A problem of definition

Britain’s Energy Secretary Amber Rudd visits Leighton Buzzard storage plant

Credit: UK Power Networks

With several projects underway and more to follow this year, the UK is among the European leaders on energy storage. But holding back the full potential of this progress is a problem of policy and regulation, writes Kelvin Ross

The technologies are proven and the value has been demonstrated.”

So says Dr Jill Cainey on the subject of energy storage.

And Dr Cainey – director of the UK’s Electricity Storage Network – has reason to be optimistic: a suite of utility-scale storage projects is expected to come on stream across Britain this year to join several already operational.

These include systems utilizing liquid air, lithium-ion batteries, pumped hydro and flywheel technology.

And yet there’s a problem. The energy regulations in the UK – and most of the rest of Europe for that matter – were written a decade ago or longer for a power system that has since changed radically.

Ten years ago, energy storage was wishful thinking. Now it is seen as essential for the successful integration of renewable technologies into the grid.

But without a definition from government – a firm regulatory classification to stimulate investment – energy storage will always be a ‘next big thing’ rather than the game-changer that it clearly ought to be.

“It doesn’t always rain when you need water, so we have reservoirs – but we don’t have the same system for electricity,” says Cainey.

“When the various energy system acts were written, storage wasn’t included. So we have supply, distribution, transmission and generation but no storage. We now have interconnectors which have subsequently been added.

“Because our electricity industry has been highly regulated, if you are already a regulated entity it becomes tricky to own and operate electricity storage because, although charging storage is not a problem, when storage discharges it is either going to look like supply or it is going to look like generation. Specific entities can’t do that under their current license conditions. That makes it complicated.

“UK government must define it and deliver an appropriate regulatory framework.”

There’s no doubt about the benefits and the savings that storage can bring. The UK power network National Grid currently spends à‚£1 billion ($1.45 billion) a year on services to balance the grid. Utilizing energy storage is a considerably less expensive way of doing this than making existing power plants sit idle and then kick-in when needed.

“It’s a no-regrets option in low carbon electricity development,” says John Prendergast, development project manager at RES, a UK-headquartered renewable energy developer with lithium-ion battery storage projects already operational in the US and more in the development stage. The company recently announced its first UK contract to build and support a 640 kWh battery energy storage system in Somerset.

“This year will be the year that breakthroughs are going to be achieved,” predicts Prendergast.

Audrey Fogarty, vice-president of product management at German storage company Younicos, says that while Europe led the way on renewables and the US followed, the flip side is true of energy storage.

Dr Jill Cainey: “The technologies are proven and the value has been demonstrated”

Credit: Energy Storage Networks

She says that utility-scale storage in the US is being driven by “falling costs and emerging performance data”. She also says market access has been vital for the American storage success story: “It’s about allowing owners and operators a way to capture the value of the assets that they provide.”

“More utility buyers are entering the US market. They have a level of sophistication on what to expect from energy storage. It’s not just about the technology anymore – it’s about the performance, and that brings third-party financing into the game.”

She says that in the US, regulatory mandates are creating a lot of market momentum, and at federal level there have been rule changes to incorporate storage into the resource mix.

Last December, Younicos signed agreements for $50 million in growth capital to scale up its deployment of energy storage solutions – the largest investment in a technology-independent energy storage provider in 2015 according to GTM Research.

The funding came from a consortium that includes First Solar and sustainable investment-focused private equity firm Grupo.

Raffi Garabedian, First Solar’s chief technology officer, said at the time that “utility-scale storage is an exciting new frontier for grid flexibility and modernization”.

He added: “As the promise of storage continues to evolve, we are eager to understand how it will broaden our own power plant offerings. This is an important investment in continuing and potentially accelerating the shift of our energy landscape to renewables.”

Fogarty stresses that, above all, the prime driver of energy storage in the US is what she calls ‘technology proof points’: “There is technology now that is ready to go.”

Among the utility scale storage projects due to come on stream across Britain this year is a 5 MW/15 MWh liquid air system developed by Highview Power Storage. The company ran a pilot plant in Slough, England, from 2011 to 2014 and is poised to begin operating a 5 MW pre-commercial technology demonstrator in Greater Manchester.

Highview chief executive Gareth Brett says that liquid air “is a breakthrough technology that enables a new and compelling solution for large scale, long duration energy storage”.

Already operational is a 6 MW battery storage project built in Leighton Buzzard in England. The biggest energy storage project in the UK, the à‚£18 million scheme was built by UK Power Networks, one of the biggest distribution network operators in the country.

John Hayling of UK Power Networks explains that the company had a choice when it realized it needed more capacity to reinforce the network.

“How we would have ordinarily done it was by building a third transformer, plus a third circuit that would have to be underground, and there was quite a cost in doing that.

“An alternative was to build a storage device. We chose to install storage and to use that project to understand how effective storage would be on the local network and also undertake trials to understand what the economics of storage would be, particularly to a DNO.”

Hayling says that UK Power Networks “are looking at what additional revenue we can get – the stacked benefits”.

An AES energy storage project

Credit: AES

The scale of the Leighton Buzzard project will be surpassed this year when AES puts into operation a 10 MW battery storage ‘array’ built next to Kilroot power station in Carrickfergus, Northern Ireland. AES currently has 384 MW of energy storage in operation, construction, or late stage development around the world.

The array utilises more than 53,000 batteries, arranged in 136 separate nodes for increased reliability.

Robin McCormick, general manager of System Operator Northern Ireland, explains: “Integrating battery storage solutions onto the system is an important development which should bring real benefits to customers across the island.”

He says that the project provides “a significant learning opportunity” for the transmission system operator: “We will assess the role that battery storage will play in the increasingly diverse portfolio of generation sources.”

So the projects are getting off the ground, but still the problem of classification persists.

Inside the Leighton Buzzard 6 MW battery storage facility

Credit: UK Power Networks

Hayling of UK Power Networks echoes Dr Cainey’s view that hindering the development of storage is the technology’s legislative background: “Storage is not defined in any text, and therefore, if it’s not defined anywhere, then what is storage?”

He says the absence of a definition creates issues: “It’s not recognized as an asset class or an activity, and it is the default position that energy storage is treated as a subset of generation.

“But that’s only because that is how storage needs to respond through the codes and various other instruments that it needs in order to work in the wholesale market. So it is really a bit of a fudge.”

Highview Power Storage’s liquid air test facility in Slough, England

Credit: Highview Enterprises

He says the lack of classification also “creates a problem for a DNO that might want to operate storage, because the DNOs are unable to own generation under their licence. Therefore, if storage is defined as generation, that prohibits a DNO from operating storage directly.”

David Walker, chief executive of DNV.GL, agrees that “there are still a lot of questions around energy storage”.

“Who actually owns that storage? Is it owned by the grid operator? Is it owned by the generating utility, because it’s part of the power supply? Is it owned by IPPs? Or is it actually owned by independent storage providers, a new group that could enter into this bit of the market?

“And how is it going to be priced? Is it going to be priced the same as generation, or is it going to be priced differently?”

And he says “the final part of the equation is: how is it going to be regulated?”

But despite the grey areas surrounding energy storage, Dr Cainey is upbeat. At the end of last year, UK Energy Secretary Amber Rudd said she was “looking at removing other regulations that are holding back smart solutions, such as storage” and the Department of Energy and Climate Change will soon launch a consultation to trigger action in the autumn.

Dr Cainey says: “The technologies are proven and the value of storage has been demonstrated. With the appropriate market framework in place, storage could rapidly be deployed across Britain. Storage is now part of the energy debate.”