20 Nov 2019

How is the electricity storage market developing?

Based on input from over 600 experts the National Grid Electricity System Operator's Future Energy Scenarios (FES) map out credible pathways and scenarios for the future of energy. The FES 2019 published in July looks at the network capacity needed in Britain and considers where it could come from, how it needs to change and what this means for the energy system itself for the next 30 years and beyond.

Energy storage is needed to support intermittent output from renewables, with growth facilitated by continued falls in battery costs and developments in other storage technologies. In particular, the FES notes that there is a need for larger, longer duration storage to support decarbonisation. In all the FES' scenarios electricity storage capacity increases; in 2018 there were in excess of 6 gigawatt (GW) of electricity storage technologies and a maximum potential by 2050 for storage of 28.1GW is projected (endnote 1). In the FES energy storage includes battery as well as pumped hydro, compressed air and liquid air.

Rapid development of energy storage projects in the past 12 months has led NG to increase projections of storage growth in the 2020s in most scenarios and it anticipates development of a robust project pipeline. The last 12 months have seen around 50 storage projects commissioned in GB, providing around 500 megawatt (MW) of capacity. Many of these are short duration batteries. Around 80 per cent of these new projects are being installed on the distribution network or at a lower voltage, for example alongside onsite generation. There has been continuing co-location of storage with generation, so projects can access a broader range of markets. Most, but not all, are currently co-located projects are with solar and wind generation.

Monitoring results produced for the department for Business, Energy & Industrial Strategy (BEIS) show that over 90 percent of known operational and prospective storage projects in GB are made up of battery storage. It is notable that most of the existing/prospective battery projects in GB have been sized below 50MW and have a duration of below 4 hours (endnote 2). Perhaps this is in part a reflection of the routes to the energy market that have so far been brought forward, rather than solely a reflection of technological preference. The collated monitoring shows a that for battery storage there appears to be a clustering effect just below the 50MW capacity threshold, with just over one quarter of projects sized between 40-50MWs (of which around 90% are sized between 49-50MW). This was highlighted in the responses to the first BEIS consultation on the treatment of electricity storage.

BEIS consultation on consenting electricity storage

Energy storage is a key technology in the transition to a robust, smart and flexible energy system and it is part of the government’s Clean Growth and Industrial Strategies. Removing barriers to electricity storage was a government commitment to support the transition to a smarter and more flexible system (endnote 3), in particular to consult on how storage is treated in the planning system.

The first consultation was launched in January and closed in March 2019 proposed to retain the 50MW Nationally Significant Infrastructure Project (NSIP) capacity threshold that applies to standalone storage facilities; and to amend the Planning Act 2008 to establish a new capacity threshold for composite projects including storage and another form of generation.

Respondents to the first consultation largely disagreed with retaining the 50MW NSIP capacity threshold for standalone electricity storage, citing this as a significant barrier to the deployment above this threshold. Respondents provided evidence which showed clustering of projects just below the 50MW threshold, as well as details of specific projects which had either been deliberately capped at 49.9MW or split into multiple 49.9MW projects in order to avoid the NSIP regime. In addition, respondents provided evidence on the planning impacts of battery storage compared to other forms of generation, highlighting the lower impacts of this type of storage.

BEIS revised preferred policy option

The follow up consultation acknowledges that there is a case for treating energy storage differently from other forms of generation to take account of its distinctive characteristics and benefits to the energy system. Many respondents noted that some energy storage technologies, and batteries in particular, have much lower planning impacts compared to other forms or generation, both in terms of the footprint and height of the facility as well as the total construction time. The same may not be said for all types of energy storage and pumped hydro in particular involves the type of large scale infrastructure for which the NSIP regime is more appropriate above a 50MW capacity.

The government's new preferred policy position is therefore to take electricity storage, except pumped hydro, out from the NSIP regime in England and Wales entirely. The primary consenting route in England would then be under the Town and Country Planning Act 1990 (TCPA). Section 35 of the Planning Act 2008 would continue to apply in England, allowing the Secretary of State to direct projects into the NSIP regime, where appropriate.

