Guest blog: Turning the tables on volatility with energy storage infrastructure

With significant wholesale price volatility predicted in 2019 and a general feeling of uncertainty prevailing in a market fresh off the policy rollercoaster ride that characterised 2018, redT's Energy Assets Director, Ed Porter gives his view on how we see the market developing next year and why volatility is an important opportunity, not a challenge, to achieving a smarter, greener and more efficient energy system in the UK...

For me, 2018 saw a key tipping point in the UK energy supply merit order, with examples of solar and wind generation’s ability to move intraday and system prices towards £0/MWh (and even below, on occasion). Right now, this means that we’re seeing increased volatility in the wholesale market driven by the increasing share of our generation stack being taken up by intermittent renewables, mostly wind and solar, which run at a very low cost – forcing out older, more expensive coal and gas capacity from the merit order.

An illustration of how increasing renewable penetration drives price volatility on the wholesale energy markets

Renewable generation now makes up a very meaningful proportion of our generation stack, a proportion we all expect to increase further, however, the increased volatility this drives also opens up a huge opportunity for flexible capacity such as energy storage infrastructure.

Forecast by Aurora Energy Research on how our energy supply mix will change in the years to come

Fundamentally, flexible energy storage assets are instruments of security and risk mitigation in an energy market which seems to evolve almost by the day, creating additional (and lucrative) opportunities for asset owners and investors in the form of arbitrage and the provision of ancillary services to the grid.

Aggregators also have a key role to play and, alongside our new-look utility companies, will be a main driver for the further development of our energy system. I think 2019 will see increasing collaboration between energy storage companies, aggregators and utilities as behind the meter energy storage takes off in a big way here in the UK.

It makes greater and greater sense to invest in energy storage machines that create flexibility and offer infrastructure returns in a dynamic market. I see the inevitable uptake of renewables and the resulting increase in volatility as an opportunity for the market to latch onto, not a challenge to overcome.

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