Government touts overhaul of energy storage policy by 2024

The UK Government has reiterated its commitment to “ensure” adequate scaling up of the nation’s long-duration energy storage by 2024, publishing the findings of a key consultation on expanding the sector.

Government touts overhaul of energy storage policy by 2024

Pictured: Pumped hydro at Cruachan dam and upper reservoir. Image: Drax

Published this week, the Department for Business, Energy and Industrial Strategy’s (BEIS) latest response paper summarises views collected as part of its consultation on scaling long-duration, large-scale energy storage. Energy storage is regarded as key to the energy transition, as it helps maintain energy security as more intermittent renewable generation comes online and as electricity demand increases. It also limits the need for expensive upgrades to the network.

But BEIS claims that long-duration, large-capacity storage (LLES) still “faces significant barriers to deployment under the current market framework due to their high upfront costs and a lack of forecastable revenue streams”. It, therefore, sought to assess ways of bringing costs down and creating mechanisms to enable operators to generate revenue.

All technologies are covered in the paper, including pumped hydro storage and battery energy storage. Plans for the UK’s first major pumped hydro project in more than 40 years were notably submitted by Drax in May, for a 600MW facility in Dalmally, Scotland. More innovative technologies, such as next-gen batteries and liquid air are also considered. 92% of the consultation respondents said a mix of technologies will be needed to maintain energy security and keep costs low amid the net-zero transition, taking into account the different geographical contexts of different communities.

Most of the 66 respondents to the consultation (eight in ten), said BEIS should take a broader definition of LLES, looking at arrays with lower capacities than 100MW. Also recommended was an alteration of BEIS’s definition of an LLES as a project that could discharge energy over four hours, to cover a longer period. These changes could help facilitate support for smaller arrays and for the most modern technologies, it was suggested.

Market design

Our aim is for all storage technologies to be able to compete fairly with each other, and with low carbon generation,” BEIS’s document states. “Evidence suggests this is currently not the case, with LLES technologies facing a financing barrier that limits deployment”.

Barriers cited included long project lead times, high project costs and long payback times, a lack of past case studies in the UK and a lack of revenue certainty. Almost all respondents (98%) said there were some barriers to the deployment and refurbishment of LLES.

Respondents asked for more collaboration to reduce the long wait times for LLES grid connection, and more action to de-risk more novel technologies so their upfront costs can come down.

They also noted that, because electricity interconnectors benefit from a dedicated cap and floor mechanism, while domestic LLES and other flexibility do not, there is unfair competition. This mechanism places minimum and maximum limits on the revenues an operator can generate, providing certainty of revenue generation.

In the ‘next steps’ part of the document, BEIS confirms that it will begin work to assess the practicalities of implementing a cap and floor mechanism for the storage sector, both now and as other changes in electricity markets come into force. BEIS formally confirmed plans for the “biggest electricity market reform in a generation” last month to deliver a more modern response to the energy trilemma.

Another consultation on the design and implementation of the LLES cap and floor mechanism will follow, but there are no timelines yet.

Overall, BEIS stated that it is committed to creating an enabling policy environment for scaling LLES investment by 2024. This is a task which will lie largely with the new Cabinet to be chosen by the next Conservative Party Leader. Liz Truss has the support of BEIS Secretary Kwasi Kwarteng, while his junior Greg Hands is supporting Rishi Sunak.

BEIS did not respond specifically to the seven respondents who wanted more clarity on carbon pricing and signals in electricity markets.

Figures published by RenewableUK in April confirmed that the UK’s energy storage pipeline had surpassed 32GW for the first time, doubling year-on-year. Not all of this will have been for LLES, as it covers smaller and shorter-duration. A doubling of the pipeline year-on-year was partly attributed by RenewableUK to a decision to relax planning rules, first announced in summer 2020 and enacted in December 2020. The change enabled local planning authorities to make decisions on larger projects, lifting the previous 50MW cap for England and the previous 250MW cap for Wales, after which point Government intervention was previously needed.

Comments (1)

  1. Richard Phillips says:

    “faces significant barriers to deployment under the current market framework due to their high upfront costs and a lack of forecastable revenue streams”.
    Precisely. This was realised as far back as 1945, and why we have organisations such as the UKAEA.
    It is, or should be, one of the functions of HMG to ensure that such works may be properly funded. The UK as a whole benefits, not just a tiny fraction of it.
    But perhaps I’m out of date!!!
    Richard Phillips

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