Ofgem consults on new definition for storage

Ofgem is consulting on proposed changes to classify storage as a type of generation.

The amendments to the electricity generation license are being introduced to prevent final consumption levies being applied twice over to stored electricity – first when it is imported and then again when it is exported to consumers.

Once implemented, licensees will be exempt from paying final consumption levies, which include payments for schemes such as the capacity market and the renewables obligation, so long as any electricity they import is only used for storage.

Some operators will be required to sign up to industry codes, depending on the capacity of their facilities and the types of services they provide. Ofgem said those who already hold a generation license will not need to apply.

Based on the responses to an earlier consultation held in 2017, the regulator has decided against prohibiting storage operators from having self-consumption as their primary function.

According to Ofgem, stakeholders said the definition was ambiguous and that it would be “difficult for storage providers to ascertain ex-ante what their primary function is as this would depend on several factors, such as the type of services provided, the technology used, the frequency and the revenue stream of each service provided”.

It continued: “Having considered stakeholders’ concerns, we agree that satisfying the requirement to not have self-consumption as their primary function could be challenging at this stage of relatively early deployment of new types of storage technologies and business models, and at a time of transformation of the energy system where needs and required services may change quite rapidly.”

They will, however, be obliged to furnish suppliers with the necessary data to accurately calculate final consumption levies and publish certain information on their websites to provide visibility to the rest of the energy market.

Ofgem said the amendments will take effect 56 days after it publishes its final decision. The regulator has set a deadline of 25 July for feedback on the proposed changes.

Modifying the generation license to include storage was one of 29 planned actions listed within the government and Ofgem’s smart systems and flexibility plan released in July 2017.

Ofgem said it intended to make the changes by the summer of 2018, meaning the work is now a whole year behind schedule. The government also said it would introduce primary legislation to explicitly define storage as a subset of generation “when parliamentary time allows” but is still yet to do so.

Speaking at Utility Week Live in May 2018, Will Broad, head of smart energy at the Department for Business, Energy and Industrial Strategy, admitted Brexit was to blame for the delay and warned that the legislation may not be passed until as late as 2022.

Earlier this year, the National Infrastructure Commission urged the government to hurry up, saying the issue of its legal status is the “biggest remaining barrier” to storage competing on a level footing with generation.