Vattenfall sees data centers as expanding battery market: Q&A

Data centers will become a “big market for batteries”, increasing over the next five years as operators prioritize power security and look to cut their environmental footprint.

So said Sebastian Gerhard, director of batteries within Vattenfall AB’s solar and battery unit, in an interview with BNEF. The Swedish utility is speaking to data center owners about the benefits of installing an onsite battery for uninterrupted power supply in case of grid failure.

At a minimum, these batteries would be 15 megawatts in capacity per site. So there is potential for “significant market volume”, Gerhard added.

Vattenfall is also targeting commercial and industrial customers in Germany to install onsite batteries, particularly those companies that pay high grid connection fees. Batteries can be used to reduce site consumption during peak hours of demand, which lowers the impact on the grid and can save customers “10 to 20 percent off the kilowatt price of energy in Germany”, Felix Halfmann, business development manager for energy storage at Vattenfall, told BNEF at the Energy Storage World Forum in Berlin.

There is potential to install batteries at sites belonging to 10 percent of industrial power consumers in Germany, where savings would typically amount to between 30,000 and 80,000 euros a year ($35,000 to $92,000), Halfmann said. The utility expects to install batteries for at least five industrial customers this year.

Meanwhile, Vattenfall is screening its portfolio for places to co-locate batteries with renewable energy projects. Its 22-megawatt battery at the Pen y Cymoeddwind farm in Wales helps to regulate frequency for National Grid Plc in the U.K., and the company is also installing a smaller battery at a wind farm in the Netherlands.

It makes sense to capitalize on existing infrastructure at wind sites, such as the grid connection, maintenance team and surveillance center, said Gerhard. “We are screening our portfolio internally, looking for opportunities to install batteries at places where we have low grid costs and low land lease costs,” he said.

Q: What is the background to Vattenfall’s work with batteries?

Gerhard: I’m the director of batteries within the business unit Solar and Batteries. The unit has been established to implement large-scale solar, but also decentralized solar like rooftop PV, and to install batteries – both large-scale and decentralized. The large-scale batteries part is 90 percent installed in our renewable parks, whether it be solar or wind energy.

Q: Which co-location projects have you done?

Gerhard: The 22-megawatt battery installed at the Pen y Cymoedd wind farm in Wales is providing enhanced frequency regulation for the national grid operator in the U.K. This battery has been in commercial operation since May 2018.

At the Princess Alexia wind farm in the Netherlands, we are installing a 3-megawatt battery. And there we are doing primary frequency control, which is comparable to enhanced frequency regulation, but is a bit slower in reaction time and longer in duration. This battery is in the commissioning phase and should be handed over from the supplier to us this summer.

Q: What are the benefits of installing batteries at wind farms?

Gerhard: If you have a wind portfolio like Vattenfall [does], sometimes [you] have grid connections that are not utilized 100 percent.

We are screening our portfolio internally, looking for opportunities to install batteries at places where we have low grid costs and low land lease costs. Compared to a wind or solar farm, a battery is so high in energy density that you don’t need much space.

There is also existing infrastructure that you can take advantage of when installing a battery at an existing wind park, such as the SCADA system, maintenance team and 24-hour surveillance center. We are analyzing every onshore wind farm we have in our portfolio [to install batteries]. Vattenfall finances battery projects on its balance sheet.

Q: Where would it make economic sense to install a battery at an industrial site?

Gerhard: Vattenfall is only looking into battery projects in our core countries – Denmark, Sweden, Germany, the Netherlands and the U.K. One business case we see for industrial batteries today is in Germany, for peak-shaving applications.

In Germany we have a large spread of grid fees – in the range of 50 euros per kilowatt a year up to 200 euros per kilowatt a year. Our peak-shaving solution is attractive for customers who pay above 150 euros per kilowatt a year.

We also see a strong driver behind becoming green for data centers. Nowadays, they are mainly using diesel generation sets for uninterrupted power supply, but they are looking more and more for energy solutions that companies like Vattenfall can offer. This can be a combination of a battery, maybe a wind PPA [power purchase agreement] from a nearby wind farm, and solar PV on site – to offer them green energy as a service.

This can develop into a big market for batteries that we expect to ramp up within the next five years. We see a significant market volume here. To supply a data center with a battery, the capacity would not be less than 15 megawatts per customer site.

Batteries at data centers would deliver uninterrupted power supply, so that data are not lost. The battery would become useful on the rare occasion there is grid failure. We see data centers being powered by a combination of rooftop solar, wind energy via PPAs and batteries. Battery is just one part of the product.

Q: Have you had discussions with data center operators?

Gerhard: Yes, we do have discussions with customers around that.

Q: What are the potential savings from installing a battery at an industrial site?

Halfmann: Providing frequency control and peak-shaving services makes the best business case for batteries in the industry sector – under economical aspects we see potential to install batteries at 10 percent of Germany’s industrial customer base. These batteries would typically be 300 kilowatts to 1 megawatt in size.

Commercial and industrial consumers can save 10 to 20 percent off the kilowatt price of energy in Germany if they invest in stationary storage for peak shaving. [Grid fees in Germany are charged partly on four peak demand periods during the year, measured in kilowatts, and partly on consumed energy]. These batteries reduce their demand on the grid during peak hours. This amounts to a saving of about 30,000 to 80,000 euros a year in total. Vattenfall expects to have five more industrial customers installing batteries in 2018.

C&I consumers may be incentivized to invest in batteries for improved power security, over and above any economic savings. Some customers such as data centers and car painting plants are sensitive to voltage fluctuations from the grid, which can be rectified by an onsite installed battery.

Q: You currently work with batteries from BMW’s i3 electric vehicle as stationary storage. Do you see them as still relevant in this context?

Gerhard: The battery industry today is driven by e-mobility. Battery manufacturers are mainly supplying batteries for electric vehicles, and those batteries are designed in a way that is maybe not the best for stationary batteries.

So we are sticking with the path of EV batteries that are designed to last for around 300,000 kilometers total lifetime, for long duration per charge. The batteries will always have about the same amount of kilowatt-hour throughput, but the energy density is going up. Today you are paying for the euro per kWh [or capacity], not the kWh throughput [or cost per battery cycle].
Battery makers have improved the amount of energy that a battery can absorb per charge, but the overall amount of charge that a battery can dispense over its lifetime has stayed the same over recent years. This is more important for stationary storage than for EV use cases.

So the euro per kWh is decreasing dramatically, but in the stationary storage sector, the amount of kilowatt-hour lifetime is more important, and this aspect is not communicated well enough.

Q: Are you working on other battery projects?

Gerhard: We have one project where we have a final investment decision already, which is part of the NEW 4.0 project near Hamburg. It’s in a bigger consortium of projects, partly financed by the government. There we will install a 1MWh battery into a third-party wind farm, and we are trying to look deeper into more than just primary frequency control applications. Such as voltage control, energy shifting, ramp-control and the stacking of those applications. That will be online later this year.

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