GLOBAL INFRASTRUCTURE UK BATTERIES

DESPITE THE CHALLENGES OF 2020 , NOTABLE REGULATORY STEPS HAVE BEEN TAKEN IN THE UNITED KINGDOM TO ACCELERATE GROWTH IN BATTERY STORAGE PROJECTS – WITH MORE EXPECTED IN 2021 . BY OLIVER IRWIN , PARTNER AND NICHOLAS NEUBERGER , SENIOR ASSOCIATE AT BRACEWELL ( UK ) LLP .

In its 16 months in government , the current administration has made some very promising remarks on its plans for energy storage in the UK . It has been described as a high priority by the Department for Business , Energy & Industrial Strategy ( BEIS ) and government representatives , and appears to be a key limb of the government ’ s push towards a net zero carbon economy as set out in the December 2020 White Paper .

UK regulators have also contributed to this enthusiasm . Ofgem has continued to emphasise that energy storage must play a key role in the integrated , flexible energy network the country is developing . It has also gone several steps further by clarifying the barriers faced by the energy storage market that have inhibited its competitiveness , as well as publishing a number of related updates on consultations and regulations .

Buoyed by these positive forces , reduced costs , improved technology and the economic attractiveness of revenue stacking , battery storage capacity in the UK sky-rocketed in 2020 .

Operational battery storage projects in the UK surpassed the 1GW mark in April 2020 – by way of context it was less than 10 % of that amount in 2016 . There is currently about 16GW of further battery storage capacity in the development pipeline – with up to half of that already granted planning permission . Multiple projects across the country with a capacity as large as 49MW have been completed , and many more of this size ( and bigger ) are under construction . In November , a project with 320MW of capacity gained planning permission in the Thames Estuary .

So ministerial and regulatory enthusiasm has been matched by investment enthusiasm . But what legal and regulatory developments actually occurred in 2020 to reduce barriers and further accelerate the progress towards the battery era ?

Storage finally defined Energy storage has historically been left undefined in the principle legislation that governs the regulation of the electricity network , the Electricity Act 1989 , and was also not addressed in the related licensing regime . It has traditionally been grouped with generators for the purposes of legislation and regulations – but without express confirmation that this is the case . Ofgem consultations from 2017 revealed a strong interest from the energy market in having storage defined in primary legislation .

Following lengthy consultations , Ofgem confirmed that from November 29 2020 , for licence purposes , electricity storage would be treated the same as other forms of generation . Ofgem also confirmed which technologies would be considered batteries – electrochemical batteries , gravity energy storage , air-based storage etc – and those that would not be – transformers , inductors , thermal energy when stored energy is not re-converted to electricity . Given the rapid development of new battery technologies , Ofgem helpfully clarified that it does not consider this to be an exhaustive list .

It was also stated that , when parliamentary time allows , a definition would be inserted into primary legislation and further clarity provided as to how storage fits into the legislative framework .

While not yet enshrined in primary legislation ( and many storage projects , in fact , benefit from licence exemptions due to their scale ), Ogem ’ s confirmation was a notable step for energy storage as it provides classification certainty to investors . This is particularly relevant for the growing number of larger projects where licences will be required and investors will be seeking the comfort of a settled regulatory regime . As a mark of the UK government ’ s intent , in the December 2020 White Paper the first item on the Energy System Key Commitments page is for this regulatory step to be enshrined in statute .

Parts of the energy sector were seeking more bespoke provisions for energy storage to be set out in regulations and statute . It will be interesting to see if the parliamentary draughtsmen or the related debates expand on how electricity storage fits into the legislative framework ( as alluded to by Ofgem ) beyond that of the inclusion of a definition .

By way of comparison , in 2020 the United States also made very similar changes to its regulatory regime to broaden the definition of “ generating facility ” to specifically include energy storage devices whether developed as a stand-alone project or co-located , see FERC Order No 841 .

Project Finance International Global Energy Report April 2021 21