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Will they or won’t they? Distribution network operators (DNOs) are seeking a change in the way they are licensed to let them play in the emerging energy storage market. Storage is currently classified as a generation activity, for no particular reason other than an accident of history. It’s an accident that prevents them from owning and operating storage assets, because they are not allowed to hold a generation licence. The answer seems clear: designate storage as a separate licensed activity, and license DNOs to own and operate it. Authoritative voices, including the National Infrastructure Commission, have been calling for just such a move.
So the industry was surprised and disappointed last month when Ofgem associate partner Andy Burgess appeared to rule it out. He told MPs: “Our principle is network companies shouldn’t own or operate storage… If you want competitive markets to develop, you need to keep regulated monopolies out of them.”
That seems pretty clear. But as we report this week (news, p11), energy minister Andrea Leadsom has insisted that while it’s “business as usual” for the moment, creating a separate licence is still on the table, pending the coming consultation on smart systems, and pointed to the existing legislation, of Byzantine complexity, that does allow DNOs to use storage within certain boundaries.
This lack of a clear direction from government and Ofgem suggests it is well worth companies’ time to lobby hard in the coming consultation. The stakes are high. As a key part of the wider agenda for a more flexible, or smart, power system, energy storage is critical both to the system of the future and DNOs’ changing role within it. As system operators, DNOs are arguably best placed to lead the widespread adoption of energy storage and its integration into the existing system.
If they are sidelined because of their monopoly distribution role, they come a step closer to a bleak future in which they are left with a limited, traditional role as all the more dynamic and flexible elements of distributed systems are stripped away.
They must be allowed to play.
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