The ongoing energy transition in Germany has led to a significant increase in the share of renewable energies in gross electricity consumption. In 2022, this share will already be 46%, compared to just 6.3% in 2000. This increase has fundamentally changed the electricity system in Germany. However, decarbonizing the electricity system by 2045 is still a major challenge. This is due to the fact that not only the remaining fossil-based electricity generation must be eliminated, but also a significant proportion of the previously non-electric energy consumption is to be electrified. This requires additional capacity for renewable electricity generation.
Large-scale battery storage systems play a key role here: with their diverse application scenarios, they compensate for fluctuations in the electricity grid and prevent power overloads. At the same time, they enable better integration of renewable energy systems into the grid.
The growing demand for flexibility in the electricity grid has increasingly brought the need for energy storage to the attention of political decision-makers, who have neglected this issue for years. As recently as December 2023, the German government presented a strategy for electricity storage. In this context, a study by leading German energy consultancy Frontier Economics, which was commissioned by Kyon Energy, Fluence, BayWa, enspired and ECO STOR, provides crucial insights into the future importance of energy storage for the German electricity system. The most important study results are summarized below.
Today, large-scale battery storage systems with a capacity of 1.5 GWh are installed in Germany(as of January 2024). If Germany follows international trends, the capacity and storage volume of large-scale battery storage systems will multiply in the coming years. According to the market simulation by Frontier Economics, the capacity of large-scale batteries in Germany could increase to 15 GW / 57 GWh by 2030 alone - which would be almost a forty-fold increase in storage capacity compared to today. By 2040, the capacity could increase to 24 GW / 94 GWh and by 2050 to 61 GW / 271 GWh. Only the day-ahead wholesale market is taken into account here; additional battery capacities are also expected to be financed via intraday and system service markets. The study thus also confirms the results of other major studies such as the Fraunhofer ISE and the scenario assumptions for the Ten-Year Network Development Plan (TYNDP).
Large-scale battery storage systems can generate considerable economic added value. This is achieved by shifting the availability of electricity from times of electricity surplus to times of electricity shortage. Frontier Economics puts the added value from savings on the wholesale market alone at around 12 billion euros by 2050 - even without taking into account the additional benefits for ancillary services, marketing on the intraday market or other economic knock-on effects. A key driver of these savings is the reduction in fuel andCO2 costs.
Storage systems can essentially contribute to savings through the following effects:
The expansion of large-scale battery storage systems can make a significant contribution to reducing the expansion of gas-fired power plants. 26 GW of new gas-fired power plants are currently planned by 2030. In a scenario without storage expansion, however, a further 9 GW of power plants would have to be built and operated. However, if storage expansion continues as expected, around 6.2 million tons of CO2 will be avoided in 2030 and around 7.9 million tons in 2040.
The study also shows that large-scale battery storage systems have a price-reducing effect on the wholesale price and reduce it by an average of around one euro per MWh between 2030 and 2050. The reduction in wholesale prices during high-price periods leads to lower overall electricity costs for end consumers, even if energy storage slightly increases electricity costs during low-price periods. As the price-reducing effect of battery storage tends to occur at times when a lot of electricity is consumed, the effect for consumers is even greater: an average of EUR 1.1 per MWh from 2030 to 2050. If there is no possibility of replacing large-scale battery storage with additional gas-fired power plants, the wholesale price would be expected to be €4/MWh higher on average from 2030 to 2050.
In addition, large-scale battery storage systems also reduce price volatility in the electricity market. This is clearly visible in the average daily price trends. In hours with low electricity prices, they increase the electricity price through the charging process. During high electricity price peaks, however, they reduce it again - and this effect is significantly stronger. The lower volatility enables market participants to make more accurate electricity price forecasts, plan their procurement strategies better and reduce the structuring and balancing energy costs of market participants.
Large-scale battery storage systems will continue to make a valuable contribution to making the electricity system more flexible in the future. The study's market simulation shows that the installed capacity of solar and wind power plants in Germany will increase from 129 GW at the beginning of 2023 to 360 GW by 2030, to 562 GW by 2040 and to 792 GW by 2050. Accordingly, the future electricity system in Germany will require significantly more flexibility to integrate renewable energies. At the same time, however, the output of controllable coal and gas-fired power plants will fall from 72 GW at the start of 2023 to 49 GW in 2030, 54 GW in 2040 and 63 GW in 2050.
In this market environment, large-scale battery storage systems are one of the few technologies that can provide the electricity market with controllable power. The high reaction speed of battery storage systems makes it possible to offer valuable positive and negative flexibility on the intraday market beyond the day-ahead market and thus support the liquidity of the intraday market. Large battery storage systems already trade one of the energy actually supplied on the intraday market.
The importance of large-scale battery storage systems for the German electricity system will continue to increase in the future. According to the study, battery storage systems could generate economic benefits of at least 12 billion euros by 2050. This does not yet take into account additional benefits for system services, marketing on the intraday market or other economic knock-on effects. As large-scale battery storage systems are purely market-driven - without state subsidies - there is also no need to subsidize alternatives such as gas-fired power plants. The potential of the technology is therefore huge. To ensure that it is actually realized and that storage systems can develop their full potential, clear political decisions and regulatory requirements are needed to promote long-term investment and at the same time reduce costs, strengthen energy security and drive forward the energy transition in Germany. The German government should therefore implement the requirements from the current reform of the European electricity market as quickly as possible to define indicative storage targets - and, building on this, present an expansion strategy for large-scale battery storage in Germany.
The complete study can be downloaded here.
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