Earlier this week the UK government and energy regulator Ofgem published a strategy for a modernised, smart and flexible power system, the result of an eagerly anticipated response to last year’s Smart Power Call for Evidence.
The 32-page document outlines how the Department for Business, Energy and Industrial Strategy (BEIS) considers the domestic power market to mature and includes significant clarity, transparency and guidance for its minded role for storage, as well as potential benefits for the UK’s solar scene.
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Business secretary Greg Clark said: “Upgrading our energy system to make sure it is fit for the future is a key part of our Industrial Strategy. A smarter energy system will create opportunities to reduce energy costs, increase productivity and put UK businesses in a leading position to export smart energy technology and services to the rest of the world.”
Breaking the document down into four main sub-sects, the key points of the big unveil are:
Solar asset holders are to receive guidance on how storage can be retrofitted onto their sites without impacting subsidy schemes they may qualify for. The most recent CfD (Contracts for Difference – a government-backed method for investing in low carbon tech) consultation has revealed how storage should be treated on CfD-eligible builds, while Ofgem has updated it guidance on the Renewable Obligation subsidy scheme (RO) accreditation amendment process and provided guidance on how to co-locate storage. This will be followed by new guidance on the feed-in tariff (FiT) and RO schemes for any participants who wish to retrofit battery storage at a later date. This is likely to be of significant importance to owners of solar assets, particularly funds and other long-term holders, who could deploy battery storage en masse once more certainty is provided and the economics make sense.
Utility-scale energy storage
Storage may not face demand residual charges at transmission and distribution level courtesy of Ofgem’s Targeted Charging Review, published in March this year. Ofgem is expected to announce details on the scope of that review shortly, with a view to provide guidance on the subject by the end of the year.
Primary legislation will be used to amend the Electricity Act 1989 to include an explicit definition of electricity storage, specifically as a generation subset. This will then allow Ofgem to consult on a modified generation licence for storage which it intends to introduce by next summer.
The removal of the much-decried ‘double charging’. Owners of storage assets will no longer have to pay charges associated with the RO, CfDs, FiTs and Capacity Market auctions when charged electricity is dispatched. Electricity used to charge storage assets may also be exempt from Climate Change Levy costs under certain conditions.
Network operators will be expected to improve the connections process for storage, specifically the clarity and transparency regarding where to connect and better queue management. Ofgem will use the RIIO Incentive on Connections Engagement to assess if distribution network operators (DNOs) are addressing the issue properly.
Ofgem will shortly clarify its regulatory position on network operators owning storage assets for their own flexibility needs. Ofgem is minded to prohibit this in order to ensure a competitive market for storage to develop. Ofgem will also introduce new reporting arrangements for DNOs who own storage and assess whether further unbundling is necessary in the future.
Residential and commercial and industrial (C&I) solar
Government has committed that future policy regarding small-scale low carbon generation such as residential or commercial-scale PV will consider the system and consumer benefits of storing electricity for both self-consumption and export at peak times. While no specifics have been unveiled at this stage, BEIS has said this could include allowances for existing generators to take advantage of time-of-export tariffs.
BEIS has insisted that current consumer protections on data protection and consumer rights are broadly fit to be applied within a new energy system, however it will work with the consumer power sector to develop standards for smart appliances. Meanwhile both the government and Ofgem are to assess the development of a voluntary code of conduct for aggregators. More formal protections will be considered if this proves to be inadequate.
The government and Ofgem will assess the need for more “proactive communications” on smart energy to educate and inform the public on how to participate in a smarter, more flexible system through any technologies they adopt.
£600,000 has been allocated to a competition for a feasibility study assessing the potential of local flexibility trading. An innovation competition could also be launched to trial such an approach. Network companies will be required to issue calls for ideas from third parties to increase the pool of technologies and ideas in this field.
Residential and C&I energy storage
Regional DNOs will be expected to provide far greater clarity and transparency for the connection process associated with connecting residential storage solutions. This could take the form of new guidance on when and where a G59 connection (for “generation over 50kW 3-phase or 17 kW single phase, or classed as non type tested generation as per G59/3” – Energy Networks Association) is necessary, which some installers have raised queries on.
The government is to work alongside the industry to review, consolidate and update all necessary health and safety standards for storage. Work from the British Standards Institute and the Institute of Engineering and Technology – which is to publish its guide to energy storage imminently – is to be included.
The potential for electric vehicles to provide vehicle-to-grid storage capabilities will be the subject of collaboration between the government and the automotive industry. Learning from trials currently underway, including the Nissan/Enel trial, will feed into this. Meanwhile, Ofgem is to assess any regulatory, network or tariff implications of vehicles connecting in such a way.