Large-scale storage gains toehold in the UK

Battery storage was a big winner in last summer's Enhanced Frequency Response tenders. Image: RES.
Energy storage is big news and, thanks in part to some high-profile companies such as Tesla, has got people in many different industries very excited. And rightly so; as the costs have fallen, for lithium-ion in particular, large-scale storage systems are becoming viable across the world and have the ability to revolutionise power networks.

A number of global trends explain the long-term strategic importance of storage. First, renewables (solar and wind in particular) are reaching cost parity with conventional centralised generation, and this trend is set to continue. Secondly, the move towards a low-carbon energy system, accelerated by the Paris climate change agreement that came into force last November, is now a priority for governments across the world. While the timescale for achieving these aims is up for debate, the direction of travel is clear.

The combination of these political and technological drivers means decentralised renewables are set to dominate the world’s energy supply; renewables’ global capacity has already overtaken coal and new installations in 2015 outstripped all fossil fuel sources. Supporting variable renewables through greater system flexibility is increasingly important for the development of an efficient, low-carbon and secure energy system.

The Solar Trade Association (STA) is the UK’s representative body for the solar industry, representing both solar PV and thermal. The STA has been looking at storage for over a year, culminating in the report ‘Solar + Storage = Opportunity’ published in September 2016.

The mutual benefits between solar and storage are obvious. For end users it allows solar to be available around the clock; in 2015 41% of new solar PV systems in Germany were tied to storage, showing remarkably quick adoption. However energy storage systems are not commercially economical for all customers yet, and more work needs to be done to support continuing cost reduction. The STA’s immediate focus will be on laying the foundations for a strong, sustainable, solar + storage market. Globally the solar + storage market alone is predicted to be worth US$8 billion by 2026, with the storage sector as a whole worth even more, according to Lux Research.

Positive signs from the top

The UK’s position as an island, with relatively old grid infrastructure, increases the potential value that flexible and smart grid infrastructure such as storage can deliver. Last December the UK’s Department for Energy & Climate Change (DECC) published a policy paper covering the challenges that the energy system faces of the coming years and focussing on how to deliver affordable, clean and secure energy through a smarter system. DECC states that the benefits of a smart grid include: less investment, reduced balancing costs and a reduced need for curtailing generation. Each unit of energy generated can be used more effectively, leading to a cheaper, greener, more resilient energy system.

Ofgem, the UK’s energy regulator, is working with the new Department of Business, Energy & Industrial Strategy (BEIS) in this area, specifically leading on enabling new business models and in facilitating the transition to new roles for distribution network operators and industrial or commercial users. However Ofgem’s position paper admits there needs to be clarification of the legal and commercial status of storage.

In October 2015 the Treasury set up the National Infrastructure Commission (NIC) to advise on long-term strategic infrastructure. The NIC’s first report in March 2016, ‘Smart Power’, found that £8 billion (US$9.95 billion) could be saved annually by 2030 through increased flexibility from a combination of additional interconnectors, energy storage and demand-side flexibility. The report specifically said the UK should become a world leader in storage through reforming the regulatory and legal status of storage, and removing barriers. BEIS is expected to consult on smart networks this autumn, although that consultation had not been announced at time of writing.

There have been many positive signs for the storage industry in the UK; in October Baroness Neville-Rolfe, the minister responsible, said “making energy storage more commonplace means stability” and “we are actively supporting the UK storage industry through our innovation programme”. However there has also been some uncertainty, such as the merger between DECC and the Department for Business, Innovation and Skills into BEIS, as well as the vote to leave the European Union. These may have an impact on the timelines, but neither changes the fundamental reasons why energy storage is so important.

While storage can offer a host of services for the grid, it is with intermittent renewables such as solar where it can make the biggest difference. In a world with high battery penetration into the grid the intermittency of renewables moves from a cost on the grid into savings, as the extra flexibility helps smooth peaks and troughs of production.

The STA recently commissioned a report into the costs associated with intermittency from independent researchers Aurora Energy Research. The report found that current intermittency costs equate to around £1.30/MWh, and rise to £6.80/MWh with the central forecast of 40GW of solar by 2030. However in that same future scenario but with high battery penetration the costs drop to £-3.70/MWh, delivering actual savings. This means that within this system solar production is actually more beneficial than a baseload equivalent output profile.

