Costs and benefits of battery storage (2024)

Investigation of the system-wide effects of large-scale batteries in the Dutch power system

Why has Kalavasta analyzed the costs and benefits of large-scale batteries in the Dutch power system?

The analysis was conducted to understand the system-wide implications of integrating large-scale batteries into the Dutch energy system given their growing importance for grid stability. Kalavasta investigated how battery storage could affect system costs and benefits across different future scenarios up to 2050, considering the first gigawatts would likely focus on balancing markets where the largest initial cost savings could be realized. The study was timely given that the Dutch grid operators' latest infrastructure planning scenarios include north of 40 GW of large-scale batteries by 2050, replacing many backup power plants from previous scenarios. While grid operators identified these battery capacities as technically required, they had not yet analyzed the associated costs, benefits and whether market conditions would support such deployment levels.

What factors most significantly influence the system benefits of battery storage?

The study identified several key parameters that strongly impact battery system benefits. Battery investment costs play a major role. Fuel prices for conventional power plants also significantly affect outcomes - higher fuel costs improve the business case for batteries by increasing the value of energy arbitrage. The development of volatile renewable electricity production and overall electricity demand are other crucial factors, as they determine opportunities for beneficial battery operation. Additionally, conditions in balancing markets like FCR and aFRR strongly influence benefits, particularly for the first gigawatts of battery deployment focused on these high-value services.

What effects do batteries have on different stakeholders in the energy system?

Grid tariffs emerge as a significant barrier to battery deployment, even in scenarios showing positive system benefits. While recent regulatory changes like the ATR85 transport rights aim to reduce grid fees for batteries that help manage congestion, the remaining tariffs can still make battery projects economically unviable. For instance, in a 2035 scenario with high fuel prices showing strong system-wide benefits from 6 GW of batteries, grid fees based on 2024 levels would result in a negative business case for battery operators. However, some battery benefits such as congestion markets and the intraday markets lie outside the scope of this study. However, the results still indicate that a disconnect can arise between system-level benefits and project-level economics that could prevent beneficial battery deployment.

What effects do batteries have on different stakeholders in the energy system?

The analysis reveals varied impacts across different stakeholders in the energy system. Electricity consumers generally benefit through lower average electricity prices and reduced price volatility. Grid operators gain from cheaper balancing options, though they must manage grid fee implications. On the flip side, electricity producers typically experience reduced margins as batteries lower peak prices, with conventional generators seeing fewer operating hours while renewables may benefit from reduced curtailment. Battery operators themselves can achieve positive returns, particularly when providing balancing services, though grid fees pose a significant challenge to profitability. Overall, most system actors benefit from battery deployment, though the distribution of costs and benefits varies significantly.