Energy shifting using battery storage to optimise the PPA price

Decreasing prices for long-term PPAs - is the hype over? 

In addition to conventional financing via state subsidies, another form of funding has become increasingly important: PPAs (Power Purchase Agreements). These bilateral electricity supply contracts allow customers to secure long-term green electricity from renewable energy plants at fixed conditions. The market for PPAs was booming for a long time, but there are now signs of a turnaround in the market. Due to the massive expansion in the renewable segment and the simultaneous generation of electricity, the profile value will fall considerably over the next ten years. Similar to the classic wholesale markets, there is currently talk of a cannibalisation effect.  

Battery storage systems can provide a remedy here by shifting some of the energy from times of high feed-in to times of lower generation. This so-called ‘peak shifting’ increases the profile value of energy generation and consequently increases the value of PPA contracts. But how much potential is there in the ‘all-rounder’ battery storage systems? 

Battery storage (co-location1) and renewables - a good partnership?  

It is no secret that our energy system needs more flexibility. It is also widely recognised that batteries are a key piece of the puzzle in this context. But how can they be combined effectively and efficiently with renewable energy systems?  

The magic word is ‘energy shifting’. If battery storage systems are operated together with wind or solar systems, this is known as co-location. The electricity generated is not simply fed into the grid unhindered; the neighbouring storage unit reacts to market signals and can store some or all of the generation when it makes sense to do so. In this way, the grid feed-in is reduced without energy being lost through curtailment. This stored energy can later - when the market signals are more favourable - be fed back into the grid. This significantly increases the value of the electricity profile. Solar plants in particular, as shown in Figure 1, benefit enormously from this approach.  

In Germany, the high installed capacity of solar plants that feed into the grid in an uncontrolled manner means that prices are at their lowest or even negative during peak solar feed-in. As soon as the feed-in decreases, prices rise again significantly. Batteries utilise this volatility and improve the profile value of the electricity sold. This also increases the value of PPAs. 

In our blog post ‘Revenue Potential for Battery Storage Systems in the Power Market’, you can read about the revenues that have been achieved in the past in Germany, taking into account other powermarkets (intraday and balancing energy markets) and for stand-alone battery storage systems. 

‘Energy shifting’ through battery storage to optimise revenues: Use case for a solar and onshore wind project in Germany 

In order to analyse the effect of batteries on the value of PPAs, our battery revenue model was used to carry out exemplary calculations based on internal price forecasts. Two fictional 10 MW solar plants at a site in “Freiburg” were analysed, which differ in their alignment (south vs. east-west). In addition, a 10 MW onshore wind turbine in “Brandenburg” was simulated. A co-located storage facility with capacities of 5 MWh, 10 MWh and 20 MWh was analysed for each plant. The simulation period was ten years. 

Battery storage systems lead to an increase in revenues, especially for solar power systems, while the effect on wind power systems is more moderate. The simulation showed a rather small effect on the profile value for the onshore wind turbine across all storage depths. Over a period of ten years, a storage facility with a capacity of 20 MWh increased the profile value and capture prices by an average of around 2 %. With a capacity of 10 MWh and 5 MWh, the improvement under the same parameters was slightly lower at approx. 1.9 % and 1.4 % respectively. The reason for this lies in the already better profile value of wind turbines. Due to different alignments and temporal discrepancies in wind levels, the cannibalisation effect is lower for wind systems than for solar systems.  

In contrast, the effects are significantly stronger for solar plants. With both east-west and south facing orientations, the improvements could be significantly increased through greater storage depths. For the south-facing orientation, the profile value was improved by up to 12 % with a 20 MWh storage system, while the east-west system improved by 10 %. Although the percentage effect was higher for the south orientation, the absolute value for the capture price was around €3/MWh higher for the east-west orientation. This illustrates that an east-west orientation alone can increase the profile value of the electricity. 

The increase in the profile value of RE plants is reflected in the fair value of a PPA

The ‘fair value’ of a fictitious PPA was determined for all variants. Here, it is also shown that the improvement in the profile value through the use of a storage facility can lead to higher PPA prices. In the case of the wind system, a 20 MWh storage system resulted in a price increase of around 2 % over the entire term. In the case of the solar plant, the ‘fair value’ increased by around 12 % (south-facing) and 10 % (east-west facing) with a 20 MWh storage system. In addition, the PPA prices for the east-west orientation were also higher than for the south orientation.  

In summary, in this example, the combination of renewable energy systems and storage systems shows that higher PPA prices can be achieved by upgrading the profile value.