Distributed energy resources are driving change in the utility sector worldwide as the ways in which power is generated and delivered become more diverse.
Spurred on by an increasing public desire for clean energy, falling prices and regulatory subsidies, solar photovoltaics, battery energy storage and microgrids are being deployed across the system.
In 2017, utility-scale energy storage – which had started as a handful of experimental programmes – became big news. There were prominent projects in Australia, Texas, southern California, and hurricane-ravaged Puerto Rico.
Now, with the wind at its back, the industry is seeking a world where flexible power systems maximise efficiency to provide us all with clean, sustainable energy at a price we can afford. But this global movement requires utilities to transform their traditional centralised networks into distributed and integrated power networks, and these new networks must evolve rapidly from demonstration and pilot phases to solid, longer-term investments that must play an important part in new business models.
And this pressure for rapid progress is only increased by the fact that companies are working to achieve the most economical design and implementation for distributed energy and microgrid customers, while simultaneously seeking to maximise benefit from existing grid investments.
Energy storage will affect the entire electricity value chain as it replaces peaking plant, alters future transmission and distribution investments, reduces intermittency of renewables, restructures power markets and helps digitise the electricity ecosystem. The UK’s storage sector is booming, with new installations expected to help create savings to the tune of £8 billion by 2030, following a raft of energy storage announcements in the early months of 2018. Recently, a 50MW portfolio spanning two sites – a 40MW battery park in Glassenbury, Kent and a 10MW battery park in Cleator, Cumbria – was completed; and renewable energy provider Anesco announced proposals to bring 185MW of energy onto the grid.
Elsewhere, Abu Dhabi energy company Masdar and Norwegian multinational Equinor have unveiled the world’s first energy storage battery attached to a floating windfarm off Scotland. The world’s first grid-scale liquid air energy storage (LAES) facility has also opened in Bury, in a move which showcased an alternative to battery technologies, and the UK government last month confirmed the latest batch of Faraday Battery Challenge research and development projects will receive £22 million of financial backing between them. On a global scale, a recent Bloomberg New Energy Finance (BNEF) report predicted the energy storage market will double six times by 2030, with more than $100 billion being invested across the globe in the next 15 years.
For utilities, battery storage will become an integral tool for managing peak loads, regulating voltage and frequency, ensuring reliability from renewable generation, and creating a more flexible transmission and distribution system. For their customers, storage can be a tool for reducing costs related to peak energy demand.
In short, the industry is sitting on the cusp of a colossal energy revolution but, as with any hard-fought revolution, there are barriers…
Cost
This is arguably the largest and therefore most widely discussed of all the barriers to energy storage transforming the grid, the economy, our homes and the world. In fact there are those who believe storage will not be economical any time soon, and it’s difficult to dismiss that pessimism offhand.
The transformative future of energy storage has been “just around the corner” for a while now, but storage continues to represent a very small drop in a very large ocean. With this in mind, identifying the most economical projects and most suitable customers for storage has rightly become a priority for companies including power providers, grid operators, battery manufacturers, energy-storage integrators, and businesses that have established relationships with prospective customers such as solar developers and energy-service companies.
As an example, EDF is currently building the country’s first large-scale battery storage project at West Burton in Nottinghamshire, and earlier this year announced plans to invest €8 billion by 2035 to become a European market leader in electricity storage. The company says it has a “buy now, use later” philosophy when it comes to energy storage. Head of business development, Chris Regan, says “cost is obviously a huge factor, but it is by no means prohibitive. Prices have come down and forecasts for growth are trending upwards. Current forecasts show that the value of battery storage will grow as the price of battery production falls. The Policy Exchange think tank estimates a flexible energy system could save the UK in the region of £8 billion by 2030.”
Elsewhere, analysis from Solar Media’s Market Research division suggests a 40 per cent reduction in lithium-ion costs is expected by 2025, and more than 9,000MWh of battery energy storage could be deployed in Britain over the next five years as a result.
And although energy storage only featured modestly in the latest capacity market auction, battery storage, in concert with renewable technologies, continues to draw “increased investment” in bespoke industrial applications as “traditional energy procurement strategies are re-cast to exploit the full cost reduction potential of hybrid solutions”, according to PA Consulting Group energy storage expert James Morris.
