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Storage will cut renewable balancing cost

By Dave Elliott

Energy storage is all the rage at the moment, with a Daily Telegraph columnist even claiming that ‘cutting-edge research into cheap and clean forms of electricity storage is moving so fast that we may never again need to build 20th Century power plants in this country, let alone a nuclear white elephant such as Hinkley Point’.

And it could be cheap. The recent Carbon Trust/Imperial College report on energy storage says that ‘the UK can realise significant cost savings if market arrangements for the electricity system allow for an efficient deployment and use of energy storage, alongside other flexibility options such as demand response and interconnectors’. It claims that many of the changes needed ‘are likely to be cost neutral and require no additional funding from the government’.

The report looks at combining storage with large-scale wind and also at using distributed solar PV with storage. With large-scale wind and storage, it found that there could be reduced curtailment of wind output, and also a reduction in the wind generation capacity needed to meet demand: ‘target volumes of low carbon energy are generated from less installed capacity’. That creates savings for customers, as does reducing the cost of curtailment payments. Moreover, ‘if wind plus storage displaces more expensive forms of generation, this will lower the overall UK generation cost as well as the cost of meeting carbon emissions reduction targets’. In addition, the inclusion of storage can avoid the cost of transmission, distribution and local network investment, so, depending on its cost, this may be the best option.

However, larger scale system-level central storage had the edge over small-scale local storage. That also was seen as being true in the case of PV solar: ‘distributed storage at household level with no interaction with the network is neither the most economically attractive solution for end users, nor most beneficial to the network’, while centrally-managed storage can support the system through frequency regulation. However, aggregation can reduce payback times, and dynamic pricing through time-of-use tariffs can also improve the attractiveness of distributed storage. The exact savings from storage would depend on the scenario, but could be up to £2.4bn per year in 2030. The report says ‘If 50% of this saving was simply passed on to domestic customers it could reduce the average electricity bill per household by c. £50 per year’.  

Although this is an extensive report, with much attention to scenario modeling and technical detail, along with some good examples of sensible approaches from around the world, the focus is on electricity storage, whether large scale (e.g. pumped hydro) or small scale/distributed (e.g. Li Ion batteries). It does admit that there are other options, including heat storage and gas storage, but given that these energy vectors open up even more complexity, it opts to limit its analysis to the already quite complex electricity system. It does however note that a ‘combination of fast (and affordable) energy storage with renewables is more cost effective than gas CCS in providing base-load supply’. So maybe gas is not seen as a major player, even for balancing. If so, that’s a bit surprising. Although, as the report notes, the attempt to get more gas plants built via the Capacity Market system has not been successful, for the moment, gas plants are still the cheapest and most available back up/balancing option. Also surprising is that Combined Heat and Power hardly gets a mention: that too, along with heat networks and heat stores, can play a balancing role. In its enthusiasm for storage, it’s also a little dismissive of the potential role of interconnectors and demand management.

All these options and issues need factoring in to any policy for supporting grid/system balancing. The big issue is whether it can just be left to the market. A recent International Energy Agency report said ‘efficient markets unlock flexibility to deal with renewables’ variability’.

However, it’s not clear if markets can really do this unaided, or choose the best long-term options – they usually just go for the cheapest short-term options. The Carbon Trust/Imperial report suggests that incentives are needed that are aligned ‘to reflect the needs of a future electricity system and remove barriers to the deployment of flexibility solutions such as storage, so that the market can determine the least cost way to manage the system’.

So a more coherent approach is needed – with government intervention to shape and direct markets. Although it has to be done right, not like the UK Capacity Market approach, which so far seems to be focused on providing extra support for existing fossil and nuclear plants. On the latter, the report includes a scenario in which the role for nuclear is small and its cost uncompetitive. Similarly for fossil CCS…Storage is seen as better!

That does seem to be a familiar cry these days. Although the National Infrastructure Commission also backed demand management and interconnectors strongly, its report ‘Smart Power’ said ‘storage can help reduce the impact of peak demand and provide demand for power stations at other times of day’ and ‘also has the potential to ease constraints on our grids’. And it says that, due to cost-reducing technology advances, ‘storage technology will not need subsidies to be attractive to investors – businesses are already queuing up to invest’, although regulation will need changing e.g. under current levy systems, storage may be double charged – for both the input and output energy.

While there is no denying that storage can play a key role in some contexts, it has its limits and costs. Electricity storage (e.g. in batteries) can be good for short-term grid balancing (over a few hours), but is not really very viable for meeting long term lulls (possibly over several days or even weeks) in renewable availability – and depending on the scale of the demand and the reservoir, even pumped hydro can probably only provide a day or two’s supply. Pre-combustion storage of fossil or green gas, for use in gas turbines, is arguably a more likely option for that. See my new IoP book, Balancing Green Power!

It will be interesting to see what focus emerges in the next round of auctions for the Capacity Market. More storage? More demand management? More interconnectors? Worried about shortfalls, the government is moving the start-up of the whole thing by a year, to the winter of 2017/18, with the next auction being held this winter.

All this, of course, will now be overseen by the new Department for Business, Energy and Industrial Strategy, which has subsumed the Department of Energy and Climate Change (DECC). Ex-DECC permanent secretary Alex Chisholm claimed all will be well: ‘Energy and climate change will continue in a single department ensuring efficient paths to carbon reduction’ andwe can make sure we have the 21st century infrastructure we need’. 

It seems likely then that ‘infrastructure’ will be a major new focus and, in addition to electricity grid balancing systems, include green heat networks and systems. I will be looking at issues related to that in my next three posts.

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