All-Energy 2016, Glasgow. Contributing funding partners:

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1 Can storage help reduce the cost of a future UK electricity system? Results from a project on opportunities from the deployment of energy storage, contributed to by government, industry & academic partners All-Energy 2016, Glasgow Contributing funding partners:

2 Key objectives of the report on storage This report assesses the benefits of flexibility solutions for a future UK electricity system using the example of energy storage. It addresses the following questions: Can the integration of storage reduce the cost of such a future UK electricity system to customers? What barriers exist to prevent potential benefits from storage being realised commercially and thus prevent investment in storage & demand-side flexibility? What practical steps can be taken to overcome these barriers? Given the complexity of the electricity system, this analysis focuses on storage for power applications only. Energy storage can be divided into three main types: bulk, distributed and fast This report distinguishes between different types of storage and the services a storage solution can provide. It takes a technology neutral perspective. 2

3 Can the integration of storage reduce the cost of a future UK electricity system to customers? Gone Green No Progression Market driven approach 2030 total electricity system cost ( billion) The UK can save up to 2.4bn per year in 2030 if energy storage is integrated with a future low carbon UK electricity system Where carbon targets are ignored (No progression), energy storage adds little value and the UK is more exposed to gas price volatility By removing regulatory and market barriers and better aligning incentives to the evolving needs of a future electricity system, the UK can save a further 5bn per year DECC central gas & carbon prices (no storage) DECC central gas & carbon prices (with storage) DECC high gas & carbon prices (no storage)

4 The first business case explores wind generation assets with energy storage Services provided by storage asset Payback period (years) Wind balance, arbitrage, balancing mechanism. + frequency response + curtailment avoidance (50 MW network constraint) The above illustrated payback periods are based on a 100MW wind farm combined with a 25MW storage asset, using today s costs A storage asset co-located with a wind farm can provide a number of layered services, providing value from arbitrage, system balancing and contract balancing Additional implementation of frequency regulation reduces payback time, assuming appropriate contracts can be entered into A significant network constraint further improves payback period 4

5 The second business case investigates distributed solar PV assets with storage Services provided by storage asset Payback period (years) Domestic rooftop PV + storage 20+ Community rooftop PV + storage + dynamic pricing + frequency response + network support The above illustrated payback periods are based on a 2kW residential Solar PV asset and 0.6kW storage asset using today s costs. A community is based on 90 households The main service provided behind the meter would be to avoid electricity purchase, this is not the best economic solution for consumers or the system Additional system & local network services increase the value of the storage asset, but require a 3rd party provider to co-ordinate provision of these services Time of use tariffs reduce payback times by managing more volatile price signals 5

6 Several market, regulatory, technology barriers exist and there are solutions Barriers Policy risk Positive externalities of storage need to be internalised Distorted market signals Revenue cannibalisation Disintegrated market structures Inappropriate network charging Lack of integrated planning and consultation Solutions Engage broad stakeholder group Align incentives and remove barriers, e.g.: Dynamic electricity pricing Review network cost recovery frameworks Allow layering of services Shorter frequency response contracts Reflective distribution network pricing Demonstrate cost and performance of storage under specific use cases Define performance and operating standards for storage 6

7 The UK should incorporate storage with plans for its future energy system now and address barriers to its deployment The UK can save up to 2.4bn per year in 2030 if energy storage is integrated with a future UK electricity system, which would also yield greater security of supply The benefit from storage can be maximised if policymakers, regulators and industry adopt a market driven approach that includes storage now. This can yield added network savings up to 5bn resulting in total savings up to 7bn per year by 2030 There are feasible solutions to overcome the barriers that currently prevent the wider deployment of energy storage, which do not require significant subsidy To realise UK opportunities from the deployment of storage, clear demonstration projects are required to test business cases, prove the technology and inform policy and regulatory The UK can realise additional benefits from becoming a lead market for storage, e.g. UK technology or solution providers can subsequently realise export opportunities 7

8 Can storage help reduce the cost of a future UK electricity system? Andrew Lever Director, Innovation The Carbon Trust andrew.lever@carbontrust.com 8

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