Trouble in store

There is no obvious route to commercialisation of electricity storage in the UK, says Megan Darby.

Picture the scene: offices and factories are quiet, parks are packed and Xboxes sit silent while children find more wholesome outdoor pursuits. It is the Sunday of an August Bank Holiday weekend and the sun is shining. Solar panels on every roof are pumping out electrons like there’s no tomorrow. Nuclear power stations are chuntering along. A breeze stirs in the windfarms.
Not everyone can kick back with a glass of rosé. In National Grid’s control room, some poor soul is tearing his hair out. There is too much power on the system. He constrains some wind turbines. National Grid has to pay them to switch off, which is not ideal but needs must. It’s not enough, so where next?
As Philip Lawton, 2020 operations manager at National Grid, explains: “The danger is we end up in a position where we cannot regulate downwards – there is no way for us of turning them off.”
He is talking at an Electricity Storage Network (ESN) conference in London. Many in the room think they have the answer. Electricity storage – be it pumped hydro, battery or liquid air – can absorb such surpluses and feed them back into the system when needed. Storage can help meet peak demand, bust through grid bottlenecks and provide flexibility in a system increasingly dominated by nuclear and renewables.
The ESN reckons the UK needs 2GW of storage by 2020, but there are significant obstacles. Capital costs are hefty, the supply chain is fragmented and the market doesn’t value all of storage’s fine qualities.
Policy-wise, storage has rather fallen through the cracks. Some money is available for innovation trials, but there is no obvious route to commercialisation. The Department of Energy and Climate Change (Decc) has no dedicated electricity storage specialist.
Ofgem is backing some storage projects from the Low Carbon Networks Fund, such as a 6MW battery at a UK Power Networks substation in Leighton Buzzard. These aim to help distribution network operators defer investment by relieving grid pressure points.
Decc has awarded cash through its Energy Storage Demonstration Competition to three projects, with a fourth to be announced soon.
When operating in the market, there are no subsidies targeted at storage. Instead, operators must cobble together an income from various sources. Their service has a value to the grid balancing system operator, the distribution networks and the supplier. It has yet to be established who should pay.
Peter Taylor is executive chairman of the Quarry Battery Company, which boldly aims to build a 600MWh pumped hydro station in Wales. It will be the first such plant since privatisation. He says: “We are not asking for subsidies, but I will tell you what: the way you treat other technologies makes it damned hard for us to raise money.”
Storage operators can bid into the capacity market, which is designed to promote security of supply by paying generators to be available. However, the market makes no allowance for the fact that storage runs out. Those contracted into the market face penalties if they are not available at four hours’ notice to provide capacity during “stress events”. There is no limit to the length of such events; there is a limit to the amount of electricity stored. And storage providers would typically already be generating before a stress event peaked.
By guaranteeing a certain level of oversupply, the capacity market is expected to dampen peak wholesale prices. If storage developers cannot take part, they will doubly lose: no capacity payment and no high peak prices. Simon Lord, head of transmission services at First Hydro, says: “If you end up with storage operators not being able to take part, it does put us on a different financial footing to, say, gas generators.”
Jane Ellaway, design lead on security of electricity supply at Decc, says: “The capacity market is a necessary tool for storage but maybe not sufficient.”
There was also a plea for Ofgem to encourage distribution network operators, through the RIIO price control, to favour storage trials. Dora Guzeleva, head of networks policy at Ofgem, says: “We want the DNOs to do the most efficient thing… in practice, it is very difficult to single out one solution.”
What the ESN would really like to see is some kind of target that would give investors the confidence to pony up. This has happened elsewhere: California is aiming for 1,300MW by 2020 and has been swamped with bidders. However, Decc has not even put a number on how much storage it expects to be deployed, let alone set out a strategy.
Storage is expensive now and it will not get any cheaper unless people are able to test the technology commercially. If policy does not get a grip on this, 10, 15 or 20 years down the line there could be headaches.