Energy storage balancing renewable energy with digital grid overlay

Can Energy Storage Solve the Renewable Energy Puzzle? How to Profit from Frequency Regulation

Mira Elwood in Tech & Innovation December 2025 • 4 min read.

"Unlock the potential of energy storage, explore the economics of frequency regulation, and discover how smart investments can drive profits while stabilizing the grid."

As societies transition to low-carbon energy sources, the ability to store vast amounts of electricity becomes paramount. Intermittent renewable energy sources like wind and solar power require effective storage solutions to ensure a stable and reliable energy supply. One critical aspect of grid management is frequency regulation, which maintains the delicate balance between electricity supply and demand.

Frequency regulation presents both a challenge and an opportunity for energy storage operators. These operators play a vital role by selling frequency regulation power to grid operators and trading electricity on day-ahead markets. This allows them to capitalize on the fluctuations in energy demand and supply. However, making informed decisions in this dynamic environment requires a deep understanding of the underlying economics and technical considerations.

This article explores the decision-making process of storage operators, providing an analytical solution to optimize their operations. We'll delve into how frequency deviation trajectories are treated as functional uncertainties, and how operators can navigate these uncertainties to maximize profits while meeting grid stability requirements. We'll also examine the factors that influence the amount of electricity traded on day-ahead markets, the costs associated with frequency regulation, and the impact of roundtrip efficiency and frequency deviation dispersion.

Understanding the Mechanics: How Frequency Regulation Works

Energy storage balancing renewable energy with digital grid overlay

The purpose of frequency regulation is to ensure electricity grids against unforeseen second-to-second supply and demand mismatches. Centralized power plants, often fired by fossil fuels, have traditionally provided this insurance. However, as wind and solar power plants replace fossil-fuel-fired power plants, power generation becomes more weather-dependent, potentially increasing the demand for and decreasing the supply of frequency regulation. Electricity storage helps fill this gap.

When more power is produced than consumed, turbines speed up, causing the frequency to rise. Conversely, if consumption exceeds production, turbines slow down, and the frequency falls. Frequency regulation mechanisms respond to these changes, injecting or absorbing power to maintain a stable grid frequency. Storage operators play a crucial role in this process, acting as flexible resources that can quickly adjust to changing grid conditions.

Fast Response: Storage devices, especially lithium-ion batteries, can respond to frequency deviations in milliseconds, making them ideal for regulation services.
Optimized Trading: Operators must decide how much power to sell for regulation versus trading on day-ahead markets, balancing immediate profits with future grid needs.
Constraint Management: Storage capacities and state-of-charge limitations must be considered to ensure devices operate within safe and efficient parameters.

The remuneration for offering frequency regulation is twofold: the power set aside for frequency regulation is compensated at the availability price, and the regulation power actually delivered at time t is compensated at the delivery price. Battery operators are required to measure the frequency deviation in near real-time. Our continuous-time formulation is independent of any particular time discretization.

The Future of Energy Storage: Maximizing Profits and Ensuring Grid Stability

The integration of energy storage into the electricity grid is not just a technological advancement but also an economic opportunity. By understanding the dynamics of frequency regulation and optimizing their operations, storage operators can play a vital role in enabling a reliable, low-carbon energy future. As technology advances and regulations evolve, the potential for profitable and sustainable energy storage solutions will only continue to grow.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

Everything You Need To Know

What is frequency regulation, and why is it important for the electricity grid?

Frequency regulation is a critical process that maintains the balance between electricity supply and demand, ensuring a stable grid frequency. It is essential because it counteracts unforeseen mismatches between electricity production and consumption, which can cause fluctuations in grid frequency. These fluctuations can damage equipment and disrupt the supply. As renewable energy sources like wind and solar become more prevalent, frequency regulation becomes even more crucial due to their intermittent nature. This is where storage operators come into play, using technologies like batteries to quickly respond to these imbalances.

How do storage operators make money from frequency regulation?

Storage operators generate revenue through two primary avenues. First, they receive compensation at the availability price for the power set aside for frequency regulation. Second, they earn a delivery price for the actual regulation power they provide at any given time. Moreover, operators can trade electricity on day-ahead markets to capitalize on the fluctuations in energy demand and supply. This dynamic environment necessitates a deep understanding of the economics and technical considerations involved in frequency regulation.

What is the role of lithium-ion batteries in frequency regulation, and how do they contribute to grid stability?

Lithium-ion batteries are particularly well-suited for frequency regulation due to their fast response times. These batteries can react to frequency deviations within milliseconds, making them ideal for quickly injecting or absorbing power as needed. Their fast response capability is critical for maintaining grid stability because it allows them to counteract sudden imbalances between supply and demand. This helps to keep the grid frequency stable, preventing damage to equipment and ensuring a reliable energy supply.

What are the key factors that storage operators must consider when optimizing their operations?

Storage operators must consider several factors to optimize their operations. They need to decide how much power to sell for regulation versus trading on day-ahead markets, balancing immediate profits with future grid needs. Operators must also manage storage capacities and state-of-charge limitations to ensure devices operate within safe and efficient parameters. Furthermore, understanding the underlying economics, including the impact of frequency deviation trajectories, roundtrip efficiency, and frequency deviation dispersion, is vital for making informed investment decisions.

How does the transition to renewable energy sources impact the need for energy storage and frequency regulation?

The transition to renewable energy sources, like wind and solar power, significantly increases the need for both energy storage and frequency regulation. Renewable sources are intermittent and produce variable amounts of electricity based on weather conditions. This variability can lead to frequent imbalances between supply and demand, necessitating robust frequency regulation mechanisms to maintain grid stability. Energy storage, particularly through technologies like lithium-ion batteries, becomes essential to address these imbalances. Storage operators can quickly inject or absorb power to correct frequency deviations, helping to integrate renewable energy into the grid effectively.