1. What electricity storage projects have been commissioned in your jurisdiction to date?
For many years pumped hydro storage projects were almost the only electricity storage technology. They still make up the largest share of the electricity storage capacity in Germany; about 30 projects commissioned between 1926 and 2004 provide a total capacity of about 7 GW. The majority are operated by utilities and they principally provide time-shifted electricity supply and balancing energy. Originally their main purpose was to store electricity during low-use hours, such as night-time, and provide additional energy during peak daytime hours. In recent years, their use during high production times of wind farms and PV plants has increased in importance while PV plants provide some of the electricity required during peak times.
Another older storage project is the Huntorf CAES plant, the world’s first compressed air energy storage, commissioned in 1978 and increased to a capacity of 321 MW in 2006. The first large battery storage plant in Germany, commissioned 1986 in Berlin-Steglitz with a capacity of 17 MW, served as energy reserve and frequency stabilization for the insular West Berlin power grid, but was taken out of operation after the reunification in 1994 as its operation was no longer necessary or economic.
In recent years, the focus of industry participants and research has been on battery storage technologies and to a lesser extent also on power-to-gas solutions. Two recent pioneering projects combine renewable energy plants with battery storage units. Since July 2014, a joint venture of Robert Bosch GmbH and the owners of the Barderup wind farm have operated a hybrid battery storage consisting of a 2 MW/2 MWh lithium-ion battery storage and a 330 kW/1 MWh vanadium redox flow battery storage. The storage is connected to the Barderup wind farm to save any production surplus, time-shift export and allow participation in the balancing energy market. In November 2014, a 1.3 MW lead-acid battery storage, supplied as a turnkey solution pre-installed in containers, was commissioned at the 68 MW PV plant Alt Daber to allow the plant to provide primary control reserve.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Germany’s Energiewende, the increasing wind energy and PV capacities and the planned decommissioning of all nuclear plants put a focus on storage solutions. Midsize and larger scale battery storage options above 1 MW are a hot topic. They are installed primarily by grid operators or utilities to balance the grid and provide control power. However, recent projects also include the co-location of battery storage with renewable energy generation to improve grid compatibility of renewables, while at the same time opening improved marketing opportunities for the project owners in times of decreasing financial support through feed-in tariffs. In 2015, 41% of new solar installations were co-located with battery storage, up from 14% the previous year.
About ten such larger scale battery storage projects have been realized in recent years already, most of them using lithium-ion technology, and at least eight projects are currently under construction with further projects in various planning stages. While many early demonstration projects received funding under the Federal Ministry of Economic Affairs and Energy’s 200-million-euro-energy storage funding initiative, recent commercial projects depend solely on revenue from participation in the frequency response market. Among others, the power plant operator STEAG already operates a 5 MW/5 MWh lithium-ion battery storage and plans six more 15 MW projects alongside existing power stations.
Falling PV system and small battery costs as well as innovative leasing and rental models are likely to lead to an increase in the combination of small battery storage with household or commercial small scale PV plants to increase self-sufficiency and open opportunities to provide frequency response services. New solutions include connecting small batteries to centrally controlled units. The resulting virtual power plant can be used to provide frequency response and thereby support grid stability. With the same aims district storage solutions are developed, such as the “electricity bank”, a project supported with funding by the Ministry for Environment Baden-Württemberg, consisting of a 100 kWh lithium-ion central battery storage in which owners of small PV and CHP plants can store their surplus energy comparable to money in a bank account.
Finally, car manufacturers are entering the stationary battery storage market both for second-use of car and electric car batteries, and to create economies of scale for electric car batteries, again with the goal of financing the projects by providing frequency response.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
There is no separate legislation on electricity storage facilities in Germany. German law regards electricity storage facilities as consumers of electricity. This would imply that storage facilities, when withdrawing electricity from the distribution or transmission system for storage purposes, need to pay all fees, charges, etc. which normally are associated with the consumption of electricity. However, there are several exemptions in place, which aim to facilitate the use of storage facilities.