A number of respondents to the initial consultation suggested raising the level or amending the unit of the threshold. BEIS states that after consideration this is not its preferred approach for the reason that it does not consider that the NSIP regime is appropriate for storage (except pumped hydro), and that having a threshold for storage results in complexity for enlargement of existing projects and for those co-located with other forms of generation.

The follow up consultation clarifies that where composite projects involve electricity storage (except pumped hydro) facilities deployed alongside other forms of generation which remain subject to the NSIP regime, the capacity of the storage facility would not form part of the overall capacity of the generating station against which NSIP capacity thresholds are measured. The project would therefore only qualify as a NSIP where its non-storage generating capacity exceeded the NSIP capacity thresholds. This is a significant change from the previous position, though some further clarification that necessary infrastructure to facilitate the inclusion of an energy storage facility can be included within such a development (for example sufficient cable infrastructure) would be welcome.

The follow up consultation also provides some further clarifications on some scenarios which may arise:

  • For new composite generating stations which would still exceed NSIP capacity thresholds, storage facilities which form part of the generating station could still be consented within the same DCO if they qualify as "associated development" within the meaning of the Planning Act 2008.
  • For "retrofit" projects, where an existing generating station which already exceeds NSIP capacity thresholds, and which was previously constructed pursuant to a DCO, or under a section 36 consent, is extended by the addition of storage facilities, developers will be able to seek consent for the extension from the LPA under the TCPA regime rather than automatically being required to seek a DCO, albeit they would need to consider the compatibility of any new planning permission with the existing consent(s). Note that a DCO may still be required where the extension also involves non-storage development.
  • Where an existing generating station has been consented by a DCO, or a section 36 consent, which has not yet been commenced or where construction has not yet completed, it may also be possible to include additional storage facilities within the development by applying to amend or vary the existing consent.

The revised policy position would also have the effect that both onshore wind and electricity storage would be carved out of the NSIP regime. Consequently composite projects involving storage and onshore wind would always be consented by the LPA, unless directed into the NSIP regime under s35 of the Planning Act 2008. This would not preclude such projects from constituting a change to an EIA development where that regime applies to them and as such the need for revised EIA is possible and in many cases likely.

Permitted development rights

Premises where the primary function is not generation

The first consultation stated that it may be possible to use permitted development rights (Part 7 Schedule 2 GPDO 2015), to install storage within an existing premises to support its primary use, provided that there are no external changes and the majority of electricity is used on the premises. Such a case it confirmed would be unlikely to constitute a material change requiring planning permission.

A number of respondents felt that it was unclear how much storage could be added via this route and that the restriction to onsite use of the stored electricity limited the type of premises able to benefit.

The follow up consultation has now clarified that subject to ensuring that any extension of existing premises to provide additional space to accommodate storage is within the limits (footprint, height, etc) specified by permitted development right, the majority of the electricity stored does not need to be used on site. But note that the consultation also states that, the electricity storage element must be ancillary to the primary use of the premises. If the premises were to be primarily used for electricity storage this may be considered a material change of use and therefore development for which an application for planning permission would be required. The significant benefit of the proposed position is that it enables such sites to freely participate in arbitrage markets by providing frequency response services and power potential where this is ancillary to the primary use of the premises.

Licensed operators

Holders of an electricity distribution, generation and supply licence under the Electricity Act are included in the definition of statutory undertakers for the purposes of the General Permitted Development Orders (GDPO) applicable in England and Wales. Such electricity undertakings benefit, subject to specified conditions, from permitted development rights to extend existing buildings or for new buildings to protect plant or machinery on operational land. These rights are a national grant of planning permission by development order, they do not grant planning permission for development which forms part of an NSIP for which consent is required under the Planning Act 2008.

