AleaSoft Energy Forecasting, November 22, 2024. Energy storage and hybridisation are transforming the energy landscape, establishing themselves as essential pillars to integrate renewable energies, improve the stability of the electricity system and advance the energy transition. Significant challenges lie ahead for the sector, such as permitting, implementation of a capacity market, development of clear and stable regulation to attract investment and social acceptance. Nevertheless, there is optimism in the sector and the next five years are shaping up to be the five-year period of batteries and hybridisation.
The 49th edition of AleaSoft Energy Forecasting’s monthly webinars was held on November 14, focusing on the prospects for batteries, hybridisation and energy storage. On this occasion, Luis Marquina de Soto, President of AEPIBAL, the Business Association of Batteries and Energy Storage, participated and gave his views on these topics. In addition, during the webinar, the evolution and prospects of European energy markets were analysed.
The role of storage in the energy transition
The webinar highlighted the strategic role of energy storage in the energy transition. Although it is not the main driver, its importance lies in guaranteeing the stability of the electricity system and serving as an essential ally for the development of renewable energies. Thanks to energy storage, unmanageable technologies, such as wind and solar energy, can become manageable. Moreover, storage reduces market price cannibalisation and renewable energy curtailments, reinforces supply security, facilitates renewable energy integration and positions itself as a key vector for advancing towards a more sustainable energy system.
Evolution of energy storage in Spain over the last year
The webinar analysed the main developments in the energy storage sector in Spain over the last year. The first tender for hybrid projects, endowed with 150 million euros, which closed in March of this year, was highlighted. These projects are due to be connected by April 2026, although they face delays in obtaining permits, which is causing concern in the sector. Additionally, a tender for stand-alone projects, also with a budget of 150 million euros, is underway. According to provisional results, this funding will be distributed among approximately 35 projects, but there is concern that these projects may face similar permitting issues.
On the other hand, the rapid progress of the free market was highlighted, where 18 GW have already been awarded to battery projects, mostly stand‑alone projects, and a further 10 GW are awaiting a response. This is evidence that developers have identified storage as a key element for the growth of renewable energies, as a massive deployment of these technologies will not be viable without storage.
In addition, the new demand circular was presented, which puts special emphasis on flexibility, a fundamental aspect for battery operation. However, detailed specifications are still pending and are expected to be published in the coming months.
Another issue of concern is that the regulation implies that hybrid photovoltaic energy plants lose dispatch priority, as they are considered manageable when they include storage. This situation affects hybridisation business plans and has already stopped some financing models, so it is essential that this is reviewed.
Finally, the creation of a new Sub‑directorate General for Storage and Flexibility in the MITECO was reported, in order to give greater relevance to energy storage and boost its strategic development.
Outstanding issues for the development of storage in Spain
The webinar addressed various regulatory and social challenges related to hybridisation and energy storage. Among them, the capacity market stands out, whose implementation has been expected for more than a year due to its importance as a support for project financing. The first capacity market auction is scheduled for the first four months of 2025.
Another pending issue is the definition of whether or not to apply the IVPEE (Tax on the Value of Electricity Production) to storage. Likewise, the situation of the Guarantees of Origin in hybridised plants is of concern, as currently the energy that reaches the grid through storage loses these guarantees.
Finally, it was mentioned that there are cases of social opposition to battery projects, underlining the need for sponsors and institutions to collaborate actively to guarantee adequate social integration.
Revenue sources for batteries
The CAPEX of battery projects has fallen significantly, by close to 30% in the last year, with prospects for further reductions. During the first years of storage development in Spain, the main revenues from batteries will largely come from participation in ancillary services, especially in the secondary regulation market, which is considered very profitable for the first installations to be connected. However, as installed battery capacity grows, these revenues will tend to decline because it is a relatively low‑volume market that will be cannibalised soon.
According to a study by AEPIBAL, an equity profitability of between 5% and 6% is estimated for a 2‑hour battery with a CAPEX of €250/kWh, as well as for a 4‑hour battery with a CAPEX of €230/kWh, considering revenues exclusively from price arbitrage in the market and from secondary regulation services. If the capacity market started operating and offered values similar to the current subsidies for 10 years, which are between €25 000/MW and €30 000/MW per year, returns could exceed 10%, allowing for potential bankability. This, together with the track record to be developed, would strengthen the financial viability of battery projects.
Source: AEPIBAL.
The future of batteries and hybridisation
Major challenges remain for batteries and hybridisation, and 2025 will be decisive to drive their development. It is crucial to implement solutions that speed up the permitting process and continue to make progress in flexibility, an essential element to facilitate the installation of batteries. A clear regulatory framework and the implementation of reforms to ensure the competitiveness of the Spanish market in terms of investment are also required.
Although the reduction in battery prices represents a positive factor for their adoption, costs continue to be high, which reinforces the need to continue advancing in technological aspects. It is also essential to implement strategies that promote greater social acceptance.
Despite these challenges, storage is positioned as an essential pillar to continue deploying renewable energies. This strategic role will be a driving force for the five‑year period starting in 2025 to be marked by the prominence of batteries and hybridisation, consolidating their role during the energy transition.
Battery and hybridisation projects at AleaSoft Energy Forecasting
The AleaStorage division of AleaSoft Energy Forecasting provides solutions for stand‑alone battery projects as well as for hybridisation projects with photovoltaic and wind power plants. In some cases, these projects combine both technologies, photovoltaic and wind energy, integrating them with batteries.
Among the services offered are the estimation of revenues in the long term, considering revenues from price arbitrage in the day‑ahead and intraday markets, participation in ancillary services and possible revenues from the capacity market, if this exists or is foreseen, as is the case in Spain. In addition, CAPEX and OPEX estimates are made and a financial model is provided. When the size of the battery is not defined, AleaSoft Energy Forecasting helps to determine the optimal size for the project.
These services are aimed at utility‑scale projects as well as commercial and industrial projects and are offered for European and other markets at a global level.
Source: AleaSoft Energy Forecasting.
