Network services with C&I energy storage systems
The transformation of the energy supply towards renewable energies presents the power grids with major challenges. While traditional power plants offer constant and controllable electricity production, renewable energy sources are characterized by their volatility. In this environment, grid services that can be provided using Commercial & Industrial (C&I) energy storage systems are becoming increasingly important and opening up new business opportunities for companies.
Fundamentals of Grid Services
Grid services encompass all measures that contribute to the stabilization and efficient operation of the power grid. The key challenge is that electricity generation and consumption must be in balance at all times. Traditionally, these tasks were performed by large power plants. However, with the increasing share of renewable energies and the associated decentralization of electricity generation, new, flexible solutions are needed.
Battery storage systems are particularly well-suited for providing grid services because they can both absorb and release electricity and respond extremely quickly. Response times are in the millisecond to second range, while conventional power plants often require minutes to adjust their output. These properties make C&I storage systems ideal providers for various types of grid services.
Types of Network Services
Primary Control Power (PCP)
Primary control power serves to stabilize the grid frequency within seconds. The European interconnected grid operates at a target frequency of 50 Hz. Deviations from this frequency must be compensated immediately to ensure a stable power supply. Thanks to their extremely fast response times, battery storage systems can react to frequency changes within seconds by feeding power into the grid when the frequency is too low or withdrawing power from the grid when the frequency is too high.
In many countries, the market for primary control power is organized through tenders in which providers are compensated for providing control power. Typically, weekly or daily auctions are held. Since response speed is crucial for primary control power, battery storage systems have a natural advantage over conventional power plants.
Secondary Control Power (SBP)
While primary control power is very fast but only effective for a short time, secondary control power is activated somewhat later but lasts longer. It is automatically activated to return the grid frequency to the setpoint and relieve the primary control reserve. For operators of C&I storage systems, secondary control power offers attractive earning opportunities, as both the provision of power and the actual activation are remunerated.
Requirements typically include an activation time of a few minutes and a minimum power level that varies depending on the market area. When participating in the secondary control market, the battery must be able to provide its power for periods ranging from 15 minutes to several hours. This requires the storage system to be appropriately dimensioned in terms of capacity and power.
Minutes Reserve (MRL)
The minutes reserve or tertiary control represents the third level of control power. It serves to replace the secondary control power after prolonged imbalances and to bring the system back into balance. The minutes reserve is usually activated manually and must be fully available within 15 minutes.
For C&I storage systems, participation in the minutes reserve market is associated with lower technical requirements than for primary and secondary control power. However, the revenue potential is also typically lower. The minute reserve market is particularly suitable for storage systems that were primarily designed for other applications, such as self-consumption optimization or peak load management, and that want to use their spare capacity for additional revenue.
Voltage control and reactive power provision
In addition to frequency control, grid voltage stabilization is also an important grid service. In the distribution grid, decentralized feeders such as photovoltaic systems can cause local voltage increases, while high loads can lead to voltage drops. Battery storage systems can contribute to voltage stability by providing or absorbing reactive power.
The compensation models for reactive power provision are less uniform than for control power and vary greatly depending on the grid operator and region. In some markets, fixed compensation is offered; in others, settlement is based on tenders or bilateral agreements with the grid operator. For C&I storage operators, reactive power provision can represent an additional source of revenue that can be realized with virtually no loss of capacity for other applications.
Black start capability and islanding
A special form of grid service is the ability to black start and create islands in the event of a widespread power outage. Battery storage can help supply critical infrastructure and support grid reconstruction. This capability is typically compensated through special contracts with grid operators.
For C&I storage operators, providing black start capability often entails additional technical requirements such as special inverters and control systems. The combination of emergency power provision for their own operations and compensation for black start capability can nevertheless be economically attractive, especially for companies with critical processes that already rely on an uninterruptible power supply.
Network services with C&I energy storage systems
The transformation of the energy supply to renewable energies presents major challenges for power grids. While traditional power plants offer constant and controllable electricity production, renewable energy sources are characterized by their volatility. In this environment, grid services that can be provided using Commercial & Industrial (C&I) energy storage systems are becoming increasingly important and opening up new business opportunities for companies.
Fundamentals of Grid Services
Grid services encompass all measures that contribute to the stabilization and efficient operation of the power grid. The central challenge is that electricity generation and consumption must be in balance at all times. Traditionally, these tasks were performed by large power plants. However, with the increasing share of renewable energies and the associated decentralization of electricity generation, new, flexible solutions are needed.
Battery storage systems are particularly well-suited for providing grid services because they can both absorb and release electricity and respond extremely quickly. Response times are in the millisecond to second range, while conventional power plants often require minutes to adjust their output. These properties make C&I storage systems ideal providers for various types of grid services.
