The energy storage market in Spain is currently experiencing a clear phase of expansion, supported by a favourable price scenario and increasing demand since the 28A blackout.

According to the recent report by Quinto Armónico, the differences between maximum and minimum hourly electricity prices reached up to €28.4/MWh in April, consolidating as a key factor in the profitability of battery energy storage systems (BESS).

The analysis highlights that this figure stands well above the average recorded in previous years, evidencing a significant increase in market volatility. This phenomenon is highly attractive for energy arbitrage operations, where BESS technologies capitalise on hourly price differences to maximise revenues.

“The monthly average of spreads remained above €20/MWh throughout most of the first quarter of 2024,” the document notes. This scenario enables investment costs to be recovered in shorter timeframes, particularly for projects located in nodes with high congestion and volatile pricing.

Signals

The report underlines that elevated volatility is driven by multiple factors, including the growing penetration of non-dispatchable renewable energies such as solar PV and wind power, and the grid’s limitations in absorbing generation during periods of high output.

During peak solar irradiation hours, electricity prices even fell below €5/MWh, while in peak demand hours they rose above €30/MWh. This difference represents a gross revenue opportunity of more than €25/MWh in daily charge and discharge cycles for BESS operators.

“Daily arbitrage opportunities have consolidated as the main driver for investment in storage, particularly in facilities configured with two-hour discharge capacities,” states Quinto Armónico.

Profitability analysis and market outlook

The study also models revenue simulations for storage projects operating exclusively in the arbitrage market. In this context, potential revenues could reach up to €160,000 annually per installed MW, depending on system location and capacity.

Nevertheless, the firm producing the report warns that long-term profitability depends on the evolution of BESS equipment prices, operation and maintenance costs, and the regulatory framework related to flexibility and capacity services.

Furthermore, it is anticipated that the implementation of capacity mechanisms and participation in ancillary services, such as secondary and tertiary reserves, will help diversify revenue streams for these projects.

“The combination of arbitrage revenues and the provision of system services is key to achieving returns above 10% annually in terms of IRR,” it concludes.