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Energy Storage Report: Can storage help reduce the cost of a future UK electricity system?

Energy storage could save £2.4 billion a year system wide by 2030; if regulatory hurdles are overcome this could rise to £7 billion a year.

Publication date: March 2016

This report outlines significant cost savings for the UK electricity system, should the potential for energy storage be realised. The impact of which could deliver savings of up to £50 a year on an average consumer energy bill through a system wide saving of up to £2.4bn a year by 2030.

The report was collaboratively funded by three major utilities, E.ON, SSE and Scottish Power, as well as the UK Department of Energy and Climate Change (DECC) and the Scottish Government. The analysis, carried out over 12 months by the Carbon Trust and Imperial College London, is the most comprehensive review to date of the benefits of storage at a UK- system level. By reviewing the societal case for storage at a system wide level the report highlights the significant savings that could be made for consumers by deploying storage. It then explores two specific example applications of distributed storage to highlight a series of core barriers to deployment that have created a market failure, and makes recommendations on how to overcome these barriers to create a level playing field for storage.

The report assesses the wider benefits of flexibility solutions for a future UK electricity system, examining the impact storage might have to bill payers across three future energy scenarios out to 2030. These include the National Grid’s ‘No Progression’ and ‘Gone Green’ scenarios, as well as a third scenario developed specifically for this report showing a least-cost pathway for the UK to meet its 2030 carbon emissions reduction target.

Under the National Grid’s ‘Gone Green’ scenario the addition of energy storage can unlock system cost savings of up to £2.4 billion a year by 2030.  And if just 50 percent of this saving was passed on to domestic customers it could reduce the average household electricity bill by up to £50 a year.

On a least-cost pathway, deploying storage could deliver cost savings of up to £7 billion in 2030. £2 billion of this comes from the deployment of storage, with a further £5 billion primarily from improved use of existing generation assets and optimised and reduced investment in new low carbon generation assets.

The range of potential benefits provided by energy storage includes absorbing “wrong time” energy, then releasing it to meet demand, to help support capacity constraints and to balance the influx of intermittent and, or inflexible low carbon technologies onto the grid, plus avoiding expense associated with reinforcing assets and adding new capacity.

If the UK addresses current regulations to create a fair and transparent market, these reduced costs and increased resilience translate into cheaper household energy bills.  However, the report finds that despite the technology readiness and the significant societal benefits of energy storage, the split of its benefits across network stakeholders makes it difficult for a single one to develop a business case.  An incompatible market structure has reduced the commercial viability of storage for investors by increasing risk and reducing revenue potential. 

The analysis shows that many of the necessary regulatory reforms are likely to be cost neutral and will require no additional funding from the government. Until the current market conditions are addressed to reflect more accurately the value that storage can provide to the network, the UK risks a future under-deployment of flexibility solutions preventing the capture of the systems benefits identified in the report.

The report calls for a clear and comprehensive strategic approach to energy storage and other forms of flexibility. Recommendations include: the creation of a multi-stakeholder taskforce to develop proposals for adaptation of market frameworks; the establishment of an inter-governmental working group to consider proposals from the taskforce to ensure changes are coordinated across the multiple and independently regulated markets relevant for storage; and joint industry projects to demonstrate specific cost or performance characteristics of storage solutions.

 

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© 2016 Carbon Trust
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