Government expects that taking electricity storage out of the NSIP regime will enable electricity undertakings to make greater use of the permitted development rights. Given the infrastructure that licensed operators own and operate they appear very well placed to do so. In line with regulatory requirements, it is likely that it is, not DNOs, but suitably ring-fenced affiliates that will be able to benefit from this opportunity. Government anticipates that some electricity storage developments which would previously have required consent under the NSIP regime will in future require planning permission under the TCPA. This means consent may be obtained on application to the LPA, or where applicable, may come within the permitted development rights.

Environmental Impact Assessment (EIA)

If a proposal constitutes EIA Development (it is likely to have significant effects on the environment), then any potential permitted development rights are automatically lost.

Currently electricity storage is not expressly identified as a category of Schedule 1 development (for which EIA is mandatory) or Schedule 2 development (which may require EIA if likely to have significant environmental effects) within the existing legislation.

The Town and Country Planning (EIA) regulations describe "industrial installations for the production of electricity" to be a form of Schedule 2 development, which may require EIA if likely to have significant environmental effects. The follow up consultation states that the government view is that "in general, [it will] be appropriate to describe storage facilities in this way" and further notes that under the TCPA regime this category of Schedule 2 development is subject to an additional area threshold of 0.5 hectares (which is equivalent to 5,000 square metres). It remains to be seen whether this threshold is appropriate or where more bespoke parameters for energy storage facilities will be developed.

However, the follow up consultation also notes that it will be necessary to consider if any other descriptions, thresholds or criteria for Schedule 1 or Schedule 2 development apply where storage facilities are developed as part of a composite project alongside other forms of conventional or renewable generation. An example of another category which may be relevant in this context is wind farms with more than 2 turbines or with a hub height over 15m, which are separately identified in Schedule 2 of the TCP (EIA) regulations.

In other scenarios it may be appropriate to describe the development as a change to, or extension of a generating station (Schedule 1 (nuclear and thermal generating stations) or a Schedule 2 (generating station other than Schedule 1) which is already authorised, executed or in the process of being executed. Changes and extensions of this kind will constitute Schedule 2 development under the Electricity Works (EIA) regulations in their own right if they may give rise to significant adverse effects on the environment or if any applicable criteria or thresholds are met or exceeded.

Wales

The Welsh Government have carved out energy storage (except pumped hydro) from their Developments of National Significance (DNS) regime. This means that storage (except pumped hydro), below 350MW in Wales is consented by the relevant LPA under the TCPA regime. The previous consultation only proposed making changes to the planning regime in England. The follow up consultation however states that government intends to extend the carve out to Wales to ensure consistency. The effect of this proposal would be that if implemented, in Wales, planning decisions for electricity storage (except pumped hydro) of any size will generally fall to be consented by the relevant LPA under the TCPA regime.

Within Welsh planning policy, on an all-Wales basis there is clear backing for energy storage projects to come forward. Planning Policy Wales Ed.10 December 2018 (PPW) provides planning policy on an all-Wales basis and outlines guidance for making planning decisions. It contains support for energy storage facilities and provides that, "Proposals for new storage facilities should be supported wherever possible", (5.7.13).

The National Development Framework (NDF) to date is still in draft and out for consultation until 15 November 2019. In its final form it will complement PPW by setting out the spatial priorities for planning and development where national level consideration is required; it will give a spatial expression to Welsh Government policies of national importance.

With most energy storage projects proposed to fall outside the DNS regime one may not anticipate to see further policy support in the final NDF for energy storage. It is the intention that the NDF will be the base from which Strategic Development Plans (SDPs) at a regional level and Local Development Plans (LDPs) at local authority level will be built. These plans will identify the location of new infrastructure and development not of national importance. It is to be hoped that these in turn will take into account and reflect the support for energy storage set out in PPW.

Note that in England, no comparable guidance exists, With most energy storage projects proposed to fall outside of the NSIP regime and in the absence of any national policy statement that would apply, there is need for additional planning policy to be developed for energy storage under the TCPA regime to enable the correct planning balance to be struck by decision makers.

