Issue link: https://fhpublishing.uberflip.com/i/736974
NETWORK / 39 / OCTOBER 2016 T he rst contracts awarded by National Grid's enhanced frequency response (EFR) service this summer represent the rst real commercial stream for storage and are expected to stimulate the storage market. But was it a success? Certainly it will deliver on its aims; 200MW of storage will now be built on to the grid to manage frequency. Although the tender exercise was technology neutral, all contracts were won by lithium-ion or lead- acid battery developers, with alternative technologies such as demand-side response aggregation missing out. This may have contributed to prices being "very, very competitive", far lower than expected by Aurora Energy Research (see graph below). This struggle for other storage technologies to compete on price with lithium-ion is expected to continue. While the low cost of the contracts is a good thing for consumers – the EFR service will be £200 million cheaper than established alternatives – the Department for Business, Energy and Industrial Strategy has said it remains to be seen "whether they are pro table or not", potentially leaving the storage market waiting for a truly sustainable revenue stream. BEIS said the low prices are as a result of companies wanting to gain a foothold "at whatever cost", ready for when the service expands in the future. Looking at the example of the US, the knock-on e• ect of the tender exercise will be lower lithium prices. Prices are expected to fall to the point where domestic customers will see savings from using home storage services. Price forecasts are already plumetting, with Aurora slashing its price predictions for lithium-ion storage to as little as £100 per kilowatt-hour by 2020. EFR: the fallout ENERGY STORAGE RES £14.65m RES is a global renewable energy company, operating renewable assets totalling 1,300MW across the world. Since developing the UK's second onshore wind farm in 1992 it has developed or built more than 42 farms across the UK and Ireland, and is currently operating 24 as a third party asset manager. It is also involved in the offshore wind, photovoltaic, and commercial energy storage sectors. It has invested in smart grid company Reactive Technologies. Low Carbon £12.67m & £2.68m This privately-owned UK investment company has enabled the investment of £250 million in capital for listed and unlisted third parties in solar photovoltaic, concentrated solar power, wind and anaerobic digestion technologies. It has funded and built, or is operating, over 317MW of solar PV assets. EDF Energy Renewables £12.04m EDF Energy Renewables is an equal joint venture between EDF Energy and EDF Energies Nouvelles, to lead EDF Group's renewables development energy assets, both on and offshore, in the UK. Since its formation in 2008, EDF Energy Renewables' portfolio has grown to 598MW capacity in 31 windfarms. Element Power £10.08m Element Power was established in 2008 with the backing of Hudson Clean Energy's inaugural $1 billion fund. Element Power UK was established in 2010. It operates 108MW of onshore wind power generation in the UK. Vattenfall £5.75m Vattenfall is 100% owned by the Swedish state and is one of Europe's largest generators of electricity. Vattenfall has grown an operational portfolio of six wind farms totalling 612MW in the UK, with another 314MW under construction. Belectric £4.20m Part of the Belectric Group, it has built 13 solar farms and numerous commercial-scale solar rooftop projects, totalling 150MWp of solar power. Belectric's lead-acid integrated Energy Buffer Unit will be used for the EFR contract. Eon UK £3.89m This big six energy supplier spun off all conventional generation and energy trading businesses into a distinct company called Uniper at the start of this year. THE WINNERS "We are excited about what we will learn from this new venture. In fact, we have already learnt a huge amount from National Grid's excellent initiative". Stephen Holdroyd, senior development manager, Vattenfall "The current EFR capacity in isolation will not be enough to unlock the full potential of batteries, so developers need to know what's next for the projects that won't win an EFR contract in this auction." Robert Owens, vice- president of demand- side management, Smartest Energy Prices awarded were "lower perhaps than we were expecting" as the result of companies wanting to be involved at "whatever cost". It remains to be seen "whether they are profi table". Department for Business, Energy and Industrial Strategy EFR has whet investor appetite, but was underpriced and overplayed in terms of its ultimate signifi cance, Aurora Energy Research 2016 EFR supply curve 5 10 15 20 25 30 35 40 45 0 200 400 Aurora's view on cost-relective bid 600 Winning bids 1,000 800 1,200 1,400 1,600 0 Aurora's view on cost-relective bid Winning bids Winning bids £/MW/h MW