Types of Network Services
Primary Control Power (PCP)
Primary control power serves to stabilize the grid frequency within seconds. The European interconnected grid operates at a target frequency of 50 Hz. Deviations from this frequency must be compensated immediately to ensure a stable power supply. Thanks to their extremely fast response times, battery storage systems can react to frequency changes within seconds by feeding power into the grid when the frequency is too low or withdrawing power from the grid when the frequency is too high.
In many countries, the market for primary control power is organized through tenders in which providers are compensated for providing control power. Typically, weekly or daily auctions are held. Since response speed is crucial for primary control power, battery storage systems have a natural advantage over conventional power plants.
Secondary Control Power (SBP)
While primary control power is very fast but only effective for a short time, secondary control power is activated somewhat later but lasts longer. It is automatically activated to return the grid frequency to the setpoint and relieve the primary control reserve. For operators of C&I storage systems, secondary control power offers attractive earning opportunities, as both the provision of power and the actual activation are remunerated.
Requirements typically include an activation time of a few minutes and a minimum power level that varies depending on the market area. When participating in the secondary control market, the battery must be able to provide its power for periods ranging from 15 minutes to several hours. This requires the storage system to be appropriately dimensioned in terms of capacity and power.
Minutes Reserve (MRL)
The minutes reserve or tertiary control represents the third level of control power. It serves to replace the secondary control power after prolonged imbalances and to bring the system back into balance. The minutes reserve is usually activated manually and must be fully available within 15 minutes.
For C&I storage systems, participation in the minutes reserve market is associated with lower technical requirements than for primary and secondary control power. However, the revenue potential is also typically lower. The minute reserve market is particularly suitable for storage systems that were primarily designed for other applications, such as self-consumption optimization or peak load management, and that want to use their spare capacity for additional revenue.
Voltage control and reactive power provision
In addition to frequency control, grid voltage stabilization is also an important grid service. In the distribution grid, decentralized feeders such as photovoltaic systems can cause local voltage increases, while high loads can lead to voltage drops. Battery storage systems can contribute to voltage stability by providing or absorbing reactive power.
The compensation models for reactive power provision are less uniform than for control power and vary greatly depending on the grid operator and region. In some markets, fixed compensation is offered; in others, settlement is based on tenders or bilateral agreements with the grid operator. For C&I storage operators, reactive power provision can represent an additional source of revenue that can be realized with virtually no loss of capacity for other applications.
Black start capability and islanding
A special form of grid service is the ability to black start and create islands in the event of a widespread power outage. Battery storage can help supply critical infrastructure and support grid reconstruction. This capability is typically compensated through special contracts with grid operators.
For C&I storage operators, providing black start capability often entails additional technical requirements such as special inverters and control systems. The combination of emergency power provision for their own operations and compensation for black start capability can nevertheless be economically attractive, especially for companies with critical processes that already rely on an uninterruptible power supply.
Technical Requirements for the Provision of Grid Services
In order to be able to provide grid services, C&I storage systems must meet certain technical requirements. These include appropriate power electronics that enable fast response times, as well as communication systems that ensure connection to the grid operators' control centers. Depending on the type of grid service, different parameters are relevant:
For participation in the primary control power market, response speed is particularly crucial. The battery must be able to provide its full power within a few seconds. For secondary control power and minute reserve, however, energy capacity and endurance play a greater role. Here, the storage system must be capable of supplying or absorbing energy over an extended period of time.
Modern C&I storage systems typically have an energy management system (EMS) that coordinates various use cases. The EMS must be able to balance the requirements of grid services with other objectives such as self-consumption optimization or peak load management. This requires complex algorithms that consider forecasts of generation, consumption, and market prices.
Prequalification for participation in balancing energy markets is carried out by the responsible transmission system operator. This involves checking whether the storage system meets the technical requirements and can reliably provide balancing power. The prequalification process typically includes technical documentation, simulations, and practical tests that verify the system's response under real-world conditions.
Economic Evaluation
The economic attractiveness of grid services depends on various factors. These include the market conditions in the respective control area, the remuneration rates for the various services, the technical characteristics of the storage system, and the competitive situation with other providers. In recent years, many grid services markets have experienced increasing competition, which has led to falling prices.
For C&I storage operators, it is therefore often useful to consider grid services as part of a multi-use approach. The storage is primarily used for internal purposes such as optimizing self-consumption or peak load management, while unused capacity is made available for grid services. This combination of different use cases can significantly improve the economic efficiency of the overall system.
The revenue potential for grid services varies depending on the market and service. In Germany, for example, revenues of between €100,000 and €200,000 per MW per year can be achieved for primary control power. For secondary control power and minute reserve, the power prices are typically lower, but energy prices are added for the energy actually supplied or consumed.
