The emergence of renewable energy such as wind and solar has brought about the need to store the electricity that is generated when it is not needed. Technological advancements mean that it is becoming increasingly feasible to store large quantities of energy in small-scale facilities. Electricity storage therefore provides vital flexibility to the UK’s energy system, supporting the growth of low carbon technologies. The government’s objectives of ensuring security of energy supply, keeping bills as low as possible for consumers and decarbonising cost-effectively will be further supported by recognising that in the not too distant future storage will become an integral part of many large-scale, energy-intensive developments, such as universities, hospitals, hotels, restaurants and retail outlets. Batteries can store energy when prices are low and then release it when they are high, thereby potentially becoming a source of income (or at least cost-saving) for these types of developments. The planning system should be keeping pace with technological advancements in this sector so as to avoid distorting the growth potential of this important asset class.
This post considers the current regimes governing electricity storage, their effect, and the potential impact of proposals recently consulted on by the government.
- What are the current regimes governing electricity storage?
- What has been the effect of this?
- Consultation proposals
- Potential impact and analysis
What are the current regimes governing electricity storage?
Electricity storage projects are subject to the same planning regimes as electricity generation projects: projects with a capacity of up to and including 50 Megawatts (MW) must be consented via the Town and Country Planning Act 1990 (“TCPA”) (planning permission) route; whereas projects with a capacity of more than 50MW fall under the Nationally Significant Infrastructure Planning (“NSIP”) regime, requiring a Development Consent Order (“DCO”).
What has been the effect of this?
Since the NSIP regime was introduced, developers have had to consider whether it is better to design a sub-50MW scheme that will benefit from a quicker and cheaper route through the planning system, or a larger and potentially more valuable scheme that has to navigate a more expensive and time-consuming consenting process. This is against a background of technological advancements and reduced cost-based barriers to market, as the relative cost of lithium-ion batteries is falling rapidly due to the expansion of electric vehicles and consumer electronics markets. Whilst storage is currently a relatively small asset class in the UK generation market, it is expected to grow significantly in the years to come, as set out in the Government’s Clean Growth Strategy. The regulatory environment, therefore, needs to respond to market changes and not act as a barrier to developers’ investment and sizing decisions.
Earlier this year, BEIS consulted on the threshold for electricity storage projects. BEIS sought views on its proposals to:
- retain the 50MW capacity threshold that relates to standalone storage projects; and
- to establish a new capacity threshold for composite projects whereby if the capacity of the storage and non-storage elements individually is less than 50MW then the relevant route for obtaining consent would be the TCPA, not the NSIP, regime.
Potential impact and analysis
Clearly there are difficulties with setting thresholds that apply to a wide range of generation assets, but planning applications should be determined at the appropriate level depending on the proposed project’s size, environmental impacts and national significance. The key question for BEIS, therefore, should be whether the planning system is continuing to ensure that the route to securing consent is proportionate to the anticipated effects of the project.
On this, it is worth noting that BEIS’s analysis, which underpins its current position on retaining the 50MW threshold for standalone projects, did not factor in the possibility that the existing system may be incentivising developers to submit separate rather than joint planning applications in order to avoid triggering the NSIP threshold. This is somewhat surprising, and it will be interesting to see if consultees produce examples of subdivision of projects or developers designing projects sub-optimally to avoid triggering the threshold. If there is clear evidence of this type of market distortion, then BEIS will have to consider whether the 50MW threshold, which is relevant to both proposals, remains fit for purpose.
The BEIS consultation (and this blog) focuses on the planning system in England, but the devolved government in Wales has (as of 1 April 2019) increased the NSIP threshold to 350MW, meaning that non-wind onshore energy generation projects with capacity of between 10MW and 350MW will now be decided by the Welsh Government under its Developments of National Significance (“DNS”) regime. There is no equivalent DNS regime in England but perhaps the Welsh Government’s move will act as a sign to BEIS that the 50MW DCO threshold is too low and that greater flexibility in the planning system should be afforded to energy generation projects of this size.
It seems as though the planning system will have to adapt as technology advances and we place greater reliance on storage to facilitate and support renewable energy. Looking further into the future, the planning system should also not dissuade developers of large-scale schemes from considering how storage might be integrated into their developments. As such, whatever the outcome of the recent consultation, we expect this debate to be revisited in the years to come and for there to be a wider range of stakeholders involved.