The German Federal Energy Industry Act (EnWG) exempts storage facilities which were built after 31 December 2008 and were put into operation within 15 years on or after 4 August 2011 from the duty to pay network tariffs for a period of 20 years when withdrawing electricity from the distribution or transmission system for storage purposes. The exemption only applies if the electricity withdrawn is stored in an electrical, chemical, mechanical or physical storage facility and the electricity is re-fed with a delay into the same distribution or transmission system. Special rules apply to pumped hydro storage plants. Whether the exemption from network tariffs also means that other charges and levies, such as concession levies, which are to be paid together and on top of network tariffs, do not have to be paid either is disputed.
Furthermore, the German Renewable Energy Sources Act (EEG) exempts electricity supplied for the purpose of being temporarily stored in an electrical, chemical, mechanical or physical electricity storage facility from the EEG levy if the electricity stored is only withdrawn to be fed back into the same network from which it was withdrawn.
According to the current electricity tax regulation, electricity tax does not need to be paid on the generation of electricity. Pumped hydro storage facilities are regarded as generators of electricity. Thus, they are exempted from the duty to pay electricity tax. However, other electricity storage facilities are not mentioned in the regulation and thus not exempted. Therefore a legislative amendment has been proposed. According to the proposal, the respective administrative body could, on request, allow stationary battery storage facilities to be regarded as part of a network if electricity is stored only temporarily and fed back into the network. In this case the battery storage operator would not need to pay electricity tax.
To open up the market for balancing energy to more suppliers, such as storage facilities, the German Federal Network Agency has proposed some changes to the balancing energy regulations. Amongst others, it proposes exemptions from the minimum size of products on the secondary and tertiary control market. Storage facility operators would prefer to have the conditions on the primary frequency response market changed to open it up for battery storage. However, changes are not expected on this market yet.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
The main challenges for new energy storage projects are as follows:
- Revenue uncertainty: Main source of revenue for most projects is the participation in the frequency response market. The prices for frequency response are not secured by long-term contracts but subject to auctions, meaning that the prices can and are changing.
- Difficulties to pre-qualify for the frequency response market: Participation in the frequency response market is the primary business model for many electricity storage projects. This requires firstly that storage projects are pre-qualified, i.e. meet the transmission system operator’s reliability requirements. Currently, this is difficult, especially for small storage units that already do not meet the minimum size requirements. But some of the other criteria, especially for the primary frequency response market are also challenging for larger scale battery storage. Further projects face the additional risk that requirements may change even during construction. Current proposals to facilitate participation of storage facilities in the frequency response market are so far limited to the secondary and tertiary control market.
- Higher operational costs: As set out above, the import of electricity from the transmission or distribution system is in principle considered “end-use” of such electricity. While exemptions from network tariffs exist for certain types of storage, including battery storage, it is unclear whether this also extends to other charges and levies normally being charged together with the network tariffs. Furthermore, according to the current electricity tax regulation, electricity storage (other than pumped hydro storage) is not exempted from the electricity tax on electricity imported out of the network for storage purposes. This situation would be improved if the proposed amendment to the electricity tax law is implemented.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
The Federal Ministry for Economic Affairs and Energy, responsible for energy policy in Germany on the federal level, supports the development of electricity storage facilities. Under the Energy Storage Funding Initiative launched in 2012, funding for the development of energy storage systems has been provided to around 250 projects. Currently a newly launched battery storage funding programme for decentralised battery storage systems aims at ensuring that PV installations connected to electricity networks will be more beneficial to the overall system by limiting a PV installation’s maximum export to 50 per cent.
The Federal Network Agency is the relevant regulator for electricity storage. As noted above it has proposed some changes to the current balancing power markets which can also help storage facility operators to be active in these markets.
The German Energy Agency (Deutsche Energie-Agentur GmbH – “dena”) (50% of dena’s shares are held by the German state, the rest by private entities) is researching storage use in its study “Optimised use of battery storage systems for grid and market applications in the electricity supply”. The study consists of various network and market oriented case studies, and will be carried out from March 2016 to early 2017. The study aims to analyse concrete network situations for the use of storage systems and attempts to cover the various areas of use of storage facilities in Germany in its entirety. In order to implement the study, dena is collaborating with transmission and distribution system operators, energy providers, plant manufacturers, and storage solution providers.