Faster Storage Expansion Lowers Electricity Costs

As wind and solar capacity grows and dispatchable power plants are phased out, the German electricity system’s need for flexibility is rising. Large-scale battery storage is one flexibility option and could lower these costs. With a ramp-up three times faster than in the delayed ramp-up scenario, variable system costs in 2035 could be up to 1.8 billion euros lower. Uncertain regulatory conditions, however, could slow the ramp-up of large-scale battery storage.

For the report “The benefits of large-scale battery storage in the German electricity system and the costs of a delayed expansion”, the Institute of Energy Economics at the University of Cologne (EWI) compared two expansion pathways of differing speed on behalf of green flexibility development GmbH. While the accelerated pathway reaches a storage capacity of 57 gigawatts by 2035, the delayed pathway reaches only 19 gigawatts. Using EWI’s own electricity market model MELI, EWI examined the system effects of this difference in isolation.

Storage uses surplus renewable power and dampens prices

Large-scale battery storage absorbs surplus power during periods of low demand and feeds it back in later. As a result, market-driven curtailment of renewable energy in 2035 would fall by 11 terawatt-hours, or almost half. At the same time, the storage would smooth price peaks: the average electricity price level would be around 5 percent lower, and price volatility on the wholesale market would decline by up to 26 percent, the analysis shows.

Lower wholesale prices and falling grid costs: across all consumer groups, this would translate into savings of up to 2.8 billion euros in 2035 and up to 1.6 billion euros in 2030. At the same time, the storage would support the market value of photovoltaics (2035: +18 percent).

“Storage is a central building block for a cost-efficient and secure electricity system,” says Arne Lilienkamp, Project Lead at EWI, who prepared the report together with Polina Emelianova, Hanna Klar, Jakob Junkermann and Dr Nils Namockel. “What matters is system-friendly integration and reliable investment conditions.”

Storage strengthens security of supply and relieves the grids

In addition, large-scale battery storage strengthens security of supply by providing firm capacity. Within the grid, it could reduce the need for redispatch, make better use of existing lines and stretch grid expansion over time. At the same time, it reduces dependence on natural gas imports and can thus cushion the effects of international price shocks.