Grid Scale, Storage

Progress for UK Battery Energy Storage with Capacity Market Auction Success

Promising steps for the integration of battery energy storage into the UK electricity system are to be found in outcomes of the nation’s latest capacity market auction.

Some 500 MW of new-build battery storage won agreements through the auctions. Altogether, some six percent (3.2 GW) of the total auctioned capacity went to energy storage capacity.

Falling below forecasts, the auction closed with a clearing price of GBP 22.50 (US$28.3/EUR 26.8) per kWh.  

On conclusion of the auction, UK Business and Energy Secretary (BEIS) Greg Clark said: “Technological innovation, as part of our low carbon future, will create jobs and opportunities across the UK. We are rebuilding an archaic energy system, bringing forward brand new gas power and innovative low-carbon capacity like battery storage to upgrade our energy mix.”

A spokesperson of the National Grid — the UK transmission system operator and body that ran the capacity auctions — told Renewable Energy World: “As system operator, we see an increasing role for storage to optimize value for consumers. Storage can provide more cost-effective system balancing services and offer opportunities to optimize network investment.”

They continued: “The benefit of using storage in our ancillary services is how much cheaper it is for the consumer by providing an alternative to costlier technology, and in reducing the need for additional network investment.”  

Frank Gordon, senior policy analyst and energy storage lead at the UK industry body the Renewable Energy Association, told Renewable Energy World: “This is an encouraging result, and it is positive to see the continued growth of energy storage in the UK market.”

However, he observed of the 3.2 GW energy storage, “much of this is existing, pumped hydro storage capacity, which has been successful in the previous auctions as well, so not too much can be read into the majority of the contracts awarded to storage.”

What has changed, Gordon added, is contracts being won by the first new build battery storage projects, which he called “encouraging.”

Low Carbon Storage Investment Company Limited (Low Carbon) won such contracts with projects featuring lithium-ion battery storage technologies.

Quentin Scott, marketing director for Low Carbon, told Renewable Energy World: “Low Carbon is delighted to have secured two energy storage contracts. The projects at Cleator and Glassenbury, with a total capacity of 50 MW, were also successful in National Grid’s recent [enhanced frequency response (EFR)] tender, where we were the only company to be awarded two contracts.”

Describing a shifting energy landscape in the UK, Scott said that storage in the UK is a reality.

“With storage projects winning contracts in the National Grid EFR tender and the capacity market auction, it is clear that we are at an important turning point for storage in the UK,” Scott said.

REA’s Gordon was slightly more cautious, noting that “it is not the breakthrough moment yet.”

Expanding on this, Gordon explained that all of the new-build battery storage projects awarded capacity market contracts have previously been awarded contracts through the UK’s EFR auction that concluded in August.

Winning contracts on both EFR and capacity markets “points to the fact that it is still not possible to finance a storage project purely on the basis of the capacity market,” he said.

Competing on both the EFR and capacity markets — as Low Carbon did — provides means to “stack” multiple revenue streams, and thereby assure financial viability of projects, according to Gordon.

Stacking in this way is seen as an important route to deployment for energy storage providers — a point that must be held in mind as effective regulations for energy storage evolve.

On this matter, the National Grid’s spokesperson said: “National Grid’s system operator is proactively exploring changes in the commercial framework, which will allow storage to provide greater ancillary and balancing services, on a level playing field with other flexibility tools.”

Such developments, common throughout Europe and indeed electricity markets the world over, would be especially welcome by developers like Low Carbon.

“While more needs to be done to ensure clarity and stability in the policy environment for storage, with the right level of support we expect to see UK large-scale storage services flourishing with increased investment in the near future,” Scott said.