Frequency Regulation Market’s Winning Combination: Low-Risk, High-Value

I recently got the chance to speak with the vehicle-to-grid technology (V2G) firm Nuvve, which is currently working on a pilot project in Denmark demonstrating V2G. Pike Research has previously covered Nuvve’s projects in Denmark from a purely technological perspective. What is most interesting about Nuvve’s business model is that it, like many other grid services firms, are targeting the lucrative market for frequency regulation. This small slice of the ancillary services is also being targeted by innovative energy storage technologies.

The characteristics of the frequency regulation market make it an ideal application for innovative, new storage technologies, either as stationary installations or in electric vehicles. Balancing the grid’s frequency, which is constantly fluctuating, requires quick responses of either input of power or a removal of power from the grid. These events generally do not last for long, usually only minutes at any given timeframe. For batteries, where degradation is a significant concern, shorter duration applications are ideal because of the potential costs of shortening their lifespan. In electric vehicles this is especially a concern for both auto OEMs and consumers alike.

In terms of resource compensation, many deregulated markets are implementing market structures that will compensate resources for their service capacity in the frequency regulation market. Fortunately for these technology and service providers, frequency regulation is one of the most expensive ancillary services on a per megawatt basis. In some deregulated markets, like PJM or the New York Independent System Operator (NYISO) territory, the value of frequency regulation can average between $30-$45/MW per hour. In many ways, the frequency regulation market represents a low-risk, high-value arena for new grid technologies.

Nuvve has found considerable success in its ability to access the Danish regulation market. The grid operator in Denmark, Energinet, is also aggressive in its pursuit of new grid technologies given the country’s small size and grid resources. With a remarkable 19% of electricity production attributable to wind resources, Denmark’s need for frequency regulation is rising and as a result they are looking to innovative technologies and services to aid renewables integration. Nuvve’s V2G technology – a technology spun out of the University of Delaware – is a cost-competitive option.

Many operators in deregulated markets still need to address rules that will make the frequency market accessible by storage technologies and develop the means to compensate them in a manner commensurate with traditional generation resources. This is particularly true in the United States. Pike Research’s coverage of the ancillary services market is broken out to give ample attention to new emerging technologies and business models in equal measure. More specifics on the market as a whole can be found in upcoming reports on both energy storage for ancillary services and vehicle-to-grid technologies, and in previous Pike Research commentary.

Article by Brittany Gibson, appearing courtesy the Matter Network.

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