- Renewable plants participating in ancillary services are making up to 26% more in revenues than the rest of the fleet, Aurora Energy Research has found.
- Reserving 20% of solar capacity for ancillary services can lead to an average upside of 12% across a project lifetime, reaching a maximum of 35% on average during the 2020s, an Aurora analysis assessed. This leads to a 3% increase in IRR compared to solely participating in the Day-Ahead Market.
- Participation in ancillary services markets can prove particularly effective for solar assets due to their more predictable generation profile and the heightened risk of cannibalisation compared to wind in Spain.
MADRID (AURORA ENERGY RESEARCH)—In a recent webinar, titled “Unlocking Incremental Revenue Streams for Renewables,” Aurora Energy Research revealed that solar assets in Iberia have the potential to achieve up to 35% higher revenues in the 2020s by increasing participation in ancillary services and Intraday markets compared to solely engaging in the Day-Ahead Market.
Specifically, the Aurora Energy Research analysis suggests that by allocating 20% of solar capacity for upwards actions in ancillary services can lead to an average upside of 12% across a project lifetime, reaching a maximum of 35% on average during the 2020s. This leads to a 3% rise in IRR compared to exclusively participating in the Day-Ahead Market. Even setting aside only 10% of capacity for ancillary services results in a 9% average increase for solar assets over their lifetime, improving the IRR by 2.4% compared to solely participating in the Day-Ahead Market.
Ancillary services participation, a growing trend in Iberian renewables, is done by either withholding a certain fraction of the generation in the Day-Ahead Market to bid it in the upwards direction of ancillary services or turning down generation in the Day-Ahead Market to provide services in the downwards direction.
According to experts at Aurora Energy Research, participation in ancillary services markets can prove particularly effective for solar assets due to their more predictable generation profile and the heightened risk of cannibalisation compared to wind in Spain. The upside from wind plants participating in ancillary services is 1.8 €/MWh, lower than solar PV plants on average.
Overall, Aurora Energy Research suggests that the expected growth in ancillary services participation offers a lucrative opportunity for renewable energy players. The increase of intermittent renewable energy has a downward effect on prices, but it also increases the need for ancillary services. Therefore, plants looking to mitigate the effects of cannibalisation and diversify revenues streams are increasingly active in these markets as. Assets participating in ancillary services markets over the last couple of years are seeing an upside in revenues of up to 26%, according to Aurora.
Ana Isabel Barillas, Managing Director, Iberia & LATAM, Aurora Energy Research, commented:
“The rapid surge in renewable generation in the Spanish market has caused a notable increase in price cannibalisation, especially affecting solar energy. However, as the expansion of intermittent renewables drives down wholesale prices, it also boosts the demand for ancillary services essential for managing system operations effectively.
“Forward-thinking market participants who can proactively manage their assets across multiple markets stand to benefit from the expanding revenue opportunities that come with participating in these markets. Although we expect a gradual decrease in upside potential over time, early movers in the market are well-positioned to benefit significantly from a higher and more diversified revenue stack.”
Ana Isabel Barillas is available for further comments, and Eva Plana Camona will be available to handle commercial questions.
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ABOUT AURORA ENERGY RESEARCH
Established in 2013, Aurora Energy Research is a leading global provider of power market forecasting and analytics for critical investment and financing decisions. Headquartered in Oxford, we operate out of 14 offices worldwide covering Europe, North & South America, Asia, and Australia.
Our comprehensive services include market outlook packages for energy industry participants, advisory support, and innovative software solutions. We foster diversity with a team of over 600 experts with backgrounds in energy, finance, and consulting, offering unparalleled expertise across power, renewables, storage, hydrogen, carbon, and fossil commodities. Our mission is to ease the global energy transition through widely trusted quantitative analysis and high-quality decision support
