Regulation to dominate today’s ESN meeting

This week's UK Electricity Storage Network annual meeting is dominated by the future regulation of energy storage in the UK. Photo credit: OST Energy
 This week's UK Electricity Storage Network annual meeting is dominated by the future regulation of energy storage in the UK. Photo credit: OST Energy

This week’s UK Electricity Storage Network annual meeting is dominated by the future regulation of energy storage in the UK. Photo credit: OST Energy

By Jason Deign

The issue of regulation is set to tower over proceedings at today’s Electricity Storage Network (ESN) annual meeting the UK, Energy Storage Report has learned.

UK distribution network operators (DNOs) are keen to deploy storage but face regulatory hurdles due to a lack of definition over how to treat the assets, said Dr Jill Cainey, the ESN’s director.

In particular, from a regulatory point of view storage in the UK is treated as both a source of demand and of supply, since it does not have a class of its own. This means DNOs have to comply with two sets of regulation.

“That’s just not efficient,” blasted Cainey. “You and I could do whatever we like. As soon as it’s owned and operated by a supplier then that becomes a problem.”

Oliver Soper, co-founder and director of the energy technical advisory firm OST Energy, said: “For a DNO it’s a massive challenge.

They want it but can’t have it

“They want [storage] and they can’t have it, because it’s not classed in a way that they can get it behind the meter to offset the cost of sub-stations and so on.”

The problems stem from the fact that storage was never properly defined in the cornerstone of UK energy regulation, the Electricity Act 1989, which is hardly surprising since the concept barely existed in the late 1980s.

Pumped hydro reserves, practically the only kind of storage on the grid when the Act was created, are treated as generation assets.

Electricity storage, however, has an increasingly important role to play in demand-side management. The ESN is lobbying to get storage reclassified in a category of its own.

And “we would argue that storage needs a licence,” said Cainey. “What we want to avoid is some quick solution and then subsequently finding we’re going to need to licence it. We’d much rather sort it out now.”

Aware of the challenges

The UK Office of Gas and Electricity Markets and Department of Energy & Climate Change are both aware of the challenges with storage regulation, and are looking for a solution.

Two options are available, Cainey said: a modification of existing rules, or a complete shake-up. Either would be a lengthy process, however, and the time to be gained from taking the shortest route is barely worth it.

“Even the quick and dirty solution is not exactly quick,” Cainey said. “You’re still talking 12 to 18 months.”

Consequently, ESN is campaigning for a root-and-branch review; a Ferrari approach, as Cainey puts it, rather than a Morris Minor. “The Ferrari would give the industry the certainty it needs in order to make investments,” she said.

“Otherwise you are asking people to make investment decisions on the back of an uncertain regulatory foundation.”

Calling for better regulation

Coincidentally, an environmental consultancy called Eunomia has also called for better regulation in order to help the UK reach more than 1.6GW of storage capacity by 2020.

Right now, “Eunomia’s analysis suggest [sic] that ‘behind the meter’ applications installed by energy users are the most attractive investment proposition,” said the company on its website.

“With minor regulatory changes, however, the installation of batteries into the distribution network could also become a major contributor to increased grid flexibility, whilst also increasing capacity for more renewable generation.”

Eunomia’s forecast is high compared to the Renewable Energy Association’s prediction for 1GW of storage by 2020, but on the low side compared to ESN’s target of 2GW of new capacity by 2020.

And if regulation really is the problem it is being made out to be then the timing involved in ESN’s target could be a tad optimistic.

Admittedly, the regulation challenge is mainly restricted to DNOs. “There’s a reasonably large portion of private developers who are looking at developing storage assets and they don’t have that problem,” Soper said.

A UK National Grid tender

The growth of this ‘merchant storage’ market is partly being fuelled by a UK National Grid tender of up to 250MW of enhanced frequency response capacity in April, with more set to follow in years to come.

Meanwhile, the UK’s burgeoning distributed solar market could potentially spark a boom in residential storage.

There are 700,000 properties with rooftop solar in the country, Cainey said, and if each were to install a 4 kW battery the total storage capacity would equal all of the UK’s legacy pumped hydro, at 2.8GW.

However, that is unlikely to happen in the next four years. So to reach ESN’s target will probably take greater involvement from DNOs. The current regulatory issues might not be fully resolved for another three years, though, said Cainey.

If that’s the case, then the fuss at the ESN today is not a moment too soon.

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