Open letter to OFGEM - Where is the market for energy storage?

I just sent this to OFGEM, copied to Amber Rudd. 

Dear OFGEM,

I have been concerned for some time that though our electricity supply market gives reasonable support for renewable energy it gives scarcely any support for energy storage. We need energy storage for energy security without being overly dependent on fossil fuels. Our main low carbon supplies are:

- wind - variable and not dispatchable, fairly even through the year but more in winter than summer, in line with seasonal demand

- solar - highly variable and not dispatchable, much more power in summer than winter, against the pattern of seasonal demand

- nuclear - (as we use it in the UK) not variable but not dispatchable either.

DSR can help but we also need storage over periods of hours, days and, if solar is to be a significant part of supply, between summer and winter.

Financial support in the form of CfDs, ROCs and FiTs are all flat rate - so there is no financial incentive there for matching variation in demand over any timescale.

Also on the demand side most customers pay a fixed price through the day and through the year. The introduction of smart meters brings the potential for more flexible tariffs that could promote use of storage over short time scales, particularly batteries with solar panels, to cover the peak periods. That may help but I fear demand side storage has limited potential in general. Also, demand side storage with renewables reduces the amount of power drawn from the grid which increases costs for everyone else. When storage is added to the  supply side, the costs and benefits are equally shared by all consumers.

The IEA said in their report ‘The Power of Transformation: Wind, Sun and the Economics of Flexible Power Systems (2014) 

'[Variable renewable energy] power plants can contribute to their own system integration. But they need to be asked and allowed to do so. The common view of integration sees wind power and solar PV generators as the “problem”. The solution has to come from somewhere else. However, wind and solar PV power plants can facilitate their own system integration.’

In our market there is no benefit to renewables to be flexible except for the Triad payments system which are minor and, in theory, the capacity market, but that auction is in practice heavily biased towards fossil fuel power stations.

Amber Rudd, Secretary of State for Energy & Climate change, said in her speech to Aviva Conference (https://www.gov.uk/government/speeches/secretary-of-state-speech-on-climate-change)

'By focusing on storage and reducing energy demand, not just generating more energy, we also help to meet our energy security needs.’ 

However, I don’t see any focus on storage in our energy policy. Can you reassure me that there is focus on energy storage as well as generation in our power supply  market? As a consumer I am very concerned for our energy security.

By the way I discuss these issues more fully in my recent blog post: 

http://energy-surprises.blogspot.co.uk/2015/07/where-is-financial-incentive-to-develop.html

Yours

Nicola Terry

Update 14/August/2015
OFGEM's reply has referred me to National Grid's Future Energy Scenarios report. This shows the situation is even worse than I thought. Not only is there no market support for energy storage, the current regulations work actively against it. See Future energy scenarios without storage: unicorns and rainbows?

Update 2/September/2015
I had a reply from DECC, via Amber Rudd. In essence, the DECC Smart Energy team is working with National Grid to understand their assessment, and to investigate the barriers to deployment of storage and how they can be mitigated. The Smart Energy team are also working closely with OFGEM on a new project called the Flexibility Project. This will look at demand side response, storage and distributed generation in general. There will be something published about this at the end of the summer. (Though judging by the recent weather that has happened already). I am not holding my breath on this but it will be interesting to see what the Smart Energy team recommends

In the first version of this letter I unfortunately confused demand and supply side in the paragraph starting 'Also on the demand side...'. I have now amended this.