A driving force for shared generation electricity and a greener system

The first storage auction for the flexibility of the electricity system, as part of the Fast Reserve pilot project, was a success.

The great digital driving force of renewable energy produced, accumulated, and exchanged with those who need it most has taken shape. It will give us (and is already doing so) an electricity system that is more cost effective to run, safer for everyone, more flexible in its ability to respond to the changing demands of citizens and businesses, even more "democratic" because it is able to use, at the service of the grid, even the small self-generation plants that are proliferating mainly thanks to renewables. Miracles, which in reality are the result of technology and the market, of distributed electricity production, of battery storage systems and of Terna’s desire - the operator of the high and extra-high voltage electricity grid - to accelerate the solutions made available by technological evolution.

Years of experimenting on technologies with the aim of developing solutions, also with regard to market rules and contractual mechanisms. And now it is time for the launch, the real one. More successful than expected. The auction held in December by Terna closed with more than a few surprises. Terna awarded, among the first in the world, 250 megawatts of storage for the flexibility of the national electricity grid as part of the Fast Reserve pilot project dedicated to testing a new ultrarapid regulation service that perfectly matches the characteristics of the batteries, both individually or combined with generation plants.

(Unsplash.com/Andreas Gücklhorn)

The market rush. The first surprise: the auction drew a large response, with total bids equal to six times the demand. The second surprise, which derives directly from the first: the capacity quotas envisaged by the auction were assigned to 17 operators who made a total of 23 units available, at prices equal to about one third of the base auction price set by Terna at € 80,000/megawatt year, a value evidently considered congruous with respect to the economic fundamentals necessary to start investing. The fact is that the quotas were awarded, with five-year contracts, at a weighted average value of about € 23,500 per MW annually to the Centre-North, which was assigned 118.2 MW, while in the Centre-South 101.7 MW were assigned at a weighted average price of approximately € 27,300 per MW and Sardinia recorded the peak in the award price, with approximately 30 MW assigned at a weighted average price of approximately € 61,000 per megawatt hour, in any case significantly lower than the reference price estimated by Terna.

The signs are very encouraging. The willingness of operators to participate in the new challenge, with profitability indices deemed favourable even at prices markedly lower than the base auction price, testifies to the current absolute competitiveness of battery storage technology not only in the management of renewable self-production with small domestic plants but also in that of "utility scale" systems, connected to large public grids and oriented towards the supply of services to the grid, as in the case of the auction just concluded by Terna.

Terna’s storage lab in Codrongianos in the province of Sassari (photo by Terna)

Advantages for everyone. It is worth remembering that there is much more at stake than the affordability of this kind of solution. In fact, the overall safety of the electricity system is at stake, put to the test by the progressive closure of plants that in the past decades have contributed most to the safe operation of our electricity system, also thanks to the fact that older, more polluting plants being decommissioned (coal-fired thermoelectric plants), are marked by an inertia in their operating mechanisms capable of automatically coping with even sudden variations in the country's electricity demand.

In the future, with a very low system inertia value and with the discontinuity and poor programmability of renewable generation, an "ultrarapid" reserve system capable of being activated within a second, thanks to the speed of the batteries, will become essential for electrical system safety. Even more essential if we really want to accelerate the energy transition for the sake of decarbonisation and environmental sustainability of the Italian energy system "in view” - reads the note released by Terna with the award of the auction - “of the commitments and objectives of the NECP (Integrated National Energy and Climate Plan that involves all European countries) which by 2030 plans for a significant dissemination of non-programmable renewable energies” together with all the elements that mark a fascinating scenario with an even more fragmented and widespread electricity trading system that does not only involve medium-large companies and producers but even individual citizens.

(Unsplash.com/Etwin Kyo)

An opportunity even for the smallest stakeholders Domestic and industrial electrical devices will be star players in this “Energy of Things” - as highlighted by Terna in a note - “including residential heating and cooling climate control systems, photovoltaic systems with batteries, as well as e-cars, connected and remotely controlled through an innovative digital platform supporting the grid managed by Terna and, in turn, the energy transition.”

This is the reason why, the purpose, the affordability, of this operation to which Terna is committed, together with its growing number of public and private partners. All with a coordinated action on several fronts. Moving in the same direction is, for example the international initiative that resulted in Equigy, the joint venture established by Terna together with two other European grid operators, the German/Dutch TenneT and SwissGrid. The purpose: to define technical standards and common rules to "ally" and interconnect the most varied devices distributed throughout the territory to act as an even more widespread "driver" for the energy demand on large grids. “This will benefit the flexibility, security, sustainability and economics of the system, but will also help the owners of the devices through revenues deriving from the supply of grid services.” Everyone’s affair. Also, and why not, in terms of direct economic benefits for the individual consumer citizen.