So far in 2016 energy storage is the buzz word in the energy industry, with Western Power Distribution announcing a new storage project at grid level and the launch of Tesla batteries into homes in the UK expected this spring.

The Energy and Climate Change Committee this month heard evidence on how electricity storage is the key but currently missing link in the UK transition to a low-carbon system built around distributed renewable generation.

But storage is a long way from being a readily deployable commercial proposition, with only a few large-scale trial storage projects underway. The industry would argue that the technology is ready, it’s the market conditions that are holding back growth. Until recently energy storage was neglected by the Department for Energy and Climate Change, but now its attention has been turned and a consultation on energy storage is expected this spring. Already the storage industry has a “short menu” of asks, revolving around regulation, which would remove current barriers and stimulate important development in this sector. And time is running out. National Grid has already started tendering for an enhanced frequency response service in 2017 that will primarily involve battery storage.

The Electricity Storage Network’s director Dr Jill Cainey hopes the government comes out with a clear position “as soon as possible”, although one is not expected until autumn this year.

Cainey says: “Our issue is that National Grid is wanting services on the network in 2017, coming out with the position in late 2016 is not going to give developers the regulatory comfort and certainty that they need.

“Potentially they are going to have to connect to the grid in one uncertain regime and subsequently find themselves in other regime.”

What the industry wants

1. Remove balancing charges

Removing the need for storage to contribute twice to the £1 billion system charge payment larger loads and generators pay National Grid every year for balancing the system would remove a significant barrier. Storage is caught twice by the payment, once for charging and again for discharging. Even if a developer has signed a contract with the local DNO to never charge during peak demand periods, storage developers are still hit by peak system user import charges, adding around £20,000 per megawatt per year to the build and materially impacting how the business case stacks up.

Removing this regulatory barrier would send a “signal that storage is seen as a solution for the future,” Oxford University’s Environmental Change Institute research fellow Dr Philipp Grünewald said.

2. Make it a separate licenced activity

A clear definition of energy storage as an activity is one of the key asks of the industry. Its classification currently as generation is simply an “accident of history” from how the market was split during privatisation Cainey says, but this prevents distribution network operators from owning and operating storage. DNOs are arguably best placed to fully optimise storage assets, but a network company is not allowed to simultaneously hold a generation license.

The classification of storage as generation is “just plain wrong” Grünewald says, as it performs many functions such as acting as a demand and delivering energy from where there is plenty to where it is needed, which is more akin to a network function. 

Siemens Energy Management’s director, Strategy and Business Development, Stephen Goldspink says DNOs are going to continue to play a vital role in the UK but currently lack any incentive to take on the mantle of developing storage as an asset. A change in licencing would be a “really positive step” he says.

“What storage allows us to do is really optimise the utilisation of that existing infrastructure. Storage plays a key role in that, and at the moment there is no incentive for a DNO to install storage to use that for constraint management and other grid support functions, so we need to change that.”

3. Allow it to secure a CfD

Cainey says partnering with renewable energy is a good approach for energy storage, but storage is unable to secure a Contract for Difference (CfD), and neither is a developer able to secure one for a whole site, just the renewable generation element of it.

Renewable UK’s director, Policy, Economics and Regulation, Dr Gordon Edge agrees the inability to bid as a hybrid technology is a major barrier. “At the moment we can only say that an operation is a wind farm or a solar farm, and storage is completely left off, whereas we should have an interest in supplying the least cost, low-carbon electricity, and if that is a single connection with a wind farm and a solar farm and some storage, that is great,” he said.

4. Remove end user classification

In another apparent accident, storage has been defined as an “end user”. Energy storage operators are hit with a charge for the climate change levy as it goes into the device, meaning the charge is collected twice as the actual final end user also ends up paying out. Revenue and Customs has ruled in the case of the UK Power Networks storage project at Leighton Buzzard, removing the end user classification and significantly improving the business case. However this is not a standard ruling, with Ofgem yet to agree to remove the classification across the board. Removing this would be a “quick win” Cainey says.

5. Remove artificial licensing limits

Pumped hydro, such as at Dinorwig, in North Wales is a form of energy storage already at technical maturity and the only one capable of delivering high capacity storage. However it is unlikely that the UK will see any more pumped hydro built to the scale of Dinorwig due to the “very long investment time frame” and difficulty securing planning, on top of the obvious geographical restrictions that apply to a project of this nature.

Market conditions also no longer favour this technology. Dinorwig was built in the 1970s in the expectation that the UK would be building a new nuclear power station every year. Grünewald says: “I understand from Scottish Power, who are looking at more pumped hydro, that it is very difficult for them to make the business case”.

Cainey says there is potential for more pumped storage in the UK, particularly in the conversion of hydro-electric to pumped hydro, but that companies developing such projects are sticking below 100MW “purely on the generation licence criteria, which set an artificial limit on how things operate in our system”.