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Why battery storage is crucial to achieve our net zero goals

Battery energy storage crucial for energy storage.

Renewable energy wastage is adding to energy bills and increasing CO2 emissions. James Basden, Co-Founder and Director of Zenobē, believes battery energy storage can help solve both of those issues. 

The numbers around UK wind power continue to balloon: a record 20 GW of wind generation in December 2022, CfD auctions doubled in frequency, and a national target of 50 GW of wind by 2030. But generating enough renewable power is just one part of the challenge. We also need to build infrastructure that lets us use that energy when and where we need it.

To update our power system for the age of renewable energy we need new transmission infrastructure such as the ‘eastern links’, scheduled to start operating from around 2030 onwards. These high-voltage cables will transport power down the east coast from Scotland, where there is a surplus of renewable energy, to sources of demand further south.

But until these cables start working, bottlenecks on the transmission network will continue to cause problems, including additional costs and delays to decarbonisation. By using new technologies such as batteries in innovative ways, it is possible to reduce these costs. If appropriately deployed, battery storage can help alleviate the impact of inadequate network capacity until the cavalry (i.e., the eastern links) arrive.

What are network constraints and what is renewable energy curtailment?

Because the UK is not upgrading its grid as quickly as it is building wind farms, clean power is regularly wasted. On especially windy days, renewable generation exceeds network capacity – or to put it in industry jargon, the network is ‘constrained’. At these times, to ensure that Scottish wind farms do not overburden cables with electricity, overheating them, National Grid ESO pays generators to switch off their turbines. This process is known as ‘curtailment’. Meanwhile, to satisfy electricity demand further south, it buys electricity from generators in England, most often turning to gas-fired plants.

From 2020-2022, the ESO spent an average of £205 million per year on curtailing wind energy. The public ultimately paid for these costs through energy bills. These figures don’t take into account the money the ESO spent on procuring expensive gas-fired electricity to replace lost wind power (also paid for by the public): £196 million in 2020, £429 million in 2021, and £717 million in 2022. Curtailment takes a toll on the climate, as well as energy bills: when substituting for wind turbines, those fossil-fuelled power stations emitted circa 3.5 million tonnes of carbon dioxide.

But there is another way. Instead of paying to squander cheap, clean power, we can store it for future use.

The promise of battery storage

Batteries connected to the transmission system could help to resolve curtailment, reducing energy bills and cutting carbon emissions. Batteries have the potential to import power during peak generation, and then to export it back onto the grid when needed. In short, batteries offer ‘flexibility’ – the ability to balance shifts in renewable generation by sending electricity to where it is needed, or by storing it for later use.

Using transmission-connected battery storage in this way would reduce the need for the ESO to pay to switch off wind farms. It would also cut the need for the ESO to spend money on climate-polluting gas. This would result in lower energy bills and lower greenhouse gas emissions.

So, what’s holding us back?

Firstly, storage operators face ill-fitting regulations designed for the age of fossil fuel generation. This disincentives them from locating assets where they would be most useful for the UK’s energy needs. For example, transmission charges treat storage like gas or coal generation – they do not take into account how storage can import, as well as export, power. As a result, storage operators face unduly high charges that discourage them from building assets where they would have the most positive impact.

Secondly, National Grid ESO has historically been hesitant to dispatch storage assets via the Balancing Mechanism. This is because the ESO’s current IT systems do not allow it to see a battery asset’s state of charge at any given time. As a result, control room operators lack trust in battery storage and turn instead to fossil-fuel assets to balance the system. As National Grid ESO updates its IT systems and drives forward its decarbonisation programme, this situation should shift.

Finally, the UK’s current electricity market design dates from 2013 and does not always incentivise participants to behave in ways that benefit the overall operation of our fast-changing system. The Department for Energy Security and Net Zero (DESNZ) is considering these operability challenges as part of the ongoing Review of Electricity Market Arrangements (REMA).

Utility-scale battery storage is increasingly being recognised as an essential component to the UK’s energy transition. The transition doesn’t just mean developing wind farms – it also requires the redesign of our network infrastructure to harness the full potential of clean power and ensure electricity is cheaper, more secure, and more sustainable.

Where next?

The energy storage sector is growing rapidly, with 4GW of batteries set to connect to the grid by 2025-6. Previously storage operators found it difficult to raise equity or debt because of high upfront costs and a perceived lack of reliable revenue streams – but that perception is changing. Investment in storage is now expanding as operators develop new business models, stacking revenues from multiple services.

For example, in February this year Zenobē secured a £235 million long-term project finance debt facility to develop two grid-scale transmission connected battery storage assets in Scotland. The debt facility is the largest of its kind ever secured in Europe and is another indicator of the increased confidence in battery storage as an attractive investment opportunity. The sector is also benefiting from new contracts that are specifically designed to stabilise non-synchronous power systems.

Even so, this growth is not keeping up with renewable energy deployment. Curtailment costs are predicted to rise by up to 500% over the next 10 years. As the National Audit Office recently observed, the public will continue to face cost and decarbonisation risks ‘if network capacity does not keep pace with electricity generation expansion’. These risks can be linked not only to inadequate network capacity, but also to the fact that wind farm construction is outstripping storage installation.

The UK risks falling behind on power system decarbonisation due in no small part to the Inflation Reduction Act, which is seeing talent and money diverted to the US. While the EU has announced how it plans to respond to this landmark piece of legislation, we are yet to hear how the UK intends to continue to attract investment in clean power in an increasingly competitive international context. We also need to see significant change at Ofgem to put decarbonisation at the top of its agenda. With ambitious renewables targets set, policymakers now need to turn their attention to updating our outdated electricity network infrastructure.

James Basden
James Basden
Co-Founder and Director of Zenobē

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