Could the UK’s variable wind and solar energy ever be classed as green baseload? Not with the government’s current renewables strategy.
Other countries have started to team renewables with grid-scale storage so that surplus output is captured for use later when the sun fails to shine or the wind fails to blow. However, the UK has so far stuck to paying renewable generators to reduce output when there is surplus power, and using fossil fuel generation to fill in the gaps when weather conditions result in little or no renewable generation.
Even if security of supply is the only requirement, there is still much more work to do. The lights have not gone out, so far, but they will unless we get smarter at managing our power by deploying measures including energy storage and smart grid technologies.
If lowest cost and least carbon are requirements too, not only does the current strategy not deliver the greatest emissions reductions, but it also fails to deliver optimum value for the UK. On all three elements of the energy trilemma, then, the current strategy is ripe for improvement. That is the inescapable conclusion to be drawn from a model developed to compare the 2020-and-beyond outcomes of the current strategy against an alternative that puts grid-scale storage at the heart of the UK’s electricity system.
What do we mean by grid-scale?
Grid-scale storage sites are national infrastructure facilities able to absorb the output of entire wind or solar farms, then sustain level output for hours at a time before requiring recharging. Such a requirement can be met currently only by pumped hydro electricity storage (PHES). Britain already has 2.8GW of PHES, but the youngest of the four sites was built more than 30 years ago.
Around the world, more than 99 per cent of grid-scale storage harnesses pumped hydro technology and new PHES schemes continue to be built in large numbers. PHES is dominant not only because is it capable of providing extremely high capacities of storage, but also because it is relatively low cost. In addition, PHES facilities typically have operational lives in excess of 125 years, requiring only simple and environmentally benign maintenance for continued operation.
It is important to record that while PHES is currently the only storage technology ready to do the heavy lifting that a change of UK strategy requires, neither of the authors of this article is suggesting that the UK’s entire electricity storage needs can or should be met by PHES alone. A smarter, more flexible UK grid will exploit other storage technologies at district, local and household levels, each of them deployed to extract the maximum benefit from their distinct abilities.
Is there space in Britain for new PHES? Easily. Aided by a £200,000 grant from the Department of Energy and Climate Change (Decc), a UK-wide geographical survey has identified suitable locations with low planning risk for 10-50GWh. Many of the locations are what may be thought of as conventional. Some would re-purpose brownfield land while others would use coastal features and seawater. Others still would harness existing fresh water reservoirs.
The model and the findings
The model uses annualised costs for offshore wind (£343 per kilowatt-hour per year), and PHES (£154/kW/year), and the current capacity market price of £19.40 for fossil fuelled back-up generation. Curtailment is calculated on the basis of Imperial College’s estimated future curtailment of wind at a price of £130/MWh.
Two scenarios were tested. The first assumed the UK’s current trajectory, which will see a further 10GW of offshore wind added to the 28-30GW that is likely to have been deployed by 2020, backed up by 10GW of fossil fuelled generation.
The second was an alternative strategy in which wind build-out halts at 31GW and the fossil fuelled back-up is replaced by 10GW/50GWh of PHES storage.
The model demonstrates that the strategy using storage would enable a 31GW wind fleet to deliver the same amount of useful electricity as a 40GW wind fleet, while at the same time it would:
• save the UK £3.6 billion a year in decarbonisation costs;
• mitigate the volatility of renewables while also enabling 10GW of thermal back-up to be stood down;
• reduce carbon emissions by 5 million tonnes a year;
• increase grid resilience.
The with-storage strategy cuts 5 million tonnes of carbon dioxide equivalent (MTCO2e) per year from UK emissions because PHES charges up on inflexible and intermittent technologies that are lower carbon than grid average, and when re-generating electricity displaces standby fossil fuel peaking plant, which is higher carbon than grid average.
Despite its cycle losses of around 20 per cent, PHES is inherently low carbon itself, adding just 2 grams of CO2/kWh stored and re-generated. There are, however, steps that government needs to take in order for the UK to realise the wider benefits of energy storage for the economy beyond investment.
The PHES fleet offers big storage volumes – 50GWh – large power output – 10GW – and large power absorption – 10GW.
It could provide National Grid with an immensely powerful and responsive balancing tool that is more reliable and more dispatchable than standby thermal plant, and which does not rely on interconnectors with neighbouring countries. Alongside smart grid innovations such as demand-side response (DSR), PHES could make the UK’s energy network more secure and efficient. A smart grid that responds to customer demands and reduces power cuts or other events on the network gives Britain the opportunity to create one of the most secure power grids in the world. It merely needs to exploit the industrial and academic expertise and array of energy storage options at its disposal.
