Ofgem and BEIS have published proposals for the development of a smarter, more flexible energy system in the UK. The proposals include a specific focus on energy storage and aim to remove the regulatory and commercial barriers to the further deployment of energy storage in the UK.
Ofgem and the UK Government have this week released their initial response to the November consultation, 'A smart, flexible energy system: call for evidence' 1. The response includes the 'Smart Systems and Flexibility Plan' 2, which sets out the proposed approach for integrating flexible and smart technologies into the evolving UK energy system. The response specifically addresses the role of energy storage in the UK electricity market, including Ofgem and Government's proposals to address policy and regulatory barriers that may prevent the further deployment of energy storage. These are summarised in the below table.
The response also directly addresses a number of other topics relevant to flexible and smart technologies including Demand Side Response, electric vehicles, smart technologies, the role of aggregators and government funding.
Ofgem has published a consultation, the Targeted Charging Review3, setting out their view that storage installations should not pay the ‘demand residual’ element of network charges at transmission and distribution level, and that storage providers should only pay one set of balancing system charges.
|Revenue Stacking||Ofgem and the Government recognise that emerging storage providers may have difficulty establishing multiple secure revenue streams in existing markets. The primary objective is to enable fair and competitive markets for flexibility providers across all technologies and sizes to provide investors with clarity and certainty in relation to revenue stacking. This process includes: (i) National Grid's System Needs and Product Strategy4 review of its ancillary services; (ii) allowing stacking of revenues between the Capacity Market and ancillary services; and (iii) establishing markets to manage local network constraints.|
|Market definition of Storage||The Government will amend the Electricity Act 1989 and other relevant legislation to define electricity storage as a distinct subset of generation. The target date for the introduction of a modified generation licence for storage is summer 2018.|
|Planning||Government plans to examine whether the planning regime could be simplified for storage facilities. This may include reviewing the national planning threshold for storage facilities and planning guidance specifically for storage.|
|Final consumption levies||Holders of the new storage licence (to be consulted on by Ofgem) will not be liable for final consumption levies. Government has also clarified that electricity imported to electricity storage facilities may be exempt from the Climate Change Levy in certain circumstances.|
|Co-location RO, CFD, or FITs accredited installations||Government has set out how storage should be treated on CFD accredited sites. Ofgem has also updated its guidance for the RO on the accreditation amendment process and has provided guidance on co-location of storage and renewables under FITs. Ofgem plans to issue further guidance on this point later this year.|
|Grid Connections||Ofgem expect network operators and industry to continue to improve the network connections process for storage, including clarifying the connection process, increasing transparency about where to connect, and implementing better queue management.|
|Ownership by network operators||Ofgem considers that network operators should not be able to own or directly operate storage as this would risk distorting the market. Government will take measures to ensure sufficient separation of storage from a network operator's network business.|
|Technology Innovation||The Government has made a number of funds available for developing early stage technologies, including: £70m for innovation in smart energy technologies (including storage) up to 2021; £9m focused on cost reductions for storage; £20m for vehicle-to-grid storage developments; and £600,000 funding toward feasibility studies into large-scale storage.|
|Small scale storage deployment||The Government will look to ensure policy design and incentive levels take into account the benefits of storing electricity for self-consumption and export to the grid at peak times for small scale low-carbon generation.|
|Health and Safety||The Government will work with industry on reviewing, consolidating and, where necessary, updating health and safety standards for storage. This includes work led by the British Standards Institute and the Institute of Engineering and Technology.|