Consultancy Aurora predicts 10% year-on-year growth of flexible generation, taking installed capacity to more than 25GW by 2030.
While there are risks to that forecast, the firm believes that tight supply margins will create sufficient revenue opportunities for such a substantial volume of flexibility – which includes demand-side response (DSR), battery storage and decentralised peaking plant.
As such, it predicts compound annual revenue growth of 13% over the same period. 
“The past few years has seen a substantial increase in flexible and distributed capacity in the GB power system. This is set to continue in the coming years due to the power market remaining relatively tight, combined with the growth in intermittent renewables,” said Ben Irons, executive director at Aurora Energy Research.
“We expect to see rapid growth in battery storage, peaking plant and demand response capability – reaching a total of 25GW installed capacity by 2030. Indeed, the rapid growth in battery storage capacity could quickly saturate the Frequency Response market, with prices falling significantly by 2020. Battery developers will need to look beyond this to alternative business models such as trading in the wholesale and balancing markets or co-locating batteries with renewables.”
Although FFR revenues are predicted to fall due to cannibalisation, arbitrage models which exploit market price volatility could become a significant value pool in the 2020s, according to the consultancy.
While price volatility varies from year to year, a typical peaking plant would have earned nearly three quarters of its annual profits during the 10% highest priced periods in in 2016/17, according to Aurora. Profit margins for peaking plants were four times higher in 2016/17 than the previous year due to a combination of tight capacity margins, cold weather and plant outages.
Whether future years continue to follow that pattern is an unknown. But Aurora said it expects de-rated capacity margins to remain low over the next ten years, decreasing from around 4GW today to just under 2.5GW in 2030.
Despite predicting gigawatts of flexible technologies coming on stream to capitalise on resulting price volatility, Aurora said its modelling suggests significant scarcity ‘uplift’ will remain in the market out to 2030.
While growth of flexibility will depend upon variables including the penetration of renewables and electric vehicles, as well as how smart EV charging infrastructure can be made, Aurora forecasts a flexibility market worth £3bn in annual revenues by 2030.
Although flexible technologies compete directly against each other, the consultancy said it was ‘not a winner takes all market’, with different technologies able to provide different services.
Aurora was one of the contributors to The Energyst’s new, free Battery Storage Report. Download it here.
Related stories:
2017 Battery Storage Report: Risks, rewards and business cases
Energy storage ‘will wipe out battery storage’
Solar and storage must bow to grid king
Battery storage to push frequency response revenues down STOR’s path?
Centrica to use council’s 3MW battery storage unit to balance local and national grids
M&S mulls battery storage but struggles to find experts
Private equity firm buys 35MW Port of Tyne battery storage project
National Grid plots major overhaul of balancing services
WPD agrees 1GW of energy storage connections, asks how big can market get?
National Grid awards £66m of battery storage contracts
As solar subsidies wane, investors plan 2.3GW of battery storage projects
As solar generation makes history, National Grid starts to feel the burn
UK Power Networks receives 12GW of storage applications
Limejump and Anesco partner to connect 185MW of capacity market battery storage
Centrica: Floodgates to open on storage in 2017
Vattenfall to build 22MW battery storage plant at south Wales windfarm
VLC Energy to connect 50MW of battery storage in 2017 after EFR contract win
Greg Clark calls for carmakers and energy firms to deliver battery storage
More than half of I&C firms mulling energy storage investment
Capacity market too low for large gas, but gigawatts of DSR, batteries and CHP win contracts
Battery storage: positive outlook?
National Grid must provide a plan for battery market, says SmartestEnergy
Who needs an EFR contract? Somerset solar site installs ‘grid scale’ Tesla battery
Ofgem: Energy flexibility will become more valuable than energy efficiency
National Grid says UK will miss 2020 targets, predicts big battery future
Nissan: Carmaker signals roadmap to energy services company
Flexitricity chief: UK has enough spare power electrify every car on the road
Government finds £20m for vehicle to grid development
Shifting the balance of power: New, free demand-side response report
Follow us at @EnergystMedia. For regular bulletins, sign up for the free newsletter.
