In its white paper, From Asset to Algorithm, Volue argues that European storage has entered a second phase. For most of the last decade the industry competed on cost per kilowatt-hour, cell chemistry and warranty terms. Hardware costs have since converged, and Volue says they no longer separate one project from another. Three things still do: grid access, market access and trading skill. Only the last of them can be improved year after year.
Value is also draining out of the revenue channels that made the early business cases work. Frequency-response markets were designed to keep the grid stable, not to absorb a fast-growing fleet of batteries, and returns thin out as more storage competes for the same contracts. Volue expects value to keep moving towards wholesale trading, and continuous intraday in particular, and warns that the same compression will eventually follow it there.
This is happening within an environment where timescales are shortening at the same time. Europe's move to quarter-hourly day-ahead trading, and increasing ancillary market complexity, have sharply increased the number of decisions a trading desk takes in a day and cuts the time available to take each one. That means more opportunities to capture value, and less room for error.
Batteries are also difficult assets to trade. A single capacity must be allocated across several revenue channels that interact with one another, and every cycle carries a degradation cost that counts against the asset's lifetime value. Volue's conclusion is that forecasting, optimisation and execution can no longer be run as separate functions, because a mistake at any stage carries through to the next.
“Europe has built a remarkable amount of storage in a short space of time, and the next phase is about getting the most out of it” said Helmut Spindler, General Manager Trading & Optimisation at Volue. “Trading and the operation of assets continue to become more complex, all of which makes operating performance a much bigger part of the return. From Asset to Algorithm puts evidence behind the fact that the gap is now created in the trading room rather than at the point of procurement. That matters for anyone financing, building or operating storage in Europe, because it changes where value is created and how performance should be measured. We have published the findings openly because the market, as a whole, benefits from a clearer, evidence-based view of where battery revenue is heading.”
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