The Market & Opportunity For Energy Storage In The UK
By Dan Taylor, Managing Director of Camborne Energy Storage Ltd
The UK electrical energy storage market is not yet as advanced as global leaders such as the US, China, Japan, South Korea, and Germany. However, as with these other countries, the UK is primarily looking to lithium-ion battery technology to be the forerunner of battery energy storage. The UK has around 30 operational battery energy storage projects, many of which are demonstration projects, with only a handful of operational projects larger than 1 megawatt (MW) in size.
The most publicised UK storage project is a lithium-ion battery storage project in Bedfordshire, led by the district network operator (DNO) UK Power Networks (UKPN), with several other partners supporting. This is a 6MW/10MWh lithium-ion system referred to as “Smarter Network Storage.” This project continues to be an innovation and learning project for all parties involved, building understanding as to how energy storage will work on the UK utility networks. One of the primary aims is to consider the deferment (or elimination) of conventional network reinforcement, by exploring alternatives to conventional work, such as increasing cable size or deploying further infrastructure at a cost part borne by the consumer.
The largest battery storage project to date also uses lithium-ion batteries, and is within a coal-fired power station in Kilroot, Northern Ireland. It has a capacity of 10MW, with plans to become a 100MW facility in time.
All of this considered, Figure 1 demonstrates the UK sitting in 7th place for the rated capacity of electro-chemical energy storage across the top capacity holders.
Evidently, energy storage in the UK is very much in its infancy. However, this looks set to change within the next year, at least for utility-scale projects. The UK’s National Grid is incentivising a market through its various frameworks, and thus making energy storage a commercially-viable operation. There is quite a buzz throughout developers at the moment, thanks to exciting initiatives such as the Enhanced Frequency Response (EFR) market mechanism being created, whereby the grid requires power onto the networks in less than a second – something batteries are prime for.
With the ever-falling price of lithium-ion technology, investors are starting to realise that energy storage in the UK is now a viable and attractive investment opportunity, and developers are looking to install systems in line with EFR regulation. The result of this, at grid scale, will lead to energy storage accelerating in growth, much like solar has done historically. Although energy storage could be seen as more complicated to develop, as the market matures and the understanding of battery-grid integration solidifies, developers will start to see the growing potential for returns. It’s not only on the commercial side that understanding will need to develop – the utilities are continuing to learn through their own innovative schemes and will need to remain receptive in order to support the rollout, most of which is connected to distribution networks.
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Alongside storage’s grid-scale flexibility, there remains the “behind-the-meter” use, where major energy users looking to save money via power arbitrage (or “peak shaving”), can see real financial benefits. Behind-the-meter storage is expected to make up a large proportion of deployed energy storage capacity, as it is more easily developed than at grid scale, and there are many high-energy users who would look to take advantage of it.
Figure 2 shows Eunomia’s forecast for battery storage in the UK, and the breakdown of utilisation type. This supports the importance of behind-the-meter storage to the UK, and just how fast growth is projected to happen.
Although there are many advances being made in the area of domestic energy storage, with the release of Tesla’s Powerwall and similar systems, the UK does not look ready to embrace this market today. As it stands, the economics of the domestic systems either alone, or with solar integration, do not quite stack up to a short-term return on investment; however, in a recent report by KPMG, it is expected that it may become economical for households with solar panels to retrofit storage from as early as 2017. As such, this is a market to watch, as the UK looks to follow the lead of other countries such as Australia spearheading the movement.
The interest in storage as a whole in the UK has been encouraged by the successes witnessed overseas. Battery storage manufacturers hold growing portfolios of successful projects, with ever-larger capacities and capabilities. The importance of this cannot be overstated for the storage market in Europe; being able to see that it can be (and has been) done boosts confidence dramatically, both for investors and utilities. Furthermore, as other countries embrace energy storage, the UK will not want to be left behind, and, as we are seeing now, start to push utilisation forward, not just for economic benefit, but also for significant environmental reasons.
The UK currently calls on peaking power plants to help deal with unforeseen spikes in demand or sharp drops in generation, and using storage systems to support and replace them could play a huge part in reducing their role and continuing to decarbonise the industry. Additionally, as the UK continues to phase out coal–fired power plants and the role of renewable energy is set to increase, the utilisation of energy storage will be paramount in helping the UK meet its carbon targets over the coming decades.
There are few barriers left to overcome for UK energy storage to really get underway, many of which are policy and regulatory. Currently, there is no set definition of what energy storage is, though it is currently defaulted as a generator, consequently leaving storage open to significant charges in some cases.
This creates a surprising number of challenges when creating support and regulation for storage, as well as for DNO deployment. Government policy around storage is currently lacking, which makes its future uncertain in the eyes of investors and financiers, which in turn stalls development. UK utilities have have seen similar requests for contract security, but are regulation bound by the lengths of contract they can offer. It is not disputed that the UK holds a huge potential for storage, and as its importance becomes better understood, reaching that potential may come sooner than most might think.
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About the Author: Dan is the Managing Director of Camborne Energy Storage Ltd, part of Camborne Capital Group. Having worked in the balancing markets in both the UK and Asia, Dan joined Camborne in 2015, following the completion of a number of low carbon initiatives.
Dan has worked on some the UK’s largest balancing schemes and completed significant demand-response projects, both client side and service side, with major energy users, distribution network operators (DNOs) and commercial aggregation providers. He is now responsible for Camborne’s energy storage interests in the UK.
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