We are pleased to present our latest Iberian Power Strategic Insight Report. The analysis draws upon our internal modelling capabilities, and much of the content has been developed through a detailed consultation process across private and public sector players.
Key insights resulting from the analysis are:
- Despite ambitious targets for renewables and storage set forth in the Spanish and Portuguese decarbonisation roadmaps, the current pipeline of battery assets in Iberia pales in comparison to its European neighbours.
- Across Europe, early adopters of battery projects relied heavily on lucrative and bankable revenue streams from ancillary and capacity market contracts. However, these revenues are expected to diminish as the growth of batteries saturates the market. The long-term prospects for batteries will therefore rely upon energy arbitrage business models, which may prove challenging in markets with high penetration of hydro assets.
- In Iberia, wholesale and ancillary markets will be the dominant sources of revenues for batteries. These markets will be increasingly attractive as the expected growth in renewables leads to higher wholesale and balancing price volatility, and greater opportunities to participate in reserve markets. Ensuring the open, transparent functioning of these markets is critical to ensuring that the economic potential of batteries is achieved.
- In Iberia, wholesale and ancillary markets will be the dominant sources of revenues for batteries. These markets will be increasingly attractive as the expected growth in renewables leads to higher wholesale and balancing price volatility, and greater opportunities to participate in reserve markets. Ensuring the open, transparent functioning of these markets is key to unlocking the true economic and technical potential of batteries.
- Amongst different configurations for stand-alone batteries, a 2 hour asset is likely to be the most competitive option for deployment in the 2020s, with an expected IRR of 5 – 8%, with additional upside from capacity payments or other ancillary service revenues.
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