German frequency response service revenues have dropped almost two-thirds in two years as utilities have rushed to deploy energy storage, research shows.
Wood Mackenzie Power & Renewables this month said prices in a June 2016 German frequency market auction cleared €23 ($26) per megawatt-hour, but were down to €8 ($9) per megawatt-hour in July 2018, a 65 percent reduction.
The reduction followed big investments in utility-scale front-of-meter energy storage systems for frequency markets.
“As these markets become increasingly crowded, we have seen prices plummet to levels which will make for lower-than-anticipated project returns,” said Wood Mackenzie in a press release.
Germany and the U.K. have led utility investments in energy storage over the last two years, according to Wood Mackenzie’s Europe Energy Storage Landscape 2018 report.
“By investing in energy storage, these companies are able to diversify their portfolio and improve their customer offering by including a clever piece of technology alongside a necessary service,” said report author Rory McCarthy, a senior research analyst.
Although there are gaps across Europe as policymakers struggle to keep pace with new technology, energy storage deployments continue to ramp up, he said. “Europe is now a very real contender for that global top spot in terms of total deployments,” he commented.
The continent is witnessing a glut of developers entering the market across the utility, commercial and industrial (C&I) and residential segments, he said.
Europe’s energy storage markets have received added impetus in the last couple of years from solar developers, which see batteries as a complementary revenue stream to traditional PV system sales that have been hit by a reduction in state subsidies across the continent.
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