Energy Storage-A Long Road Ahead?

For the energy storage market to grow, a multi-dimensional view of its benefits must be adopted.
Published: Thu 08 May 2014

Governments around the world realise the importance of reducing carbon emissions and in response, have put in place some very ambitious targets while still trying to keep the lights on.

Renewable generation is one way in which to do this and forms a major part of many countries’ generation mix. However, renewable generation has an intermittent nature, explains Andrew Jones, Managing Director of S&C Electric Europe Ltd, and as such, the ability to meet peak demands becomes very difficult. He suggests that a range of flexibility options will keep costs stable and meet the security of supply standards.

“The expectation is that energy efficiencies will keep consumption relatively flat but peaks are going to significantly increase. We did not change from horses to tractors because horses were not available- we changed because we need to do things differently and this is what we are facing now.

Energy storage is one such solution to the energy challenges we all face-flexibility, security of supply, cost-effectiveness and climate change.

The markets

Europe’s energy storage is developing well with 256 projects currently in operation. To date, energy storage has received over £750m of EU funding and more is expected to be given the nod over the next few years.

In Italy, the Distribution System Operator and Transmission System Operator can achieve a 2% additional return over and above the current 6% if investments are made in energy storage. This has created a £200m market.

In Germany, the government introduced a self-consumption subsidy for storage linked to small-scale solar photovoltaic at residential and small and at the medium business level. This has created a £65m market per annum.

The US energy storage market has grown quicker than Europe’s-around 320 projects are currently operating, most of which are of a larger scale with more operating on a commercial basis. The New York Independent System Operator was the first commercial market for storage as they recognised the benefits of fast response -effectively storage responds quicker than conventional generation. This speed of response reduces the amount you need to correct an event, and it is inherently greener than spinning reserve.

Both continents are attempting to resolve a single challenge through the adoption of energy storage, points out Mr Jones. However, in comparison, Africa is solving a number of challenges out of necessity through energy storage. The continent has been operating lead acid schemes for a long time now and off-grid projects, combining renewables and storage are currently the most advanced in Kenya. The country has recently claimed that they are saving £350k in operation costs per annum due to their 10.2MW renewable-storage projects.

South Africa has also just awarded Round 3 of their renewable program and they are (inadvertently) recognising the benefits of storage by awarding Concentrated Solar Power with molten salt- a premium compared to solar photovoltaic which can be up to 2.6 times at peak usage.

Only 30 energy storage projects are recognised in Africa but the figure jumps to 3000 if lead acid projects are included.

Storage-not one dimensional

The general consensus is that energy storage solutions are technically proven and commercially available in volume.

The first requirements in California had 500 bids against a demand of 50MW. Says Mr Jones, “We are clearly seeing intervention to encourage storage. The various Low Carbon Network Fund projects are helping us learn how to use storage.”

However, Mr Jones points out that many governments believe that energy storage is too expensive. In response to this perception, he says, “My question always is too expensive for what? Most people appear to think one dimensionally about storage and don’t look at what storage can do at many levels.”

Energy storage has a number of benefits, all of which have a revenue stream. However, due to the EU third energy package, it is currently unclear how you access these. So is policy creating a barrier? Mr Jones explains that there are varying views on this but in reality, it is the market design which calls for evaluation. To meet the increased peak demand by 2050, he points out that these value streams have to be unlocked.

While storage technology is emerging quickly, more development is needed in most cases. Mr Jones points out that software is the key to unlocking the market potential of energy storage, as well as the formulation of sound business cases and economic modelling.