Battery Energy Storage System Valuation

Batteries: Real All-Rounders of Tomorrow’s Power Grids

The increase of variable renewable energy in power systems raises the question of the role that Battery Energy
Storage Systems (BESS) can play in one’s energy strategy. Now is the right time for power grid operators, industrials,
as well as commercial and residential buildings to leverage their charge and discharge ability, and their extremely
short response time.
Thanks to significant recent progresses of their technical and economic performances, BESS can be competitive for
multiple power systems applications, including:
• Energy arbitrage, discharging the BESS
when the electricity costs are high and
charging it with low cost renewable electricity

• Transmission and Distribution (T&D)

Upgrade Deferral (or “virtual line”), charging
and discharging two BESS located on either
sides of a congested line instead of
upgrading the transfer capacity of this line

• Shaving electricity consumption peaks

for industrial sites, thus reducing the
electricity bills Energy arbitrage using PV to reload a BESS

• Contribution to the operational reserves of the power grid by providing/absorbing a significant amount of power
in a short amount of time

• Support of the grid tension by injecting or absorbing reactive power

• Power ramp support absorbing or injecting power for a few hours to allow for slower generation units to adjust
their production

• RES plant generation stabilization by charging or discharging the BESS to limit the subhourly variations of the
RES plant generation
Experts note that most of these applications are meant to facilitate the integration of Renewable Energy Sources
(RES): energy arbitrage helps to prevent renewable curtailment, T&D upgrade deferral prevents curtailment and
reduces the costs of development of additional remote RES capacities, while operational reserves, RES plant
stabilization and power ramp support help mitigate the effects of important RES penetrations on the grid stability.
These applications also bring savings to the power system, as RES are associated to low production costs, BESS
combined with high RES penetrations will help lower electricity costs.

© ENGIE Impact | 1
Time To Act: Size Your Batteries For The Proper Applications
To get the most from their BESS strategy, operators and organizations should start by sizing the batteries and
identifying the applications fitting their needs. Several applications can be combined together in order to maximize the
revenue streams and the benefits to society:
• Energy arbitrage is only interesting if there is RES Case Study Result #1:
curtailment that could be tapped to charge the BESS, or if the
total combined costs of RES & BESS investments are lower PV & BESS for energy arbitrage
than alternative production technologies. The BESS size for typically yield IRR of 10%-19%, and
energy arbitrage will mostly depend on RES costs, BESS can help push down the Levelized
costs, BESS charge & discharge efficiencies and the costs of Cost of Electricity of islands
alternative production technologies. towards 80 USD/MWh in 2030.

• T&D Upgrade Deferral requires BESS to charge and

discharge during hours of T&D congestion. The BESS size mostly depends on how often the congestion occurs,
on the BESS costs, on the BESS charge & discharge efficiencies, on the costs savings realized from the reduced
congestion, and on the T&D lines upgrade costs.

• Shaving consumption peaks sizes BESS according to the bill peak consumption fees of the industrial consumer
and on the BESS costs (and charge & discharge efficiencies). Higher fees, higher peaks and lower BESS costs
will push for increased BESS sizes.

• BESS contributing to operational reserves are sized to Case Study Result #2

minimize the total operating costs of the grid, in particular the
costs associated to the operational reserves. The size of the BESS for reserve provision is an
required reserves, the BESS costs and the operating costs of attractive investment with an IRR of
alternative technologies are key components driving the around 13%-21% in many regions.
BESS sizing for this application.

• Supporting the grid tension is a side benefit of BESS, as cheaper alternatives exist where only grid tension
support is needed. Revenues from this application will depend on local remuneration mechanisms or can be
priced against the total costs of investment in alternative technologies yielding the same results.

• Power ramp support depends on the net load (difference between the load and the renewable production) ramp
and the lack of flexibility of existing generation. Investment in BESS is justified if the excesses and lacks of
thermal production are best absorbed by the BESS instead of relying on alternative technologies.

• RES plant generation stabilisation requires little energy capacity of the BESS, but the RES subhourly variability,
BESS costs and stabilisation requirements of the grid operator are key parameters to correctly size the BESS for
RES plant generation stabilisation.
For most of these applications, an expansion plan is the best tool to size the BESS, possible RES and alternative
production technologies. The expansion plan optimizes the total costs of the system, resulting in an optimal sizing of
the BESS and other candidates for expansion.
To top up the economic expansion plan, a market simulation tool can identify additional revenues yielded by the
market energy trade for each application, possibly extending the BESS size.
When combining applications, a rough approach consists in adding the BESS powers and energy capacities of each
application together to identify the total BESS size required. However, the applications are not necessarily all required
at the same time: the BESS size (and costs) can therefore be reduced by accounting for the chronology of the
applications requirements. Again, due to the complexity of the hourly and seasonal production and demand patterns,
any expansion plan should include an optimization phase, in order to define the optimal sizing.

