Currently, the UK grid faces significant challenges driven by macro changes:
Large scale plants are starting to be decommissioned: the market expects the closure of fossil generation and nuclear powerplants in the short-term, and
A commitment to increase renewables generation: the UK has committed to reducing greenhouse gas emissions by 80% by 2050, compared to 1990 levels, as well as signing the Paris Climate Agreement in 2015.
Consequently, the use of renewable energy is expected to reach 31% of total energy generated in the UK by 2020, up from 18% in 2016. Renewable energy sources are intermittent and increase the difficulties in balancing demand/supply of electricity.
Battery storage systems can therefore help to maintain the stability of the grid. Among other services they enable excess energy in the system to be stored at times of over production and release this energy when grid capacity is constrained.
There are multiple revenue streams for energy storage projects which may be stacked on a single battery, including (a) frequency response services, (b) triad avoidance services and (c) capacity market services. In addition, there are prospective new revenue opportunities over the coming years such as market arbitrage and balancing mechanism services, amongst others.
The combination of strong market drivers plus the rapidly reducing cost of battery technology, means that Gore Street Capital believes that there are significant prospects for the roll-out of battery storage systems. Even the least optimistic National Grid forecast scenario predicts a storage installed capacity of 2GW by 2020, representing an increase of approximately 570% from the current installed capacity of approximately 300MW.