As solar subsidies wane, investors plan 2.3GW of UK battery storage

Investors appear confident batteries will generate returns

Subsidy cuts to solar and wind energy are driving investors towards battery storage, with 2.3GW projects announced, according to independent energy firm Smartest Energy.

The company’s latest report on independent renewable energy investment shows growth slowed last year following a rush to complete projects in March, ahead of reductions in support. To date, independent investors have funded 12.75GW of projects, finds the report, with 8GW coming in the last four years.

Solar generation has taken the lion’s share of investment. However, the report warns subsidy cuts and unstable policy now means “money is going elsewhere”.

While investors may seek higher returns abroad, the report finds many solar developers are turning to UK battery storage. Costs, while still high, are falling. Moreover, existing solar projects have some of the necessary infrastructure and connections to enable battery deployment. Combining a battery with solar PV enables asset owners to make more money. They can charge the battery or curtail exports when demand is low and in some cases, be paid to do so, and can export when demand is high, improving their revenue via arbitrage.

The report suggests 2.3GW of battery storage, via some 150 projects, is now in planing. Of that total, around 578MW is due for completion within four years, via capacity market and enhanced frequency response contracts.

According to the report, Smartest Energy estimates the 2.3GW figure from ‘a range of publicly available databases such as the National Grid Capacity Market registers for the Early Auction and T-4 Auction in addition to the Enhanced Frequency Response register.’ It adds that ‘operational storage projects have been compiled from the United States Department of Energy Global Energy Storage Database.’ 

Whether all of that volume is developed remains to be seen. Official figures suggest around 4GW of battery storage may be in operation by 2033. However, growth of intermittent generation, especially solar, is creating balancing challenges for National Grid that may need to be addressed more quickly. System operator director Cordi O’Hara has suggested that as much as 8GW of battery storage could be connected within five years if costs continue to fall at current rates.

However, investors seeking new markets are already causing industry some concern. Distribution network operator UK Power Networks recently highlighted the impact ‘highly speculative’ storage investors were having on its administrative operations. The DNO has received more than 12GW of storage applications in little over a year, and says it wants to charge fees to put off those with little intention of seeing through their bids.

See the report here.

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