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Software: an anchor amidst change

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Energy Global,

Jeff Damron, Senior Director, Business Development, at Wärtsilä’s Energy Storage and Optimisation Business, USA, describes how energy management software can help the changing energy storage landscape as the industry develops at a rapid pace.

Energy storage plays a vital role as more intermittent renewables are added to the grid, providing important grid services for reliability and stability. It has also been proven to provide excellent returns on investments and new revenue streams that power producers have come to rely on. In light of supply chain constraints that are likely to impact the cost structure of new energy storage projects, software optimisation is the most important decarbonisation and monetisation tool in the arsenal of power producers.

Supply and demand imbalance creates new challenges for energy storage

The energy storage industry has enjoyed steady cost declines since 2010, driving utility scale, commercial, and residential deployments across the globe. But at the end of 2021, the price of lithium-ion batteries increased for the first time in a decade. The recent increases in battery prices have been triggered by skyrocketing demand and a host of supply chain constraints.

The price of raw materials is up across the board in response to demand from stationary energy storage and electric vehicles (EV). According to IHS Markit, the price of lithium carbonate has risen nearly 400% between 4Q20 and 4Q21. The total material costs of a lithium iron phosphate (LFP) battery has risen by 35%, forcing battery manufacturers to increase prices.

According to S&P Global Market Intelligence, lithium supply is forecast to jump to 636 000 t in 2022, up from an estimated 497 000 t in 2021. But demand will jump even higher to 641 000 t, from an estimated 504 000 t. Battery recycling and recovery efforts currently being explored are compelling, but will not scale in time to provide any immediate relief for the near-term supply shortage.

Previously, the energy storage industry had enjoyed ample supply of LFP batteries, but as more automakers announce EV models utilising LFP technology for its lower cost, this is no longer the case. Compared to large established automotive original equipment manufacturers, energy storage system integrators buy batteries in relatively small volumes for just-in-time delivery. Naturally, manufacturers are prioritising large, long-term EV supply agreements at this time.

Energy transition continuity hinges on energy management software

According to the Energy Information Agency, utility scale energy storage in the US is expected to grow 84% this year, for a total of 5.1 GW of additional capacity. Despite a slew of challenges, industry analysts remain cautiously optimistic about y/y growth in 2022, although at lower levels than previously anticipated.

Energy storage is not the only cleantech sector feeling the pinch. Supply chain constraints have caused industry analysts to lower their 2022 forecasts for solar by as much as 25%. Rystad Energy has predicted that the rising costs of solar panels could prompt the delay or cancellation of as much as 56% of the solar generation capacity currently planned worldwide in 2022. This is significant when you consider that over 60% of planned storage capacity in the US is collocated with solar installations, demonstrating the interconnected nature of the country’s industries.

The magnitude and rate of cost increase is making it difficult to manage costs throughout the energy storage project development cycle. At the same time, 46.1 GW of new utility scale electric generating capacity is expected to come online in the US in 2022. Meanwhile, energy demand is projected to grow by 1% this year as the economy continues to recover from the pandemic. There has never been a more important time for power producers to ensure that their portfolio of existing assets is prepared to respond to market fluctuations and generate expected levels of return. The most cost-effective and immediate way to do this is to effectively utilise energy management software.

Software optimisation

Today’s energy infrastructure is a complicated amalgamation of power sources in need of synchronisation. Fortunately, there is the technology to orchestrate the various instruments at play. Energy producers rely on sophisticated energy management platforms when integrating renewable energy and energy storage into their existing power systems.

With energy management software, power producers can maximise the productivity and profitability of existing assets while remaining flexible enough to introduce new assets without interruption. Energy management systems use algorithms and machine learning to automate decision making for power producers, ensuring the energy system’s performance is always optimised. Software uses machine learning to analyse data, forecast future loads, and intelligently dispatch assets in the most efficient way while also reducing maintenance costs.

By leveraging machine learning, energy assets can be maintained at their most optimal point to generate, store, and release electricity for years to come. This makes the grid more reliable, maintains equipment capacity, and improves the producer’s return on investment.

