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UTILITY WEEK | 9TH - 15TH OCTOBER 2015 | 11 Policy & Regulation Column Government must back storage Investors need a clear commitment from government before they will build the storage facilities the UK is crying out for. O ne of the unique features of the power market is that the main product cannot be stored in the conventional sense. Yes, we have had pumped storage for many years but technologies such as fuel cells, flywheels, compressed air storage, voltage optimi- sation and batteries have seen little commercial deployment. Yet stakeholders are in agreement that the need for storage, as part of a broad mix of energy technologies, is greater than ever. The driver for storage comes from the increased penetration of intermittent renewables and the costs these technologies impose on the system, both in terms of balancing supply and demand and also in terms of efficiently managing power networks. These forces, which are increasing in impact, should help stimulate demand for storage technologies and, as these become more mainstream, will increasingly attract the focus of investors in energy assets. The challenge for storage is one of timing. Is there sufficient political momentum to support technologies today that may only create value in the 2020s? When investors are asked what they want from government to facilitate investment in energy infrastructure, the number one response is the need for a clear, transparent long-term policy framework. Unfortunately, the competing demands of energy policy in relation to climate change, security of supply and affordability is making this more of a challenge for technologies such as storage. The key factors that potential investors in storage will want to understand include: • How firm is the government's commitment? • How does storage stack up against alternatives such as dispatch- able generation, demand-side response and interconnectors? • What financial incentives are available to investors in storage? • How do you value storage? Energy storage can deliver a number of services to the energy sys- tem. These can reap financial rewards in a variety of ways, depend- ing on the characteristics of the storage technology and who receives the benefit. These include: • responding to shi ing demand – storing at times of oversupply and releasing at times of peak demand; • investment deferral – storing when power flows into the network exceed capacity and releasing when headroom becomes avail- able. By smoothing peak flows, networks do not need to be sized to peak flows; • grid stability services – by varying charging and discharging loads, storage can provide system stability services (that is, fre- quency response and fast reserve). Despite being able to deliver much-needed flexibility, there is cur- rently no single market for flexibility services, in the same way as we have a market for capacity. Providing a framework that will allow storage to be valued at competitive rates of return should be the priority for policymakers if we are to have a healthy storage market by the 2020s. Ronan O'Regan, energy and utilities director, PwC the mismatch between generation and loads by quickly adjusting generation output to maintain the grid's ideal frequency – 60Hz in parts of the world and 50Hz in others. S&C's storage management systems are being deployed across networks to balance com- munity energy demand. To further understand the potential for storage solutions, we have developed four business scenarios to help customers better understand how assets can be deployed: Scenario one. The customer owns and oper- ates the storage device, receiving all revenue generated from the asset. Scenario two. The customer hosts the asset, which can then provide additional revenue streams if some of the services of the stor- age project are contracted to third parties. However, the customer is not responsible for contracting the services or owning the asset. Under this scenario, an aggregator can own the assets, sharing any revenues generated, and it would underwrite any risks. Scenario three. The customer leases the storage technology from the manufacturer, with the manufacturer taking responsibil- ity for installing and decommissioning the technology. The project would, however, likely be financed by a third party. At the end of the lease contract, the manufacture could extend the life and value of the tech- nology by relocating the project to another customer site. Scenario four. An aggregator owns or leases the asset and secures a contracting service to a number of clients, such as SSE's Constraint Managed Zones, which is inviting interested parties to enter the pre-qualification ques- tionnaire stage of a tendering process in which it is looking to purchase constraint management services for a specific time of the year. An aggregator has the advantage of a portfolio of assets, enabling it to pro- vide multiple services and hedge against non-availability. As technology continues to advance, the electricity network holds huge poten- tial for innovation. However, if economies are to make the transition to a low-carbon economy, governments need to evaluate and update legislation to fit an industry land- scape that is shiing. In conjunction with supporting market mechanisms, businesses need to educate the younger generation of engineers on the benefits of implement- ing storage and clarify the business case for these solutions. Achieving this will provide a better understanding of the market for energy storage and how projects can yield returns on investment. Mick Barlow, application director, S&C Electric