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In a fully developed electricity market, battery energy storage systems (BESS) can provide multiple value streams—such as energy dispatch, capacity provisioning, ancillary services. (Image: Fluence)
Written by Kai Wang, Growth Manager, Fluence APAC
In response to the global trend of energy transition, Taiwan’s energy storage industry is actively integrating with the international community to advance the vision of a prosperous green electricity supply chain.
On May 9, 2025, the Legislative Yuan passed partial amendments to the Electricity Act to promote renewable energy trading. The amendments will allow renewable electricity providers to conduct peer-to-peer transactions, ensure the neutrality of the Electricity Trading Platform (ETP), and explicitly define a new category of “Specific Electricity Supplier”, which brings grid-connected energy storage and demand response under regulatory oversight to reduce entry barriers and expand the pool of available power resources.
The amendments also reaffirm that Taipower will retain its vertically integrated operational model, rather than proceeding with vertical unbundling. This decision aims to maintain coordination between generation and grid operations, enhance investment efficiency, and ensure power supply stability. However, this change of direction also reflects the challenges Taiwan faces in advancing power market liberalization, with the energy storage sector still constrained by rigid regulations and limited market flexibility.
From support to core: Taiwan’s turning point for energy storage systems
Fluence has been closely participating in the development of Taiwan’s energy storage market. Leveraging our extensive international expertise, we have proactively aligned with local policy changes to demonstrate our firm commitment to supporting Taiwan’s energy transition.
Since the launch of electricity sector reforms and amendments to the Electricity Act in 2017, the government has vigorously promoted renewable energy development. The target is to achieve a 20% share of renewable power by 2025, and 60% to 70% by 2050, as outlined in the “Taiwan’s Pathway to Net-Zero Emissions in 2050.” These initiatives not only advance energy transition and carbon reduction goals but also foster the growth of Taiwan’s green energy industry.
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Kai Wang, Growth Manager, Fluence APAC. (Image: Fluence)
In parallel, market liberalization is a key component of Taiwan’s electricity reform. Measures include giving priority to green energy, establishing the Electricity Trading Platform (ETP), and planning future legal amendments to grant all consumers the right to choose their electricity suppliers.
Since 2016, Taiwan has actively accelerated the deployment of energy storage as a strategy to strengthen grid resilience. The 2025 legislative amendments further introduced the category of “Specific Electricity Supply Enterprise,” formally defining the market position of energy storage. Taiwan’s approach is relatively rare, as it prioritized liberalizing the ancillary service market ahead of other markets.
With the launch of the Electricity Trading Platform in 2021, the government aimed to integrate energy storage and demand response resources into the frequency regulation market. This initiative received enthusiastic support and active participation from the private sector, rapidly helping to meet grid demands.
The integration of fast-response resources significantly improved year-round frequency stability and proved crucial during critical events such as the 403 Hualien Earthquake, fully demonstrating their role in enhancing grid resilience.
While Taiwan’s power sector reforms have achieved impressive progress, institutional gaps that may constrain the full potential of renewable energy and energy storage continue to be observed. The electricity market remains predominantly regulated, with only around 1% of electricity traded freely in 2024—significantly lower than Japan’s 40%. This indicates that even with market access, private players still face substantial constraints. Although mechanisms such as Feed-in Tariffs (FiTs), Power Purchase Agreements (PPAs), and Taiwan Renewable Energy Certificates (T-RECs) have supported green power development, they have yet to effectively unlock the market’s full potential.
Economically, renewable energy offers clear advantages, including low marginal costs and fuel price decoupling. Under the Electricity Act, renewable sources must be given priority dispatch in Taiwan. However, because current green electricity trading mechanisms rely on fixed pricing structures, they limit the application of the Merit Order Effect, reducing the ability to suppress electricity prices, and ultimately preventing consumers from accessing low-carbon, low-cost energy.
In a fully developed electricity market, battery energy storage systems (BESS) can provide multiple value streams—such as energy dispatch, capacity provisioning, ancillary services, dual roles as electricity buyers and sellers, and even functioning as transmission assets. By leveraging price differentials, BESS can closely coordinate with renewable energy to balance supply and demand across all time periods, further amplifying the Merit Order Effect. However, Taiwan’s current Electricity Trading Platform (ETP) only permits BESS participation in the ancillary services market, effectively restricting them to frequency regulation and limiting their full market potential.
European inspiration: Building a more comprehensive BESS market
The European electricity market is relatively mature, offering valuable lessons for energy transition and BESS deployment. Countries like the UK, Germany, and Norway have played leading roles in advancing electricity market reforms. Although many European countries began liberalizing their energy markets in the 1990s and progressively opened their energy markets, the participation of BESS in these markets has only been established for the past decade.
In the early stages of development, the BESS frequency regulation capabilities garnered significant attention from Transmission System Operators (TSOs) across many European countries, specifically Germany, the UK and Ireland. These operators facilitated participation by BESS in fast frequency response markets through tenders or the establishment of ancillary services markets. Frequency services demand rapid and substantial power injection with relatively low energy throughput, making it particularly suitable for early-stage battery energy storage technologies. The island systems in the UK and Ireland developed very fast frequency response services, with reaction speeds of only 150ms. These new frequency products were not only well designed around the technical capability of batteries, but also meant fast, more precise and therefore overall cheaper frequency regulation in those markets.
However, the demand for frequency services within a system does not experience rapid growth over short periods. Consequently, the influx of BESS participation led to market saturation, resulting in a decline in revenue potential. Around 2020, countries began to open markets for slower-response frequency restoration reserves, such as automatic Frequency Restoration Reserves (aFRR) and manual Frequency Restoration Reserves (mFRR), which offer longer discharge durations.
