Battery storage charged for positive role in smart energy transition

Battery storage charged for positive role in smart energy transition

Electricity battery storage is set to play a vital role in the energy system as part of an ongoing transition to a smart energy network. The use of battery storage technology will allow the shifting of energy delivery to a time when the supply is most valued, either to the consumer or to the network.

As part of a wider move to encourage the development of the technology, energy regulator Ofgem is moving towards defining energy storage as generation. This follows the regulator recently allowing Renewables Obligation Certificates (ROCs) to be claimed on all the renewable electricity generated from solar, including that which is used to charge storage. Such steps should help battery storage technology to improve supply margins, by allowing generation to be utilised when demand is at its highest and avoid oversupply issues which are possible during periods of high renewable output.

Marrying renewables and battery storage is seen as a key move towards addressing the issues of intermittency in renewable generation. In this way, through the use of dynamic frequency response and load shifting, battery storage is able to enhance system flexibility and help to mitigate costs to the network.

Battery storage as a flexibility source

A rapid adoption of battery storage is expected in the next few years. National Grid’s most recent Future Energy Scenarios (FES) report expects total electricity storage to grow to 6GW in 2020 from 4GW in 2016. Growth is then expected to accelerate, with up to 18GW by 2040. Ofgem has a more modest estimate of 0.5GW of storage being contracted to come online by 2020, but this still represents notable growth.

Building on the support being offered by Ofgem, the Government has recently released a consultation on plans to exempt energy storage owners from costs of schemes such as the Renewables Obligation (RO), Contracts for Difference (CfD), Feed-in Tariff (FiT) and Capacity Market auctions. The Government has also confirmed that electricity storage facilities will be exempt from the Climate Change Levy (CCL), where relevant conditions are met. These changes are expected to encourage a rapid deployment of storage to be used to manage flexibility.

Response service

As well as allowing generation to be used more effectively, battery storage technology has an additional benefit in its role of frequency response. The generation available from stored electricity could respond quickly in service to a number of National Grid balancing tools, such as Firm Frequency Response (FFR) and Enhanced Frequency Response (EFR).

Last summer, National Grid launched a tender for EFR. 201MW of predominantly battery storage capacity was procured, at a total cost of £65.9 million, resulting in an average price of £9.44 per megawatt. Following this tender, the first EFR asset has just gone live. The 10MW battery was specifically built to provide EFR and has been developed by E.ON UK at its Blackburn Meadows site. Following the success of such schemes, National Grid plans to design and implement faster and wider frequency response products by March 2018.

Reserve service

The use of storage in EFR highlights the ability to store energy to be used when required and will be of increased importance to those tasked with balancing the electricity system. Stored electricity will be able to act as back-up capacity, at times when other supply sources are unavailable or break down. At present, however, there have been questions over how the current technology can be applied to meet all supply requirements.

The Department for Business, Energy and Industrial Strategy (BEIS) is currently reviewing Capacity Market rules for batteries. The proposed changes are a sharp reduction in the initial derating factor for the technology. The derating factor is used to give a realistic assessment of a site’s available capacity. It will be less than the total capacity the site can offer, as it takes into account normal site maintenance and operational availability.

The changes proposed could see the majority of storage assets lose their current 96% derating status. However, the new factor will increase in 30 minute periods from 0.5 to four hours. This means, the longer the site can operate, the higher the derating factor it will be allocated. This will improve its competitiveness. This is in reflection to concerns that some sites would not have the ability to provide capacity for the full term required under the Capacity Market. These changes may make some battery projects less competitive in the Capacity Market auctions. However, at the same time, the new rules should encourage greater investment in larger, more efficient battery technologies.

Load shifting and reducing non-commodity costs

Storage energy may also be employed in reflection to peak and off-peak demand as a means of lowering non-commodity costs such as transmission and distribution charges. Stored electricity will be useful in attempting to smooth demand throughout the day to avoid significant spikes in consumption.

This could be of particular value to the electric vehicle industry, which is anticipating a surge in popularity of its own over the next 20 years.

A smart energy system

BEIS has invested £20m into vehicle to grid (V2G) projects as part of its Industrial Strategy to create a smart energy system. As part of this process, half-hourly settlement could be combined with smart meters and battery storage to allow for innovative time of use and export tariffs. This would encourage generators to store electricity and export to the grid during peak demand.

Flexible battery storage needs to be adopted in order to aid the transition towards a cleaner and smarter energy system. As renewable energy deployment rises as a means of reducing carbon emissions across the industry, there will be an increased incentive to develop electricity storage to best utilise the renewable supply available.

The Government wants to ensure that the consumer benefits of storing electricity for self-consumption and export to the grid at peak time are realised. This could lead to storage owners taking advantage of time-of-use and export tariffs to effectively manage the grid in a more flexible and cost-effective manner.

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Ross Moffat

Posted by on Monday, the 16. October at 12.00

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.