New battery storage investment - is this the push that the industry has been waiting for?

The Government has recently pledged major support for battery storage as part of plans to modernise the energy system. James Graham, Head of Asset Optimisation Sales, discusses what the industry requires to overcome existing barriers and enable more battery storage in the future energy mix.

Interest and investment in battery storage has really ramped up over the past year since we published our “Making the commercial case for battery storage” report to address the challenges facing the sector.

In our recent Energy Entrepreneurs Report, we identified 20MW of battery storage capacity already operational in the UK and estimated it to increase by as much as 100 times in the next four years.

These growth predictions have been further endorsed by the Governments’ recent announcement of the Faraday Challenge, which has pledged £246 million towards research, innovation and scale-up of battery storage projects.

Although the Faraday Challenge is for domestic level, the invaluable research will also support the development of commercial-scale battery storage.

Another positive development is the commitment to developing a legal definition of storage in primary legislation, which we have been pushing for through our work with Ofgem and the Department for Business, Energy and Industrial Strategy (BEIS).

Establishing a definition for batteries has the potential to remove one of the major commercial barriers – the double-charging of renewable levies.

Currently battery storage projects pick up the cost of renewable levies on the electricity they import even though they are only storing it short-term, then the end-user of the electricity is also charged the renewable levies.

We hope to see the definition resolved quickly so operational battery projects and those in the pipeline can benefit.

Other significant changes impacting battery storage projects were also announced around the same time, although with noticeably less fanfare.

A new BEIS consultation proposes to account for actual capabilities of battery storage, given that the majority built are one-hour duration.

Currently, battery projects can apply for all stress events even though they may not be able to provide power for the required four hours.

With the proposed changes, battery storage owners would have to enter a reduced capacity for their project and therefore their revenues would be lower.

These changes, while bound to be unpopular with developers in the short-term, are designed to address the fact that batteries are not the same as traditional generation.

Although battery storage projects will receive less revenue in the Capacity Market, correctly defining battery storage and adjusting schemes accordingly will open more potential for future projects.

Another positive point to remember is the other markets available for battery storage projects such as the Balancing Services (Frequency Response) and Balancing Mechanism.

We predict that the Balancing Mechanism will have a huge influence in battery storage projects in the future after the implementation of National Grid’s Systems Needs and Product Strategy makes it easier for battery storage projects to access revenue (read more here).

While the current transition period will be challenging, continued Government support and collaboration with developers will ensure battery storage is able to play a major role in the new system where energy generated may not always match demand.

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