Domestically there are already a number of companies launching products; there is a lot of excitement around new products from high profile brands such as Tesla, Nissan and E.On, for example. The drivers are obvious: solar energy is largely produced during the day while people are at work and demand remains after the sun has gone down; storage allows you to use solar power at night.

The system can be that simple, however there is no reason why the business model for solar + storage need be the same as solar-only models. Peer-to-peer trading at a local level could provide value for a domestic customer. An aggregator-owned approach would allow an aggregator to provide balancing services to the grid through a large number of small domestic batteries. Another model could be a large-scale battery installed as a “bank,” allowing people to deposit excess generation and other consumers to withdraw on the same basis.

At a large scale, solar farms and energy storage seem intuitively a perfect match. Grid connections are typically underutilised due to the variable nature of solar generation and lack of sun at night. Space is typically available and planning permission either already granted or relatively simple to obtain. They can also offer further services than just energy generation, including frequency response.

Manufacturers have already launched their products into the UK marketplace. Image: Solar Media.
Storage and frequency response

Last summer the UK government announced the outcome of its Enhanced Frequency Response (EFR) tender, with eight contracts between £7-12/MW/hr (see table below). EFR can react to frequency changes in under one second, helping maintain the grid at the requisite 50Hz. Battery sites featured heavily in the bidding process and all eight of the successful contracts were to storage systems.

EFR is important because of the potential for savings it offers – National Grid predicts approximately £200 million in reduced costs – so other nations will be watching with interest. The price for the successful bids was also unexpectedly low, below even Fast Frequency Response (FFR) that has a timescale of 10 seconds. This demonstrates the ability for battery systems to compete in the marketplace.

One of the reasons that the price for EFR could fall so far was the contract length. At four years the contracts on offer were much longer than traditional FFR ones; this enabled lower financing costs as investors had greater security. For renewable technologies looking to go subsidy-free this provides useful information on how changes to the business landscape can affect the viability of projects.

There is clearly a bright future for storage technologies. The grid of the future will have large amounts of renewables on it, with storage helping to even out the peaks and troughs. However, government needs to act to provide the right environment to help the industry flourish: currently there is no clear regulatory framework for storage; the industry will remain limited until that issue is solved. This is especially important for multi-use sites such as solar + storage.

Currently storage is treated as generation, and subject to network charges on that basis. Any electricity stored is therefore charged twice: firstly for importing and storing the energy and secondly for discharging and using that energy. If charges were levied on final consumption and not all consumption this double-charging problem would be solved and level the playing field for storage.

To fulfil storage’s potential new marketplaces for services must be made. Distribution Network Operators (DNOs) are network operators, not distribution system operators. As a result they are unable to procure and tender for services to ensure the stability of the grid in the way that National Grid can: we couldn’t have an EFR tender at the local level, for example. This means that a significant amount is spent on passive grid reinforcement even if by spending a lesser amount DNOs could procure storage services that would mean upgrades are not required.

Storage, along with solar, has a major role to play in the transformation of the UK’s energy system into a truly smart grid fit for the 21st Century. The UK is making progress in this area, but more can be done; the potential benefits from such a system are too big to pass up.

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Currently storage is treated as generation, and subject to network charges on that basis. Any electricity stored is therefore charged twice: firstly for importing and storing the energy and secondly for discharging and using that energy. If charges were levied on final consumption and not all consumption this double-charging problem would be solved and level the playing field for storage.

Winning bidderCapacityTechnologyTender price £/MWh

EDF Energy Renewables40MWStorage7

Vattenfall22MWStorage7.447727273

Low Carbon10MWStorage7.94

Low Carbon40MWStorage9.38

RES35MWStorage11.93

Element Power25MWStorage11.49

E.ON UK10MWStorage11.09

Belectric10MWStorage11.97

Winners of the National Grid Enhanced Frequency Response tender. Source: National Grid.

This article was originally published in PV Tech Power, Solar Media's technical journal for the downstream solar industry.

Solar Media is once again hosting the UK Energy Storage Summit, from 28 February to 1 March in London, featuring a range of speakers from government, regulatory and industry circles. See here for more details.