Abstract
This paper presents a SWOT analysis of the impact of recent EU regulatory changes on the business case for energy storage (ES) using the UK as a case study. ES technologies (such as batteries) are key enablers for increasing the share of renewable energy generation and hence decarbonising the electricity system. As such, recent regulatory changes seek to improve the business case for ES technologies on national networks. These changes include removing double network charging for ES, defining and classifying ES in relevant legislations, and clarifying ES ownership along with facilitating its grid access. However, most of the current regulations treat storage in a similar way to bulk generators without paying attention to the different sizes and types of ES. As a result, storage with higher capacity receives significantly higher payment in the capacity market and can be exempt from paying renewable energy promotion taxes. Despite the recent regulatory changes, ES is defined as a generation device, which is a barrier to a wide range of revenue streams from demand side services. Also, regulators avoid disrupting the current energy market structure by creating an independent asset class for ES. Instead, they are encouraging changes that co-exist with the current market and regulatory structure. Therefore, although some of the reviewed market and regulatory changes for ES in this paper are positive, it can be concluded that these changes are not likely to allow a level playing field for ES that encourage its increase on energy networks.
Highlights
Climate change concerns are encouraging the international community to adopt policies to decarbonise the energy system by increasing the reliance on renewable energy sources (RES) such as wind and solar [1]
Storage’ in the main legislation; (ii) removing the double network and balancing charges for storage; (iii) co-locating storage with renewable generation sites that are supported through consumption levies policies; (iv) limiting storage operation by network owners; (v) facilitating energy storage (ES) planning permission and (vi) employing de-rating factors for storage in the capacity market (CM) [33]
Even though distribution network operators (DNOs) used ‘DNO contracted’ and ‘contracted services’ business models for larger size battery energy storage system (BESS), they needed to enter into a complex contractual agreement with third parties to make revenue streams in the market because each party involved with the DNO needs to make a profit, which reduces the overall revenue
Summary
Climate change concerns are encouraging the international community to adopt policies to decarbonise the energy system by increasing the reliance on renewable energy sources (RES) such as wind and solar [1]. 270 GW respectively [5] This increased penetration of RES in the electricity system poses network balance challenges to grid operators due to the intermittent nature of many clean energy sources such as PV and Wind turbines [6,7,8]. Amongst the different types of ES systems, battery energy storage system (BESS) is interesting because of its suitability to many applications in grid-connected electricity networks such as peak shaving [21], energy arbitrage [22], reserve capacity [23], and frequency regulation [24] amongst many others. Qualitative data from the EC, the UK government, energy regulators, journal articles, and reports are utilised to examine the internal (S/W) and external (O/T) factors concerning the proposed regulatory changes Such analysis is vital to provide ES with a clearer insight into the regulatory framework surrounding future business cases for ES. The remainder of the paper is structured as follows: Section 2 provides an overview for ES classification; Section 3 reviews the main market/regulatory aspects that affect the business case of BESS and the regulators’ proposed solutions; Section 4 presents SWOT analysis as a method; Section 5 presents and discusses SWOT analysis results; Section 6 provides a summary of the paper’s findings and discusses the ‘Brexit’ issue; and Section 7 provides concluding remarks
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