is worth mentioning how the battery market has changed since Kiwi Power worked with UKPN in 2014, maximising revenue from the Leighton Buzzard battery the UK’s first grid-scale battery. The market is beginning to better understand batteries, in particular, the work involved to install them, as well as their capabilities and limitations.
In my recent discussions, I was noting how the first batteries would be considered to be over-engineered with the installation/construction process now radically streamlined. I expect this evolution to accelerate as batteries are pushed more and more to their limits, and technological advances increase. Particularly of interest is how this push is leading to a demand for greater understanding as to what batteries are capable of, and their technological limitations. In turn, this is driving a need for greater clarity around battery data when monitoring degradation, the number of cycles, availability and state of charge.
Strong growth continues
So, to 2019. Kiwi Power’s expectation is that batteries will continue the strong growth we have seen since their introduction, continuing as a significant growth area not only in the UK but globally. We estimate that there will be an additional 400–600MW of installed/developed to ‘spade ready’ batteries across the UK this year. These figures are based on approaches to Kiwi Power from developers, as well as analysis of:
- Planning applications,
- Ancillary Services Market, and
- Capacity Market Registers.
By November 2019 (in time to capture the Triad) Kiwi Power expects 1.2–1.5GW of batteries to have been installed in the UK.
As you’d expect battery development is predominantly driven by a strong business case to build the battery. It is worth noting that operational expenditure is increasingly becoming considered as part of the case. Operational costs predominantly focus not only on the battery’s round trip efficiency, and the cost of purchasing power to charge, but the battery degradation caused by the run schedule. I’ll expand later as to why this is growing in importance.
Although some of the revenues which can be generated from a battery have fallen across 2018, in particular, Firm Frequency Response (FFR) prices, we believe this has now bottomed out as the frequency market shifts to a shorter time-frame and liquidity in these markets grow. My conversations with a variety of participants in the battery market have led us to believe there is increasing comfort with this move to a merchant risk model.
Embracing merchant risk
What is a merchant risk model, and why are we moving towards it? Firstly, merchant risk in terms of batteries is the shift to revenue that can only be secured in the short term (weeks), where previously a long-term price, which provides revenue certainty (years), could be secured. The move to a merchant risk model impacts a battery project’s ability to access certain types of finance which require long term price certainty to achieve a pre-agreed internal rate of return. As noted, when frequency market moves to a shorter timeframe, batteries will be exposed to greater price fluctuations from week to week. In addition, the pause in the Capacity Market, and the pending dissolution of Triads has removed two of the longer-term revenue streams available, further increasing merchant risk. To understand more about merchant risk in the power market I recommend reading:
So why am I expecting such robust growth in the market despite these headwinds? Because investors are not only becoming more comfortable with this exposure to merchant risk but embracing it as it allows them to take advantage of a battery’s greatest asset: its flexibility!
Flexibility in the power markets is becoming more valued, with the growth of intermittent generation, and is taking centre stage. Batteries operating using a merchant risk model are ready and available to take advantage of multiple revenue streams as they become economically lucrative, be it faster frequency response services (fast acting reserve), trading or accessing the Balancing Mechanism. At Kiwi Power we do the heavy lifting for our client, optimising run schedules to maximise revenue. This starts from the early design stages of a project when we talk you through the different ways to set up your battery so that you can best access the various revenue streams.
This then brings us back to operational expenditure and why this is now an increasing focus. Any project exposed to merchant risk needs to consider operational expenditure as not only are prices increasingly volatile in the short term, but the run schedule will need to be managed to ensure battery degradation is not jeopardised. Previously, Long Term FFR contracts had a low cycle rate and accounted for the majority of operational costs within the contract. Our approach is always to understand the full operational cost of providing any service.
Investors are also increasingly comfortable with merchant risk as a result of the falling cost of battery systems, another trend we expect to continue during 2019. In 2018 we saw prices reducing, this downward pressure is expected to increase in 2019, perhaps even resulting in a price war? I believe this pressure to be coming from East Asia with the huge growth of Electric Vehicles along with their huge over capacity for battery manufacturing. Recommended reading on energy storage costs:
The reduction in cost has not only created the environment for greater risk appetite but a willingness of investors to cycle batteries deeper and more often as part of their run schedule to achieve higher returns.
As run schedules evolve to better optimise battery revenue, we have seen investors increasingly become interested in battery usage data to understand how their battery is being used, and the impact on long-term performance. Kiwi Power provide this data through our Kiwi Live web portal which integrates control technology, performance analytics, and market access, to deliver the full potential of battery systems, meeting the requirement to better understand a battery’s operational capability.
Overall, we see 2019 as continuing to be a period of strong growth for batteries with higher risk revenue models making Kiwi Power’s experience and expertise all the more valuable. Looking forward to 2019!