Market Insight

Alevo Group announces 200 MW energy storage project to provide frequency regulation services in USA

February 25, 2015

Sam Wilkinson Sam Wilkinson Associate Director, Solar & Energy Storage
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Alevo Group, a Swiss manufacturer of grid-scale energy storage systems, announced on 17th February 2015 that it has signed a joint operational agreement with Customized Energy Solutions (CES) to provide 200MW of frequency regulation services to the wholesale energy market in the United States, using its MW-scale Grid-Bank battery product. Alevo claims that this represents the largest ever energy storage deployment in the United States of America.

Key Points

  • The announcement highlights the increasing activity that is being seen in the US frequency regulation markets, highlighting the strong economics of batteries in frequency regulation.
  • Alevo pursues a vertically integrated business model, taking on the merchant risk of owning and operating the energy storage. This approach is currently uncommon for battery manufacturers in the energy storage industry.
  • Source: Alevo and Customized Energy Solutions Announce Largest Ever US Energy Storage Deployment

 

IHS Insight

Alevo Group is a battery manufacturer headquartered in Switzerland. The company was unveiled in a somewhat mysterious way in late 2014, when the company left stealth mode by announcing its intention to deliver large-scale energy storage projects in Turkey and North America, and the opening of a large-scale manufacturing plant in North Carolina, USA. It claims that its proprietary battery chemistry (offered via its Grid-Bank energy storage product) offers a significant improvement in cost and lifetime over today’s industry leading large-scale battery technologies, which could significantly improve the current economics of using batteries to provide services to the grid.

The announcement that it will deploy 200 MW of systems in North America in 2015 appears instantly ambitious, given that to date it has currently completed very commercial installations, and has only recently begun manufacturing operations. That said, the enormous scale of the manufacturing plant where Alevo plans to carry out the manufacturing of its batteries will allow for manufacturing capacity to be increased very quickly.

The project is made up of several systems of differing sizes (with the exact sizes and locations for some systems yet to be finalized) and not a single 200 MW system.  This makes it the largest collection of systems to be deployed by one supplier, but not the largest single system. Southern California Edison announced in late 2014 that AES would install a single 100 MW system as part of its energy storage procurement. IHS believes that this remains the largest single energy storage system planned in the United States to date.

The announcement also highlights the increasing activity that is being seen in the US frequency regulation markets, with a number of suppliers, such as RES, Invenergy, and NextEra developing projects. To date, the majority of systems have been focused on the PJM network, however IHS understands that the Alevo systems will also be connected to other networks.

This latest announcement highlights the strong economics of batteries in frequency regulation, which, once the lowest hanging fruit of PJM is tapped, will likely spread to other markets, with ERCOT a front-runner due to its relatively high prices.

In contrast to nearly all large-scale battery manufacturers that are currently involved in the industry, Alevo Group plans to retain ownership and operation of the energy storage systems. This mirrors the business model of US solar panel manufacturers such as First Solar and SunPower, whose increasingly vertically integrated businesses rely on developing and owning projects, rather than simply selling products to other project developers. Alevo’s apparent financial capability to own and operate such an unprecedented volume of energy storage projects in a relatively high risk merchant market environment, despite being at such an early stage of its development, highlights that it is backed by significant investment.

More analysis from IHS: Grid-Connected Energy Storage Report - 2014

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