UK energy storage: government in no hurry

The UK’s energy sector is eagerly anticipating the government’s response on the recent call for evidence (CfE) asking for views on how to enable a smarter and flexible energy system. The CfE was a joint move between the government and the country’s energy regulator Ofgem that concluded on 12th January. Since then, the sector has waited patiently for the government’s conclusions. It appears they will need to wait for at least two more months.

Deidre Bell, senior manager at Ofgem, told the Westminster Energy, Environment and Transport Forum (WEETF) that took place in London on Tuesday that the CfE received a total of 240 responses, of which approximately 150 responses mentioned energy storage specifically.

Bell said that an initial analysis of the feedback shows that the CfE has identified the correct barriers, while some additional barriers were raised in the responses, such as the ability of energy storage investors to stack revenues.

Overall, Bell added, there is an agreement among the CfE respondents that for more clarity on the regulatory treatment of storage, (licensing options) are needed and that a definition of energy storage is required. Ofgem and the government consulted on other areas too, like network connecting issues and charging as well as the use of storage by grid operators. The grid charging issues are furthermore addressed in a separate consultation currently in place by Ofgem. Bell, however, declined to comment on future energy policy since the country is facing a snap general election on 8th June.

Stakeholders waiting for the policy
Energy storage stakeholders do need answers to above issues, and urgently, it was argued

Ross Fairley, head of energy, power and utilities at Burges Salmon, a U.K. law firm, told the event that, based on his experience, financing is not impossible. “However,” he said, “all banks we talk to are still trying to get around the revenue streams of energy storage projects. They are asking: what is the security of the various revenue streams? Have investors developed an alternative plan in case that one of the planned revenue streams fails?”

Furthermore, argued Fairley, the revenue and regulatory work in storage projects is different from the renewable energy projects, so therefore an investor cannot apply the usual project development model. “So far, we see most of the energy storage applications concerning co-locating projects along with solar PV and wind installations,” Fairley said.

However, this is only an application of the energy storage technology. As Phil Sheppard, director of system operations at the U.K.’s transmission system operator National Grid remarked, energy storage is not a single product; it offers different routes to market. In brief, Sheppard said that the National Grid sees three markets emerging in the U.K.: ancillary services, network services, and a market around arbitrage opportunities (e.g. behind the meter storage applications).

Overall, there was a sense at the Forum that businesses are ready to engage in various forms of energy storage markets as long as the regulatory framework is clear.

John Prendergast, head of energy storage business development at the RES Group, told the event that he sees strong equity appetite in financing, but this is very much impacted by the policy changes. Specifically, Prendergast said, we need to see the government moving faster in policy making, allowing new energy storage business cases to emerge.

The government does not appear to be in a hurry. An example showing this comes from a relevant, if not more urgent, front: the air quality plan. The government’s original plan was challenged at the court, and was seen as too weak.

The court asked the government to submit an improved air quality plan by Monday 24th April. Not only has the government missed the deadline, but it also applied to delay publishing the draft plan until 30th June because of the forthcoming snap election. In energy storage, the court is not even involved. The government can take its time.