FEATURE: Energy Storage Vital To A Low Carbon Future
Intermittent (principally solar and wind) generation is increasing, and large volumes of coal and gas fired capacity are expected to be decommissioned over the coming years. There will be a sustained period of uncertainty around what the long term make-up of the future GB generation mix will be.
To date, there are a number of factors that have held some investors back. But, as new markets open up for battery storage along with the falling cost of technology, the business case for investing in energy storage continues to become stronger.
Evolving Power Systems
As the UK energy system evolves into a network fit to serve a growing population and integrate new energy sources and smart technology to decarbonise the energy supply, batteries will play an integral part in supporting the proper functioning of the system.
The National Grid has recently acknowledged the need to deploy at scale new technologies to provide small bursts of energy in real-time to keep the grid in balance. This is called frequency response. A recent tender for so-called Enhanced Frequency Response (EFR), where response times need to be less than 1 second, showed that energy storage projects are particularly well suited to provide these services across the UK. The introduction of EFR will provide the National Grid with greater control over frequency deviations, resulting in potential cost savings up to Â£200 million.
National Grid forecast that their frequency response requirement will increase by 30-40% in the next 5 years and "the response requirement in the period between 2025 and 2030 will be 3-4 times higher than the current level". Battery energy storage is the optimum technology for providing this service, offering a pipeline of future opportunities in the foreseeable future.
Emerging Business Models
There are a growing range of services that batteries can provide to help support the operation of the power system more cheaply than alternatives, reducing and deferring costly upgrades, and helping to integrate more renewable energy into the electricity system. Installing large-scale storage on the grid network enables the UK to better balance supply and demand "“ contributing to reducing reliance on fossil fuels and stability for a constantly evolving power network.
Eight contracts were awarded in National Grid's EFR tender process totalling approximately 200MW of storage. Two of these sites, one in Cleator (Cumbria) and the other in Glassenbury (Kent), have a combined storage capacity of 50MW, and further EFR tenders are anticipated.Â The longer ancillary services contracts (4 years, as opposed to 2 years in the case of FFR) stacked on top of capacity market payments provide more visibility on contracted revenues secured from bankable counterparties, which provides more comfort to investors and in turn has encouraged the lower bid prices.
Energy storage is not a new concept. We have had large scale pumped hydro storage for decades. In fact, the Renewable Energy Association recently reported that 3.23GW of electricity storage projects are now operational in the UK, mostly made up of pumped hydro. However, the evolution of lithium ion battery technology has opened up a huge opportunity to harness the potential of battery energy storage in particular for faster responding and more localised uses.
Battery technology has steadily developed, first in mobile phones and then electric cars. Significant resources are being devoted to R&D, and strong competition between global players is commoditising energy storage solutions and driving lithium ion battery costs further down, making the technology rapidly cheaper and more efficient, to the point that utility scale battery storage is already being deployed at scale in the UK and globally.
Based on this track record, investors are getting increasingly comfortable with the technology risk, which is backed by a growing number of bankable EPC contractors and system integrators who are willing and able to warrant the system functionality for long enough to recoup their investment.
Storage in action
The UK's biggest operating battery energy storage system is in Leighton Buzzard in Bedfordshire. The town had a choice between building a third main power line to the town from the National Grid or installing 6MW of batteries. Installed in 2015 for Â£18m, the new battery plant was considered cheaper than building a power line, and is an example of how batteries may be able to help manage the flow of electricity through our power network, delaying further costly and unsightly installation of power lines criss-crossing the countryside.
Batteries are already in operation extensively in South Korea, Europe, and parts of the US for frequency response. Other jurisdictions are exploring other uses, such as peak load shaving, by being able to save some power produced in the middle of the day or night when there is less demand, for times when the power load picks up, like in the mornings when there is high demand for kettles, toasters, water pumps (for showers), or in the evening, when TVs, ovens, and heating cause a demand surge.
UK lags behind US
However, while historically the UK and Europe has been ahead most of the US in adopting renewable energy, it is very much behind when it comes to energy storage. Regulatory hurdles and a continued reliance on fossil fuels are the most referenced reasons for the lack of investment in energy storage to date.
California, in comparison, has a commitment to removing diesel back-up generators from its power systems to tackle climate change. To achieve this, the state has mandated 1,200MW of energy storage by 2020.Â
The UK Government, on the other hand, has been criticised for using polluting diesel generator farms, as well as its heavy reliance on fossil fuels. But with Â£500m committed to non-nuclear energy innovation, increased investment into energy storage is expected.
Securing our energy future
Energy storage will play a crucial role in both the management of energy supply in the UK and in the wider uptake of renewable energy technologies nationwide in the future.Â As the UK's energy requirements continue to grow, energy storage has an essential role to play in an increasingly smart grid to ensure that energy is always available when and where it is needed.
Storage provides a crucial component of optimising the performance of the future smart grid. As it powers forward, it will soon become much more commonplace and form a central part of securing our energy future.
Ultimately investment in energy storage will help to combat the cause of climate change and reduce the UK's carbon emissions. As use cases and applications increase, storage will add significant value and enable the Government to invest more in renewables.
While investor confidence is growing and the Government is getting behind major projects, the energy storage market is taking shape. As the industry moves away from carbon-heavy production, energy storage will enable us to collectively combat the causes of climate change and achieve a future with lower carbon emissions.