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20 | 19th - 25th September 2014 | UtILItY WeeK Finance & Investment Market view B ritain's energy policy is haunted by ghosts. The most disturbing of them is the failure of central planners to grow Britain's grid-scale storage capacity in line with the aggressive build out of renewable generation. The UK has just 2.8GW of grid- scale storage at four sites, all of it pumped hydro and the most recent of which was built more than 30 years ago. Other countries have recognised that renewables are intermittent and have cou- pled their development with new storage so that excess production can be stored, then released at times of high demand, or when the wind fails to blow. Portugal, for exam- ple, is planning 1GW of new storage for every 3GW of renewables in order to achieve the optimum balance between security and evenness of supply. By the same 1:3 formula, the UK has 2GW less storage than it needs now, and will have a 6GW deficit by 2020. Without sufficient storage, National Grid is finding it difficult to balance increasingly intermittent supply against "peaky" demand. This is costing industry and households dearly in subsidies and constraint payments. There may be signs that the government is now thinking about how to bridge the stor- age gap. However, it is one thing to recognise that the UK must have more storage, and quite another for the government to create the conditions in which more can be built. Storage equals long timescales and big risk. The last grid-scale facility built, at Dinorwig in north Wales, required hollowing out the inside of a mountain and took a dec- ade to construct. If developers, investors and construction companies are to be persuaded to risk building storage on the scale that Brit- ain needs, then ghosts lurking within the system must be exorcised. The most fundamental of them is the lack of a National Policy Statement (NPS) for storage. Twelve NPSs published by the govern- ment establish the overarching framework against which decisions about where nation- ally significant infrastructure for energy, transportation and water can be built. They also state how such developments support government policy on mitigating or adapting to the effects of climate change. They are intended to ensure that the plan- ning approval process is rapid, predictable and accountable. Six of the existing NPSs relate to energy, including renewables and electricity networks, yet none has anything to say about storage. Would-be investors in storage read this omission as a red letter warning that returns from investments in storage could be easily put at risk by sudden shis in central policy. They also see that it means storage projects face planning permission hurdles and uncer- tainties that do not trouble other assets that have NPSs. Further perversities which hamper stor- age investment are tied to Triad* payment thresholds and the requirement for new storage to pay grid connection fees even though, unlike a new power station whose construction requires complementary grid reinforcement, storage lessens the need for reinforcement. It is important to note that these ghosts do not haunt pumped hydro storage alone. They are largely storage technology agnostic. If, for example, compressed air storage, or hot gravel storage are eventually refined to the point where either or both become viable for deployment on a scale useful to the grid, then they too are likely to suffer from the same constraints. For now, though, pumped hydro is the only viable grid-scale technology able to bridge the storage gap with an electric- ity regeneration efficiency of 75 per cent or more. The UK's 2020 storage needs could in the- ory be met in their entirety by just a handful of new pumped storage facilities – if suitable sites could be found and developed. However, therein lies another problem: very few areas within the British Isles have the necessary natural topography for such facilities, and those that do are more oen than not sited either in national parks or areas of outstanding natural beauty. Further- more, such sites are oen long way from the population centres that are hungry users of electricity, suggesting significant transmis- sion losses. Is there another way that Britain can bridge its storage gap? Is there a way that pumped storage can be deployed without requiring some of our most prized wild places to be flooded? There is, and it requires the government to define a vision of the role of storage, including pumped storage and a variety of other storage technologies. Think small This vision should support planning for mul- tiple smaller schemes rather than three or four major ones and re-purposing brownfield sites. Now in the early stages of construction at Glyn Rhonwy near Llanberis in north Wales, the UK's first new pumped hydro facility for more than three decades is a blueprint for this new way of thinking. Being built around two former slate quar- ries, the scheme is expected to be opera- tional by 2018. It has a planned capacity of 600MWh, useful to National Grid in balanc- ing supply against demand, but also making the region more energy self-sufficient and reducing the need for costly grid upgrades. The project has strong support from the local council and community. As Britain's only active developer of new pumped hydro storage, Quarry Battery Company has options on other sites around Britain which, like Glyn Rhonwy, similarly feature brownfield ground, or which com- bine largely brownfield ground with an ele- ment of greenfield. We believe that, through using brown- field sites only, additional new storage with an output of 500MW is possible. If a com- bination of brownfield and greenfield land is used then the possible output jumps to between 1.5GW and 2GW – just sufficient to bridge Britain's current storage gap. Pumped hydro technology is far from static, though, and as advances are made the range and number of potential sites will increase. Storage gap looms The UK needs a lot more storage to balance the deployment of intermittent renewables. Dave Holmes says small multi-site schemes make environmental and economic sense.