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Long-duration energy storage (LDES) will be essential to reaching the UK’s 2030 clean-power ambitions according to regulators, with industry leaders advocating for a mix of technologies to reach net zero.
Gavin O’Leary, head of LDES at the Department for Energy Security and Net Zero (DESNZ), said the technology will be a “non-negotiable” part of the energy system.
Speaking at the Innovation Zero event in London in April, he pointed out that energy storage is “the way that virtually every government in the world is going in terms of costs and maximising security”.
LDES is a method of storing energy produced from power plants and helps to balance grid fluctuations against intermittency caused by the varying availability of renewable power.
But George Martin, a senior consultant at energy consultancy LCP Delta, emphasises that the government’s Clean Power 2030 mission is going to take a “gargantuan” effort from government, regulators, industry and investors.
According to Martin, expansion of new energy infrastructure was “significantly below” the 11.3 GW level required to hit 2030 targets in 2023 at just 3 GW. The UK will “need an unprecedented scaleup of all key low-carbon technologies” to fulfil those ambitions.
“Renewables alone can’t get us there,” he says. “We need other technologies, such as long-duration energy storage, and low-carbon thermal solutions such as gas carbon capture and storage (CCS) and hydrogen power generation.”
A report produced by LCP Delta for DESNZ last year said energy storage technology would lead to a cheaper, more decarbonised power system. The analysis showed that adding 12 GW of LDES capacity to the system would reduce emissions by 28% in 2035.
By 2050, the firm estimates that the UK could save up to £24 billion in net power costs by nearly doubling energy storage capacity to 20 GW.
Sarah Griffiths, vice president for government and regulatory affairs at energy storage system specialist Hydrostor, says there is a need to “evolve the market” for energy storage over the first 20 years to get to a point where it can help meet national energy needs.
“That is going to take time,” she says. “It’s nothing against Ofgem… the system operator, or regulator.”
However, if wind is the primary source of power, that “will drive longer periods of excess” power or a “shortfall of renewable generation” due to weather patterns, according to Martin.
This anticipated volatility in the supply and demand of renewable power means the UK has an “acute need” for longer-duration storage technologies.
While shorter periods of excess power generation and demand “can be resolved with short-duration storage”, Martin says, storage over longer periods is expected to provide an even greater buffer.
© Jessica Davies/DCT MediaMarket ‘intervention’
The cap-and-floor mechanism for energy storage that the government launched in April is “required to provide an investment framework”, according to Martin.
The first window for applications under the new regime, which provides a minimum price floor and a cap on costs, opened last month.
LCP Delta estimates that at least 3.5 GW of new LDES capacity is required to reach the UK’s clean power goals.
Griffiths also emphasises the need for regulation in order to meet the 2030 targets: “It’s finding the mix of technology to fulfil the goal.”
Ofgem deputy director for low carbon Gordon Hutcheson says that new energy storage policies introduced by regulators represent “a significant intervention in the market”.
Regulators argue that a fixed price for energy storage will not distort how power markets operate, with a price set for stored rather than generated power due to be integrated into the main market.
Hutcheson says that any incentive has the potential to distort the market, even contracts for difference (CfDs) for renewables under AR7. Ofgem will review the adoption of LDES, while also considering other technologies, he says.
Griffiths meanwhile points out that the UK’s contracted power model for renewables, and the cap-and-floor mechanism for LDES, is not new.
She says it is the “same idea” as the contract system that is in place in Australia, which has already brought forward projects now in development. But some market participants remain nervous about how subsidies for stored power will impact the marginal cost of energy.
‘Distortionary impact’
Speaking in April, O’Leary denied that the adoption of energy storage incentives would have a ‘distortionary’ impact on the market.
Overall, regulators say the market should not be discouraged by the impact of energy storage facilities coming onto the system in the next five years.
“If we hit a minimum of our clean power 2030 ambitions, that means, in the next five years, 1.2 extra gigawatts of LDES and 18 GW of extra short-duration storage,” he said.
“So I feel like, even if there is a distortionary impact, it is nothing compared to the distortionary impact of everything else that is coming onto the system in the next five years.”
The need to develop a market for renewables with energy storage is particularly pertinent given the escalating price of building natural gas in a merchant market, according to Griffiths.
And while the price of renewable power has “come down massively”, energy storage costs are also falling, according to environmental consultant Andrew Boswell.
Boswell, who this month lost an appeal against the Net Zero Teesside gas-fired project with CCS, says innovative low-carbon technologies are “competing for one space”.
If the UK chooses to build out CCS and blue hydrogen over energy storage with renewables, “we’re locking ourselves into a very expensive solution”, he says.
Oghosa Erhahon, policy officer for the Long Duration Energy Storage Council, explains that energy storage is also opening up the market for renewable power to regions in countries such as Asia and Africa – particularly in cities.
Ofgem has been reviewing cost allocation in the energy system. It has also explored central volume allocation and supplier volume allocation models for the transmission and distribution networks.
“We assume Ofgem wants to look at the international standards; best practices,” Griffiths says.
For businesses to break into international markets in this space, she adds that it is important to collaborate with companies overseas.
“Talk to who’s coming next,” she says.