The economic evaluation must also consider the impact on battery life. The frequent charging and discharging cycles involved in providing control power can lead to accelerated battery aging. Modern battery management systems attempt to minimize this effect through intelligent operating strategies, for example, by maintaining the state of charge within a battery-saving range.
Practical Example: Combined Application
A medium-sized manufacturing company with an installed PV system of 500 kWp and an annual electricity consumption of 1.2 GWh has installed a 600 kWh / 300 kW battery storage system. The storage system is primarily used to optimize self-consumption and for peak load management. Furthermore, the company participates in the primary control power market.
100 kW of the battery capacity is reserved for primary control power, which corresponds to approximately one-third of the total capacity. Since primary control power normally only experiences short power peaks, the energy capacity remains largely available for other applications. The energy management system ensures that the battery charge level is always in the optimal range to respond to both positive and negative frequency deviations.
By participating in the primary control power market, the company generates additional revenue of approximately €15,000 per year. This income shortens the payback period of the storage system by approximately 20% and significantly improves overall economic efficiency. At the same time, the company contributes to the stability of the power grid and supports the integration of renewable energies.
Technical requirements for the provision of grid services
In order to be able to provide grid services, C&I storage systems must meet certain technical requirements. These include appropriate power electronics that enable fast response times, as well as communication systems that ensure connection to the grid operators' control centers. Depending on the type of grid service, different parameters are relevant:
For participation in the primary control power market, response speed is particularly crucial. The battery must be able to provide its full power within a few seconds. For secondary control power and minute reserve, however, energy capacity and endurance play a greater role. Here, the storage system must be able to supply or absorb energy over a longer period of time.
Modern C&I storage systems typically have an energy management system (EMS) that coordinates various use cases. The EMS must be able to balance the requirements of grid services with other objectives such as self-consumption optimization or peak load management. This requires complex algorithms that take into account forecasts of generation, consumption, and market prices.
Prequalification for participation in balancing energy markets is carried out by the responsible transmission system operator. This involves checking whether the storage system meets the technical requirements and can reliably provide balancing power. The prequalification process typically includes technical documentation, simulations, and practical tests that test the system's response under real-world conditions.
Economic Evaluation
The economic attractiveness of grid services depends on various factors. These include the market conditions in the respective control area, the remuneration rates for the various services, the technical characteristics of the storage system, and the competitive situation with other providers. In recent years, many markets for grid services have experienced increasing competition, which has led to falling prices.
For C&I storage operators, it is therefore often useful to view grid services as part of a multi-use approach. Storage is primarily used for internal purposes such as self-consumption optimization or peak load management, while unused capacity is made available for grid services. This combination of different use cases can significantly improve the economic efficiency of the overall system.
The revenue potential for grid services varies depending on the market and service. In Germany, for example, revenues of between €100,000 and €200,000 per MW per year can be achieved for primary control power. For secondary control power and minute reserve, the power prices are typically lower, but energy prices for the energy actually supplied or consumed are added.
The economic evaluation must also consider the impact on battery life. The frequent charging and discharging cycles involved in providing control power can lead to accelerated battery aging. Modern battery management systems attempt to minimize this effect through intelligent operating strategies, for example, by maintaining the state of charge within a battery-friendly range.
Practical Example: Combined Application
A medium-sized manufacturing company with an installed PV system of 500 kWp and an annual electricity consumption of 1.2 GWh has installed a 600 kWh / 300 kW battery storage system. The storage system is primarily used to optimize self-consumption and for peak load management. Furthermore, the company participates in the primary control power market.
100 kW of the battery capacity is reserved for primary control power, which corresponds to approximately one-third of the total capacity. Since primary control power normally only experiences short power peaks, the energy capacity remains largely available for other applications. The energy management system ensures that the battery's charge level is always within the optimal range to respond to both positive and negative frequency deviations.
By participating in the primary control power market, the company generates additional revenue of approximately €15,000 per year. This income shortens the payback period of the storage system by approximately 20% and significantly improves overall economic efficiency. At the same time, the company contributes to the stability of the power grid and supports the integration of renewable energies.
Regulatory Framework
Participation in grid services markets is subject to certain regulatory requirements that may vary by country and region. In Europe, the harmonization of balancing energy markets in recent years has led to a standardization of the framework conditions, for example through the introduction of common platforms for trading balancing power.
Important regulatory aspects include prequalification conditions, minimum bid sizes, tender periods, and remuneration models. In many markets, barriers to market entry have been lowered in recent years to allow more providers access. For example, minimum bid sizes have been reduced and tender periods shortened, which particularly benefits smaller providers such as operators of C&I storage systems.
