Global | Publication | March 2017
The term energy storage relates to the various types of storage solutions which can store different types of energy. The following systems can be distinguished:
Power to power systems consist of pure electrical systems (condensers), electro-chemical systems (battery storage systems) and physical systems (pumped-storage power plants, compressed air/liquid storage systems). The power to gas/liquid systems use hydrogen or synthetic gas as storage medium. The thermal storage systems relates to all types of systems where heat/cold is transformed into cold/heat respectively, for example in order to store heat generated by solar plants for later use. These different types of energy storage systems feature their own technology, functionality, business model and regulatory requirements. Currently, battery storage systems and power to gas/liquid systems are considered as being an interesting asset class.
In international projects storage systems are part of stand-alone solutions or help to improve the stability of larger transport and distribution grids. The German market however is specific, as the German electricity grid is one of the most stable grids in the world and stand-alone solutions are rare. Therefore the business model for a German energy storage system is slightly different to business models in other markets. The key business models in Germany comprise:
There will be further interesting opportunities for business models in the future, such as combination with renewable energy sources and combination of storage with heat and mobility (Sektorenkopplung).
The required type of permit depends on the nature of the storage system. A battery storage system requires a building permit. In order to obtain such permit, the battery storage system must comply with the applicable planning and building law.
Power to gas/liquid systems usually require a permit under the federal Emission Control Act (Bundesimmissionsschutzgesetz).
In order to participate in the reserve control market, storage systems have to successfully pass a prequalification procedure undertaken by the German transport system operators (TSOs).
Energy storage systems benefit from the connection privilege for RES plants to the public grid.
Electricity stored in a storage system qualifies for the feed-in premium (Marktprämie), which is granted to the plant operator under the Renewables Act 2017 (EEG 2017) once the electricity is fed into the public grid.
A specific provision of the EEG 2017 ensures that the EEG surcharge is not imposed twice on the electricity stored in a storage system, but only on the electricity fed from the storage into the public grid, provided that metering requirements are complied with and subject to certain limitations in the event of only partial feeding-in into the public grid.
Storage systems are considered as consumers of electricity. As a consequence, the electricity stored into the storage system is subject to several levies and taxes which are imposed on the consumption of electricity. Since the final recipient of the electricity, which has been fed from the storage system into the grid, is also a consumer, it has to pay the same levies and taxes again. As a result, the same electricity is subject to a double charging.
Currently, industry representatives and politicians are discussing solutions to solve this impediment for energy storage systems in Germany.
As stated above, there are on-going discussions on how to improve the regulatory landscape for storage systems in Germany. Further interesting opportunities are provided by the EEG 2017 by introducing a special tendering system for applications providing specific support for the grid.
A “typical” (or, more aptly an “ideal”, since there is still a large variety of different structures) energy storage project comprises the supply contract for the battery storage system and a construction contract for the planning and erection of the storage system. There are also projects in which supply and construction of the system are subject to an EPC contract which reduces the interfaces of the project. Depending on the technology, there are also one or more operation and maintenance agreements. Depending on the business model, further agreements deal with the marketing of the storage system on the reserve control market as well as the connection of the system to the grid. If the storage system is the asset of a separate company (special purpose vehicle), respective corporate documents complete the picture.
We are of the opinion: Yes it is! There are several technologies which pass the tests of the TSOs for the provision of reserve control, which means that they are seen as reliable devices in the electricity market. The regulatory environment is still challenging and subject to on-going changes; a qualified due diligence, however, can identify and mitigate the risks. The same applies to the project agreements of a storage system project. If the sponsors can prove a solid business case which creates a stable cash flow during the term of the financing, there are no reasons why energy storage should not be subject of a project financing.
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At times, disputes arise among such parties as to whether multiple contracts involving a common matter should be read as a single, integrated contract, or as separate and distinct agreements.
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