Member Article

As longstanding partners and participants in the Electricity Storage Network (ESN)’s working groups, Shoosmiths' Energy & Infrastructure sector were delighted to host the industry body’s Winter Conference at our London office earlier this week.

The highly attended event demonstrated the in-demand level of insight needed on the UK and Irish market for energy storage projects. Amongst current headwinds with very recent moves to alleviate some of those, the overall support for the sector’s development meant the timing for the event was well placed to an optimistic crowd.

Keynote

Andrew Bowie MP, Parliamentary Under-Secretary of State (Networks and Nuclear), outlined the Government’s recent steps to address the enormous queue for grid connections, and highlighted the proposed steps in the Energy Act to support the storage industry. Which included giving storage its own definition class (through efforts from ESN), investment in the transmission network, spatial and regional planning reform and the upcoming effect of REMA.  Significant detail is expected in the coming weeks, and we await that with intense interest.

As well as the Energy Act passing, we have also had code modification CMP376, which allows the introduction of milestones which need to be met to allow projects to retain their place in the connections pipeline. This can and will have an effect on projects which have no realistic prospect of connecting ,and may well lead to significant pressure on the planning system in particular as holders of those connection offers scramble to put project rights in place to meet their milestones. Time will tell how quickly and deeply these reforms will cut into the excess clogging up the connections queue.

Revenues and the future

We heard from LCP Delta and MODOENERGY about a precipitous collapse occurring in battery storage revenues in 2023. In context, though, this wasn’t unexpected from anyone close to the industry coming off the back of two record years of price upheaval and significant frequency response revenue from the Dynamic Containment product. As volumes in Dynamic Containment (DC) have led to saturation, those revenues have fallen sharply, and revenue from the balancing mechanism has not risen to compensate for this.

Energy storage pipeline in GB

Justifiably, there was significant focus on the treatment on batteries in the balancing mechanism, and on the statistics that indicate that batteries are skipped over on 80% of occasions in the Balancing Mechanism (BM), leading instead to dispatch of higher-carbon energy sources for balancing purposes. Clare Dytka from National Grid Electricity System Operator (ESO) talked through the steps the ESO is taking to improve and reform the BM, from the Open Balancing Platform launching next month and review of the dispatch process.  Again, this is one of the key focus areas for the ESN and in particular, its Markets and Revenues Working Group.

Investment into electricity storage with the UK Infrastructure Bank

Looking longer term at the future of the battery revenue markets in the UK, the picture was generally very positive. We heard from Peter Clifton, Investment Director and Head of the Energy Storage portfolio at UK Investment Bank, which has already deployed £2bn of its £22bn fund into infrastructure projects in the UK. Peter spoke of the need to recognise that revenues will fluctuate from year to year, as new products are introduced and macro and geo-political factors influence gas wholesale prices, but that it was important to recognise the “fundamentals”.

We are seeing a massive shift to renewables in our generation mix, and with the expected 50GW of offshore wind and an additional 30-40GW of solar expected, a roughly equivalent amount of storage is needed to operate a Net-zero energy system. Peter spoke of flexible financing options for battery storage products, which was a welcome approach to technology and markets that, by their nature are dynamic, but where the long-term demand and growth is a more stable trend. This was echoed to some extent by the penultimate panel, which looked at the emergence of a more stable, longer term approach to battery revenue products and their financing, with cap and floor and even tolling products re-emerging, particular in other jurisdictions.

Future role of long duration energy storage

Lastly, we heard from LCP and Department for Energy Security and Net Zero (DESNZ) on the proposed route-map for Long Duration Storage, and what support the Government are proposing to move these projects towards commercialisation. There was, predictably, some concern from a room full of lithium-ion battery developers that longer duration storage could cannibalise some of their revenues, but DESNZ were mindful of that potential impact and of the need to balance shorter- and longer-term storage deployment for the benefit of a future energy system and the taxpayer.  A charged, positive discussion.

We’re pleased to be hosting the ESN’s Innovation Working Group in London on 6 December, which looks at long duration technologies, as well as ESN/REGEN’s event on REMA (Reform of Energy Markets) on 18 January.  

 

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