Is storage the answer to the UK’s energy strategy?

Following the raft of policy changes from the government, Charles Hardcastle, a partner in the energy and marine Team at Carter Jonas looks at whether energy storage could be a solution.

There has been a raft of announcements from the Department for Energy and Climate Change (Decc), over the summer months. These have left many in the UK energy sector questioning the Government’s future energy strategy for the UK.

• The early removal of support for onshore wind followed the Conservative Party manifesto commitment however the subsequent removal of guaranteed support for future solar farms soon followed. More recently, Decc has also proposed a significant reduction (of up to 86 per cent) to the Feed in Tariff (FIT) rates from January 2016 with a possible closure of the scheme altogether. The rationale behind the early withdrawal of support and proposed cuts to the FIT budget are supposedly driven by budgetary cuts within the Treasury and the Government’s desire to control the impact of the cost of such subsidies on the consumer’s bills. But with Mr Osborne offering Chinese investors a guaranteed price at £92/MW for a new nuclear development at Hinkley Point, far higher than the cost of onshore wind or solar, it is clear why the industry is questioning the logic. 
• Many are now also questioning whether the UK will have sufficient capacity of low carbon energy generation deployed to meet its 2020 target; possibly with good reason. In the last few months Drax Power have withdrawn from the £1 billion Carbon Capture White Rose Project and we have seen other significant offshore wind developments being shelved by developers citing the development costs and risks involved and lack of certainty behind the support required as the key reasons.
• Recent reports suggest the UK’s coal powered facilities may all be taken off line by 2023 but as the larger developments mentioned above are not forecast to come into production before then, it is understandable from whence the concerns arise. 
• Shale gas will undoubtedly feature in the future energy mix given the Government’s current support but this won’t help the UK reach any new carbon reduction commitments that Mr Cameron may seek to agree at the forthcoming Climate Change Conference in Paris.
• National Grid’s Winter 2015 outlook report, recently released, highlighted that the gap between the UK’s electricity generating capacity and peak demand would fall to just 1.2 per cent without the deployment of further storage/backup developments or paying factories to be prepared to power down if needed.

It is therefore clear that more storage and diesel generator Short Term Operating Reserve (STOR) sites will be required over the coming years. These tend to consist of small compounds of banks of batteries or diesel generators which can be switched on when called upon by the National Grid to meet peak energy demands over winter. These typically only occur for short periods of up to a few hours at either end of the day.

In the absence of new renewable opportunities in the short term, these may provide landowners who have access to grid connections, possibly following a failed wind or solar scheme, with attractive propositions. As the returns available to developers are likely to fall as the deployment of such sites increases, we would urge any landowner to take advice and check whether they may be sitting on a potential development site.