As the country’s renewable solar and wind energy capacity grows, so does the need for grid balancing to ensure a steady supply of electricity. Although Lithuanian renewable energy producers and consumers have been able to participate in the balancing market for a couple of years now, only a very small number of them have invested in the necessary storage batteries. According to experts, companies should take a more active interest in participating in the balancing market, as it allows them to almost halve their electricity costs and ensure stability in the electricity market.
According to Karolis Kiguolis, an expert in the electricity balancing market, the world is already witnessing a boom in the use of electricity batteries. The US and Asia are leading the way with their large electricity grids and balancing needs, while Europe started to take an interest about three years ago, after the second wave of the coronavirus, with a particularly big jump last year, after Russia’s war in Ukraine and the worst energy crisis in history.
“Lithuanian developers of renewable energy – wind or solar farms – are also starting to look at batteries. There is one wind park in the Klaipėda region that is already taking real steps to install batteries. Today, there is not a single active battery/storage unit in the electricity grid, but I think that this situation will change this year, as renewable energy developers, industrial and retail companies are interested in this,” says K. Kiguolis, founder of Linea Ignis.
Optimises costs by 40%
According to him, the potential for participation in the balancing market is enormous – according to the estimates of the electricity transmission grid operator Litgrid, the current balancing market in the Baltics is more than 670 megawatts (MW), which could turn into real revenues for the country’s companies supplying electricity to the balancing market.
“To achieve a breakthrough, what is most lacking so far is the readiness and the knowledge and information businesses need about the benefits of batteries. Conservatism is also a factor – we have a hard time embracing innovation, waiting for someone to be the first to start, when we could do with the best practices of other European countries,” he says.
The expert believes that wind and solar park developers should build and operate these parks in a smart way – generating and selling electricity to the market not when the wind is blowing and the sun is shining, but based on prices.
The size of the battery is typically 15-20% of the size of the wind or solar park. In this case, filling the battery with a fifth of the electricity produced gives the developer a twofold benefit: it can sell electricity to the Nord Pool exchange at peak electricity prices instead of when it produces, or it can sell it on the balancing market, where electricity prices are higher than on the Nord Pool exchange, while helping the country to balance the electricity grid.
Meanwhile, the companies that bought the batteries, which are also generating consumers, can use the stored energy for their own use when the market peaks and electricity is expensive, or they can also sell it to the balancing market through poolers. In addition, the battery can be filled with cheap, off-peak electricity purchased from the exchange for consumption at a later date or sold at a higher price on the balancing market. By maximising the use of batteries in this way, generating consumers can optimise their electricity costs by around 40%.
Regarding the investments required, K. Kiguolis points out that a 1 MW battery costs around EUR 1 million, but that, with maximum deployment, this investment can be recouped in around three years, after which the battery is “in the black”.
“We make financial projections based on 16 different battery scenarios, which determine the battery’s payback period. As an example, for one company in the agricultural sector, the payback period ranged from 2.5 to 14 years, depending on the different battery scenarios. It should also be stressed that, by participating in the balancing market, a 1 MW battery can generate a minimum of €3 million in additional revenue over 5 years,” says K. Kiguolis.
Harnessing both wind and sun is essential
According to Edgars Maladauskas of the Lithuanian Wind Energy Association, balancing of electricity capacity is necessary to ensure that electricity production always matches consumption. Efficient operation of this market requires active investment in batteries by wind and solar farms and private business.
“It is essential for the stable operation of the country’s electricity system that both wind and solar developers are equally prepared to participate in the balancing market, as the sun and wind generate electricity at different times. Therefore, ideally, the development of wind and solar energy should be equal in terms of the readiness of both sectors to participate in the balancing market, contributing to the stability of the country’s electricity supply”, says Mr Maladauskas.
According to the Lithuanian Hydrometeorological Service, the country’s sun shines longest in April-September, while the strongest winds tend to blow in November-March, and electricity production from these sources is at its peak at the same time.
Interestingly, due to rapid climate change and associated changes in atmospheric circulation, Lithuania’s sunshine is gradually increasing, while average wind speeds are slightly decreasing. Between 1991 and 2020, sunshine duration has increased by around 7% compared to 1961-1990, while average annual wind speeds have fallen by a sixth from 3.7 m/s to 3.1 m/s.
A market without a price “ceiling”
K. Kiguolis said that the more solar, wind and, in the future, hydrogen-generated electricity in the country, the more intermittent electricity generation will be available on the market and the more batteries will be needed to stabilise the grid so that the country’s electricity supply will be uninterrupted and steady.
“Solar or wind farms with batteries will only benefit in the future. Not only will they play a socially responsible role in contributing to the country’s energy stability and security, but they will also earn a more solid income than just selling the electricity they produce”, when they produce it, but also when they want to produce it themselves, he stresses.
From 2025, after synchronisation with continental European grids, the Baltic countries will move to the Western European balancing market, where prices are several times higher. This means that the market for battery developers and consumers will expand considerably.
In addition, according to Mr Kiguolis, today wind farms face a price ceiling of €180-200 per 1 MW when selling electricity on the Nord Pool exchange.
As an example, he cites the situation in Germany in December 2020, when, in the face of a major electricity imbalance and in order to stabilise the grid quickly, the flexibility balancing market paid €99,000 for 1 megawatt-hour (MWh) for six consecutive hours.