I. INTRODUCTION
Ongoing transformation in energy markets and the rapid increase in the share of renewable sources have elevated energy storage systems (the "ESS") from merely a supplementary technology for storing surplus electricity to a critical element in grid flexibility and supply security. In an environment where more than half of the installed capacity in Türkiye is based on renewable sources, ESS plays a significant role in maintaining grid stability, mitigating price fluctuations, and ensuring supply-demand balance. However, factors such as the high capital costs of ESS installations and the regulatory framework necessitate an examination of both the financial and legal dimensions of ESS.
Originally implemented solely to store surplus energy, ESS has now become an attractive option for investors through revenue models derived from arbitrage, capacity mechanism support, and grid services. In addition to contributing to market stability by providing ancillary services, ESS, when integrated in a integrated configuration with renewable power plants, possesses the potential to offset the intermittent nature of generation. At this stage, ESS has positioned itself at the intersection of rapidly evolving technological and investment perspectives, emerging as a field that offers significant opportunities for the future of Türkiye's energy sector.
II. FUNDAMENTAL PRINCIPLES
1. What Are Energy Storage Systems and What Purpose Are They Used?
ESSs are widely employed to address the imbalances in supply and demand that arise in the electricity market and to enhance generation flexibility. In particular, with the rising share of renewable sources, the primary function of ESS has evolved into stabilizing the grid by compensating for the intermittent nature of renewable generation. Their applications include providing the additional energy required by the system during periods of high electricity demand, responding swiftly to sudden frequency or voltage fluctuations, and ensuring more efficient operation of the existing infrastructure.
Various technological approaches exist in the field of storage. Common types include mechanical storage (such as pumped hydroelectric and compressed air), chemical storage (including synthetic natural gas and hydrogen), electrical storage (such as supercapacitors and superconducting magnetic systems), and thermal storage (including molten salt and hot water). While the technical characteristics and field adaptability of each method vary, the fundamental objective is to optimize the utilization of generated energy, thereby contributing to both the economic and operational sustainability of the system.
Furthermore, storage units support the grid during periods of high demand by smoothing sudden fluctuations and mitigating imbalances caused by intermittent generation, thereby maintaining both frequency and voltage stability. In addition, by storing surplus energy produced from renewable sources and later reintegrating it into the system, cost optimization is achieved for investors and operators, and arbitrage opportunities may also emerge. Such flexibility not only enhances profitability in markets with variable electricity prices but also greatly facilitates the integration of renewable power plants into the grid.
2. What Are the Leading Business Models in Türkiye in terms of the Use of ESSs?
In Türkiye's electricity storage sector, two primary models attract particular attention: independent Battery Energy Storage Systems (the "BESS") and integrated projects with renewable power plants (the "Integrated Storage Projects"). Independent BESS projects, which can connect directly to the grid without being tied to any generation source, possess the flexibility to deliver stored energy to the market when favorable market conditions arise.
In Integrated Storage Projects, battery technology not only supports grid stability by storing electricity generated by power plants but also creates additional revenue opportunities for investors. In particular, the fluctuations in electricity generation stemming from the intermittent nature of renewable sources are balanced through the integrated configuration, ensuring a more stable supply. This dynamic contributes both to enhanced renewable energy efficiency and to a more predictable revenue stream in electricity trading.
From a technical perspective, the batteries employed in both independent BESS and Integrated Storage Projects are equipped with advanced monitoring and control systems capable of tracking current and voltage values in real time. These systems dynamically manage critical parameters such as the state of charge and the depth of discharge, to extend battery life and maximize performance. In integrated applications, the generation profile of the renewable source is integrated into the battery's charge/discharge strategy, thereby determining the optimal operating points and improving the quality of the power delivered to the grid.
3. What Are the Ancillary Services Utilized to Achieve Balance in the Energy Market?
Balancing in the energy market involves continuously maintaining the instantaneous equilibrium between electricity generation and consumption. This process ensures that technical parameters of the electricity grid, such as frequency and voltage, remain within predetermined limits, thereby safeguarding the stability and reliability of the electrical system.
Balancing is achieved through various mechanisms, referred to as "ancillary services," which are provided by the relevant legal entities associated with the transmission or distribution system. These services ensure that the system operates reliably, and that electricity is delivered to consumers under the required quality conditions.
- Primary Frequency Control: In response to a decrease or increase in system frequency, the ancillary service unit automatically increases or decreases its active power output to bring the system frequency to a new equilibrium.
- Secondary Frequency Control: The active power output of ancillary service units is automatically increased or decreased in response to signals transmitted from the national load dispatch center, thereby restoring the system frequency to its nominal value and aligning the total electricity exchange with neighboring grids to the programmed level.
- Demand-Side Participation Service: This service is provided by reducing the consumption of facilities through aggregators in accordance with instructions from the system operator.
- Instantaneous Demand Control Service: Provided by consumption facilities, this service relies on the load, which can be automatically disconnected via instantaneous demand control relays, to prevent the system frequency from falling to critical levels.
- Reactive Power Control: This service ensures the control of voltage levels by enabling units, operating as generators or synchronous condensers, to supply reactive power to the system or draw reactive power from it.