On the other side of the coin though, Keith Maclean, chair of the UK Energy Research Centre, said at last year’s Energy Summit the deployment of batteries alongside solar panels will add to the overall cost of the energy system. He said storage will enable many households and businesses with solar panels to go off-grid, and in doing so detract from a naturally complementary relationship between wind and solar generation: “It may make sense to the individual, but if we’re removing that solar which is making the system balancing costs lower because of the anti-correlation with wind, we’re just going to push up the whole-system costs and other people are going to have to pay them.”
Policy
The government’s support for clean technology innovation, and its awareness that the next phase of integrated energy decarbonisation is about to begin, is hugely welcome. But, as the industry is now making plain, without clarity about long-term policy the energy revolution could stall.
For example, beyond the Clean Growth Strategy, Electricity Market Reform – currently under discussion at European level – threatens to stifle battery storage innovation. Under the Austrian presidency of the EU, the Council and the European Parliament are expected to agree a set of rules that foster innovative solutions for new services to participate in the system, including electricity storage.
Under the proposals, the grid will take on a host of new functions, including storage. But a large battery unit in the ownership of the grid operator cannot be used to bridge redispatch needs without affecting the market. A battery has to be charged or discharged again with real power. So a battery must be clearly separate from the grid to allow it to serve as load management in a market-oriented manner and also serve the grid.
The development of efficient energy-storage solutions in Europe will only be successful if the incentives to invest are set correctly. If it is the free market that creates innovation, this requires unbundling of the EU energy market. Not sticking to the unbundling rules will lead to lower investment in storage solutions and fewer incentives for innovation. Disrupting grid neutrality is a latent threat to energy storage development that should not be underestimated.
In more general terms, the government and Ofgem’s Smart System and Flexibility Plan identifies the need for reforms to accommodate, rather than stifle, advances in energy storage. Furthermore the pace of implementation of any policy or regulation – particularly as government and the civil service must dedicate much of their attention to leaving the EU – remains key. Regulators must clarify the market rules around energy storage.
Hype
Energy storage technology is not the decarbonisation white knight. And continued hyperbole about batteries propelling us towards a zero-carbon future are not doing the industry any favours.
Or as Scott McGregor from redox flow energy storage provider RedT puts it: “The real silver bullet is cheap solar and cheap wind, that’s what’s driving energy storage. I actually think as an industry we are being a bit lazy, in that we’re not using our brains to connect the two effectively enough.”
Energy storage has the potential to increase flexibility as well as deliver ancillary services to both the grid and its customers. Those services include frequency control, black-start capability and reactive power. Without energy storage, EU targets for renewable energy cannot be met. It will also play an increasingly critical role in the resilient grid of the future, because storage systems will provide important services, including improved grid stability and back-up power, and allow for greater integration of renewable resources. But storage will not answer the decarbonisation question. Not alone.
Big fish
Significant expertise and investment are needed to develop the technology required for battery energy storage systems. And as a result, the barrier to market entry for new players is high.
Currently, Tesla, Panasonic and LG Chem swim largely unchecked in the battery storage ocean. There are new entrants on the horizon though, in the form of General Electric and Fluence, a joint venture between AES Corporation and Siemens.
Elsewhere, a report from the all-party parliamentary group on energy storage, published in December, said 12GW of battery storage in Britain is possible by the end of 2021. This raised questions about whether it will really be possible to gain a foothold in the battery business while 88 per cent of battery manufacturing capacity currently happens in Asia. But the government hopes its ambitious £246 million Faraday Challenge will give the home side a significant boost in the right direction.
Mindset
Blockchain, big data and artificial intelligence have the potential to revolutionise the entire industry, but these technologies are not new. They not only exist but are available. So why aren’t they being widely used to build an energy network in which people produce, consume and exchange energy peer-to-peer, shifting the balance in favour of the consumer and a new generation of innovators?
The industry has these technologies at its disposal and the talent to implement them accordingly, but companies across the board need to adopt a more digital mindset to propel the market forwards.