Nevertheless, despite the opening of these new service categories, revenue from frequency-related services has continued to decline as a proportion of total income for energy storage systems. This trend underscores the need for storage operators to diversify their revenue streams and adapt to evolving market dynamics.
In recent years, declining revenues from frequency services have prompted energy storage owners in Europe to revise their operational strategies. Many have gradually entered established wholesale electricity markets, generating revenue through price arbitrage in day-ahead and intraday markets. The rising penetration of renewable energy has intensified supply-demand imbalances and widened price volatility, creating highly favorable conditions for arbitrage.
With the advancements in long-duration battery technology, BESS can now effectively support market operations by shifting energy across different time periods and contributing to grid balancing. In addition to wholesale energy markets, some TSOs in the UK have implemented balancing mechanisms—single-buyer, centrally cleared auctions in which qualified units submit bids approximately one hour before dispatch. Awarded units are then instructed to increase or decrease generation (or consumption) to compensate for imbalances between day-ahead schedules and real-time demand, receiving corresponding remuneration for their flexibility. For BESS, these mechanisms present strong value-stacking opportunities. During times of oversupply, BESS can even be compensated for charging. In 2023, reforms to the UK’s Open Balancing Platform further lowered entry barriers for non-traditional resources like BESS, enabling wider participation.
Countries like the UK, Belgium, Poland and Italy have also established capacity market mechanisms, with other countries like Germany and Spain planning the introduction of capacity markets. The goal is to provide capacity payments to both new and existing power assets without interfering with the energy market and preventing generation shutdowns or investment delays caused by insufficient revenue or excessive risk. This ensures that demand over the next 3 to 5 years can be reliably met, safeguarding overall electricity supply security. By offering investors a stable additional revenue stream, capacity markets help mitigate uncertainties in the energy market and improve the bankability of energy infrastructure projects.
Similar initiatives have also emerged in Asia. For example, Japan has introduced a long-term decarbonization market to support the timely achievement of its national net-zero emissions targets.
Innovative mechanisms: How UK, Germany are transforming power markets
In addition to basic frequency service, power transfer, energy arbitrage, and capacity, some TSOs are developing more innovative mechanisms to maintain grid stability in increasingly complex power systems.
Concerns around system inertia, voltage stability, and black start capabilities have intensified in recent years, particularly following incidents such as the major blackout on the Iberian Peninsula in April 2025. To address such issues, TSOs have continued to launch proactive initiatives. In 2019, the UK introduced a series of market-based procurement for critical stability services under the Pathfinder program, covering three main areas: Stability, Voltage, and Constraint Management. Its Stability Pathfinder seeks resources like inertia and short-circuit capacity (in GVA.s) to limit the Rate of Change of Frequency (RoCoF). Since Phase 2, the program has included BESS with grid-forming capabilities. Likewise, in 2024, the German TSO TransnetBW began piloting a market-based approach for black start service procurement, replacing the conventional bilateral contracting model. This marked a significant step toward more transparent and competitive market design for critical grid restoration services.
BESS as Storage-as-a-Transmission Asset (SATA)—also known as non-wires alternatives (NWA)—refers to deploying battery systems as part of the transmission grid to address bottlenecks rather than serving as market resources. These BESS installations enhance transmission capacity, manage overloads, and provide backup during disturbances. For example, in N-1 contingency[1] scenarios, strategically located BESS can prevent cascading failures by quickly responding to line outages, allowing grids to operate closer to their capacity limits.
The most representative global examples of SATA are found in Germany and Australia. In Germany, the Grid Booster program, initiated in the 2019 National Grid Development Plan (NEP), is TSO-led and funded through regulated tariffs. These storage assets are used solely as n-1 contingency assets for grid operation. The first batch of Grid Booster projects was approved in 2021, and Fluence was awarded a 250 MW grid booster for TransnetBW and two 100 MW grid boosters for TenneT. All three projects are currently under construction. Grid boosters have since been integrated into subsequent versions of NEP, with an additional 500 MW of projects approved to date. It is aimed at accommodating the growing need for inter-regional transmission of renewable energy, reducing pressure to build new transmission lines, and lowering congestion and redispatch costs.
In Australia, the Virtual Transmission solution, primarily driven by the Australian Energy Market Operator (AEMO) and supported by state governments, follows a similar model. Investments are guided through public tenders and policy incentives, with regulated cost recovery incorporated into transmission tariffs shared by all grid users. The concept of virtual transmission was first introduced in AEMO’s 2022 Draft Integrated System Plan and officially included in the 2024 Transmission Expansion Options Report published in 2023. These projects mainly support the development of Renewable Energy Zones (REZ), enable efficient renewable energy exports, reduce congestion, and serve as cost-effective, flexible alternatives to traditional transmission lines.
Taiwan’s energy transition hinges on bolder reforms, storage integration
By looking at other mature markets, Taiwan can learn valuable lessons for energy transition and BESS deployment, overcoming structural challenges to expand market openness, establishing a comprehensive energy trading framework, and developing a capacity market to enhance overall competitiveness and efficiency.
Building on these insights, Taiwan must accelerate reforms in its electricity market by further liberalizing the market, establishing a comprehensive energy trading framework, and developing a capacity market to enhance overall competitiveness and efficiency. The role of BESS should also be significantly expanded beyond frequency regulation to include participation in capacity assurance, energy trading, and a broader range of ancillary services. This will facilitate the integrated development of renewables and storage, while strengthening grid resilience.
Editor’s note:
[1] The N-1 contingency is a standard power system reliability rule ensuring the grid can withstand the unexpected loss of a single key component—like a line, transformer, or generator—without major outages or operational violations.
This is a contributed column in collaboration with Fluence. The opinions expressed are those of the author(s) and do not necessarily reflect the views of RECCESSARY.
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