Battery storage and the roll-out of smart power systems got a welcome boost in the UK market on Monday, 24 July as the UK Government outlined its "Smart Systems and Flexibility Plan". In a speech made at the University of Birmingham, the Business Secretary, Greg Clark, announced:
1. the launch of the Faraday Challenge, which will put £246 million into research, innovation and scale-up of battery technology, with the aim of making Britain the go-to place in the world for battery storage; and
2. a "Smart Systems and Flexibility Plan" intended to open up new markets by addressing regulatory barriers to electricity storage, driving down costs for consumers and improving the market for new, innovative systems and business models.
He also announced a £25 million investment in autonomous vehicles via the Connected and Autonomous Vehicles Fund. These announcements are to be welcomed as they will inevitably encourage further UK investment and help to place the UK at the forefront of these new technologies.
The Faraday Challenge
The Faraday Challenge will deliver a coordinated programme of competitions that aims to boost both the research and development of expertise in battery technology. It is part of the £1 billion Industry Strategy Challenge Fund announced in April. The first competitions include: (i) a £45 million competition (led by the Engineering and Physical Sciences Research Council (EPSRC)) to create a Battery Institute; and (ii) a competition by The Advanced Propulsion Centre to facilitate the funding of the UK's first automotive battery manufacturing development centre, in conjunction with Innovate UK.
"The work that we do through the Faraday Challenge will – quite literally – power the automotive and energy revolution where, already, the UK is leading the world." (comments from Greg Clark)
Smart Systems and Flexibility Plan
The UK Government recognises that the energy system is changing rapidly. There is more low carbon generation, more distributed and localised resources, new technologies (such as storage) and the costs of these new technologies is decreasing.
The Smart Systems and Flexibility Plan, published on 24 July, is an important part of the Government's Industrial Strategy, the forthcoming Clean Growth Plan and a core component of Ofgem's future-facing work to enable energy system transition.
The Plan sets out how the Government and Ofgem intend to take action alongside industry to deliver a smarter, more flexible energy system. The action to be taken is split into three key areas:
- removing barriers to smart technologies, including storage;
- enabling smart homes and businesses; and
- making markets work more flexibly.
On battery storage, the Government has indicated that it will take a number of actions to address regulatory and policy barriers, including:
- going ahead with the proposed Targeted Charging Review (TCR) aimed at assessing whether the current system of network residual charges should be reformed. The scope will be announced shortly;
- amending the Electricity Act 1989 to include a definition of storage as a distinct subset of the generation asset class;
- reviewing the planning regime to see if it can be simplified for storage facilities;
- consulting on the form of modified generation licence for storage, where the licence charges will be designed to enable storage facilities to identify themselves as exempt from "final consumption levies"; and
- a number of further initiatives aimed at reducing the existing additional barriers to storage, including making it clearer when storage can co-locate alongside renewable generation without putting at risk agreements under Contracts for Difference, the Renewables Obligation or Feed-In Tariff schemes.
In a move that will disappoint distribution network operators, the Plan states that Ofgem will ensure that network operators cannot directly operate storage. It will introduce new reporting requirements for DNOs who own storage and look at further action in the future.
More positively, on smart homes and businesses, the Plan sets out various initiatives aimed at unlocking the potential consumer savings and efficiencies that could come from Demand-Side Response (DSR) (these cover enabling elective half hourly settlement, smart appliances standards which ensure smart functionality allows customers to benefit from DSR and electric vehicle chargepoint standards which ensure chargepoints can be used for DSR and vehicle-to-grid, V2G, tech).
Finally, the Plan sets out various forthcoming developments aimed at making the markets work more flexibly, both in terms of price flexibility and contracted flexibility. On price flexibility, the Government is keen to ensure that network tariffs appropriately signal the costs or benefits of using the network at different times and locations and, with this in mind, Ofgem will be considering how to improve forward-looking signals for network usage.
To facilitate contracted flexibility, in relation to the Capacity Market, the Government intends to simplify metering requirements for those offering demand-side response, enable asset reallocation by demand-side response providers and allow the stacking of revenues between the capacity market and ancillary services.
In relation to the Balancing Mechanism, Ofgem has set out its views (covering access, measurement, cost reflective pricing and balancing responsibility and delivery risk) on the provision for the participation of independent aggregators in a separate letter to stakeholders, for a copy of which, click here. Ofgem has published its views with the aim of guiding industry thinking on code modifications (specifically, Balancing and Settlement Code (BSC) modification, P344).
The Plan also sets out various other measures in relation to ancillary services and targeting the lack of established markets in local flexibility services to manage local network constraints.
The various announcements on 24 July are to be welcomed and show the Government's commitment to battery storage and other new forms of energy technology in the UK. However, as with all new initiatives, the devil will be in the detail of how these are rolled out and the timeframes. For example, the plan indicates that amendments to the Electricity Act 1989 will occur, "when Parliamentary time allows". Given the uncertain political times and Brexit, it seems unlikely that this will be implemented any time soon.