Potential Revenue Streams for Commercial Storage Systems

Time Shifting – Maximising Self-Consumption

A battery storage system allows surplus energy generated by a PV installation during the day to be used in the evening, thus increasing revenues.

Time Shifting – Peak Avoidance

For commercial or industrial sites in the UK, up to 25% of the total electricity cost is attributable to transmission and distribution network charges.  Commercial/industrial users’ electricity consumption is metered at half-hourly intervals and these charges are based on the consumption during specific half-hourly periods:

  • Transmission Network Use of System (TNUoS or TUoS) charges are based on three annual peaks of demand in the transmission network during the months of November to February.  The peaks (‘TRIADs’) are not known in advance, but can be forecast by experts and typically occur during the late afternoon or early evening.
  • Distribution Use of System (DUoS) charges are billed monthly based on the customer’s electricity consumption during each half-hour period of the respective month.  However, the DUoS charges are split into three different rates (red, amber and green) depending on the time of day.  Red rates usually apply for two to three hours during the late afternoon or early evening on Monday to Friday, and are typically more than a hundred times as high as the charges during the green rate periods.

A battery can be charged during the night utilising cheaper electricity, and discharged during red rate and TRIAD periods, thus realising significant savings on electricity costs.

Grid Balancing Services

In the UK, National Grid operates several frequency response markets which allows battery operators along with other demand-side resources to participate in balancing the grid frequency.  Firm Frequency Response (FFR) is currently the most attractive option, with static frequency response giving lower revenues.  The FFR market requires a fast and reliable resource to provide regulation on a second-by-second basis, which can be provided by a battery system.  Operators of smaller battery systems can participate in the FRR market through an aggregator as part of the total capacity of the aggregator’s portfolio.  Participation in the FRR market secures monthly revenue for customers.

To date, there has also been one EFR (Enhanced Frequency Response) tender; EFR is similar to FFR but requires shorter response times.  National Grid currently works with other parties on a SMART Frequency Control project (formerly known as Enhanced Frequency Control Capability, or EFCC), developing a frequency response system for the future.

Capacity Market

The capacity market was introduced by the Government in 2014 as part of the Electricity Market Reform.  It is designed to ensure sufficient reliable capacity is available by providing payments to encourage investment in new capacity or for existing capacity to remain open.  Payments are offered to power generators for being available to generate at certain times, but also to demand response providers for being able to reduce electricity demand.

The market takes the form of an annual auction, for capacity to be delivered in four years’ time.  Participants bid into the auction at the price they need to be built in time to generate.  The amount of capacity needed is decided by the Government, following National Grid’s recommendation.