Just weeks after the UK’s battery sector was promised cash to become a global leader in R&D, ministers have been warned new electricity market reforms could make it harder for battery storage firms to compete.
A consortium of UK universities is spearheading R&D for the battery industry under the government-backed Faraday Challenge investment programme.
But new government reforms of the capacity market— designed to secure backup power generation capacity for the UK— “will limit the amount of innovative new battery storage capacity able to compete”, the UK’s Renewable Energy Association (REA) said.
The Department of Business, Energy and Industrial Strategy (BEIS) confirmed on 4 December it intended to lower the ‘de-rating factor” in capacity market auctions by almost 80% for 30-minute duration batteries.
De-rating factors are assigned proportionate to how much support power providers can offer in a ‘system stress event’, with longer duration storage being given a higher percentage.
BEIS said the previous 96% de-rating factor for half-hour duration batteries would now be set to as low as 17.89% in the upcoming the T4 auction (for power backup supply from 2021 for 15 years). BEIS set 21.34% for the T1 auction for 2018/2019. Only batteries with four hours duration or more will qualify for a 96.11% de-rating.
REA policy manager Frank Gordon said: “Considering the government R&D funding going towards batteries at the moment and the drive to encourage future battery manufacturing, it seems strange to undermine the development of a battery storage market.”
“The capacity market is an ever more crucial mechanism for delivering battery projects, which underpin the additional electricity system flexibility that is so urgently needed in the UK,” Gordon said.
Storage facilities offering more than four hours’ duration, such as flow batteries that can hold power for longer periods, “will see no change from the decision”, Gordon said. But the changes announced by BEIS “could make it harder for a number of battery storage projects to compete”.
“One cannot forget that this is one of many recent changes that are undermining the growth of this sector,” Gordon added. “The timing of these changes is our main criticism however. As they are being applied in the midst of an on-going auction process, it’s akin to changing the rules of a football match at half-time.”
UK Power Reserve, which has registered more than 1GW of “new battery storage and flexible gas-fired generation projects” ahead of the 2018 capacity market auction, said it accepted the government’s decision, which “provides the incentive for developers to build the higher quality, longer duration batteries that can help secure the UK’s electricity supply when it is threatened during a stress event”.
A BEIS spokesperson told BBB: “These changes to the capacity market will improve fairness and competition for all market participants, and reflect the contribution that storage, including batteries, can make to secure energy supplies. They will also ensure that consumers do not face excessive costs for securing this capacity.”