One of the cost barriers to the further development of energy storage technology in the GB market has been the confusion about its classification or rather its lack of classification. Not defined in the Electricity Act of 1989 or subsequent primary legislation, energy storage has, as a result, directly suffered in comparison to generation and other more traditional network infrastructure, most obviously when it comes to the use of system charging.
Most grid connected energy storage projects contract with network operators for equivalent export and import capacities, meaning that they pay higher demand use of system charges than most generators, and higher generation use of system charges than most demand customers, and are “double charged” for each unit of energy transported across the network unlike other users.
Ofgem are seeking to address this issue, amongst others, in their push to inject flexibility into the energy system and transform it into a more active network. They are proposing to do this by changing the generation licence so that it also includes a technology neutral definition of energy storage. Ofgem’s “minded to position” would classify energy storage as a subset of generation and enshrine this classification in the generation licence thus making energy storage a licensable activity.
Ofgem’s stated intentions are to:
- Include a definition of storage and storage facility to clarify the role of electricity storage in the energy system; and
- Ensure storage providers are not subject to final consumption levies, subject to them correctly identifying and reporting on the volumes of electricity exclusively related to the storage facility.
The consultation is closed and a decision is pending. These changes should result in a playing field that is more uniform from the perspective of energy storage, and although there remain significant other market barriers for further energy storage development, the anticipated outcome of this consultation is a step in the right direction.