The double burden of grid charges and other surcharges poses a particular regulatory challenge. In many countries, fees are levied both for withdrawing electricity from the grid and for feeding it into the grid. This can impair the economic viability of storage systems that regularly switch between charging and discharging. In some countries, special regulations for storage have therefore been introduced to avoid or reduce this double burden.
Future Developments
The market for grid services is in constant change, driven by the ongoing energy transition and the associated challenges for grid stability. Several trends are emerging for the future that could be relevant for operators of C&I storage systems.
One important development is the increasing importance of local flexibility markets. While traditional balancing energy markets are located at the transmission grid level, new markets for flexibility are now emerging at the distribution grid level. Here, storage operators can offer their ability to quickly adjust power to resolve local grid bottlenecks or support the integration of decentralized generators.
Another trend is the shortening of trading intervals and the increase in temporal resolution. This enables more precise grid control and opens up new opportunities for fast-responding systems such as battery storage. At the same time, however, the demands on communication and control systems are also increasing.
Finally, advancing digitalization and automation are also important drivers for the grid services market. The use of artificial intelligence and machine learning can improve forecasts and optimize operating strategies. This enables even better integration of various use cases and maximizes the economic benefits of C&I storage systems.
Conclusion
Grid services represent an attractive opportunity for operators of C&I energy storage systems to generate additional revenue while contributing to the stability of the power grid. The rapid responsiveness and flexibility of battery storage systems make them ideal providers for various types of grid services, from primary control power to voltage control and black start.
In practice, the combination of different use cases is often the key to economic success. A storage system primarily used for self-consumption optimization or peak load management can provide unused capacity for grid services, thus generating additional revenue. Modern energy management systems enable the optimal coordination of these various applications and maximize the overall benefit of the storage system.
With the ongoing energy transition and the increasing share of renewable energies, the demand for grid services will continue to grow in the future. At the same time, new markets and compensation models are opening up additional opportunities for innovative storage solutions. Companies that invest early in C&I storage systems and build the necessary expertise can benefit from this development and position themselves as active participants in the energy transition.
Regulatory Framework
Participation in grid services markets is subject to certain regulatory requirements that can vary by country and region. In Europe, the harmonization of balancing energy markets in recent years has led to a standardization of the framework conditions, for example through the introduction of common platforms for trading balancing power.
Important regulatory aspects include prequalification conditions, minimum bid sizes, tender periods, and remuneration models. In many markets, market entry barriers have been lowered in recent years to allow more providers access. For example, minimum bid sizes have been reduced and tender periods shortened, which particularly benefits smaller providers such as operators of C&I storage systems.
The double burden of grid charges and other surcharges poses a particular regulatory challenge. In many countries, fees are levied both for withdrawing electricity from the grid and for feeding it into the grid. This can impair the economic viability of storage systems that regularly switch between charging and discharging. In some countries, special regulations for storage have therefore been introduced to avoid or reduce this double burden.
Future Developments
The market for grid services is in constant change, driven by the ongoing energy transition and the associated challenges for grid stability. Several trends are emerging for the future that could be relevant for operators of C&I storage systems.
One important development is the increasing importance of local flexibility markets. While traditional balancing energy markets are located at the transmission grid level, new markets for flexibility are now emerging at the distribution grid level. Here, storage operators can offer their ability to quickly adjust power to resolve local grid bottlenecks or support the integration of decentralized generators.
Another trend is the shortening of trading intervals and the increase in temporal resolution. This enables more precise grid control and opens up new opportunities for fast-responding systems such as battery storage. At the same time, however, the demands on communication and control systems are also increasing.
Finally, advancing digitalization and automation are also important drivers for the grid services market. The use of artificial intelligence and machine learning can improve forecasts and optimize operating strategies. This enables even better integration of various use cases and maximizes the economic benefits of C&I storage systems.
Conclusion
Grid services represent an attractive opportunity for operators of C&I energy storage systems to generate additional revenue while contributing to the stability of the power grid. The rapid responsiveness and flexibility of battery storage systems make them ideal providers for various types of grid services, from primary control power to voltage control and black start.
In practice, the combination of different use cases is often the key to economic success. A storage system primarily used for self-consumption optimization or peak load management can provide unused capacity for grid services, thus generating additional revenue. Modern energy management systems enable the optimal coordination of these various applications and maximize the overall benefit of the storage system.
With the ongoing energy transition and the increasing share of renewable energies, the demand for grid services will continue to grow in the future. At the same time, new markets and compensation models are opening up additional opportunities for innovative storage solutions. Companies that invest early in C&I storage systems and build the necessary expertise can benefit from this development and position themselves as active participants in the energy transition.