Energy storage plays a fundamental role in the integration of renewable energies and in guaranteeing a stable and flexible electricity supply, especially at times of high demand or when renewable sources are not available. Using energy storage technologies, such as batteries, represents a turning point in the renewable energy sector, since these sources are variable in terms of generation. According to data from the European Commission, battery storage is the fastest growing storage technology and will play a key role in meeting the target of reducing greenhouse gas emissions by 55% by 2030.
Our climate reality has exposed the vulnerability of each country’s systems, so the regulatory guidelines for the adoption of storage by the Regional Electricity Interconnection Commission (CRIE), as the regulatory and normative body of the Regional Electricity Market (MER), should be considered a priority and it should also be understood that the benefits of energy storage will depend on the extent to which regulatory conditions are in place to encourage the development of attractive business models using storage technologies, in such a way that regulatory certainty overcomes barriers such as the establishment of conditions for access and connection to the grid, the need for permits and authorizations, grid charges, payments to be received by energy storage systems including payments for energy, capacity and balancing.
According to a study by the Inter-American Development Bank entitled “Incorporation of energy storage in electrical systems in LAC: International experiences in regulatory models”, the best practices and key elements of the regulatory framework for the integration of energy storage were analyzed, as well as their impact on the viability of business models. The study concludes that the regulatory framework should address the following fundamental aspects:
- Definition and treatment of storage: Most of the best practices analyzed explicitly define storage as a liberalized activity.
- Conditions of access and connection to the grid: Some systems consider storage as a generator, while in others it is given specific treatment.
- Permits and authorization of projects: Most legislators authorize storage in a manner equivalent to generation projects.
- Network tolls and charges: On this point, there are differences between international experiences. In some countries, such as Spain, storage is exempt from paying network tolls; in others, they pay tolls as a consumer or producer (USA, France), and in others, such as Germany, they pay when loading and unloading.
- Market participation: Best regulatory practices point towards a total opening up of markets (energy, capacity, frequency control services, etc.) for storage, which must compete with other agents in a non-discriminatory manner.
- Remuneration framework: The best international experience indicates that the optimal remuneration framework, both for the system and for the storage developer, is one that remunerates the services that storage provides according to the needs of the system.
Progress in the Central American region in terms of energy storage regulation
1- Guatemala: in 2024, the National Electric Energy Commission (CNEE) approved the proposed regulations for the installation, operation, and remuneration of storage systems attached to solar and wind power plants, referred to in the proposed regulations as Autonomous Hybrid Generation (AHG), contained in resolution CNEE-128-2024.
The purpose of the regulations is to establish the regulatory framework for the integration and coordination of storage systems in the National Interconnected System (SNI, for its Spanish acronym). In addition, the regulations were updated to improve the coordination of solar and wind power plants, as well as power electronics-based equipment.
In this context, the incorporation of storage systems into the regulations of the Guatemalan Wholesale Market is being carried out in phases, the first being the consideration of storage systems in hybrid operation with photovoltaic and wind power plants, as well as the use of storage systems for the participation of any generator in the primary frequency regulation service; This phase has already been completed and has been in force in the regulations since May 14, 2024.
2- Honduras: The Electric Power Regulatory Commission (CREE) is working on a reform of the Regulations of the General Law of the Electric Industry and the Regulations of System Operation and Wholesale Market Administration to incorporate storage in hybrid systems and for the expansion of the transmission network itself.
The integration of Energy Storage Systems (ESSs) into the Honduran national electricity system represents a key strategy for increasing the stability, efficiency, and sustainability of the electricity supply in Honduras. In the context of the energy transition and the growing contribution of energy generation from intermittent renewable sources, ESSs are emerging as important technical solutions to guarantee the continuity and reliability of the electricity service.
3- Costa Rica: The Regulatory Authority for Public Services (ARESEP) submitted for public consultation a reform of the Technical Standard for Planning, Operation and Access to the National Electricity System (POASEN), which incorporates a sixth chapter on the integration of variable renewable energies and storage systems into the SEN; in which new conditions for such integration are established, considering aspects for both high and medium voltage connections to guarantee a safe and effective integration of clean energy sources in the national grid.
