A study by Frontier Economics-commissioned by Fluence, BayWa r.e., ECO STOR, enspired, and Kyon Energy - provides valuable insights for advancing the energy transition in Germany.
The new analysis underlines the pressing need for the electricity storage strategy recently put forth by the Federal Ministry of Economics and urges its prompt completion and implementation.
Falling costs of storage
The recognition of energy storage’s role in power systems will increase significantly in the coming years. The analyses conducted by Frontier Economics show that the capacity of storage deployed in Germany will rise to 15 GW/57 GWh by 2030, if a supportive policy framework is in place. This means a forty-fold increase compared.
The tribute of energy storage’s role in power systems will increase greatly in the coming years
By 2050, the capacity of large-scale battery-based storage systems in Germany can reach 60 GW/271 GWh. This increase is driven by the growing demand for flexibility services in the electricity system and falling costs of storage.
Deployment of storage
Dr. Christoph Gatzen, Director at Frontier Economics, sees the study results as clear indicators for the future role of storage in Germany: “Large-scale battery storage is critical for the energy transition in Germany. Without the flexibility provided by storage, the country will face higher economic costs caused by increasing gas imports and expensive curtailment of renewable generation.”
The deployment of storage is expected to follow a growth trajectory similar to the one photovoltaic (PV) technology experienced in recent years, both in terms of cost degression and expansion rate. However, the deployment of storage is purely market-driven, as new projects can be built and operated economically without government funding.
Storage participation in the wholesale market
Frontier Economics estimates that using storage to shift the availability of electricity from times of surplus generation to times of electricity shortages can generate a (macro)economic value of around €12 billion by 2050. This value is estimated based on the savings from the wholesale markets alone and will increase further when additional benefits of storage, such as system services, decreased CO2 emissions, and participation in intraday markets, are taken into consideration.
Deployment of large-scale storage systems in Germany has the prospect to cap CO2 emissions by 6.2 tonnes
According to the study, the deployment of large-scale storage systems in Germany has the potential to limit CO2 emissions by 6.2 million tonnes by 2030 and by approximately 7.9 million tonnes in 2040 compared to an electricity system that uses gas-fired power plants instead of storage. Furthermore, storage participation in the wholesale market will lower wholesale electricity prices by €1/MWh on average between 2030 and 2050 compared to a scenario where no energy storage is built. If no energy storage is built and the missing capacity is not replaced by additional new gas plants, the wholesale prices would rise by 4€/MWh.
Gas-fired power plants by 2030
The forecasted deployment of energy storage systems will further ease the pressure to invest in new gas-fired power plants. According to the study, Germany needs to develop approximately 26 GW of new gas-fired power plants by 2030. However, without the deployment of storage as forecasted in the model, an additional 9 GW of new gas power plants will be needed.
The modeling by Frontier Economics concluded that although storage cannot replace the construction of gas power plants entirely, it will reduce significantly the investment required compared to an increased build-out and operation by 2030.
Expansion of renewable energies
Grid-scale storage systems can be built without government funding and can reduce the need for construction"
Considering the current budget crisis and the shortage of financing required for hydrogen-ready gas power plants, Dr. Christoph Gatzen stated: “Grid-scale storage systems can be built without government funding and can reduce the need for construction of new hydrogen-ready gas power plants as well as their fuel usage. Ensuring investment security for storage and green generation assets through the introduction of a clear and reliable regulatory framework should be a priority for policymakers.”
“We expect the demand for electricity and peak load requirements in Germany to increase significantly in the coming years. There is an urgent need for new large-scale storage systems and other generation assets in addition to the expansion of renewable energies for ensuring the security of supply.”
Industry expectations from policymakers
The initiators of Frontier Economics’ study call on policymakers to ensure investment security for the development of new large-scale battery-based energy storage systems. Bureaucratic and regulatory barriers in Germany, such as complex approval processes for new storage projects, should be reduced. All markets for energy trading, capacity, and ancillary services should be market-based and open to all technologies, including storage.
The Federal Government should meet the requirements set by the European Commission in the current reform of the European Electricity Market and set indicative storage targets for Germany as quickly as possible. Building on this, the Federal Government should present an expansion strategy for energy storage in Germany. With the recent publication of the electricity storage strategy, the Federal Government has taken the first step that must now be translated into concrete legislative proposals without delay.
