Out-Law News 4 min. read
17 Oct 2016, 4:01 pm
In a report on the energy revolution and future challenges for UK energy and climate change policy, the Energy and Climate Change Committee identified energy storage and demand-side response (DSR) technologies as central to the forthcoming "energy revolution", which it said presents the UK with a "huge economic opportunity".
It was the Committee’s final report. It has now been disbanded following the government reorganisation that saw the Department of Energy and Climate Change subsumed into the new Department for Business, Energy and Industrial Strategy.
The report urged the government to move quickly to cut "regulatory barriers" to the development of the energy storage market, including removing the "double-charging" that exists when businesses and consumers first store energy and then supply it back to the electricity grid.
"There must be a clear definition for storage, double-charging must come to an end, and a separate asset class for grid-level electricity storage should be established as a matter of urgency," the Committee said. "The government must also review the outdated Capacity Market rules and regulations in relation to storage, including considering increasing the contract length and addressing restrictions around stacking of revenues for storage projects."
"We further recommend that government sets out a high-level public commitment to making the UK a world-leader in storage and sets a storage procurement target for 2020. The government should also consider a possible subsidy framework for energy storage to accelerate deployment given the importance of storage to unlocking the full potential of renewable energy," it said.
The Committee said that "explicit market mechanisms and target capacity goals" are also necessary to ensure consumers get the "best value" from demand side response (DSR) technologies. DSR is where energy users moderate their energy consumption at times of the day when there is additional strain on supply.
The government must do more to support developments in DSR as there is currently "a lack of effective incentives for DSR providers and energy consumers" to embrace DSR technologies, the Committee said.
The Committee said that DSR providers should be able to win contracts for "capacity payments" under the Capacity Market system that are "significantly longer" than the one year limit currently imposed, so as to be able to obtain greater returns on their investment. The requirement that DSR providers put up a "capital bond" when bidding for capacity payments under the system should also be removed, it said.
The report urged further support for procurement of DSR solutions and said the government and the parliament itself should use "flexible demand" technologies.
The UK government was also called on to "develop methods to nudge the energy sector towards embracing the opportunities arising from developing a smarter market in which consumers are more engaged and where reduction of demand is valued over increasing supplies of energy". It was also urged to "ensure that it is thinking ahead" about data protection and privacy issues "in the context of more fully-connected smart homes and businesses".
The Committee further recommended that the UK government look to universities to help deliver innovation in energy technologies.
It said: "The UK has world-leading universities: leveraging these to attract and retain international talent, and support innovation throughout its cycle, is crucial to achieving an energy revolution. The government should support efforts to get the next generation of students interested in energy research, and the policy implications of their research. The government should embrace tripartite collaboration between academia, industry and government where projects help to address the UK’s long-term decarbonisation goals."
The government should "make green technology a top priority in its forthcoming industrial strategy", it said.
Nick Shenken, expert in energy law at Pinsent Masons, the law firm behind Out-Law.com, said the Committee's recommendations tie in with conclusions that can be drawn from a report published by the National Grid late last week.
According to National Grid's Winter Outlook report for 2016/17, the UK has sufficient energy supply to meet anticipated demand this winter. However, the UK may face challenges in future years which energy storage technologies and DSR solutions could help address, Shenken said.
"The capacity margin reported should offer some comfort to those grappling with balancing energy supply and demand in the UK," Shenken said. "However, it is worth noting that the margin reported has been achieved with a larger proportion of balancing reserve services than last year and has also been positively affected by unanticipated additional capacity on the system due to circumstances such as downtime on the interconnector which might otherwise have been exporting power to Ireland."
"There is therefore no room for complacency and the report evidences clearly how measures such as demand side response, can play a major role in safeguarding our future energy supply. Incentivising consumers and businesses to power down at peak times is unlikely to be a silver bullet on its own, but there is little doubt it can play an even bigger role than ever in alleviating pressure on the grid and safeguarding supply during the winter months," he said.
Shenken said that while DSR technologies exist, providers face a real challenge to "deploy at scale largely due to cost concerns and limited awareness".
"If it can be brought online more effectively and in greater volumes, DSR is a win win situation – it can cut energy costs, put money in the consumer's back pocket and simultaneously take the heat off the grid as it grapples with keeping the lights on," Shenken said.
Shenken was commenting as the Financial Times reported that German energy storage company Sonnen has raised $85 million in a fresh fund raising initiative. Sonnen is at the forefront of energy innovation. It operates a peer-to-peer energy supply network among customers and its plans for expansion include enabling virtual power stations in customers' homes using battery storage technology.
Energy law expert Becca Aspinwall of Pinsent Masons said: "We are seeing growing interest in the UK market in engaging domestic consumers in virtual power station solutions, similar to Sonnen’s peer-to-peer energy supply network in Germany, Austria and Switzerland. Bringing in government subsidies or incentives to support demand side response and storage would certainly have a positive impact on scaling up this market within the UK, encouraging consumer engagement and making better use of energy generated."