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Network March 2017

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NETWORK / 8 / MARCH 2017 T he publication of the joint call for evidence on the transition to a smart, flexible energy system was protracted and painful. Waiting six months for a solu- tion to a problem is one thing, waiting merely for discussions about the problem to start is something else alto- gether. The reasoning behind such a discussion was sound. Acting to facilitate a particular approach in one area without fully consid- ering the knock-on effects in another is a recipe for disaster, hence electricity storage continues to wait for even the most basic regulatory changes. But industry responses to the consulta- tion reveal a desire for less talk and more action. Energy storage features far less prominently in the responses than might have been expected. It has been eclipsed by a much greater interest in the transition to a distribution system operator and preparing for the rise of the electric vehicle (EV). Both parties should not be surprised to find that network operators are pressing ahead with a major programme of work without waiting for them to finish chewing the cud. The electricity storage sector has long been vocal about the key regulatory issues that are holding back the adoption of the technology. Accordingly, consultation re- sponses for the most part repeat well-worn arguments that are universally accepted. The only point of conflict remains over whether distribution network operators (DNOs) should be allowed to own and oper- ate storage. This raises the question of whether Of- gem is really willing to listen to the evidence it has collected. In a column written at the time of the call for evidence, Ofgem's Andy Burgess set out the regulator's thinking on electricity storage. While ownership by DNOs was not categorically ruled out, there was little doubt about the regulator's posi- tion: "We don't think network companies need to own or operate storage as it might stifle development of competition in the market." Instead it proposes that DNOs produce "heat maps" to show where connecting stor- age would be of most help to the overall net- work. But that doesn't mean those locations will be the most profitable, and responses make it clear the industry is unconvinced by such an approach. Understandably, networks want assur- ance that their balancing needs will be met by a competitive model before they are ruled out. But the storage industry itself also disagrees with Ofgem's point of view. The Electricity Storage Network says DNO ownership will be a vital driving force for the deployment of storage in the short to medium term for the efficient management of the distribution networks. According to National Grid's Future Energy Scenarios 2016 DNOs could represent as much as 85% of electricity storage capacity. Several ideas have been suggested to protect the burgeoning competitive market while allowing DNOs in, including applying a number of safeguards that have already been set out in the winter package for Europe. Another proposition is to adjust the innovation components of the RIIO price control to allow DNOs to "prime the pump" for a limited time before a market-based deployment for storage takes over in the medium to long term. But where electricity storage was once the new disruptive technology, the delay in the consultation's timeframe means the focus has moved on to the next technology in the pipeline. Given the pace of regulatory change for energy storage, stakeholders can be forgiven for wanting to look further ahead. And they have identified another technology: the rise of the electric vehicle is a prominent concern in the responses, and it is clear industry wants preparations to start as soon as possible. The Energy Networks Association (ENA) calls the rise of the EV a "significant and near-term challenge" and says the devel- opment of technology and commercial standards is necessary to enable visibility and control of the smart charging of such vehicles. Already the ENA has carried out a high-level assessment of the potential impact of EVs on network investment. It encourages the government to "co-ordinate an approach to accessing EV charging infrastructure that meets the needs of the industry and consumers". Innovate UK is also calling for gov- ernment support in the development of vehicle-to-grid charging technology to en- able the market to overcome the significant design challenges in developing a low- cost, compact and low-power charger for domestic use. Forward thinking now would also allow technology developers to take advantage of the techno-economic opportu- nity for small-scale renewables and plug-in vehicle-charging systems to be linked. This would cut investment costs through the sharing of DC-AC inverter hardware. The barriers to both of these markets are fairly cut and dried. Of greater concern is the evolution of distribution system opera- tor, and the balance between necessary di- versity because of geographical differences and consistency for technology developers. T h e o w n e r s h i p a r g u m e n T The question of whether network operators should be allowed to own storage rumbles on "We want to see competition thriving in provision of flexibility services. So we don't think network companies need to own or operate storage as it might stifle development of competition in the market. Instead they should buy storage output from the market when they need it. A number of other European regulators also share this view." Andy Burgess, Ofgem "In the medium to long term, the market- based deployment of storage for grid or energy services is preferable. But in the short term there is scope to adjust the de minimis limits on the innovation components of the price control in order to demonstrate viable use cases and allow DNOs to 'prime the pump'." Northern Powergrid "We believe that a major driving force for the deployment of storage facilities in the short to mid term will be the need for more efficient management of the distribution networks. According to FES 2016, this may amount to 45-85% of new electricity storage capacity. As such, it is essential to have clarity on the allowable ownership and operation arrangements for storage. We believe that network companies should be able to own and operate storage to ensure efficient and economic operation of their assets, subject to a number of safeguards, as per provisions already set out in the winter package from Europe." Energy Storage Network "Storage has an important role to play in addressing network challenges and therefore should be available to network operators to support their networks. Our members support flexibility, including storage, being procured from the competitive marketplace as a commercial service. However, we do not yet know if the commercial marketplace can provide viable storage services in the highly location-specific manner networks may need, therefore we believe that the option to allow network operators to own and operate storage in the future, where it can provide benefits to consumers but where the marketplace cannot provide it, should not be precluded at this stage." Energy Networks Association SMART SYSTEMS

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