The Central and Eastern Europe (CEE) energy storage market is in its infancy but has the potential to leapfrog more developed markets with Poland in a leading position, said executives from Fluence.
The global battery energy storage system (BESS) integrator’s senior director for strategy, market development and policy in Europe, the Middle East and Africa Julian Jansen and senior sales manager Rosa Milano discussed the company’s approach to the region in this interview, which touches on strategy, customer requirements, market development, augmentation and more.
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The interview took place at the Energy Storage Summit Central Eastern Europe 2023 in September in Warsaw, Poland, where both Jansen and Milano were speakers.
The event came as the region gears up for large-scale deployments, with upcoming capacity market auctions in which batteries are expected to do well in Poland, a 200MW storage-as-transmission project now online in Lithuania, and positive developments elsewhere.
CEE has the opportunity to leapfrog developed markets
While the CEE region’s energy storage market remains in its “infancy”, Jansen said, even in Poland where it is relatively advanced, this, and the current high dependency on coal, presents an opportunity, he added.
“At the same time, there’s a real opportunity for this whole region to be a place where storage can leapfrog developed markets because we’re not trying to shoehorn storage into really established market frameworks that were developed in particular for natural gas,” said Jansen.
“We’re actually able, as we’re reducing reliance on coal fired generation and increasing renewable penetration, to really set the frameworks that accurately reflect the value that storage can provide from the start.”
Jansen highlighted Poland and Baltic countries joining Europe’s cross-border aFRR ancillary service market as another positive step.
Poland in a leading position
Discussing the priority markets for Fluence in the CEE region, Milano highlighted Poland as being in a leading position thanks to the capacity auction’s 17-year contract providing a bankable revenue stream to “justify the business case” of storage.
“It [the 2022 auction] also cleared at one of the highest prices for this type of service compared to other markets in Europe in the last few years, and there are additional capacity market auctions that are planned in the next two or three years. So we see a lot of interest in that,” Milano said.
Thi,s coupled with the aFR,R gives the right combination of revenues in Poland to develop into new market that will be sustainable and “without major subsidies”, Milano added.
The topic of subsidies was one which came up immediately in the two day-event. A keynote speech saw Tonci Bakovic, chief energy specialist for the IFC call for subsidies to ‘kickstart’ the region’s markets, which was then discussed in the following panel on which Jansen sat. There was a minor disagreement between Jansen and developer Low Carbon’s storage investment manager Bharath Kantharaj on this, but both agreed a market-driven approach rather than subsidies was ultimately the most ideal.
European funding for other markets
Outside of Poland, European Union funding is being used for energy storage tenders in various countries in CEE including Hungary, Romania, Slovenia and, most recently, Bulgaria, covered by our sister site PV Tech last week.
“I would say those markets are still a little bit further away from transacting. But certainly, we see a real potential kind of depth and opportunity around that funding structure,” Jansen said.
“And then the other market that we look at is the Baltics for us. We have our existing project with Litgrid and Energy Cells in Lithuania. And as I mentioned earlier, with that market opening and greater merchant opportunities in those markets as well as opportunities for transmission system operators to use energy storage deployed as transmission assets, we are definitely looking at that as a potential growth opportunity.”
Customer requirements in CEE
The discussion then moved on to what customer needs currently look like in CEE, with Poland the obvious talking point as the country where large-scale projects will be deployed soonest. But like any market that is newer to the technology, “the first grid scale energy storage project will always be perceived like the first project with that technology to be implemented,” Milano said.
This means a need to provide support and education to the market to increase “transaction readiness” and numerous other steps.
“Helping local stakeholders with the grid connection permitting, how to deal with permits and fire safety regulation, all these practical items also need to adapt and adjust to accommodate the new technology and they have to be done at the same speed as the new grid services that will come,” Milano added.
She added that BESS projects in Poland require a duration of between two and four hours but something that makes the market relatively different is the very long project life required because of the 17-year capacity market contracts.
“Building in additional flexibility”
The long project life and capacity market contract deliverables in Poland touches on a topic covered extensively this year by Energy-Storage.news: augmentation, the addition of capacity to a BESS project over its lifetime as its capacity degrades.
“We are assessing this a lot, it will be really important because of the project life. It’s important to understand the cycling needs of the customer because we also need to allow them the flexibility to add additional revenue as they will open up,” Milano said.
“So we are working on building in additional flexibility to the systems and allow the customer to operate more in an opportunistic way as the revenues open up.”
Milano also said that thinking about augmentation also meant thinking about what the new technology for energy storage might be in future.
Jansen added that this has sometimes not been factored in by suppliers in other markets and has led to some “stranded” assets, as he explained.
“We see a lot of supply that doesn’t offer customers that flexibility, whether it’s on the hardware side, whether it’s the augmentation, whether it’s on the design flexibility in the early stages of the project. The customers need to consider the best ways of optimising their footprint around the capacity they need, as well as the software capabilities over the project lifetime.”
“We’ve seen in other markets that going for solutions with insufficient flexibility have led to some of these assets being basically stranded because the suppliers have not been able to provide the software capabilities required by the changing markets.”
Factoring that in during the project design phase is therefore “critical” for the nascent Polish market, he said.
In response to a question about challenges in CEE, Jansen agreed with Milano’s earlier point about need educating and supporting stakeholders to accelerate their understanding of energy storage and the value it can provide. “I think’s that a bigger challenge than anything else.”
Fluence has also announced the latest iteration of its grid-scale BESS product, the Gridstack Pro, covered in a separate article also published today.