4-6 October 2016 The NEC, Birmingham, UK. cleanenergylive.co.uk

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1 4-6 October 2016 The NEC, Birmingham, UK cleanenergylive.co.uk #celive

2 cleanenergylive.co.uk #celive

3 UK Energy storage policy A defining issue Clean Energy Live, 5 th October 2016 Frank Gordon, Senior Policy Analyst, REA GROWING THE RENEWABLE ENERGY ECONOMY

4 Energy storage in the UK Huge interest in energy storage 19GW of applications on distribution network Ofgem & DECC instructed to remove any no-cost barriers to energy storage DECC/Ofgem Call for Evidence forthcoming (any day) DECC consulting on Energy Storage in CfD mechanism Capacity Market changes from DECC: Storage not permitted in TA, but eligible for other auctions. Pre-qual 1-26 August National Infrastructure Commission strongly support storage projects National Grid Enhanced Frequency Response: 63 Prequalifications, c1.4gw of applications, 200MW capacity awarded National Grid Power Responsive: Balancing Services agenda

5 Storage Projects in the UK- large scale

6 Storage Projects in the UK- REA Database Energy Storage in the UK: An Overview, REA, Second Edition Published Oct 2016

7 Enhanced Frequency Response World first tender for frequency services from National Grid (UK Transmission Network operator) For service traditionally provided by high-carbon conventional power plants Must provide frequency response within 0.4 seconds to grid Four year contracts 63 Pre-qualifications, c1.4gw of applications 200MW capacity awarded, to 8 projects National Grid forecast saving to system of 200million

8 Enhanced Frequency Response

9 UK Government support for storage 50 million for innovation in energy storage, demand-side response and other smart technologies over the next 5 years Ofgem will consult on 100 million Network Innovation Competition Increased ambition for greater electricity interconnection by 80%, now supporting at least an additional 9GW of interconnection VAT and ECAs for renewables & energy efficiency materials They stated that the list of designated energy-saving and water efficient technologies qualifying for an Enhanced Capital Allowance will be updated during summer 2016, subject to State Aid approval.

10 Capacity Market Tool for energy security & storage can apply: - First full delivery year 2017/18 - Three auctions, for capacity in coming years - In previous years existing large scale pumped hydro storage has won support, but not new build projects - Crucial issue of 'Embedded benefits' being targeted by Government for diesel generators: implications for storage projects is removed

11 Capacity Market Timetable Three CM auctions, with next full auction brought forward to 2017 capacity Pre-qualification run concurrently for all auctions, in a window from the 1 st 26 th August 2016 Auction bidding window for the main T-4 Auction (for delivery of capacity four years ahead)- 6-9 th December, results announced 21 st December. Following two auctions 31/01/17 to 03/02/17 (Early capacity auction) and 22/02/17 to 27/02/17 (Transitional Arrangements for DSR auction), results published 15th February and 16th April 2017, respectively. Recent consultations on changes to the Capacity Market led to following outcomes: Transitional Auction eligibility unchanged - no generation, therefore storage ineligible Embedded benefits to be reviewed by Ofgem (to restrict diesel gensets winning CM contracts) Air pollutant restrictions to be applied by Defra (to restrict diesel gensets)

12 Smart Agenda National Infrastructure Commission Report Smart Power report concluded that Energy storage alongside DSR and interconnectors could save consumers up to 8 billion a year by 2030, help the UK meet its 2050 Carbon targets, and secure the UK s energy supply Recommended: 1) DECC and Ofgem should review the regulatory and legal status of storage to remove barriers which restrict storage competing fairly with generation in energy markets. Wants reforms by spring ) Network owners should be incentivised by Ofgem to use storage in order to improve capacity and resilience of network. DSR Ofgem held a consultation on DSR for Industrial & Commercial Users, also keen to support

13 Renewables (CfDs) & Energy Storage Energy storage at renewable (CfD) Projects: It is possible to include storage devices at CfD projects. However, new arrangements are required for the metering of such projects as the current provisions do not cover this. The proposal is therefore that the generation unit and storage unit would be required to be registered under separate BM Units. Operationally, CfD payments will be based on the wholesale prices at the time of electricity generation, NOT when the electricity is actually sold on. Therefore by having separate meters, electricity imports will remain distinct from CfD payments

14 CfD Consultation Energy Storage The exact wording in the document is as follows: 43. Proposals for metering storage at CfD projects- (i) First, we are considering further clarifying within the CFD that the BM Unit Metered Volume used to calculate CFD payments should only include the output of generating units of the Facility Generation Technology (as specified in the CFD Agreement). (ii) Second, to give CFD generators confidence that storage can be installed on a CFD site and that it should be in a separate BM Unit, we propose defining storage within the CFD and stating that it should be in a separate BM Unit to the Facility.

15 Definition of Energy storage [DECC] Proposed: A Storage Facility means a facility which consists of- (i) A means of converting imported electricity into a form of energy which can be stored, and of storing the energy which has been so converted; and (ii) A generating unit which is wholly or mainly used to reconvert the stored energy into electrical energy. Possible definition in REA's response: Electricity Storage in the electricity system is the conversion of electrical energy into a form of energy which can be stored, the storing of that energy, and the subsequent reconversion of that energy back into electrical energy. Electricity Storage Facility in the electricity system means a facility where Electricity Storage occurs.

16 UK Govt Decisions awaited on energy storage Dedicated support for energy storage? Half hourly metering, domestic bills Size of renewables budget beyond 2020/21 Outcome of Solar Renewables Obligation (<5MW) re-banding New-build (Zero-carbon homes) policy Implementation of CMA Market Review Findings Next stage CfD policy(?)

17 Related policy Possible Smart Tariffs introduction ECC Committee Pre-legislative scrutiny of DECC energy proposals: would enable Ofgem to introduce consumer smart tariffs No mention in Queens Speech legislation could come in late-2016 EU RED II Consultation Consultation on implementing 27% renewable energy 2030 target, closed 10 Feb Would set agenda at European level for energy storage and co-location with renewables

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