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United Kingdom

Energy storage should be supported, says new report

UK: The final report published by the government's energy and climate change committee (ECCC) has urged the removal of regulatory barriers to energy storage and advocates subsidies to give the sector a boost.

The parliamentary committee called on the government to support storage technology more
The parliamentary committee called on the government to support storage technology more

Cumulative installed energy storage capacity operating in the UK now stands at more than 3.2GW, according to new figures released by the Renewable Energy Association (REA).

The government should now incentivise storage to improve the technology's economics, according to the committee's "The Energy Revolution and Future Challenges for UK Energy and Climate Change Policy" report.

It is the last report from the committee, following the government reshuffle in July, which merged the business and energy departments. Each UK government ministerial departments has a watchdog of MPs to oversee activities.

The committee formed to oversee the business department prior to the reshuffle was renamed the business, energy and industrial strategy committee on 11 October to reflect the change.

At the launch of the ECCC committee's final report, chair Angus MacNeil MP, said: "The government must get a move on and encourage the energy market to embrace smart technological solutions like energy storage and demand-side response.

"There is an incredible opportunity for the UK to become a world leader in these disruptive technologies. Yet our current energy security subsidies favour dirty diesel generation over smart new clean tech solutions," MacNeil added.

The report impressed upon the government the need to move quickly on addressing regulatory barriers faced by energy storage.

These include the creation of a new clear legal definition of energy storage, since technologies such as intelligent battery-based systems are designed to store as opposed to produce electricity independently, and ending double-charging, which makes storage deployment commercially unviable in many cases.

Anthony Price director of the Electricity Storage Network, said that there is reluctance to agree on a definition, "because this means admitting the old regime was wrong and some participants in the energy sector have interests that may not be served by reform and licensing energy storage.

"[Regulator] Ofgem is also not very clear in its own thinking about ownership and operation. We welcome the fact that the Energy and Climate Change Committee has examined the evidence and concluded that this needs to happen," Price added.

The report suggests redefining the capacity market to incentivise both energy storage and demand-side response, since the last two auctions failed to deliver any energy storage. In addition, a separate subsidy framework for storage would accelerate deployment.

"We do not support subsidies because they are not sustainable or realistic," said Scott McGregor, CEO of Redt, a UK manufacturer of energy storage systems based on vanadium redox flow electrolytes.

"A smart way would be for a government supported organisation, like the Green Investment Bank, to lend and take on the financial risk of energy storage projects initially."

The debt market is the source of collateral for renewables as well as other energy and infrastructure project financing. McGregor points to Germany's state-backed KfW bank, which provides loans with favourable terms and low interest to bridge the gap before more risk averse commercial lenders start lending.

Pent-up demand

The National Grid's 200MW enhanced frequency response (EFR) market revealed the pent-up energy storage pipeline seeking commercial opportunities for grid-scale energy storage in the UK. Expressions of interest amounted to around a gigawatt-worth of projects.

Long-term offtake requirements are also important. Solar PV and wind farms have offtaker agreements for 20 years and the wider energy sector is established around assets valued for their long-term performance.

"The EFR and other grid ancillary services markets guarantee a pay-out for four years. These revenues are important, but energy storage also needs to be recognised for long-term savings and offtaker agreements should be structured accordingly," said McGregor.

In Germany, double charging of energy storage, as an electricity generator and consumer, is also hobbling adoption of the technology, despite battery-based energy storage having proven its ability to provide value for power utilities and distribution network operators.

Back in the UK, an Ofgem-supported energy storage plant 65km outside London, is earning multiple revenue streams, from some of the National Grid’s ancillary services markets, on top of its core function of deferring costly grid upgrades.

"Bringing on domestic storage technology should be a basic part of an industrial strategy. British research and development is suffering because there is little or no home deployment," said Price.

"The UK has lots of intellectual property in energy storage. There are British companies doing very smart things with the technology, but they will go elsewhere if there is not sufficient domestic demand," added McGregor.

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