Government ‘must incentivise storage and demand side response’

The government should redesign its electricity Capacity Market – the subsidy scheme designed to minimise the risk of blackouts – to incentivise energy storage and demand side response (DSR) technologies that could make the grid cleaner, more flexible and secure, according to the final report from the Energy and Climate Change Committee. 

The government must move quickly on addressing regulatory barriers faced by energy storage: there must be a clear definition for storage, an end to double-charging, and a separate asset class for grid-level electricity storage established, said the Committee. It also recommended that the government sets out a public commitment to making the UK a world leader in storage and sets a storage procurement target for 2020. And, as the last two auctions have failed to deliver any energy storage, the Capacity Market should be redesigned to incentivise both energy storage and demand side response. 

Meanwhile, DSR can reduce costs to consumers, cut carbon emissions and improve the efficiency of the entire energy system, said the Committee, but unfair bid bonds and the length of contracts available under the Capacity Market are currently disadvantaging DSR providers in favour of more polluting new-build power stations. The market should be given a clear signal that DSR capacity is a preferred alternative to diesel generation plants. 

Launching the Committee’s report, its Chair Angus MacNeil MP said: ‘The government must get a move on and encourage the energy market to embrace smart technological solutions like energy storage and demand side response. There is an incredible opportunity for the UK to become a world leader in these disruptive technologies. Yet our current energy security subsidies favour dirty diesel generation over smart new clean tech solutions.’

MacNeil continued: ‘Getting DSR right will empower consumers, reduce bills, ease pressure on the grid, and lower carbon dioxide emissions. Energy storage is a vital keystone in building a clean electricity system. It will mean we won’t have to wait for the sun to shine or the wind to blow to get our energy from renewables. We can generate electricity, store it and turn it on when it’s needed.’

It is perhaps no coincidence, then, that Ofgem and the government are asking for views on developing a smarter, more flexible and user-friendly energy system which could lower the energy bills of Britain’s homes and businesses. A wealth of innovative technologies and services, including batteries, could deliver substantial savings, improve the reliability of Britain’s electricity supply and support the move to a low carbon energy system, says the regulator.

There is significant demand to develop electricity storage projects in particular, says Ofgem. In recent months, over 19 GW of applications have been made to connect electricity storage. Meanwhile, the roles of network companies are changing. Local grid operators need to be smarter and work closely with National Grid to work out the best solutions for managing a system with increasing amounts of low carbon generation.