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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The U.K. government has been accused of damaging the emerging battery storage energy sector with new rules to de-rate smaller projects.
The changes proposed by the Department for Business, Energy, and Industrial Strategy (BEIS) will make it very difficult for short-duration battery projects to compete for government funding in future capacity auctions for backup power. The government aims to de-rate battery projects by up to 80% in future auctions, meaning that those short-duration battery projects capable of providing backup power for 30 to 60 minutes will be less profitable for developers. The government expressed concern that it could end up paying too much for too many short-duration projects not capable of backing up longer outages.
The existing de-rating measure relates to expected availability of a storage installation in the event of a power outage, termed a System Stress Event. For battery storage assets, the de-rating factor is 96% but this will now be cut to 18% for battery storage with a 30-minute duration. The factor increases for each 30 minutes the battery storage project can operate, with four-hour projects the only ones still rated at 96%--similar to pumped storage.
The government noted that a high proportion of the battery storage projects approved and under development are in the 30- to 60-minute class, which do not match the length of many outages.
"The emergence of batteries in the last round of auctions was considered to be a sufficiently significant development to prompt a review to consider whether changes were needed ahead of the next round of auctions to facilitate their participation going forwards on a fair and equal basis to other technologies," the government stated in its report. "At the time of the review there was emerging evidence that market signals were driving the deployment of limited duration batteries that could generate continuously for a maximum of 30-60 minutes, while initial analysis from National Grid suggested that the duration of stress events may frequently exceed this. This raised concerns regarding the potential for storage to be over-rewarded... relative to its ability to contribute capacity during longer stress events, which in turn could lead to a reduction in security of supply."
The government's proposed changes were questioned by Frank Gordon, policy manager at the industry group Renewable Energy Association: "The Capacity Market is an ever more crucial mechanism for delivering battery projects, which underpin the additional electricity system flexibility that is so urgently needed in the U.K.," he said. "The changes unveiled today are slightly less drastic than those first proposed but could make it harder for a number of battery storage projects to compete. Storage projects over four hours duration, such as flow batteries that can hold power for longer lengths, will see no change from the decision. The timing of these changes is our main criticism however. As they are being applied in the midst of an on-going auction process it's akin to changing the rules of a football match at half-time."
There was support for the changes from some battery-storage developers including U.K. Power Reserve (Solihull, London), which has 120 megawatts (MW) of battery projects.
"We accept and understand the Government's decision to de-rate battery storage ahead of the Capacity Market auction in February next year," it stated. "We agree with the conclusions from the Department for Business, Energy and Industrial Strategy that de-rating factors should reflect technology duration, and believe that this is in the best interests of the market and the consumer. This decision provides the incentive for developers to build the higher quality, longer duration batteries that can help secure the U.K.'s electricity supply when it is threatened during a stress event."
href="http://www.industrialinfo.com/"target="_blank">Industrial Info has been tracking the rapid developments taking place in the U.K. energy storage sector. Last year, the country's grid operator, National Grid plc (NYSE:NGG) (London, England) completed the world's first energy-storage auction. Attracting 37 bidders, most of which were pitching battery-storage solutions, National Grid awarded contracts to eight companies to provide 200 MW of grid-scale battery storage, which it estimated will save the country £200 million ($262 million). For additional information, see August 31, 2016, article - U.K. Bets Big on Battery Power.
In October, Industrial Info reported on the startup of one of the U.K.'s first industrial-scale battery storage projects at the Blackburn Meadows biomass plant owned by E.ON AG (OTC:EONGY) (Dusseldorf, Germany) near Sheffield, England. The 10-MW lithium-ion battery plant will store power from the 30-MW combined heat and power (CHP) plant. For additional information, see October 13, 2017, article - Battery Storage Project Goes Live in the U.K.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
The changes proposed by the Department for Business, Energy, and Industrial Strategy (BEIS) will make it very difficult for short-duration battery projects to compete for government funding in future capacity auctions for backup power. The government aims to de-rate battery projects by up to 80% in future auctions, meaning that those short-duration battery projects capable of providing backup power for 30 to 60 minutes will be less profitable for developers. The government expressed concern that it could end up paying too much for too many short-duration projects not capable of backing up longer outages.
The existing de-rating measure relates to expected availability of a storage installation in the event of a power outage, termed a System Stress Event. For battery storage assets, the de-rating factor is 96% but this will now be cut to 18% for battery storage with a 30-minute duration. The factor increases for each 30 minutes the battery storage project can operate, with four-hour projects the only ones still rated at 96%--similar to pumped storage.
The government noted that a high proportion of the battery storage projects approved and under development are in the 30- to 60-minute class, which do not match the length of many outages.
"The emergence of batteries in the last round of auctions was considered to be a sufficiently significant development to prompt a review to consider whether changes were needed ahead of the next round of auctions to facilitate their participation going forwards on a fair and equal basis to other technologies," the government stated in its report. "At the time of the review there was emerging evidence that market signals were driving the deployment of limited duration batteries that could generate continuously for a maximum of 30-60 minutes, while initial analysis from National Grid suggested that the duration of stress events may frequently exceed this. This raised concerns regarding the potential for storage to be over-rewarded... relative to its ability to contribute capacity during longer stress events, which in turn could lead to a reduction in security of supply."
The government's proposed changes were questioned by Frank Gordon, policy manager at the industry group Renewable Energy Association: "The Capacity Market is an ever more crucial mechanism for delivering battery projects, which underpin the additional electricity system flexibility that is so urgently needed in the U.K.," he said. "The changes unveiled today are slightly less drastic than those first proposed but could make it harder for a number of battery storage projects to compete. Storage projects over four hours duration, such as flow batteries that can hold power for longer lengths, will see no change from the decision. The timing of these changes is our main criticism however. As they are being applied in the midst of an on-going auction process it's akin to changing the rules of a football match at half-time."
There was support for the changes from some battery-storage developers including U.K. Power Reserve (Solihull, London), which has 120 megawatts (MW) of battery projects.
"We accept and understand the Government's decision to de-rate battery storage ahead of the Capacity Market auction in February next year," it stated. "We agree with the conclusions from the Department for Business, Energy and Industrial Strategy that de-rating factors should reflect technology duration, and believe that this is in the best interests of the market and the consumer. This decision provides the incentive for developers to build the higher quality, longer duration batteries that can help secure the U.K.'s electricity supply when it is threatened during a stress event."
href="http://www.industrialinfo.com/"target="_blank">Industrial Info has been tracking the rapid developments taking place in the U.K. energy storage sector. Last year, the country's grid operator, National Grid plc (NYSE:NGG) (London, England) completed the world's first energy-storage auction. Attracting 37 bidders, most of which were pitching battery-storage solutions, National Grid awarded contracts to eight companies to provide 200 MW of grid-scale battery storage, which it estimated will save the country £200 million ($262 million). For additional information, see August 31, 2016, article - U.K. Bets Big on Battery Power.
In October, Industrial Info reported on the startup of one of the U.K.'s first industrial-scale battery storage projects at the Blackburn Meadows biomass plant owned by E.ON AG (OTC:EONGY) (Dusseldorf, Germany) near Sheffield, England. The 10-MW lithium-ion battery plant will store power from the 30-MW combined heat and power (CHP) plant. For additional information, see October 13, 2017, article - Battery Storage Project Goes Live in the U.K.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