© ENGIE Impact | 2
Start Implementing: How To Achieve a Dynamic Operation of Batteries
Once optimally sized, one of the most common challenges is the optimal operation of the BESS. Whether energy
markets are in place or long-term contracts are signed to provide a fixed number of services to the grid, the BESS
operator must identify when to charge and discharge energy from or to the grid to maximize its revenues.
Seasonal changes in the renewable production
patterns, in the demand and/or in the transmission
lines transfer capacities can influence the economic
feasibility of all applications. Some applications may
be required during specific seasons to maximise the
revenues based on those seasonal conditions,
whereas other seasons will focus on lower return
applications.
Daily changes can show the same effects on a
much shorter duration. For example, batteries fully
reloaded from photovoltaic energy during daytime can
provide more raise reserve to the grid during January July January July
afternoons than at night, when the BESS are
discharged. At night, they can however provide more Comparison of the charge (Load) and discharge (generation) profiles
lower reserve (BESS available to charge if required by of a BESS according to the season in the Middle-East
the network).
An identification of the seasonal patterns and daily patterns is therefore important to formulate recommendations on
when to best charge and discharge your BESS, and which services to offer during which seasons and which hours.
Moreover, as several services can be proposed at the same time (e.g. energy arbitrage while providing reserve), it is
important for the BESS operator to know the size of the band of the BESS State of Charge dedicated to each
application. Setting up bands for each application ensures that the energy injected or absorbed by the BESS
for one application does not prevent the implementation of another simultaneous application. The set-up of
these bands can also be optimized intra-day or from one season to another to maximize revenues.

Get A Fair Share Of Revenues Through Adequate BESS Services Pricing

Where energy markets and ancillary markets are in place, the estimation of the revenues of the BESS can be
achieved by market modelling simulations. However, if energy markets haven’t rolled out yet, the revenues will be
based on bilateral contracts signed between the BESS project developer and the grid system operators. The question
arises then: what is the fair price calculation to remunerate each service (service fee)?
Whereas setting an exact price is rather a negotiation
between buyer and seller, minimum and maximum
acceptable price values can however be determined for
the buyer and the seller.
• The minimum acceptable price is the fee paying
back the BESS project costs, including a minimum
commercial margin for the BESS project developer.

• The maximum acceptable price is more

complicated to assess: it is the price beyond which
the costs of the BESS solution exceed the costs of
alternative solutions yielding the same results as the
BESS. The complexity of this assessment stems from
the variety of alternative solutions, sensibility to input
data and possible combinations of services
multiplying the possible alternative solutions. ENGIE Illustration of the minimum and maximum acceptable prices
for BESS services to the grid
Impact help?

© ENGIE Impact | 3
How can ENGIE Impact help?
Contact Us
For operators and organizations to reap the fruits of BESS applications, ENGIE
Impact experts rely on their technical and economic expertise, advanced analytics engieimpact.com
and a track-record in clean energy innovation spanning more than 75 countries
info.impact@engie.com
across 6 continents.
+32 2 763 70 70
Relying on their extensive experience in BESS projects, our experts can help you with
all steps required to set up your BESS project:
1. Identification
Using our experience, we can help you identify early-on the relevant applications to help you decarbonize
and reduce costs in your power grid and business situation. This step helps to focus the efforts on the
applications that matter the most and to establish a roadmap of the possible services that the BESS can deliver.

2. Sizing
We offer advanced BESS sizing methods accounting for all possible applications as part of our integrated
generation, storage and transmission expansion plans thanks to our advanced optimization tools. Know when,
where and how much BESS capacities are required to optimize your cost reductions or maximize your revenue
streams for multiple scenarios

3. Operations
Once the BESS is sized, we analyze the optimal use cases of the BESS to make recommendations of
seasonal, monthly and daily modifications of the BESS operation. This analysis helps you to maximize the
operational revenues of your BESS

4. Pricing
Get an edge in your negotiations between BESS developers and grid system operators: ahead of your
negotiations, we can provide you the minimal and maximal BESS service fees that the BESS developer can
accept and that the grid system operators can accept

Selected References
• Integration of massive solar PV integration and
storage in Burkina Faso – SONABEL
Analysis of the technical and economic impact of strong
renewable integration objectives for Burkina Faso, along with the
battery storage need.
• Indonesia least-cost planning and dispatch
diagnosis in Eastern Islands – PLN - World Bank
Renewable strategy development for islanded systems taking
into account technical and techno-economic aspects including
battery storage for energy arbitrage and reserve provision
• Stability study of Benin's electrical network and
introduction of Battery Energy Storage Systems –
Benin Ministry of Energy
Establishment of a roadmap for energy storage in Benin to facilitate
the operation of the network and the integration of intermittent
renewable energy projects planned in the electricity system.
• Saudi Electric Company Renewable Energy Sources
Penetration - SEC
Analysis of the optimised long-term expansion plan of the generation and
storage assets of Saudi Arabia from 2026 to 2030. Analysis of the optimal use
cases of a 235 MW 715 MWh lithium ion BESS: energy arbitrage, primary

• Morocco Storage – ONEE - European Investment
Bank
Description of the current and future energy storage systems fit for
stationary storage, their applications for the power grid and the side
benefits outside of the power grid (transportation, feedstock...).
Design of the expansion plan, including BESS candidates
• Senelec storage solutions – Senelec – French
Development Agency
Screening of the energy storage solutions, and analysis of the
candidate energy storage solutions to assess their economic
benefits for energy arbitrage and reserve provision
reserve and secondary reserve applications. Sensitivities for different BESS
sizes have also been carried out. The optimal use bands of the BESS energy
have also been identified.
• NEOM 100% RES energy supply - NEOM
NEOM plans on meeting its energy demand solely with renewable
energy from wind and PV energy. Determination of the cost-optimal
energy mix between Wind and PV, where to build it and how much
Battery Energy Storage System needs to be developed to make this
RES penetration feasible
• Prefeasibility study of a PV+BESS Plant at in
Burkina Faso – Toyota Tsusho CFAO
Economic sizing of the BESS and calculation of the minimal and
maximal PPA tariffs.