Electricity storage: a new business case perspective

Energy storage and electricity storage in particular is an area of utility development that has been on the radar now for a number of years, and on a journey that still has some distance to run. With pumped hydro as the single exception, it is probably fair to say that 20 years ago the use of storage as part of the electricity system in an operational distribution network operator (DNO) environment was probably not conceived in any shape or form, and even 10 years ago business as usual network deployment would have seemed like moons away.

Battery technology was being developed for many many things but certainly not with networks in mind. But, as time has progressed and the nature or our future energy system has become clearer, low carbon network fund (LCNF) innovation projects in particular have brought a very real tangible dimension to the technical benefits associated with grid storage, a better understanding of the economics and issues, an understanding that it is likely to have a role at a very wide range of scales and locations, both grid connected and behind the meter.

Through this journey, electricity storage has moved from technology development (particularly in Lithium Ion technology), through to network demonstration and the crystallisation of how it might be used and what environmental and commercial barriers need to be overcome. It is now at a stage where the economics are improving quickly, where use of electricity storage for frequency management is becoming a reality and for business as usual adoption to manage network constraints is starting to peak at us over the horizon, particularly as we look ahead to the next distribution network operator regulatory period 2023-2031.

But there is still some fog to navigate. The structure, age and use profile of our networks is incredibly varied, reflected in the experience of LCNF projects which demonstrated that storage will probably have a useful role at scales and locations that are similarly diverse.

Given the potential therefore for deployment in scenarios ranging anywhere from high voltage down to the customer side of the meter, this equates to great diversity in terms of the beneficiaries in each scenario, different barriers to market in each scenario, and different business models. This makes it incredibly difficult for investors or those supporting the sector such as DECC or Innovate UK to know which deployment scenarios have the most promising commercial position, and which need support, focus, or investment.

So, working with Innovate UK and input from DECC the Electricity Storage Network (ESN) is developing a template document that will describe the commercial readiness status initially up to 5 generic storage deployment scenarios, hosting information such as typical costs, potential revenues, barriers, and the status of activities seeking to break down those barriers. The result will be a straightforward publically available portfolio document of up to these likely common scenarios, with more to be added as the sector develops. Equally for anyone looking into the sector from outside such as investors or new entrants, it will give them an apples-with-apples, clear and succinct guide to the relative strengths, weaknesses and ultimately the commercial prospects and investment readiness for each typical deployment scenario.

The initial scenarios being focussed on in this work will be:
1) Storage used to directly support intermittent generation at medium voltage,
2) Storage used principally to defer low voltage network upgrade,
3) Merchant model bulk storage
4) Behind the meter domestic and
5) Industrial and commercial customer owned.

The ESN will use the knowledge and experience of its members over the next 2-3 months to compile and develop this package of information and publish in the autumn, but they would like to encourage anyone with an interest or contribution to make in this area to get in touch.

We know from talking to both innovators in this part of the sector, and investors alike, that understanding and articulating the commercial opportunities for storage is a real challenge, given the significant variety in how it might be deployed and the different business models that might be employed. They tell us that the proposed scenario by scenario perspective on the different business cases will be of enormous value, and help them navigate this multidimensional and foggy area. If successful, we hope the approach could be used to make like for like comparisons for other storage types such as thermal and chemical etc.

Jill Cainey, director, Energy Storage Network and Mark Thompson, lead technologist, Innovate UK 

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