The UK’s growing energy storage fleet can reduce market risk for Contracts for Difference (CfD) projects. While a CfD protects renewable generation projects against price volatility, storage can help reduce negative prices, according to AFRY’s John Perkins.
Speaking to Energy-Storage.news, Perkins, senior principal at consultancy AFRY, highlighted that negative prices are a “big risk” for generators and that they could grow to “several hundreds” of hours a year.
But energy storage can help reduce market risks around imbalance costs. Without it, balancing costs for managing forecasting errors would consistently increase.
Perkins explained: “CfD wind receives fixed income per megawatt hour, but it is exposed to market risk on its imbalance costs. Greater storage deployment, and therefore a smoothing of imbalance prices, is a benefit to CfD generators. It helps reduce the costs associated with its forecast error and balancing.”
Danish energy company Ørsted recently took final investment decision (FID) for a BESS to be installed at its Hornsea 3 Offshore Wind Farm. The BESS’s provision of complementary services and revenue profile, alongside its favourable position within the UK electricity system and co-location for efficient construction and operations, support the investment case, Ørsted said.
A total of 56 ground-mounted solar projects won backing in Allocation Round 5 (AR5) in November 2023. Historically, the scheme has primarily awarded contracts to offshore wind projects; AR5 was also the first round to run annually (rather than every two years).
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