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Energy Storage in the UK: opportunities, benefits and barriers

About RES:
Headquartered in the UK, RES is one of the worlds leading independent energy generation and storage
project developers with operations across Europe, the Americas and Asia-Pacific. In addition to successfully
delivering 10GW of global renewables capacity, RES has over $50m-worth of electricity storage (battery
storage) in operation and construction and was recently named by Navigant Research as a global leader in
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energy storage system integration .
Background
Historically, users of the UK electricity system have been classed as one of three things: generators, who
produce electricity, consumers, who use electricity, or interconnectors, who transfer electricity between the
UK system and other countries. Electricity storage is a separate type of user: it doesnt generate or consume
electricity, but imports it, stores it for a period of time, and then exports it. This means it operates differently
from generators, consumers and interconnectors.
The UK has very few operational electricity storage sites, largely due to historically unfavourable project
economics and technology limitations. However, technology cost reductions, successful demonstration
projects and a real and increasing need for the services that it can provide to the UK system mean that costeffective electricity storage projects are now increasingly viable in the UK, bar the barriers described below.
The contribution of storage to UK energy goals
DECCs overarching responsibility is to ensure that the UK has secure, clean and affordable energy
supplies. Electricity storage can help achieve this goal:
Secure the stability and security of our electricity system is reducing as our ageing generating
plant retires and the UKs generation mix changes. Electricity storage provides a number of valuable,
and often unique, services which increase system stability and help National Grid Electricity
Transmission plc (NGET) more economically and securely manage the electricity system. Electricity
storage also reduces UK reliance on energy imports by making better use of domestic generation.
Clean electricity storage complements and enables the increasing renewable and new nuclear
generation mix and mitigates a number of the barriers to the move towards a low carbon future, such
as network constraints and electricity system stability. It helps avoid energy waste and reduces
system inefficiencies. At a local level, new electricity storage technologies only require a small site
footprint (typically less than half a hectare) and have a negligible noise and visual impact. It can also
negate the need for new overhead power lines.
Affordable electricity storage does not require taxpayer or electricity consumer financial support to
be economically viable and, as a proven technology, is market ready. The use of electricity storage
avoids some of the costs of replacing or improving ageing grid infrastructure. It also reduces the cost
impact of the move towards a low carbon future, by providing cheaper alternatives to the network
reinforcements and system operation actions required for new generation sources and for the
electrification of heat and transport. In these ways electricity storage can reduce costs for UK
consumers.
We therefore consider that electricity storage has a valuable contribution to make in meeting the goals of UK
energy policy.
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http://www.navigantresearch.com/research/navigant-research-leaderboard-report-energy-storage-systems-integrators

Policy priorities
Given that the UK has very few operational electricity storage sites, UK energy policy, market arrangements
and network access and charging rules are not adequately set up for storage. This results in a number of
unnecessary barriers to the uptake of electricity storage. In order to realise the value to the UK that storage
delivers and make the UK an attractive place to invest, these barriers need to be addressed; a subsidy is not
required. We consider that the three main barriers are:
1. Electricity market arrangements should be updated to allow the UK to take advantage of the
benefits of electricity storage. Under current market arrangements, electricity storage is
inappropriately penalised compared to other market participants. One key example of this is that
electricity storage gets charged final consumption levies such as Feed in Tariff and Renewable
Obligation recovery charges, even though electricity storage doesnt consume electricity and those
fees are then paid by the true end consumer. This results in double charging and a discriminatory
cost penalisation on storage compared to demand side management (DSM) and generators
providing flexibility. To solve this quickly DECC and Treasury should confirm that final consumption
levies should be applied on net import instead of gross import (netted over an appropriate period of
time such as 24 hours). Market arrangements should be updated to reflect that electricity storage is
different and separate from consumers and generators so that it is correctly treated.
2. Network access and charging rules should be updated to reflect that electricity storage is different
from consumption and generation. Network access and charging rules currently negatively treat
electricity storage as both a generator and a consumer. In addition, the contribution electricity
storage makes to network security is not correctly reflected and its contribution to system stability
isnt considered at all. This means that storage is disproportionately charged for making use of the
network and unduly delayed from connecting to it, even though it is a solution to network problems.
3. Service contract lengths. A major benefit of storage is that it can be the best value provider of
ancillary services needed to alleviate system and network challenges. Historically ancillary service
contracts have been short typically one month to two years. These short contract lengths are
suitable when ancillary services have been provided by generators whose CAPEX investment is
predicated on another revenue stream such as energy generation. As we move to a future where the
best value providers of ancillary services are dedicated service providers whose only revenue is from
ancillary service income, contract lengths must be increased to reflect this change and make these
projects financeable in the first place. Without longer service contract lengths, the storage market will
likely be much narrower and less competitive as only a few large parties will be able to take the
financial risk of building storage. Longer service contracts will also give increased cost and network
planning certainty to the system operator and network companies who buy the services, so enabling
better longer-term infrastructure planning decisions. The regulator, Ofgem, should ensure that there
are sufficient incentives on these regulated companies to enable longer-term contracts.
As a result of these barriers, the uptake of this commercially viable and subsidy-free technology, and the
associated delivery of savings for the UK and consumers, is being delayed.
Given the contribution storage can make towards an affordable, secure and sustainable energy supply for
the UK, we consider that action to remove these barriers to uptake should be a key priority for government.

January 2016

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