Pumped hydro and other forms of storage (eg compressed air energy storage, liquid air energy storage)

The government intends to retain the 50MW NSIP threshold for pumped hydro storage. The reason given is the larger planning impacts of pumped hydro projects and the fact that they often require other consents, for example authorisation for the compulsory acquisition of land which can be provided through a Development Consent Order (DCO).

Some of the other forms of storage technologies are not yet deploying commercially and/or at scale in GB, which also makes it difficult to predict how they may develop. The follow up consultation notes that the initial evidence suggests that although the planning impacts of these technologies may be slightly greater than batteries, they are lower than the impacts of other forms of generation and pumped hydro storage. The proposal is therefore that these also will be carved out of NSIP regime and will be consented by the relevant LPA, unless directed into the NSIP regime under s35 of the Planning Act 2008 or consented as associated development as part of a composite project where the other form of generation falls into the NSIP regime.

Comments

The consultation states that government defines storage as a distinct subset of generation for planning and licensing purposes and that it will define storage in this way in primary legislation when parliamentary time allows.

The 4 October decision on the DCO for the Drax re-power project is interesting in this context. The SoS concluded that the battery storage facilities should be categorised as NSIPs in that case, given that each of the prospective generating stations exceeds the capacity thresholds necessary to be considered in its own right. In future, similar projects may need to consider how battery storage facilities which do not independently meet the NSIP thresholds should be categorised within an application for development consent.

The follow up consultation states that there is currently no evidence to suggest that LPAs are not able to appropriately assess and determine applications through the TCPA regime. Nevertheless in certain circumstances the 2008 Act regime has a number of advantages over the proposed regime including the ability to include powers of compulsory acquisition and taking the decision out of the local decision making process and giving it to the SoS, which may be preferable particular where the scheme is controversial. It remains to be seen how battery storage schemes develop and come forward and what level of objection in particular larger schemes may encounter before it will become clearer which is the most appropriate consenting route.

The proposed changes to the permitted development rights may be of even greater significance for the future of the electricity grid. This is illustrated by the events on Friday 9 August this year which are described in the Electricity System Operator's (ESO) interim report into the low frequency demand disconnection (16 August 2019) (endnote 4).

Immediately before the incident, around 30% of the generation was provided from wind, 30% from gas and 20% from Nuclear and 10% from interconnectors. The almost simultaneous unexpected independent losses of power that occurred (amounting close to 1.378MW), were subsequently described by National Grid ESO as "an extremely rare and unexpected event".

The Interim Report states that the ESO was keeping 1,000MW of automatic "backup" power at the relevant time. This is the minimum amount approved under its Security and Quality of Supply Standards (SQSS). The minimum amount is designed to offset the largest loss risk of generation; the collapse of its single largest generator of power, currently Sizewell B which in future is likely to exceeded by the new plant currently under construction at Hinkley.

A question which arises is whether the ESO should have a more significant reserve of "back up" power to dip into, and if yes then how will that be supplied. The Interim Report states that all the "backup power" and tools the ESO normally uses and had available to manage the frequency were used and that this included 472MW of battery storage. It also reveals that in order to facilitate further evolution of the generation mix the ESO is working across the wider industry on several initiatives specific to the control and stability of frequency.

More questions pose themselves, will more batteries be part of the answer? Further, providing a higher level of reserve will come at a cost to ensure additional generation and/or storage plant will be available. The question is whether the consumer is or should be willing to pay the price for additional reserves of power?

Endnotes

(1) The FES 2019 Storage in the scenarios includes battery as well as pumped hydro, compressed air and liquid air.

(2) BEIS, Renewable Energy Planning Database (REPD)

(3) 'Smart Systems and Flexibility Plan 2017'

(4) Interim Report into the Low Frequency Demand Disconnection (LFDD) following Generator Trips and Frequency Excursion on 9 Aug 2019