The ongoing energy revolution in Germany has led to a significant increase in the share of renewable energy in gross electricity consumption. In 2022, this share is already 46%, compared to just 6.3% in 2000. This increase has fundamentally changed the electricity system in Germany. However, decarbonizing the electricity system by 2045 is still a major challenge. This is due to the fact that not only must the remaining fossil power generation be eliminated, but a significant part of the previously unelectrical energy consumption should also be electrified. This requires additional capacity for renewable power generation.
Large-scale battery storage systems play a key role in this: With their diverse application scenarios, they compensate for fluctuations in the power grid and prevent power overloads. At the same time, they enable the better integration of renewable energy systems into the grid.
The increasing demand for flexibility in the power grid has increasingly brought the need for energy storage into focus among policy makers who have neglected this issue for years. It was not until December 2023 that the German government presented a strategy for electricity storage. In this context, a study by leading German energy consulting firm Frontier Economics, which was commissioned by Kyon Energy, Fluence, BayWa, enspired and ECO STOR, provides decisive insights into the future significance of energy storage for the German power system. The most important study results are summarized below.
Today, large battery storage systems with a capacity of 1.5 GWh are installed in Germany (Status: January 2024). If Germany follows international trends, the output and storage volume of large battery storage systems will multiply in the coming years. According to Frontier Economics' market simulation, the capacity of large batteries in Germany can rise to 15 GW/57 GWh by 2030 alone — which would be almost a forty-fold increase in storage capacity compared to today. By 2040, capacity could rise to 24 GW/94 GWh and by 2050 to 61 GW/271 GWh. Only the day-ahead wholesale market is taken into account; additional battery capacities are also expected, which will be financed through intraday and ancillary services markets. The study thus also confirms the results of other major studies, such as Fraunhofer ISE and the scenario assumptions for the Ten-Year Network Development Plan (TYNDP).
Large-scale battery storage systems can generate significant economic added value. This is done by shifting the availability of electricity from periods of surplus to times of power shortage. Frontier Economics estimates the added value from savings on the wholesale market alone at around 12 billion euros by 2050 — even without taking into account the additional benefits for system services, intraday market marketing or other economic consequences. A major driver of these savings is saved fuel and CO2-Expenses.
Storage can contribute to savings primarily through the following effects:
The expansion of large battery storage systems can make a significant contribution to reducing the expansion of gas-fired power plants. 26 GW of new gas-fired power plants are currently planned by 2030. In a scenario without storage expansion, however, a further 9 GW of power plants would have to be built and operated. However, if storage expansion continues as expected, around 6.2 million tons of CO2 will be avoided in 2030 and around 7.9 million tons of CO2 in 2040.
The study also shows that large battery storage systems have a price-reducing effect on the wholesale price and reduce it by an average of around one euro per MWh between 2030 and 2050. The reduction of wholesale prices during high-price periods results in lower overall electricity costs for end users, even though energy storage slightly increases electricity costs during periods of low prices. Since the price-reducing effect of battery storage systems tends to occur at times when a lot of electricity is consumed, the effect for consumers is even greater: at 1.1 euros per MWh on average from 2030 to 2050. If it is not possible to replace large battery storage systems with additional gas-fired power plants, the wholesale price would be expected to be 4 €/MWh higher on average from 2030 to 2050.
In addition, large battery storage systems also reduce price volatility in the electricity market. This is clearly visible in the average price trends of a day. In hours with low electricity prices, they increase the price of electricity as a result of the charging process. However, during high electricity price peaks, they reduce it again — and this effect is significantly stronger. The lower volatility enables market participants to make more accurate forecasts of electricity prices, better plan their procurement strategies and reduce the structuring and balancing energy costs of market participants.
Large-scale battery storage systems will continue to make a valuable contribution to making the power system more flexible in the future. The study's market simulation shows that the installed capacity of solar and wind power plants in Germany will increase from 129 GW at the beginning of 2023 to 360 GW by 2030, to 562 GW by 2040 and to 792 GW by 2050. Accordingly, the future electricity system in Germany will require significantly more flexibility to integrate renewable energies. At the same time, however, the output of controllable coal and gas power plants is falling from 72 GW at the beginning of 2023 to 49 GW in 2030, 54 GW in 2040 and 63 GW in 2050.
In this market environment, large battery storage systems are one of the few technologies that can provide the electricity market with controllable power. The fast response rate of battery storage systems makes it possible, beyond the day-ahead market, to offer valuable positive and negative flexibility on the intraday market and thus support the liquidity of the intraday market. Large-scale battery storage systems are already trading some of the energy actually delivered on the intraday market.
The importance of large battery storage systems for the German electricity system will continue to increase in the future. According to the study, battery storage systems can generate economic benefits of at least 12 billion euros by 2050. This does not yet take into account additional benefits for system services, intraday market marketing or other economic consequences. Since large-scale battery storage systems are being built up purely on the market — without government funding — there is also no need for subsidies for alternatives such as gas-fired power plants. The potential of the technology is therefore huge. For it to actually be realized and for storage facilities to develop their full potential, clear political decisions and regulatory requirements are needed to promote long-term investments while reducing costs, strengthening energy security and driving forward the energy transition in Germany. The Federal Government should therefore implement the requirements from the current reform of the European electricity market to set indicative storage targets as soon as possible — and, based on this, present an expansion strategy for large battery storage systems in Germany.
The complete Download the study here.
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