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The Topic: Electricity storage UtILItY WeeK | 28th November - 4th December 2014 | 13 created by the proliferation of renewable generation. Some are purely distribution ser- vices that displace other expenditure, while others involve trading power. But distribu- tion licences cap sales from non-distribution business activities such as storage at 2.5 per cent of the DNO's revenue. Investment in non-distribution activities by a DNO is also capped, at 2.5 per cent of its share capital. A more serious bear trap in the path of DNO storage aspirations is regulation that blocks DNOs from trading energy. That cuts off revenue streams that are likely to be cru- cial to making a storage business case and attracting investors. Currently, power in and out of DNO stor- age projects is treated as losses and spills, so it is unmetered. This would become unten- able should storage exit the trial phase to enter widespread commercial operation. In a recent report, consultancy Poyry calculated that every 100MW of storage flow treated as losses would hit other market players' losses adjustments to their metered volumes to the tune of £3 million a year. "There is an obligation on us not to distort competition – that's tricky," says Heyward. "With storage taking unmetered energy off the system, treated as losses and socialised, it distorts the market. If it is metered, then storage needs to buy and sell energy and that's currently a no-go." Ownership and operation of storage would enable DNOs to add trading revenue to strengthen the business case for storage investment. Poyry looks to Ofgem to unlock this potential: "Action is required from Ofgem to make these options possible (if considered appropriate) through revisions to the regulatory framework," it says. However, the favoured option for a DNO looking to play the storage game is, accord- ing to Poyry, to find someone else to do the trading. Energy trading activity to manage inflows and outflows can be handled by a third party supported by contractual arrangements, sug- gests Poyry. This, it says, avoids the short- comings of the losses/spill approach and issues relating to potential distortion of gen- eration and supply through DNO trading and The role of waTer in priming The secTor Reservoirs could be a feed source for small pumped storage schemes The water sector could have a role to play in bringing on pumped storage. Part of a £240,000, Decc-funded research and development programme at Quarry Battery is an investiga- tion into the possible use of res- ervoirs as a feed source for small pumped storage plants. "Pumped storage needs lakes, so why not use ones that are already there and not have to build new ones? Providing there is no burden on water resources, we thought about using reser- voirs," says Quarry Battery man- aging director David Holmes. The company's proposal amounts to using a disused quarry as one end of the pumped storage cycle with a reservoir at the other. Holmes says he is talking to a number of water companies. He acknowl- edges that there are immediate water treatment concerns about the potential impact of mix- ing quarry water with reservoir water. Meanwhile, MWH business director Craig McMaster says a number of water companies have approached the company to assess their redundant assets as possible sites for power production. "Many have large areas of land, dams that are no longer used as reservoirs and disused pipelines which could lend themselves to pumped storage or conventional hydro," he says. The companies, McMaster says, are looking both at in-house generation and at selling land or assets to private developers to develop storage schemes. is, "the most likely model for grid-scale stor- age assets in the short/medium term". Heyward sees a downside: "It's a risky business model. How do we ensure the third party is incentivised to deliver peak shav- ing?" Heyward asks. He adds: "DNOs need confidence that they will provide that ser- vice. They would of course have that confi- dence if they owned the storage. "Is it possible to get that confidence or will DNOs have to pay too much to make it a goer?" Pumped storage Regulatory issues trouble even the one elec- tricity storage technology that is established commercially – pumped storage. Mature pumped storage technology came to the mar- ket free from capital costs, courtesy of the British taxpayer, prior to privatisation. New plant will need a different, more testing busi- ness plan. Business director with MWH Global, Craig McMaster, is critical of the lack of encour- agement in recent regulatory reform for pro- spective investors in new pumped storage. "Electricity Market Reform (EMR) does not Time is money System power rating, module size High power supercapacitors Flywheels Nickel metal hydride battery Li-ion battery Advanced lead-acid battery Sodium-sulphur Flow battery Cryogenic energy storage Compressed air energy storage Hydrogen and fuel cells High energy supercapacitors Lead acid battery Nickel cadmium battery Super conducting magnetic energy storage Reserve and response services Transmission and distribution grid support Note: conceptual purposes only. Many of the options have broader duration and power ranges than shown Bulk power management Discharge time at rated power Seconds Minutes Hours 1kW 10kW 100kW 1MW 10MW 100MW 1GW 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 20% 15% 10% 5% 0% Pumped hydro storage Thermal Electrical Electromechanical Mechanical Hydrogen-related Key: types of storage spare elecTriciTy capaciTy in The UK dUring winTer Source: National Grid Source: Centre for Low Carbon Futures