In deregulated energy markets, Liquid Air Energy Storage (LAES) operators can access multiple potential revenue streams by leveraging the flexibility and services their storage assets provide to the grid and market participants. These revenue streams arise because deregulation separates electricity generation and transmission from distribution, creating competitive wholesale markets where energy storage can participate in various market products and services.
Potential Revenue Streams for LAES Operators in Deregulated Markets
- Energy Arbitrage
LAES systems can buy electricity during low-price periods (usually off-peak) to liquefy air and store it, then generate and sell electricity back during high-price periods (peak demand), capturing the price differential. This simple buy-low, sell-high mechanism is a fundamental revenue source in deregulated markets where market prices fluctuate hourly or sub-hourly. - Ancillary Services
LAES can provide ancillary grid services essential for reliability, including frequency regulation, spinning reserve, voltage support, and reserve capacity. Grid operators in deregulated markets procure these services through competitive markets, allowing LAES to bid and be compensated for fast-response capabilities that help balance supply and demand in real-time. - Capacity Market Participation
Some deregulated markets operate capacity markets where resources that guarantee availability to supply power during peak periods receive payments. LAES units can participate by committing capacity, thus earning steady revenue for being ready to deliver energy when needed. - Demand Response and Peak Shaving
By reducing demand from the grid during peak periods through onsite discharge, LAES operators can participate in demand response programs or reduce demand charges that utilities impose. These programs often pay users to lower consumption or inject power back to the grid during critical times. - Integration with Distributed Energy Resources (DER)
Deregulated markets have frameworks for aggregator participation, allowing LAES operators to combine their storage with other DERs like solar or wind and provide grid services or wholesale market products collectively, enhancing revenue potential. - Renewable Energy Integration and Grid Flexibility Services
LAES supports increased renewable integration by storing excess generation when renewable output is high and releasing it when output is low. Markets may provide incentives or additional payments for these flexibility and grid support services that LAES provides.
Summary Table of Revenue Streams for LAES in Deregulated Markets
| Revenue Stream | Description | Market Role/Mechanism |
|---|---|---|
| Energy Arbitrage | Buy low-price electricity, sell at high price | Wholesale energy markets |
| Ancillary Services | Frequency regulation, spinning reserve, voltage support | Real-time grid balancing markets |
| Capacity Market Participation | Payments for capacity availability during peak demand | Capacity auctions or forward contracts |
| Demand Response & Peak Shaving | Reducing peak demand or injecting power during peaks | Demand response programs, utility incentives |
| DER Aggregation | Combine with other DERs to maximize value | Aggregator participation rules |
| Renewable Integration Support | Flexibility to integrate variable renewable generation | Grid support payments, incentives |
In conclusion, LAES operators in deregulated energy markets can stack multiple revenue streams by providing energy and grid services that the competitive market and grid operators value. These include buying and selling energy, offering ancillary services, participating in capacity markets, engaging in demand response, aggregating with DERs, and supporting renewable integration. The specific opportunities and compensation mechanisms depend on the unique market rules and frameworks of each deregulated region.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-potential-revenue-streams-for-laes-operators-in-deregulated-energy-markets/
