Capacity Contracts
- Purpose: Capacity contracts are designed to ensure that a utility has access to a specified amount of power from a battery storage system when needed, typically during peak demand periods or grid outages.
- Payment Structure: The utility pays a fixed capacity payment to secure the right to dispatch energy from the storage system. This payment can be based on the availability of the system or the energy delivered to it.
- Benefits: Utilities can leverage stored electricity during peak times, reducing reliance on grid power and associated surcharges.
Resource Adequacy Contracts
- Purpose: Resource adequacy contracts are aimed at ensuring that the electricity system has sufficient capacity to meet demand at all times. They are particularly useful for managing power supply when generation is reduced or curtailed.
- Payment Structure: While not explicitly detailed in terms similar to capacity contracts, these agreements generally focus on ensuring that energy storage systems can support grid stability by providing power when needed, potentially including higher payments for peak periods.
- Benefits: These contracts help in optimizing project revenues by utilizing stored energy during high demand periods or when power from other sources is limited.
The key differences between these contracts lie in their focus:
- Capacity Contracts emphasize securing a guaranteed power output for utilities.
- Resource Adequacy Contracts focus on ensuring overall grid stability and adequacy of supply.
Both types of contracts support the integration of battery storage into energy systems but serve different strategic goals regarding reliability, revenue optimization, and operational flexibility.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-capacity-contracts-differ-from-resource-adequacy-contracts-in-battery-projects/
