Energy storage can help stabilise rapidly evolving power markets, but only if regulators provide a proper framework, says Jeffrey Casey.
The UK may be missing a historic opportunity to integrate energy storage technologies as it moves to decarbonise the energy sector. Recent evidence of this misstep can be seen within the provisional results of the capacity market auction, announced last week, being dominated by fossil fuels with storage getting a paltry 1.7 per cent of the payments – a cut of 80 per cent.
Storage technologies – primarily batteries – are proving to be game-changers throughout the world. However, in the UK structural challenges are slowing progress and development of energy storage has yet to achieve the outcomes and scale that it should have. The recent move to de-rate for shorter-duration systems will have a dramatic impact on project profitability for the technology.
What we need to do is correct structural market challenges.
Shying away
Under Ofgem’s regulatory framework, there are not enough incentives for developers to take the risks to deploy storage. Who wants to put their career, company, money, etc. on the line by taking a 10 year risk on an 8 year asset with a measly 2-3 year guaranteed cash flow? Pricing signals are telling them to put their investment elsewhere in the market or in the world. Large infrastructure investment banks are shying away from the UK storage market.
In parts of the world where storage is thriving and growing, revenue stacking compensates its gamut of services and allows appropriate opportunities to recover a reasonable return on investment. In the UK there is not a strong enough payback for any private investors to enter the market. When the country’s largest investment banks shy away from investing in energy storage, you can be sure the market isn’t functioning as well as it should be.
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