1. The Capacity Market pays resources for standby capacity during grid stress events, with de-rating factors determining the percentage of the auction tariff different technologies receive.
2. Energy storage projects in the UK typically have de-rating factors of 19-22% for 2-hour systems and 30-40% for 4-hour systems in the Capacity Market auction.
3. Stakeholders are calling for updates to the de-rating methodology for energy storage in the Capacity Market to reflect storage’s value and role in ensuring national security of supply.
The Capacity Market in the UK pays resources for being available during grid stress events, with tariffs reflecting the reliability of resources in delivering stand-by capacity. Thermal gas plants and hydro receive the highest de-rating factor, while solar and wind get the lowest. Energy storage’s de-rating factor depends on its duration, with longer systems receiving higher percentages.
Most battery energy storage systems being developed are 2-hour and 4-hour systems, which would only receive a fraction of the tariff in Capacity Market auctions. The Electricity System Operator (ESO) is looking at increasing de-rating factors for energy storage to better reflect their value.
Operators can bid in projects at a higher duration than their true duration, but improvements are suggested to make long-duration energy storage more attractive. Suggestions include providing information on the maximum amount of energy a project can store and how quickly it can be released.
Moving towards central dispatch where the ESO controls energy storage resources could maximize the value of energy storage in system stress events. The latest de-rating factors for energy storage are available in the ESO’s Electricity Capacity Report. Solar Media will host the Renewable Energy Revenues Summit in London in 2024 to explore various topics related to renewable energy.