Government must back storage

Investors need a clear commitment from government before they will build the storage facilities the UK is crying out for.

One of the unique features of the power market is that the main product cannot be stored in the conventional sense. Yes, we have had pumped storage for many years but technologies such as fuel cells, flywheels, compressed air storage, voltage optimisation and batteries have seen little commercial deployment.

Yet stakeholders are in agreement that the need for storage, as part of a broad mix of energy technologies, is greater than ever.

The driver for storage comes from the increased penetration of intermittent renewables and the costs these technologies impose on the system, both in terms of balancing supply and demand and also in terms of efficiently managing power networks. These forces, which are increasing in impact, should help stimulate demand for storage technologies and, as these become more mainstream, will increasingly attract the focus of investors in energy assets.

The challenge for storage is one of timing. Is there sufficient political momentum to support technologies today that may only create value in the 2020s?

When investors are asked what they want from government to facilitate investment in energy infrastructure, the number one response is the need for a clear, transparent long-term policy framework. Unfortunately, the competing demands of energy policy in relation to climate change, security of supply and affordability is making this more of a challenge for technologies such as storage.

The key factors that potential investors in storage will want to understand include:

•    How firm is the government’s commitment?

•    How does storage stack up against alternatives such as dispatchable generation, demand-side response and interconnectors?

•    What financial incentives are available to investors in storage?

•    How do you value storage?

Energy storage can deliver a number of services to the energy system. These can reap financial rewards in a variety of ways, depending on the characteristics of the storage technology and who receives the benefit. These include:

•    responding to shifting demand – storing at times of oversupply and releasing at times of peak demand;

•    investment deferral – storing when power flows into the network exceed capacity and releasing when headroom becomes available. By smoothing peak flows, networks do not need to be sized to peak flows;

•    grid stability services – by varying charging and discharging loads, storage can provide system stability services (that is, frequency response and fast reserve).

Despite being able to deliver much-needed flexibility, there is currently no single market for flexibility services, in the same way as we have a market for capacity.

Providing a framework that will allow storage to be valued at competitive rates of return should be the priority for policymakers if we are to have a healthy storage market by the 2020s.

Ronan O’Regan, energy and utilities director, PwC