The role of battery energy storage in industrial flexibility

Abstract

The Swedish electricity system is undergoing a transition characterized by increasing electrification, rising industrial electricity demand and a growing share of variable renewable electricity generation. These developments increase the need for flexibil- ity resources that can support system balancing and reduce exposure to electricity market volatility. Battery energy storage systems (BESS) have therefore gained at tention as a potential flexibility solution for energy-intensive industries. This thesis investigates the role of BESS in the Swedish paper and pulp industry and identifies the main barriers limiting implementation at paper and pulp mills. The study combines semi-structured interviews with actors from the paper and pulp industry and the electricity system with a quantitative simulation and investment appraisal based on site specific data from two anonymized mills. The qualitative results show that BESS implementation is constrained by high investment costs, uncertain and market-dependent revenues, requirements for continuous production, existing flexibility solutions that reduce the perceived need for BESS, and regulatory uncertainty flexibility. The quantitative results indicate that electricity price arbi- trage alone is financially insufficient while profitability depends mainly on revenues from ancillary services. In the base-case assessment, only one of the two studied sites reaches operating payback within the 24-month analysis period, and the investment outcome is highly sensitive to revenue levels and financial assumptions. The thesis concludes that BESS can create value under specific site conditions, par ticularly where grid capacity, operational constraints and market access enable effec- tive participation in ancillary service markets. However, under current conditions, BESS cannot be regarded as a generally viable flexibility solution for all paper and pulp mills. Whether BESS is viable depends on site-specific energy profiles, existing flexibility resources, investment costs and future electricity market development.