Harnessing the Solar Surge: The Potential of BESS

Harnessing the Solar Surge: The Potential of BESS A Case Study in Spain

Monday, January 20, 2025

By Laura Susta & María Santana

As Europe transitions toward a renewable-powered future, the challenge of managing intermittent energy sources is becoming increasingly critical. This year, the captured rate of solar PV has declined across the continent, dropping to 67% in Spain and 69% in Greece. For investors, ensuring expected returns on investment has become increasingly tough, whether through PPAs or by staying merchant. Therefore, reaching the ambitious targets for renewable energy deployment of the coming years is expected to be challenging. 

In this context, Battery Storage Systems are emerging as a transformative solution, not only for balancing the grid but also for stabilizing the electricity prices. According to the National Energy and Climate Plan, Spain aims to achieve 22.5 GW of installed storage capacity by 2030, with at least 25% of this capacity expected to come from BESS. Some industry projections are even more aggressive, forecasting up to 20 GW of BESS deployment by 2030. 

To understand the potential of this technology to mitigate the solar price cannibalization, we have built a model to compare hourly prices in scenarios with and without substantial BESS deployment in Spain by 2030.  

The study is based on historical data and the expected load, PV and wind capacity according to the national targets and market consensus. The methodology used is a mix of statistical techniques based on machine learning, which allows achieving an accuracy of 85% in price prediction.  

The findings are represented in the graph above, showing the difference in the two 2030 average hourly price curves, considering a RES deployment according to the national targets and market forecasts. With a BESS installed capacity of 20 GW, the production is almost constant throughout the day, as the peak during the solar hours is absorbed by the storage and then reinjected into the system during the night hours, while with 0 GW of BESS the production is definitely discontinuous.  

This strongly impacts the prices, as without BESS they show a standard deviation of 55% compared to the daily average, while with the modelled BESS installation the fluctuations are reduced to 36%. The peaks remain during sunrise and sunset hours due to the higher load, but their amplitude is reduced from 100€ to 50€.  

This is due to BESS’s ability to absorb excess energy when prices are low and release stored energy during periods of higher demand, creating a more stable and predictable electricity market. This brings benefits for all stakeholders: for consumers, it leads to more predictable pricing and potentially lower overall costs, for grid operators, it enhances system reliability and minimizes the need for expensive peaker plants, for producers, it improves captured prices, thereby incentivizing investments in renewable energy and fostering a virtuous cycle of growth in renewable capacity. 

Surely, BESS are not the only solution available, and they must be complemented with alternatives such as demand side flexibility, which helps stabilize prices through a load shift. This has already been implemented for example by Google, to adjust the consumption of their data centres in different regions. However, demand response solutions have more significant impact on the single company but take more time to reflect on the whole system. 

In conclusion, as Spain approaches 2030, BESS are expected to become the key enabler of the energy transition—a trend mirrored across European energy markets, thanks to the combination of ambitious government targets, declining capital costs, and favourable trading conditions.  

However, timing and strategy are crucial to avoid the pitfalls of over-saturation and revenue erosion: there is the risk that, through too aggressive targets and supporting systems, BESS could undergo a fast cannibalization effect.  

With strategic planning and early adoption, investors can leverage BESS to accelerate the transition to a renewable-powered future, securing economic and environmental benefits for generations to come. 

At Our New Energy we give strategic and quantitative support to enable actors to exploit the potentials of the different technologies and maximise the benefits for all. To assist developers in making an informed evaluation, we have also developed a proprietary model to estimate the future expected merchant revenues of a BESS, and compare them with other alternatives such as incentive schemes or PPAs, to maximize the revenues while minimizing the risks.  

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