Having more energy flows that move in both directions on the grid will push ageing grid infrastructure to its limits and will not be able to support a green baseload. However, the hardware and software in a smart grid provides greater control and automation over the way the grid is managed. It not only helps regulate and balance the grid, but also reduces energy consumption. We cannot replace the grid, but we can make it more intelligent, matching supply to demand in real time and within network constraints.
While UK energy regulatory policies are in need of serious overhaul, the UK is in many ways leading in demonstrating how energy storage systems interact with the grid. An energy storage test bed and smart grid lab facility at Newcastle University, part of Newcastle’s £250 million flagship project in urban sustainability, Science Central, are currently examining how energy storage and smart grids might work to best effect. The programme is testing grid-connected electrical energy storage, including redox flow batteries with DSR and other smart grid innovations.
Cost
If we compare the annualised cost of new-build PHES at £154/KW against the capacity market closing price of £19.40/KW, then storage appears expensive. However, offshore wind, tidal lagoons and solar photovoltaics have an annualised cost many times greater than PHES, with offshore wind the most expensive at around £343/kW. PHES allows for more effective and efficient use of these renewable installations and so provides value for money.
By 2020 Britain is likely to have deployed some 28GW of wind. Imperial College anticipates that with 30GW of wind and no new storage, some 27 per cent of wind output will have to be effectively thrown away.
If, as under the government’s current strategy, wind build-out continues to 40GW, then the additional 10GW will add annualised costs of £6.3 billion including curtailment of up to £2.7 billion.
The alternative strategy of deploying a 10GW/50GWh fleet of storage enables better use to be made of wind, cutting curtailment from 27 per cent to around 7 per cent and allowing 31.4GW of wind to produce the same overall output as the 40GW wind fleet.
This strategy has an annualised cost of £2.7 billion, saving £3.65 billion a year while also cutting carbon emissions and increasing energy security. Over the 25-year life of a windfarm it saves £91.3 billion.
PHES is physically and commercially durable. Lasting a century or more, it has a breakeven sales cost currently of £45/MWh. This is lower than open cycle gas turbine, on a par with combined cycle gas turbine, and it is set to fall lower still as more renewables suppress off-peak prices. Storage is also naturally hedged against all fuels because it trades in electricity rather than any single fuel type.
Further savings not factored in or calculated by the model would result from storage lessening the need for costly grid upgrades and reinforcement, and from a reduced reliance on energy imports via interconnectors, which would improve the UK’s balance of trade.
Building the flexible grid
In order to stimulate the building of storage to get a more flexible grid, storage must be redefined as a distinct asset class.
It is not generation, yet it is currently treated as such by the market. It is not classed as renewable so does not qualify for contracts for difference (CfDs), and the capacity market as it currently works cannot reward storage for the way it offers a more reliable and lower carbon alternative to spinning thermal reserve.
Extending to storage the same guarantees as provided to strategic infrastructure projects and renewable investments would send a powerful signal to investors, resulting in a sea change in attitude.
Longer-term ancillary services contracts, locked in and extended scope embedded benefits, revised capacity mechanism arrangements or CFDs designed for storage would lower the cost of borrowing.
Since distributed storage both reduces the need for costly network reinforcement and makes hosting districts more self-sufficient, another positive move would be for grid connection and transmission costs to be revised for storage.
Storage below 100MW can be connected at a distribution network level, but a facility with an output of 100MW and above must be transmission connected. The former receives embedded benefits via a share of Triad payments, but the latter receives no embedded benefits and pays substantially more for transmission.
The 100MW break point was devised to help manage the extra grid stress resulting from new thermal power stations, but it is inappropriate for storage, which lessens grid stress. The loss of embedded benefits and the increase in connection and transmission charges over the 100MW break point casts a long shadow, with the result that smaller-scale storage, otherwise perfectly viable, is less likely to be built.
Finally, while there is planning guidance in the form of National Policy Statements for roads, reservoirs, wind and solar, there is none for storage. This leaves nationally significant infrastructure storage projects without the framework of relevant supporting policies. It is yet another element of uncertainty that deters would-be investors and developers.
Subsidies are not necessarily required to stimulate the build of new PHES, but changes to UK energy policy most certainly are. The UK needs to recognise, incentivise and reward storage, rather than ignore storage, and it needs to do so now.
Dave Holmes, managing director, Quarry Battery Company; and Professor Phil Taylor, Newcastle University