New report shows Scotland has the UK edge for investment in energy storage

Cover of the Everoze report on energy storage
Cover of the Everoze report on energy storage

An expert new report published today aims to decode complex market opportunities for UK energy storage and explain what is needed to drive cost-effective investment.

The report from Everoze – a commercial energy consultancy – makes a series of far-reaching recommendations to level the playing field for rapidly developing energy storage technologies – some of which are locked out of current market arrangements.

And it tackles head-on the primary risk holding back the roll-out of energy storage: securing a bankable revenue stream.

The report adds: “The three major issues of low bankability, lost potential and revenue interface risk are common across the whole UK.

“However, whilst the challenges may be common across the UK Scotland faces a distinct opportunity on storage.

“Compared with some other parts of the UK, Scottish renewable energy projects can incur specific challenges such as high incidence of grid constraint and high transmission charges.

“This creates unique opportunities for storage to alleviate these issues, and is likely to favour storage technologies such as flow batteries suitable for longer duration storage (rather than high power applications such as frequency response).

“Longer duration” in this context means storing energy for hours or even days, rather than for seconds or minutes. Such longer duration storage options are often less commercially mature than some high power alternatives such as li-ion batteries, but Scotland is well-positioned to continue to pioneer their research, demonstration and commercialisation.

The report’s publication comes a day before a National Grid tender for 200MW of ‘Enhanced Frequency Response’ closes – with companies representing six times the advertised capacity having submitted applications, the vast majority for storage projects.

Sixty companies/developers have prequalified for the tender, and together during prequalification they submitted total capacity in excess of 1.3GW –  888MW of which was from battery projects. The tender closes on 15 July and results will be published on 26 August 2016.

The document – Cracking The Code: A Guide to Energy Storage Systems and How to De-Risk Them was commissioned from Everoze, with assistance from RES and Strathclyde University’s Power Networks Demonstration Centre. Its recommendations include:

  • Longer contracts from National Grid for support services like frequency response and fast reserve – to help get banks on board
  • Designing revenue streams to enable them to be ‘stacked’ together more easily, addressing ‘revenue interface risk’ and ensuring they line up technically, commercially and legally
  • Unlocking new revenue opportunities within the distribution network
  • Exploring the introduction of a ‘cap and floor’ mechanism for storage assets with long lifetimes – similar to the mechanism which already supports investment in connections to other countries.

By pushing down revenue risk and the associated cost of finance, the emerging storage sector can help deliver the £2.4 billion of consumer savings previously highlighted by the Department of Energy (DECC) and the Scottish Government.

Felicity Jones, Partner at Everoze, told how reducing investment risk was key to the success of the growing storage sector.

She said: “If the overwhelming challenge for the solar and wind sector has been cost reduction, the key challenge for storage is getting financiers comfortable with the merchant risk of revenue streams.

“Yes, continued reduction in the capital cost of storage is needed, but the bigger challenge lies elsewhere. Renewables developers eyeing up storage must flip their attention from cost to the other half of the profit formula: revenue.

A Scottish Renewables spokesman added: “A whole series of changes are needed if we are to ensure that the cheapest and most efficient technologies provide the services that a modern clean electricity system requires.

“While batteries today are 94% cheaper than they were in 1990, and a range of pumped storage projects are ‘shovel-ready’ or in the planning process, the current market arrangements are at risk of favouring more expensive sources of flexibility for our network.”

 

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