Essential storage technologies ranging beyond two-hours in endurance won’t happen on the UK grid without technical innovation & incentives including tax breaks, two consultancy firms argue today.
A new joint study from DLA Piper and Cornwall Insight addresses how adaptations of established techs such as compressed air or pumped hydro can reduce renewables’ intermittency, adding flexible supply to Britain’s increasingly complex grid.
Their paper, Ready and waiting: Opportunities for energy storage, warns that innovations and fresh thinking in both engineering & finance are needed, to overcome inadequacies of current storage, unable to hold power for all but a couple of hours.
Batteries providing 60 or fewer minutes up dominate frequency response (FR) markets at present, authors Dr Matthew Chadwick & Roubayet Choudhry note. Trades in the Balancing Mechanism or in wholesale arbitrage cover periods up to four hours. Sophisticated trading strategies that stack multiple revenue streams are integral to optimising the business case for electricity storage assets and maximising returns, they observe.
At the FR level, market saturation is expected to erode the value of this component of revenue stacks. The pair foresee a transition towards 2hr+ duration batteries, alongside pumped hydro and more novel technologies such as compressed air energy storage (CAES).
“Looking forward, the co-location of energy storage assets with existing renewable generation could provide a valuable opportunity to overcome the long wait times new assets are currently facing to access a grid connection”, the duo argue.
Major questions linger, though, over how to best optimise a co-located storage asset to reduce price cannibalisation for renewable generators. A second challenge is avoiding periods when both assets require the ability to export to the grid over restricted wires.
For storage beyond four hours, Chadwick & Choudhry observe, UK providers struggle against a shortage of financial incentives to promote the sector’s growth. The development of the government’s Pathfinder programme into a formalised market could prove crucial to the future roll-out of longer duration inter-day and ‘seasonal’ energy storage in the UK. So might a replication of Australia’s Long-Term Energy Service Agreements. These offer up to 40-year contracts with cap-and-floor prices built in.
“By implementing a strategic combination of grants, tax incentives, capacity market mandates, and contract schemes, the government can catalyse the growth of a robust and diversified long-duration energy storage sector,” said Chadwick.
“Such advancements would not only ensure a reliable and resilient electricity system but also position the UK as a global leader in sustainable energy solutions, ultimately paving the way towards achieving its ambitious net zero targets.”
Read the paper here.
