A Discussion on the Challenges and Opportunities in the UK Energy Storage Sector with Dr Andrew Crossland.

We are now entering the “store-age” with over £1bn of batteries installed across Great Britain, and billions of pounds of investment waiting for a grid connection¹. Battery energy storage is set to be a critical aspect of our future energy mix (alongside other technologies such as thermal storage in the energy storage mix), with the UK leading the way in Europe.² However, as the UK Battery Energy Storage System (BESS) market matures, the challenges will become more acute and grid constraints and difficult commercials mean that the UK BESS market may stall. This article discusses those challenges and looks at the future opportunities for Battery Energy Storage.

What are the current business models in battery energy storage and where does the market need to move towards?

The business models for battery energy storage were built on support to the National Grid with obscurely named services such as frequency response or capacity. Batteries have obvious advantages meaning that they are great for short-term response – for example, they are fast and agile, so they can replace coal power plants to keep the grid stable at millisecond response times. This stability provision was historically very profitable, and the business models looked strong in the short term. Furthermore, capacity payments provided security for the battery operator, with a long-term utility contract guaranteeing a fixed fee for a battery operation. However, with a UK BESS development pipeline of 80GW and markets with the National Grid already congested, traditional markets will become completely saturated.³

In response, batteries are getting bigger and being located at strategic points on the grid or with wind or solar projects. Many believe that this is to help store and sell renewable power when power prices are highest. In reality, batteries are an easy addition to renewable projects as they can share grid connections with limited planning risks and costs, which allows developers to create projects with lower risks. Yet creating a profitable business model out of colocation has its challenges. 

Although cost reductions and technological advancements will increase the margins for all BESS business models, it presents an opportunity for Energy Arbitrage (Time Shifting). As we see more wind and solar assets, the door is open for battery operators to buy electricity cheaply during off-peak periods and sell it back to the grid during periods of high demand. Arbitrage likely holds the key to a sustainable BESS business model – but key challenges remain to achieve long-term commercial viability. In particular, battery life needs to improve to allow massive energy cycling with limited degradation and costs need to fall significantly from their current levels. Battery developers will also be mindful of the possible massive flexibility afforded by electric vehicles, the storage capacity which will reduce arbitrage revenues.

What are the challenges and opportunities in battery supply chains?

The global battery supply chain faces several complexities, such as the environmental, social, and ethical implications of mining and manufacturing. Put simply, workers’ pay, conditions, and health & safety are of as much importance as the sustainability of materials and ecological impact.⁴ As such, consumers and investors now demand a real commitment to ESG and want to see operators audit all stages of the supply chain.

In addition, and just as important, there are also enormously geo-political considerations for supply chains. If we have learnt anything from a reliance on Russian fossil fuels, it is that having a dependency on a handful of countries manufacturing batteries will jeopardise energy security. The need to bring supply chains closer to home has been recognised by the UK Government, which has already established a critical minerals national task force.⁵

A secure and sustainable supply chain also needs to consider the recyclability of batteries. Theoretically, batteries are close to 95% recyclable, but lithium is a finite resource. Sodium-ion batteries may offer a solution. Despite lithium being 20% more energy-dense than sodium, for utility-scale storage, space is less of a concern. With sodium over five hundred times more abundant, sodium-ion batteries offer a potential solution to the current challenges in the battery supply chain – and we are now also seeing mass manufacture for EVs, including by world-leading battery manufacturer CATL.⁶

Why is grid connectivity an issue and how can it be overcome? 

Delays in grid connectivity are one of the primary factors which are slowing down development pipelines.  The UK may be celebrating success in terms of renewables connected, but installation levels and rates are far below where they need to be to abate climate change and achieve net zero targets.

The issue behind grid connections is inherently human. Historically, the National Grid had between 40-50 connection applications a year.⁷ Now, they receive over six hundred applications on top of those to regional distributors. Evidently, the UK’s ageing infrastructure needs substantial investment to meet future demand – and the supply of engineering talent will be insufficient if something does not change.⁸

A major cause of the National Grid’s logjam is its reactive model in response to grid applications. One solution is a proactive approach where there is a clear build plan of power lines that would see a grid built for developers. Yes, there would be stranded infrastructure, but that would be more than offset by the abundance of cheap, local, low-carbon energy on the grid. A full reimplementation of the way we build the grid must happen soon or climate targets will be impossible to meet. Recent promising moves by Ofgem may now allow proactive grid upgrades and would be a huge relief to network operators, low-carbon generation, and EV/heat pumps alike.

Concluding Thoughts 

It is important not to lose sight of the overall picture. To reach net zero there are three key areas for the UK to focus on:

• A major increase in Low Carbon Generation (Wind, Solar, Nuclear)
• Greater Grid Flexibility including from EVs, demand response, thermal storage and battery storage.
• Improved Energy Efficiency (e.g., better insulation, greater appliance efficiency, heat pumps)

Grid Flexibility and the need for battery energy storage in the UK Electricity Mix is fundamental to the energy transition. Yet to achieve net zero, we need to continue to raise awareness, promote transparency, and foster an open dialogue about the challenges, as well as the opportunities.

Dr Andrew Crossland is the Director of New Energy at solarZero and an Advisory Board Member at the Durham Energy Institute. The Durham Energy Institute is a world leader in research on energy, decarbonisation, and interdisciplinary solutions to address the global climate emergency. Andrew is a Fellow of the Energy Institute and an engineering specialist with several peer-reviewed publications on energy storage and low-carbon generation including the book Decarbonising Electricity: Made Simple. Andrew is passionate about engaging a wider audience on energy, climate change, and net zero and is a regular speaker at international conferences.