4- Panama: The National Public Services Authority (ASEP) approved modifications to the commercial rules for the wholesale electricity market, where the use of Energy Storage Systems is now allowed in the different segments of the chain, incorporating figures such as ESS, bESS, and VESS.
According to resolution AN N° 19112 – Elec, published at the end of April 2024, the use of battery energy storage systems (BESS) is now being considered as a complement to the calculation of firm power for renewable generation plants.
In the region, the installed capacity of photovoltaic solar energy will multiply, going from 2.3 GW in 2024 to almost 20 GW in 2050, which will imply investments of more than US$22 billion, representing close to 40% of the total projected costs for a generation. Together with solar energy, wind energy is emerging as one of the main sources of electricity, with both covering approximately 45% of annual energy demand by 2050.
This projected growth in renewable generation sources will require significant investments in both transmission networks and technologies that provide system flexibility and battery storage. It is estimated that these will require an outlay of close to US$20 billion, guaranteeing the stability and operational security of the system. In addition, the expansion of SIEPAC’s interconnections with Mexico is planned, as well as new interconnections between Panama and Colombia, and Belize and Guatemala, with a projected investment of US$1.5 billion.
The investments will require a sustained process of modernization of regional and national regulations, aware of the challenges that this implies, since as the system grows and diversifies, it is essential to update the rules to guarantee the reliability of supply and the efficiency of the market. In this sense, promoting long-term transactions and developing regional tenders that take advantage of economies of scale will help maximize the economic benefits of the Regional Electricity Market (MER, for its acronym in Spanish).
It is important to continue consolidating integration with other markets as it represents a unique opportunity to connect all of Latin America. Interconnections with Mexico, Belize, and Colombia could generate significant economic and social benefits, although not without technical, regulatory, and political challenges. Energy integration is one of the keys to a more secure, sustainable, and prosperous future for the entire region, especially for Central America, which has become an example of collaboration and progress toward more robust energy integration and could become a center for energy storage.
The global energy storage market almost tripled in 2023, the largest year-on-year gain on record. The growth comes in the context of historically low prices, especially in China, where the costs of turnkey energy storage systems in February were 43% lower than a year ago at a record low of $115 per kilowatt-hour for two-hour energy storage systems.
The region is currently facing great opportunities to establish a general and enabling framework for storage, with a technologically neutral regulatory scheme; this means that regulatory models should be promoted that allow for the application of different storage technologies, including not excluding thermal backup itself to ensure the firmness of the system in situations where variable renewable energies are unavailable.
In this context, it will be important to establish coherent rules that promote the development of projects and that determine market participation, ensuring that all the economic conditions are in place (charges, tolls, payments, incentives, subsidies). To this end, realizing the benefits of energy storage will depend on the definition of regulatory frameworks that encourage the development of attractive business models taking advantage of different technologies, conditions that may well be adopted in the countries of the region to have rules that are as uniform as possible and even contribute to the strengthening and resilience of SIEPAC.
Additionally, it is important to note that the International Renewable Energy Agency (IRENA) has analyzed the current costs and performance of a range of electricity storage technologies in stationary applications as well as the cost reduction and potential for performance improvement up to 2030 in the report “Electricity Storage and Renewables: Costs and Markets to 2030”. The aforementioned report concluded that total electricity storage capacity could triple in energy terms by 2030. Together with the rapid adoption of renewable energy, this should be enough to double the share of renewables worldwide in less than a decade and a half. Battery electricity storage could grow 17-fold and battery storage technology costs could fall by as much as 66%.
The study shows that battery-based electricity storage systems offer enormous potential for implementation and cost reduction. By 2030, total installation costs could fall by between 50% and 60% and battery cell costs even further. All of this is driven by the optimization of manufacturing facilities, combined with better combinations and lower use of materials.