UK LDES Scheme May Cut BESS Project Returns
Analysis by LCP Delta suggests the UK's long-duration energy storage support scheme could reduce project IRRs by up to 2.7 percentage points.
The UK's long-duration energy storage (LDES) cap-and-floor scheme could reduce project internal rates of return (IRR) by 2.7 percentage points. This analysis comes from research firm LCP Delta, as highlighted in a weekly industry digest from Energy-Storage.news.
George Martin, a principal consultant at LCP Delta, shared the findings. Compared to a scenario with no new LDES, the scheme leads to that 2.7-point IRR reduction. However, when measured against LCP's existing Central Scenario, which already anticipated significant LDES deployment, the IRR impact is just 0.5 percentage points. The effects vary by location and asset specifications.
The scheme has drawn opposition. Critics argue subsidised lithium-ion battery projects will bid into ancillary service markets at lower prices than unsubsidised ones. This could negatively affect the buildout of short-duration battery energy storage systems (BESS).
Battery Safety and Grid Impact
Battery safety consultant Neza Lupsina prompted discussion on thermal runaway risks. She noted every new chemistry or standard moves the industry closer to a solution, but the requirement to design for failure remains.
Another post examined how BESS impacts grid power quality. Maryiam Arshad of Energy Futures explained batteries can influence harmonics, voltage fluctuations, and resonance at the point of interconnection. Some commenters said grid-forming inverters solve these issues, but noted procurement teams may not know to ask for them.
International Market Developments
In Saudi Arabia, a recent procurement for 2GW/8GWh of BESS set a new low price record. According to analysis by ex-Fluence executive Marek Kubik, the price was US$145 per kilowatt-hour, all in.
Germany has effectively created a new 23GWh grid asset through a rule change. From 1 October, a vast fleet of residential batteries can participate in the same markets as large-scale BESS, said Fabian Fürst, CEO of virtual power plant firm Flexa. The big question is what battery owners will do with this new capability.
In Italy, the second MACSE auction for grid-scale storage is set for 24 November. Like the first round, it will procure capacity only in the south of the country. Giovanni Battista of LG Energy Solution questioned how long this geographic focus would last, considering the 15-year contract length.
Analytical Challenges and Policy Shifts
Claudius Jehle, CEO of Volytica, pointed out that calculating usable capacity in a BESS is not straightforward. A 100MWh battery at 50% state of charge does not simply mean 50MWh is available for use.
Separately, Spain is considering new rules for data centres. A proposal, first reported by Reuters, would require centres above 1MW to cover at least 80% of their electricity demand with renewables. Consultant Florian Mayr of Strategy& posted analysis on this potential policy shift.