When weather conditions change and renewable energy is not producing enough power, energy management software can automatically balance the output with secondary resources such as batteries to make up the difference. Software can react to match asset output to demand in milliseconds – faster than any human operator.

A case study: Frequency regulation in Northern Germany

As the energy landscape transitions to more distributed and intermittent resources, providers need the ability to provide ancillary services that maintain the reliability of the grid. In Northern Germany, for example, where large amounts of wind energy are being introduced to the grid, energy storage has been deployed to enable reliability, flexibility, and stability in and across energy networks and assets. But an intelligent and unifying platform is necessary to integrate and maximise all generation assets onto the German grid to ensure reliable and safe energy delivery to the end customer.

In Cremzow, Germany, a 22 MW/35 MWh energy storage facility balances the grid by providing frequency regulation services to the country’s Primärregelleistung (PRL) market. The Cremzow project is based on a partnership between Enel Green Power Germany, ENERTRAG AG, and Leclanché. Wärtsilä’s GEMS Digital Energy Platform intelligently integrates and manages the power plant across multiple applications, delivering frequency control, energy arbitrage, and reactive power services.

Cremzow is one of the latest projects to utilise the multiple application capabilities of GEMS with primary control reserve and reactive power applications. When the grid frequency decreases due to high power demand, the battery is able to begin delivering its stored energy within 300 msec., while charging with surplus energy during periods of low demand.

The software efficiently manages the state of charge of the system by actively participating in the German wholesale electricity market. GEMS specifically ensures system integration and optimisation of storage, renewable and power generation assets through changes in market conditions and structures, using real-time forecasting and artificial intelligence – effectively future-proofing energy storage investments for both power developers and utilities.

Software monetisation

Software provides the needed flexibility and reliability to support renewables while also maximising the economic contribution of individual assets. Market-based strategies are critical to revenue and energy value maximisation, which is a key feature of energy storage’s value as a flexible asset. Building industry awareness of battery monetisation opportunities and strategies is essential for maximising the value of renewable energy projects.

Energy management software can also help power producers access lucrative new energy markets that have been previously unavailable to them due to the nature of a grid built for fossil fuel resources.

Renewables are now the cheapest source of energy, but currently only account for approximately 12% of energy consumption in the US. This is partly due to a lack of tools for integrating renewables into the current wholesale energy market-bidding structure. It was previously thought that renewable energy would not be able to compete in market-driven procurements. However, first-mover auctions surprised utilities with energy storage offers too good to refuse. Energy storage has enabled improved integration of renewables onto the grid by guaranteeing that reliable renewable power is available to meet the demand of energy markets just as any flexible fossil fuel power plant guarantees fossil fuel electricity.

Power producers compete in a complex market selling power into the grid. With variable power demands being supplied by a broad spectrum of independent producers grappling to maintain profits, staying atop market fluctuations becomes increasingly difficult. Bidding in energy markets with power from energy storage assets requires a sophisticated approach that anticipates fluctuations and can recalibrate and react in fractions of a second. This type of instantaneous calculation requires traders to work with an algorithmic software to manage the bidding process. Automated bidding software maximises revenue from assets while also developing new strategies for future growth and return on investment.

Wärtsilä recently commissioned a 40 MW/80 MWh solar-plus-storage facility in Georgia, US, that is one of the world’s first examples of using artificial intelligence and energy storage technology to competitively bid into wholesale markets. Wärtsilä’s GEMS controls the entire hybrid plant while its new cloud-based IntelliBidder software can bid firm energy into the day-ahead markets. IntelliBidder leverages machine learning based on automated and forecasted data and real-time trading for elevated value-based asset management and portfolio optimisation.

With a greater focus on the value of flexible energy and the rise of new energy markets and market signals, renewable energy developers are leveraging the intelligence of modern energy storage systems for advanced value-based asset management and portfolio optimisation. Energy storage is critical to achieving 100% renewable energy, and it is imperative that the industry continues to support energy providers as they deploy storage at unprecedented speed. Energy management software is always an integral part of any power system, but will play an outsized role in helping power producers weather changing market conditions by streamlining operations, improving revenues, and clearing a more efficient path to a renewable energy future.

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