BayWa r.e. on Europe's shift to flexibility-centric energy

Europe's power system is undergoing a structural shift from being generation-centric to flexibility-centric. This means the core challenge is no longer just producing clean electricity but ensuring the grid remains reliable and resilient as variable wind and solar displace conventional power, according to Teresa Casacchia of renewable energy company BayWa r.e.

In an interview with Energy Monitor, Casacchia explained that storage and hybrid projects have become essential. They deliver three key values: System Adequacy for firm power, System Flexibility for balancing and congestion management, and System Resilience for inertia and voltage support. Batteries help make variable renewable output controllable and dispatchable.

The developer's shift

Developers moving from wind and solar into battery storage quickly discover it is not merely another generation asset. A battery's role is broader. Its value depends on when it charges, where it is connected, and how it participates across multiple markets and system services.

This demands a wider mix of expertise in market analysis, engineering, trading, and optimisation. The developer's role changes from a generator to a flexibility provider. The focus shifts to maximising an asset's value within an evolving power system.

Beyond lithium-ion and market risks

BayWa r.e. monitors emerging technologies like flow, thermal, and mechanical storage. Casacchia suggests the next major breakthrough may not be a new chemistry but a capability. The goal is solving problems lithium-ion handles less well, such as longer-duration flexibility and system resilience.

Grid-forming capability is also growing in importance. As synchronous generation declines, batteries must provide grid-stability functions. For this to scale, market frameworks must properly remunerate developers for the system value provided.

More battery capacity entering European markets brings a risk of revenue cannibalisation. Increased competition could compress prices in pure energy arbitrage and some ancillary services.

This does not weaken the overall case for storage. It changes where value is created. The business case for new projects will depend on access to markets that reward System Adequacy, Flexibility, and Resilience. Future value will come from location, connection quality, duration, and access to multiple revenue streams like capacity payments and grid-forming services.

A call for regulatory change

As an active member of the European Association for Storage of Energy (EASE), Casacchia identified one key regulatory change to accelerate deployment. She advocates for a harmonised, technology-neutral framework across Europe for procuring flexibility. In this framework, energy storage would be fully recognised as a key flexibility source and compensated through predictable, market-based mechanisms.

Current challenges include market fragmentation and a lack of transparency on flexibility needs. Casacchia proposes requiring Transmission System Operators and Distribution System Operators to regularly assess and publish their flexibility requirements. These should detail where, when, and for how long flexibility is needed. Procurement should then happen through competitive, technology-neutral mechanisms.

The most overlooked shift, according to Casacchia, is that flexibility is becoming the new baseload. Historically, value came from producing electricity. Now, value will come from making electricity dispatchable, reliable, and available when needed. Trends like hybridisation and grid-forming capability will move into the mainstream.