Ievgen Didichenko, a co-owner of KNESS, on the online conference, devoted to the development of energy storage market

“Energy storage facilities in the power system of Ukraine. Current state and development prospects” was the topic of an online conference that brought together representatives of government institutions and private companies – leading industry experts, market participants, and energy storage projects stakeholders. The speakers outlined the constraints and steps required to stimulate the development of energy storage facilities in Ukraine, and shared their projects and plans in this area.

“Currently, we are working on business models focused on the ancillary services market of the Ukraine’s Integrated Power System (Ukraine’s IPS). We have developed, designed and manufactured our own energy storage solution. Its competitive advantage is its technical design and smart operation algorithms, thanks to which our solution requires significantly less investment to implement 1 MW of Frequency Containment Reserve (FCR), and Automatic Frequency Restoration Reserve (aFRR) services. We are currently implementing a pilot project of our own investments in the energy storage facilities construction with a certified capacity of 12 MW to provide the FCR services. It will be constructed on the basis of our containers. Shortly, we will test the first megawatt to try out the provision of the FCR service.  Also, our company is currently developing 7 projects with a total connected capacity of about 200 MW,” said Ievgen Didichenko, a co-owner and CBDO of KNESS, during his speech.

Why is it so important to discuss the development of energy storage facilities today? There is a lack of flexibility in the market. And with the increase of solar and wind generation share in the balance, the deficits of power reserves for primary and secondary frequency regulation will increase. And in this “story”, energy storage can fully meet the current market needs, as it has significant advantages over traditional generation.

Energy storage facilities offer: 

• high-speed performance – full activation takes seconds; 
• accuracy and continuity of service provision: unlike generation, energy storage does not depend on the modes of electricity production, and can provide services uninterruptedly (24/7); 
• relatively low CAPEX compared to generation, flexible deployment and decentralization; 
• the possibility to provide synthetic inertia reserves, which is important as the increase of RES reduces the natural inertia of the system.

“With the development of long-duration energy storage technologies, it will be possible to use energy storage facilities to provide replacement reserve services. In other words, long-duration energy storage facilities will be able to serve as maneuverable generation. However, such technologies are still at the development stage and, in general, they will be needed only when the share of renewables exceeds 50% of the total balance,” our expert emphasized.

What factors currently constrain the development of energy storage facilities in the short term? 

The participants of the discussion highlighted the major challenges for the energy storage market development in Ukraine, namely military risks, regulatory obstacles, debt in certain market segments, pricing, etc.

“For banking institutions, the energy storage business model on the ancillary services market is unfamiliar and not sufficiently predictable in terms of the “obviousness” of debt capital return. The solution to this problem may be the implementation of long-term auctions for ancillary services market for more than 1 year and the Regulator’s compliance with the current Methodology for setting ancillary services price caps, which are currently at the level of 2022. Therefore, the marginal price for the service is almost twice lower than it should be according to the Methodology. It is also necessary to activate the market for replacement reserves, which would reduce the required energy storage installed capacity to provide the aFRR service and, accordingly, reduce the cost of the service itself.

In the segments of the balancing market and the day-ahead market, in our opinion, price arbitrage itself does not yet ensure the payback of energy storage projects. To implement energy storage in these markets, price caps should be canceled, and negative prices should be introduced, as it is common in most EU countries,” said Ievgen Didichenko.

After all the presentations and discussions, a keynote of the meeting was outlined: despite the difficulties, Ukrainian business is working, looking for ways to develop, and despite the risks, it is ready to invest in projects in its home country. There is intellectual potential, there are actions focused on supporting the country’s economy, there is a desire to develop innovations, help and work in Ukraine.

The event was organized by: The UN Global Compact Ukraine and ExPro, within the Ukraine Energy Initiative.