Summary: The UK has a rare opportunity to be a global leader in energy storage and the development of smart behind the meter solutions for energy use are central to this. The potential gains for organisations that are able to embrace the opportunities may be significant, but there are a number of risks and obstacles that also need to be dealt with in order to do so.

This is the first of a series of short articles looking at energy storage. We will analyse the possible role of storage from the perspective of three different uses: (i) behind the meter (“BTM”) (e.g. by large commercial and industrial users); (ii) co‑location with power generation assets; and (iii) by distribution network operators (“DNOs”) for network services.

This article focusses on BTM use and some of the benefits available. Subsequent articles on BTM use will look at applicable ancillary services, as well as the various regulatory and commercial challenges involved in deploying BTM battery storage in the UK.

The Case for Storage

Energy storage has been around for many years in the UK, mainly in the form of pumped hydro stations (such as that at Dinorwig in Wales which currently provides the vast majority of the UK’s current storage capacity). However, in recent years, other storage technologies have developed quickly, with lithium ion batteries in particular receiving significant investment and delivering significant technological and price improvements.

Electricity storage offers a number of opportunities for those that can successfully identify and manage the risks and opportunities that it provides.

Electricity storage has the potential to assist the UK in transitioning to a smarter grid, as well as enabling increasing amounts of renewable generation connect to the grid, without costly reinforcement works.

Behind the Meter – What is it?

BTM use is the use by large businesses and industry who install (or allow others to install) battery storage systems on site (i.e. behind the meter). Many industry commentators believe BTM use is best placed to make an immediate impact on the electricity system compared to co-location with generation assets and use by DNOs, mainly because BTM use avoids a number of the issues that are holding back the use of batteries in these ways (as will be explained in detail in following articles).

Benefits and Revenues

There are a number of revenue streams and cost savings which may be available to those that deploy BTM battery storage and the main ones are summarised below.

Arbitrage

For BTM users with grid connections of greater than 100kW, electricity consumption will be measured by a half-hourly meter. However, many BTM users will nonetheless be on a time of use tariff and be exposed to varying energy prices throughout each day.

Arbitrage (or peak-shaving) is potentially the most significant use of BTM storage where a time of use tariff is in use. It involves the use of batteries to store power in off peak times when electricity is cheaper for use during peak times when electricity is more expensive.

The difference between peak and off-peak electricity prices is more pronounced in the retail market than wholesale, making arbitrage likely to be a greater benefit to BTM battery users than other battery operators. In fact, the Energy Storage Association estimates that use in this way could save BTM users 9p/kW in lower distribution use of system charges alone.

As well as the differential between peak and off‑peak prices, the value of the use of batteries by BTM users will depend on the volumes of electricity consumption which can be moved to off‑peak periods, which is likely to vary significantly across different industries.

All storage technologies can help deliver arbitrage benefits but arbitrage technologies which can store large quantities of energy for slow release, such as redox flow batteries, are likely to be able to deliver the greatest benefits.

Connection Costs

Utilising BTM storage may allow large industry users to minimise the costs of sourcing an electricity connection. A significant proportion of connection charges will be directly linked to peak import and export volumes, which will be reduced by using storage to smooth out demand.

Triad Avoidance

With the help of Triad warnings, BTM battery operators could charge the battery in anticipation of a Triad period and avoid taking power from the grid during the Triad period itself, thus minimising TNUoS charges. The actual Triad periods are not confirmed by National Grid until the March following the Triad season, though, incentivising users to minimise electricity consumption across the whole Triad season.

Use as an Uninterruptible Power Supply

Battery systems could be configured to provide back‑up power supplies in the event of a network fault. The value of this will depend, primarily, on the value of any possible lost operations (e.g. factory production time). Use as an uninterruptible power supply could be combined with the provision of ancillary services as described in subsequent articles.

Conclusion

This article has set out some of the many benefits available to battery storage assets. However, it is likely that, to be economically viable, most assets will wish to also take advantage of a complicated array of possible revenue streams available from providing ancillary services to National Grid. BTM users will also need to navigate the various regulatory and commercial challenges before taking the decision to invest in a BTM battery asset.

Following articles will look at both these areas in more detail but please do not hesitate to get in touch if you wish to discuss or have any questions in the meantime.