In Finland, DSO Elenia and Nordic energy company Fortum present a novel business model where an aggregator company makes the investment to the battery system and offers the system as a service for the DSO. The suggested model creates a market place for the DSO, where they can purchase reservation time from the battery. This service and business model are compatible with the current regulatory environment.
As a result of lower lithium-ion (Li-ion) battery prices, batteries have become a reasonable solution to improve the supply reliability of the branch lines of the medium voltage (MV) network in the rural area. The battery system also enables reactive power compensation, management of peak loads, and other DSO level services, and thus reduces the potential network reinforcement needs of the future (due to, for example, solar panels and electrical vehicles).
However, as these batteries could be used to provide also services in the electricity and balancing markets there has been significant controversy whether the DSO should be allowed to purchase, install and operate these batteries. One of the main topics in the discussions (e.g. in the Clean Energy package by the European Commission) is that since DSOs are highly regulated monopolies, they should not be allowed to participate in the unregulated electricity markets.
During the project, a technical concept and business model have been developed, in which the battery is offered as a service (service level agreement, SLA) to Elenia. The underlying concept is that both the occurrence and duration of the DSO’s needs for the battery are very limited. Rest of the time the owner of the battery, in this case Fortum, would be able to utilize the battery in other applications, such as primary frequency regulation service – frequency containment reserves (FCR), offered for the national transmission system operator (Fingrid). This combination allows actors to build a positive total business case in relation to current Li-ion prices. Anticipated revenue streams are two folded; 1) market income from the primary frequency regulation, and 2) the reduction in DSO's regulatory outage costs (ROC).
Novelty value here lies in new kind of business concept, which incorporates the value of a single battery storage from two different applications. Our work (and this project) aims to show that such a project can be economically and technically feasible and fully compatible with the current regulatory framework.
In 2019, Elenia’s network will be equipped with the battery system capable of supplying a MV branch line with 10 secondary substations during an interruption of supplying network. The average time that the system (with battery capacity of 300 kW/220 kWh) is capable to maintain the island mode is approximately 3 hours based on the average power of the MV branch. The project will be presented in more detail in CIRED 2019 with paper number 636.