The quest for the Holy Grail: Top takeaways from energy storage seminar

German utility RWE and GE are developing the ADELE system to compress air at times of high electricity availability and place the resulting heat in an interim thermal storage device and to inject the air into subterranean caverns. When electricity demand rises, the compressed air can be used to generate power in a turbine – while recovering the heat. Source: RWE

The first law of thermodynamics states energy cannot be created or destroyed, only transformed from one type of energy to another. The second law of thermodynamics states when an energy transformation is made, some of the energy lost as heat. That is why there can never be a perpetual motion machine and why energy storage technologies have hitherto struggled to gain traction.

Yet the UK is home to a plethora of energy storage companies attempting to battle these laws of thermodynamics via such technologies as compressed air, large batteries, cryogenics, flywheels and thermal storage. A recent seminar put together by EcoConnect – ‘Electricity Storage: Renewables’ Holy Grail’ highlighted a number of challenges that the industry needs to overcome before it can hope to compete with pumped hydropower as a reliable source of energy storage.

Here my top ‘takeaways’ from the event:

1. The UK Department of Energy and Climate Change (DECC) is to create an energy storage subsidy scheme

DECC hopes to support energy storage through a scheme of grants from this autumn. DECC’s Head of Innovation Delivery Ian Ellerington said: “We have just received business case approval for an energy storage scheme and we are working on the delivery plan. We aim to officially advertise for participants on 14 September and there will be £10-20 million available.

“I am also encouraging DECC’s electricity markets team to take energy storage into account so that there will be a marketplace for suitably developed technologies.”

DECC’s Head of Innovation Delivery Ian Ellerington

2. Commercial deployment of energy storage is going nowhere until changes are made to UK and EU regulation

The natural customers for energy storage are the Distribution Network Operators (DNOs), such as UK Power Networks and Western Power Distribution, which operate the 12 regional distribution areas. Being able to own/contract energy storage would enable the smoothing of the supply and demand peaks and reduce network reinforcement costs.

However, this would require some recognition that these regulated companies can be a market participant in intra-day transmission system dispatch in order to stimulate deployment. This is currently outlawed as it is the responsibility of the transmission system operator (TSO), i.e. National Grid, to balance networks at a regional level.

Furthermore, while there is nothing stopping TSOs owning energy storage, regulation may prohibit their usage, says Anthony Price, director of the Electricity Storage Association. “The EU says the power industry has to be vertically separated and disaggregated with no cross-subsidies yet demands that energy storage is operated by TSOs,” he said. “They could have storage, but it’s not clear how they could use it. There’s a great deal of investigation as to how to get the rules changed, but don’t hold your breath.”

Steven Fawkes, partner in Matrix Group’s corporate finance

3. The current business case for energy storage is challenging

Energy storage has high capital costs and low load factors, says Steven Fawkes, partner in Matrix Group’s corporate finance. “Part of the problem for investors is trying to put the demand response benefits of storage into a viable business case, as they occur in different areas and benefit different parties. So it’s very hard to have a regime and compile a business case that stacks up for grid-scale energy storage.

“It’s an equity investment play at present,” he said. “Unless you have a medium- or long-term contract, such as a STOR (short-term operating reserve) contract from National Grid, there will be no debt finance for energy storage. It’s only for venture capital at present.  Energy technology is not like IT, it takes a very long time to develop and many investors are turned off by the delay.”

Gareth Brett, CEO of cryogenic energy storage system developer Highview Power added: “We’ve been at this since 2005 and spent £12 million to date, plus a £1 million DECC grant and we’re still trying to build a commercial demonstration project. It is likely to cost £20 million and we’re trying to find a host.”

Anthony Price, Director of the Electricity Storage Association

4. Energy storage could fundamentally change the way power is sold, so utilities are running scared

At present, utilities are rewarded on the basis of selling units of electricity. The more they generate and sell, the more they are profitable.  Storage technologies could be so disruptive and revolutionary the market could turn on its head, said Price.

“If everyone had their own generation and storage facilities, there would be no electricity market. But unless we can reform the market structure and regulation which currently absolutely locks out change, we aren’t going to be able to use these disruptive technologies.”

Clearly this is a very tough sell to utilities, says Highview’s Gareth Brett. “We’re trying to sell the future to a utility sector that is legendary for its conservatism,” he said. “No-one is going to get a bonus for installing #0001 of a new technology.

“Couple that with uncertainty over how the market will reward storage, or indeed a lack of market signals as to who would own storage facilities, and you have a real challenge. Utilities don’t want the lid blown off their economics and so gaining understanding of a disruptive technology is really very hard.”

Fawkes added it will only be when the giant power equipment OEMs like ABB, Siemens and GE adopt these technologies will energy storage will really take off. Partnering with such companies may be energy storage technology developers’ only hope, he said.

Gareth Brett, CEO of Highview Power

5. Energy storage throws up schemes at the outer fringes of sanity

Bernard Hanning of Skystream invited delegates to invest in his idea for a 1.5 MW solar-powered airship, which could be easily transported and plugged into the grid to be eligible for feed-in tariffs. As yet, there are no takers for Mr Hanning’s project.

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