The Capacity Market (CM) was seen as a good/stable income stream for grid-scale battery projects worth around £20k per MW p.a. However, a recent decision by the Government has just blown a hole in potential new capacity market contracts!
The CM is designed to provide an insurance policy against any possibility of future electricity blackouts, by providing payments to encourage investment in new capacity or for existing capacity supplies to ensure sufficient reliable capacity is available. However new de-rating factors were announced last week which will make short duration batteries less valuable in the capacity market.
Until now, a ‘traditional’ 1MW lithium-ion battery would have 1MWh of storage capacity. It would be kept 50% full so that at any moment it can either import surplus electricity at its rated MW or export stored energy for 30 minutes. The difficulty with regard to the Capacity Market is that National Grid could ask for electricity to be exported for up to 4 hours.
National Grid has therefore just announced their proposed de-rating factors for batteries. What these mean is that our ‘traditional’ 1MW battery (above) will only be paid on 21% of its capacity. So £20k p.a. becomes £4k p.a.