A new National Grid service, designed to improve energy security and to maintain system stability, held its first auction for bidders on 26 August, with a number of commercial battery projects winning contracts.
In its role as system operator, National Grid aims to maintain the frequency of the electricity system as close as possible to 50Hz, in order to ensure stable operation.
Should the frequency move outside the range of 49.5Hz-50.5Hz, electricity may do damage to machinery and equipment that is designed to run within these limits. Much further outside the range, and there is the risk of power outages.
Enhanced Frequency Response (EFR) is a new service that requires providers to help National Grid to balance the power system in under a second.
Previously, such services have only been deliverable in the region of 10-30 seconds.
But, as more intermittent renewables generation connects to the network, the challenges facing National Grid in maintaining system frequency increase.
While the EFR auction is technologically neutral, battery technology is felt to be the main beneficiary, as it has the capability to provide instant response—in turn alleviating some of the concerns about system inertia and the increasing rate of change of frequency.
Moreover, the costs of battery technologies have fallen markedly in recent years. Analysis issued by Cornwall Energy last month (see graph overleaf) showed that the costs of Li-ion battery storage had dropped by 85% since 2011, and could be expected to fall a further 45% by 2025.
As part of the EFR auction, National Grid sought to procure 200MW of enhanced frequency response, with a 50MW cap set for each provider. National Grid has estimated that the auction will save around £200mn in system costs.
Participants in the auction, as shown by the successful tenders, range from Big Six companies, to smaller renewables developers and other new entrants to the energy sector. Stakeholders noted that, while National Grid had sought projects amounting to 200MW of capacity, 1.4GW of projects had offered their services – suggesting that a significant pipeline of battery projects could be waiting to progress.
The auction came after a new report by Smartest Energy reinforced the view that energy storage could be on the cusp of a significant breakthrough in its contribution to system balancing, but that barriers remained to be addressed.
As part of the survey, published on 17 August, the company consulted 45 battery storage innovators to explore the challenges ahead of commercialisation. It suggested there was uncertainty about how projects could be monetised from the revenue streams currently available.
The report said that a significant amount of battery storage capacity could remain untapped owing to the limited availability of contracts for the sector.
There remains a lack of clarity around the payback periods expected by investors. According to the survey, the “line in the sand” seemed to be five years, although some developers were more optimistic than others and requirements vary across different funding models.
Just over a third (36%) of respondents expected payback on their investment within five years, while nearly half (49%) expected it to be achieved within 5-10 years.
The report found that the commercial case for battery storage was complicated by the charging of environmental levies, such as the Renewables Obligation (RO) and the Feed-in Tariff (FiT), to electricity consumers.
Under the current regime, suppliers have to pass on the full charges for the energy supplied to charge batteries, and when the energy is eventually exported, the end consumer is charged again. This “double charging” adds a substantial cost.
Smartest Energy recommended that certainty was given on the continued tendering of future National Grid contracts such as EFR, and that the double-charging irregularity was removed.
The outcome of the EFR auction has been welcomed by industry groups as showing that battery technology has reached a point where it is commercially viable.
James Court, head of policy and external affairs at the Renewable Energy Association, said: “The conclusion of the EFR auction shows that storage is now ready to deliver, and with the right framework can provide vital services to UK Plc.