With lithium-ion batteries raising ESG-related concerns, investors are increasingly seeing value in long-duration storage
UK storage set for $20bn boost, but major barriers remain
UK storage capacity could grow more than tenfold by 2030 – but only if grid connection and supply chain challenges are addressed
- $20 billion could be invested in UK storage by 2030
- But grid connection problems causing years of delays
- UK must invest in domestic battery manufacturing capacity
It’s easy to get excited about the prospects for the UK battery storage market. A recent analysis conducted by Rystad Energy concluded that battery storage capacity in the UK will increase from the current level of 2.1GW to around 24GW by 2030. Massive amounts of capital are set to be ploughed into the sector, with utility-scale battery systems expected to attract investments of up to $20 billion by the end of the decade. This will mean the UK has sufficient combined energy reserves to power 18 million homes for a year, the Rystad Energy study showed.
It's a trajectory that would put the UK among the pacesetters in the global energy storage market. If the projected level of capacity is indeed attained, it will mean that the UK will account for 9% of all global capacity additions and will be ranked fourth by capacity behind China, the US and Germany.
Removing planning hurdles for storage
In fairness, the UK government has laid some of the foundations for a flourishing energy storage industry. Energy sector experts have acknowledged that the government’s 30GW energy storage requirement target – including batteries, flywheel, pumped hydro and liquid air energy storage – for 2030 is ambitious. Meanwhile, reforms to the planning system are also viewed as having provided a shot in the arm for the UK’s storage industry. In 2020 new laws were introduced that simplified the treatment of storage under the planning system. Specifically, the changes to the law removed electricity storage (except pumped hydro) from the Nationally Significant Infrastructure Projects (NSIP) regime in England and Wales and also removed the requirement for consent under s.36 of the Electricity Act 1989.
In effect, this meant that developers of electricity storage projects above 50MW in England and 350MW in Wales would be able to apply for ordinary planning permission for such schemes instead of having to apply to the Secretary of State for a development consent order (DCO). The rationale for the changes was that it would reduce the extra cost and time delays that the NSIP regime can often bring.
Barriers to increased deployment of storage
As a result, the usual size of battery energy storage projects in the UK is expected to increase significantly. We should see some individual projects weighing in at a hefty 1GW – projects of this scale would have been much more challenging from a planning perspective if the legal changes hadn’t been made. As Rystad Energy pointed out, a battery project of this scale could require as much as 55 acres of land, equivalent to more than 40 football fields.
But the storage community needs to guard against excessive bullishness as there are significant obstacles that could stop the storage sector from fulfilling its undoubted potential.
Let’s take these in turn:
1. Grid connection problems
Securing a grid connection for an energy storage project can take years, sometimes even more than a decade. Merlin Hyman, chief executive of energy advisory business Regen, recently told a House of Commons Business Energy and Industrial Strategy Committee oral evidence hearing that grid connection was the key issue that everyone in the clean energy sector wanted to talk about. He added: “If you apply with a new solar farm, battery, hydrogen electrolyser, large-scale EV charger in most parts of the country, you will get a connection date in 15 years’ plus time. Given our [energy storage] targets are rather earlier than that, that is clearly a huge problem now for the whole net zero transition.” At the same hearing, Will Mezzullo, head of hydrogen at Centrica, summed it up succinctly: “At the moment, the grid is absolutely constrained. They physically can put hardly any more gridscale batteries or renewables on the network.”
2. Supply chain challenges persist
The advancement of the UK energy storage industry is being held up by an immature supply chain with an over-reliance on overseas production lines. This means that most UK manufacturers produce sodium-ion cells – which can be produced at a lower cost than, say, lithium-ion batteries – only in low volumes. To truly benefit from the much lower environmental cost of sodium-ion cells, the UK must build out manufacturing capacity onshore. The argument is that this is essential to truly fulfil climate goals by reducing the carbon footprint of the industry and that of the UK. Sourcing cell products from domestic suppliers, as opposed to importing from China, minimises CO2 emissions.
3. No policy framework for long duration storage
Developing a policy framework for long duration storage – including pumped hydro – is viewed as crucial if the UK is to fully realise the potential of energy storage. The Long Duration Energy Storage Council has highlighted “uncertainty in the policy landscape” as one of the key barriers to the greater commercialisation of long duration storage. Better policy support for long duration storage would include: the setting of storage capacity targets and procurement targets, as well as the incorporation of energy storage into grid planning efforts; mechanisms that both enhance revenues and provide long-term revenue certainty such as contracts for difference, caps & floors, hourly energy attribute certificates, power purchase agreements, and the regulated asset base; public-private partnerships, grants and incentives; and targeted tenders to accelerate early projects and their required infrastructure.
Address the challenges, and the future for UK battery storage is very bright. As already highlighted, the UK government has said it anticipates that at least 30GW of “low carbon flexible assets, which includes electricity storage”, may be needed by 2030 to maintain energy security and cost-effectively integrate high levels of renewable generation. If the aforementioned obstacles are removed, there is every chance that the UK will not only reach this target, but surpass it.