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Fluence supplying 40MW battery storage in Italy for Enel X’s Fast Reserve projects

Earlier this year Fluence supplied BESS technology to the first megawatt-scale project of its type in Lithuania. Image: Litgrid.

Enel X, one of the winners of contracts tendered by Italy’s transmission operator to provide fast response frequency reserve to the grid, has contracted Fluence to supply two battery energy storage system (BESS) solutions. 

Transmission system operator Terna held its Fast Reserve Service pilot tender in 2020, awarding 250MW of five-year contracts, after receiving 1,327MW of bids. Contracts were awarded at a weighted average price of €29,500 / MW / year (US$33,500), well under expected price benchmarking of between about €78,000 and €108,000 per MW. 

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As reported by in December 2020 after tender results were announced, the Fast Reserve bi-directional service sees power go onto the grid or be drawn from it to balance the supply and demand of electricity. 

Helping to maintain the network’s stable operation within boundaries of operating frequency limits, service providers need to be able to response continuously to grid signals, within one second of receiving them. 

Corentin Baschet from energy storage consultancy Clean Horizon offered some analysis at the time and told the site that the tender was similar to the UK’s 2016 Enhanced Frequency Response (EFR) auction which in many ways kicked off that country’s battery storage market. The UK is now home to more than 1.3GW of grid-connected battery storage providing a range of different services and applications and more than 20GW more in development. 

The Terna Fast Reserve Service auction’s two biggest winners were Enel X and ENGIE. Enel X got about 65MW of contracts and ENGIE 70MW. The auction was split into three regional tranches — one for the Central and Northern Italy regions, another for the Centre-South and a final one for Sardinia. Awarded average prices through the tender were almost double on the island of Sardinia than in the better-interconnected areas further north.  

‘Increasingly significant role’ for batteries to play

Fluence said earlier this week that Enel X has contracted the Arlington, Virginia-headquartered energy storage system technology and services provider for the delivery of two systems totalling 40MW. Based on GridStack, part of Fluence’s sixth generation technology range of products, they will be deployed at a site in Northern Italy. 

Fluence’s software platform, Fluence OS, will manage their operation and participation in grid services. The company noted in a press release that with Italy set to start decommissioning coal power plants, significant change lies ahead for the country’s grid, requiring more and more of the system flexibility and integration of renewable energy that batteries can enable.   

“As Italy and other countries in Southern Europe adopt innovative technologies to reach their decarbonisation targets, energy storage systems with advanced software controls will play an increasingly significant role in enabling that transition while maintaining reliable and resilient electric grids,” Fluence market director for Southern Europe, Panagiotis Stamoulis said. 

The deal between the pair follows a collaborative relationship with Enel X’s parent company Enel that stretched back to 2012 and track record of working in Italy with Terna on a number of projects including a 12MW / 72MWh system, Fluence said. 

Fluence floated an IPO at the end of October, bringing the company’s valuation close to US$5 billion.

Fast Reserve Service tender: a promising first step

A source with ties to the Italian clean energy industry told that to decarbonise, the country “will have to shut down a lot of old thermal plants” and that to facilitate the rollout of renewables, “it needs to be paired with a technology that ensures flexibility and resilience,” which in this case, the source said, “is clearly batteries”.

The source — who asked to not be named — said that Terna initially rolled out a capacity auction in 2019, for which it expected to award contracts to natural gas generators but found battery storage was also able to compete and win. Then after discussions with industry stakeholders, the grid operator decided to also host the pilot Fast Reserve Service tender. 

Revenues accrued from contracted Fast Reserve Service payments are likely to be complemented by merchant revenues and participation in secondary and tertiary frequency regulation markets, the source said. 

However, it was noted that the pilot tender is only a promising “first step” and that more needs to be done to enable batteries to compete in regular revenue-generating services opportunities at an event hosted earlier this year by our publisher Solar Media. 

Paolo Marino, director of Milan-headquartered energy markets consultancy REF-E, said at the Energy Storage Summit 2021 that a reform of grid services markets and their participation rules is needed to achieve “a full deployment of merchant revenues for such installations”

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