capacity limitation contract
LC Energy

Making a profit with a capacity limitation contract

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LC Energy, a developer of large-scale solar parks and battery projects, approached QING with a complex question. Due to the increasing amount of renewable energy sources and electrification in society, there is more and more press the net, which is a major concern for network operators.

Here's how we helped LC Energy analyze the impact of a capacity limitation contract on a battery's earning potential.

Opdrachtgever
LC Energy
Vraagstuk
An in-depth analysis of the capacity limitation contract
Toegepaste tools en expertises:

Predictions and analysis of electricity prices
In-depth knowledge about the CBC and its possibilities

Overcrowded electricity network causes problems

LC Energy wanted to install a battery near an existing solar park, so they needed a new connection. Closing a new connection is becoming increasingly difficult due to increasing network congestion. That is why the network operator came up with a proposal to draw up a so-called capacity limitation contract (CBC).

The capacity limitation contract

A CBC is simply a contract where, at certain times of the year, it is agreed that part of your import capacity or export capacity of electricity cannot be available.

Because you can fetch or plug less power from and into the grid at these times, you will receive financial compensation for this. You will also receive this compensation if you ultimately do not have to be cut, so you can simply purchase electricity. Shortly before, you will be told whether that is the case.

The crux is that LC energy uses their batteries, among other things, to make a profit with the trading in electricity markets. Simply put: at times where the electricity price is low, power can be charged to the battery. At times of expensive prices, power can be supplied back to the grid at a profit.

An issue that is difficult to understand

As you can imagine, the offer of such a contract raises many questions, including for LC Energy:

  • Are the days and times where LC Energy would be cut favorable?
  • What is the financial value of electricity at the moment?
  • What is the worst case scenario if all hours are ultimately cut?
  • And what is the best case scenario? Does the offered allowance cover this?

This is where QING jumped in. First, we looked at what LC Energy can earn per hour on average with the battery in all future years, and whether this would require buying or returning electricity from the grid. Subsequently, it was analyzed what effect the CBC has on the battery's sales potential and how this loss of income relates to the compensation offered.

Making a future forecast is difficult because it involves a lot of varying factors. For example, we looked at the changes and trends in electricity prices over the years. Subsequently, predictions were made about the future price.

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Simulate best and worse case scenarios

On the basis of complex calculations A worst case, best case and most likely case were subsequently created. These provide insight into the possible risks of the CBC and help LC Energy make choices.

Insight into the business case

The result of the analysis is that LC energy now understands whether the CBC is lucrative for them. If the battery mainly has to charge during limited hours, a CBC will be negative. When the battery is discharged during these hours, a CBC is an attractive choice.

Also dealing with a CBC? Or do you want to know what this could possibly mean for your company?

Get in touch with Stan. He is happy to help you out without obligation.