If you're looking to make a lot of money in the short term, then the article makes sense.
But if you see electricity as a common good, wuth the goal being an ability to reliably supply electricity to meet the demand, then the article is meaningless.
And that's why China will continue to accelerate away from the US in everything but inequality.
Treating essential services as a common good pays for itself in social cohesion, and more opportunities for more people.
Thanks for the comment, Richard. The article isn’t about making money in the short term. It’s about understanding a moment where batteries are beginning to cannibalise their own revenues, which is a market design signal, not a flaw in the goal. The goal is exactly what you describe: reliable, clean, and cheap power for everyone. Well-designed markets can serve that as they’re what’s pushing fossil fuels out and bringing renewables and storage in. More may need to be done on incentive design. On China: it’s actually been moving toward more market-based electricity dispatch, so the contrast may be less sharp than it seems.
Excellent article; congratulations. In the case of Spain, what essential precautions should be taken before desperately launching this battery capacity market? Should the state have its own battery infrastructure in the grid to, via the TSO, encourage optimal battery deployment?
Thanks a lot for your kind words, José! I think a key precaution is auction design: the mechanism needs to reward genuine flexibility and location, not just availability — otherwise you risk over-procurement or locking in the wrong assets. Poland's experience comes to my mind here as an example and it could be instructive. Their capacity market drove impressive BESS deployment when parameters were right, but a single decision to slash the de-rating factor for batteries effectively redirected the whole auction toward gas.
Regarding REE holding some anchor storage, I personally like the idea as a way to coordinate deployment in underserved grid nodes, while keeping in mind the risk of crowding out private investors if not carefully scoped. Targeted public co-investment where markets clearly won't go on their own could be a good trade-off.
Thanks for the comment, Mark. From a consumer point of view, yes! Though, battery investors may need better incentive structures. On the supply side, I expect we’ll also see more VPPs emerge, aggregating distributed assets to capture value from flexibility services rather than pure energy arbitrage.
Thanks for the comment, Mark. Indeed, a textbook “missing money” problem. Let’s see whether smarter price signals can fix it, or if cheap power is just a public good in disguise.
I didn't need all of that deep dive, but I sure appreciate it.
It would seem easy to over-invest in batteries, and the last project in doesn't make much money.
Since batteries are just a few years away from ANOTHER significant price drop (when sodium-ion are manufactured in large numbers), battery economics are going to be a changing, volatile field.
Thanks for the interesting comment, Roy. I agree and I'd add that more uncertainty will also come from demand growth (EVs, heat pumps) and how flexible that demand turns out to be. If smart tariffs and demand response work well, they may compress the arbitrage spreads batteries rely on; if they don't, peak shaving becomes more valuable.
Thanks for the comment, Matt. Great point. Australia would be a fascinating case, especially as they're actively shifting flexible gas roles to BESS; I may look into it. China could be trickier to compare since, as far as I remember, it hasn't fully transitioned to a market-based merit order yet so the price signal dynamics may be different.
If you're looking to make a lot of money in the short term, then the article makes sense.
But if you see electricity as a common good, wuth the goal being an ability to reliably supply electricity to meet the demand, then the article is meaningless.
And that's why China will continue to accelerate away from the US in everything but inequality.
Treating essential services as a common good pays for itself in social cohesion, and more opportunities for more people.
Thanks for the comment, Richard. The article isn’t about making money in the short term. It’s about understanding a moment where batteries are beginning to cannibalise their own revenues, which is a market design signal, not a flaw in the goal. The goal is exactly what you describe: reliable, clean, and cheap power for everyone. Well-designed markets can serve that as they’re what’s pushing fossil fuels out and bringing renewables and storage in. More may need to be done on incentive design. On China: it’s actually been moving toward more market-based electricity dispatch, so the contrast may be less sharp than it seems.
Excellent article; congratulations. In the case of Spain, what essential precautions should be taken before desperately launching this battery capacity market? Should the state have its own battery infrastructure in the grid to, via the TSO, encourage optimal battery deployment?
Thanks a lot for your kind words, José! I think a key precaution is auction design: the mechanism needs to reward genuine flexibility and location, not just availability — otherwise you risk over-procurement or locking in the wrong assets. Poland's experience comes to my mind here as an example and it could be instructive. Their capacity market drove impressive BESS deployment when parameters were right, but a single decision to slash the de-rating factor for batteries effectively redirected the whole auction toward gas.
Regarding REE holding some anchor storage, I personally like the idea as a way to coordinate deployment in underserved grid nodes, while keeping in mind the risk of crowding out private investors if not carefully scoped. Targeted public co-investment where markets clearly won't go on their own could be a good trade-off.
So…great, right? (Unless you invested in batteries). Energy abundance, no?
Thanks for the comment, Mark. From a consumer point of view, yes! Though, battery investors may need better incentive structures. On the supply side, I expect we’ll also see more VPPs emerge, aggregating distributed assets to capture value from flexibility services rather than pure energy arbitrage.
There is no money in providing cheap power. Filing this under limits to markets
Thanks for the comment, Mark. Indeed, a textbook “missing money” problem. Let’s see whether smarter price signals can fix it, or if cheap power is just a public good in disguise.
I didn't need all of that deep dive, but I sure appreciate it.
It would seem easy to over-invest in batteries, and the last project in doesn't make much money.
Since batteries are just a few years away from ANOTHER significant price drop (when sodium-ion are manufactured in large numbers), battery economics are going to be a changing, volatile field.
Thanks for the interesting comment, Roy. I agree and I'd add that more uncertainty will also come from demand growth (EVs, heat pumps) and how flexible that demand turns out to be. If smart tariffs and demand response work well, they may compress the arbitrage spreads batteries rely on; if they don't, peak shaving becomes more valuable.
Would be interesting to compare this with China and Australia, and how disseminated battery of virtual power plant affects outcomes.
Thanks for the comment, Matt. Great point. Australia would be a fascinating case, especially as they're actively shifting flexible gas roles to BESS; I may look into it. China could be trickier to compare since, as far as I remember, it hasn't fully transitioned to a market-based merit order yet so the price signal dynamics may be different.
Excellent article, thank you. Your readers might enjoy this one as well.
https://needsofthemany98.substack.com/p/grid-batteries-are-not-a-renewable?r=gwg0&utm_campaign=post&utm_medium=web
Thanks for the kind words, Scott.