The process of energy transition from fossil sources to renewable sources has accelerated internationally with the aim of decarbonizing economies and meeting the objectives in this matter, such as those contracted in the 2030 agenda: in the case of Mexico, 22 for that year .
Energy Storage Systems (ESA) play an extremely relevant role in the energy transition since they allow stabilizing the generation of intermittent renewable sources, such as photovoltaic and wind technologies.
Implementing SAE in an electricity market, such as the Mexican one, means identifying the adoption barriers to subsequently design market incentives and regulations so that our electricity market operates in optimal conditions, respecting the principle of economic efficiency and access that is not unduly discriminatory.
Mexico requires integrating SAE into its electrical system to have a reliable energy transition. But to do so, it must resolve different issues from a regulatory point of view. For example, SAEs should be able to operate without being associated with a generation facility and not be limited to participate in the other segments of the electricity sector.
Also, the technical requirements must be developed for the SAEs to participate in the different products of the electricity market: energy, Power, Related Services, among others. Furthermore, it is recommended that the design carried out allows the participation of an SAE in the delivery of several products and that the regulation considers the necessary flexibility for the incorporation or withdrawal of products in which they can participate.
Additionally, SAE implementation requires the technical capability to 1) monitor the charging and discharging states of SAEs; and 2) the price signals for the different products in which the SAEs participate. It is also necessary to incorporate software that will allow the optimization of these resources and their dispatch.
Finally, a final step could be incorporated (with the necessary regulatory and technical adjustments) that corresponds to incorporating small-scale SAEs so that they can participate in an aggregated form in the Wholesale Electricity Market, as is already beginning to occur in different international electrical systems.
The above is important since there is a relevant increase in solar generation by small consumers, who if they also had SAE could not only use the generated energy more efficiently for their consumption but also have income from the sale of surpluses in the Wholesale Electricity Market under the figure of aggregators.
Having said the above, it is necessary to establish a methodology to be able to value the SAE, either in a centralized (regulated) manner, both in the system or in certain segments, or in a decentralized or unregulated manner by the companies that invest in these systems. In both cases, the methodologies generally evaluate the present value of the savings in the operating costs of the electrical system in two conditions: with and without SAE.
In our case, we have collaborated in carrying out the regulatory diagnosis and market design that is required in Mexico to incorporate SAE. Also, we have supported the establishment of valuation methodologies that consist of determining the benefits that SAEs have for the electrical system from the point of view of an investor. The benefits that should be considered are the following:
1. Benefits for the system.
2. Benefits for generators/consumers.
3. Benefits to the transmission/distribution system.
4. Benefits that are not directly quantifiable, such as reducing the emission of greenhouse gases and criteria pollutants, among others.
The key to a good SAE analysis requires identifying the system requirements and transforming them into functional requirements for the SAEs. Valuation methodologies must be easy to implement, although specialized software is necessary. Among other things, assessing an SAE requires:
1. Determine the products to be valued and the characteristics of the SAE.
2. Establish the investment and operation cost of the SAE project.
3. Determine the base scenarios (demand, generation projects, transmission projects, fuel costs, etc.).
4. Model the network and the selected products.
5. Incorporate SAE projects into the modeling and determine their impacts on the system.
6. Bring the benefits obtained to present value by identifying the types of benefits and obtain the valuation of the SAE projects.
From what has been said above, it can be concluded that it is economically viable to implement SAE in the Mexican electricity system as long as the market design and consequently the regulatory framework that avoids asymmetries and achieves efficiencies is in place.
It is also important to keep in mind that the valuation exercise must be very clear in its objective and detailed in its calculation, as well as contain validators of results for making investment decisions.
The implementation of SAEs is crucial to facilitate the energy transition, attract investments and achieve greenhouse gas emissions reduction objectives.
In this transition, the analysis tools and software algorithms, ready to implement, allow a very accurate valuation of the SAE.
The volatility of energy prices and the complexity of modeling the Mexican electricity system make these tools today more crucial than ever to increase the competitiveness of electricity market participants.