- Restoration of a Settled System: If the transmission system becomes partially or completely settled, generation facilities that can be activated without relying on an external energy source are employed to energize the transmission system, supply electricity to customers, and facilitate the reactivation of other generation facilities.
- Regional Capacity Rental: To preserve system reliability and address potential regional need arising from insufficient capacity, the capacities of new or existing generation facilities are rented through tenders organized by the Turkish Electricity Transmission Company.
- Limited Frequency Sensitivity Mode: This mode enables units of generation facilities operating in limited frequency sensitivity mode to contribute to system frequency balance by automatically increasing or decreasing their active power output when certain frequency thresholds are exceeded.
All these ancillary services are implemented by the technical requirements and regulatory principles stipulated in the legislation, with the objective of improving the quality of electricity supply, enhancing grid stability, minimizing the risk of outages, and ensuring the rapid recovery of the system in the event of any technical failure or unforeseen circumstance. In this manner, the electricity system can be operated sustainably and securely in both the short term and the long term.
4. What Revenue Models Do ESS Offer as Financial Mechanisms for Investors?
ESS's primary revenue model in the electricity market is the arbitrage model. The arbitrage model is based on the strategy of storing energy during periods of low prices and selling it when prices rise, thereby generating profit. The rapid charge/discharge performance of battery systems and their capability to track market prices in real-time further enhance profitability. In this context, battery storage systems enable dual revenue streams by participating in both electricity trading and grid support services.
However, with the increasing integration of renewable energy resources, imbalances between electricity supply and demand within power grids are becoming more frequent. This development necessitates the deployment of ancillary services by system operators to ensure instantaneous frequency and voltage stability. Energy storage systems contribute significantly to grid reliability by providing ancillary services, including frequency regulation, reactive power support, and uninterrupted power supply, thereby enabling additional revenue streams. Consequently, energy storage systems establish a dual revenue model by combining revenues derived from electricity trading and ancillary service provision, thus enhancing their investment attractiveness.
Similarly, capacity mechanisms—implemented to provide the grid with fixed and reliable capacity—serve as an important financial support tool that grants ESS a predictable long-term revenue stream. However, these mechanisms may occasionally introduce uncertainty and risk due to potential changes in regulatory frameworks. Long-term renewable energy supply agreements (the "PPAs") and capacity mechanisms play a critical role in providing predictable cash flows for banks and financial institutions; while PPAs offer an effective hedge against market price fluctuations, capacity mechanisms ensure the continuity of energy supply under state-supported incentive schemes. Additionally, green financing and ESG credits add further value to projects by leveraging the potential of storage systems to reduce carbon emissions. Green financing and ESG credits enable ESS to receive support through green bonds, carbon credits, and sustainable finance programs; ESG-compliant projects are backed by financial instruments aligned with sustainability criteria, while carbon offset programs can serve as supplementary incentive mechanisms.
On the other hand, Integrated Storage Projects create a more stable supply profile by mitigating the generation fluctuations inherent in intermittent renewable sources, thereby contributing to secure cash flow under long-term PPAs. From a technical standpoint, high-performance battery technologies and advanced control software enable ESS to integrate different revenue models through a "revenue stacking" approach. Real-time monitoring and management systems continuously oversee critical parameters such as state of charge and depth of discharge, facilitating optimal decision-making regarding the timing and quantity of energy to be purchased or sold. As a result, revenues from both arbitrage and ancillary services can be maximized. In integrated applications, battery units synchronized with renewable sources strengthen the alignment between generation profiles and market price signals, thereby enhancing efficiency and profitability.
5. What Inherent Risks Are Associated with the Deployment of Energy Storage Systems?
Financing energy storage system projects entail certain risk factors that investors must be prepared to address. Uncertainty in electricity prices emerges as a significant risk factor, particularly in revenue models based on arbitrage and balancing markets. In this context, risk management strategies—such as forward contracts and derivative instruments that allow for fixing electricity prices at a predetermined rate for a future date amid market fluctuations—must be implemented, while optimizing investment return projections by modeling various price scenarios over the battery's economic lifespan is of strategic importance. On the other hand, the regulatory framework concerning storage projects has not yet fully matured, leading to uncertainties arising from insufficient regulation. This situation may adversely affect investors' long-term decision-making processes and result in increased financing costs. Therefore, establishing incentive mechanisms during the integration process into the energy market and enhancing regulatory provisions are critical to minimizing the project's risks.
III. CONCLUSION
Energy storage systems emerge as a strategic element in Türkiye's renewable energy-dominated electricity market, enhancing grid flexibility and addressing supply-demand imbalances. Both independent BESS and Integrated Storage Projects present attractive opportunities for investors through dual revenue models derived from arbitrage, capacity mechanisms, and ancillary services, bolstered by advances in technology and control systems. However, effective management of risks—such as regulatory uncertainties and fluctuations in electricity prices—is critically important for ensuring the economic sustainability of these projects. In this context, the implementation of innovative technological approaches and risk management strategies will strengthen the pivotal role of energy storage systems in Türkiye's energy transformation and contribute to market stability.
The full text of the Draft Regulation can be accessed here.
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