Utility Week

Utility Week 20th October 2017

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8 | 20TH - 26TH OCTOBER 2017 | UTILITY WEEK Policy & Regulation Analysis 1. The licensing regime Earlier this month, Ofgem published propos- als to clarify the licensing regime for stor- age by classifying it as a form of generation. Among the aims was to stop storage from being "double counted" as both generation when exporting electricity and as consump- tion when importing, and therefore contrib- uting to schemes such as the Renewables Obligation and contracts for difference through final consumption levies. Ofgem opted to amend the generation storage licence to bring storage into the fold, believing this would be simpler, quicker and easier than creating an entirely new licence. But Energy Storage Network chief executive Georgina Penfold believes the regulator may be building up problems for the future. "I understand why they've put it in as generation," says Penfold "It means less sub- stantial change to the regulation, so they can get it through quicker. "But storage is not a generator. It is in fact a net consumer and it offers different value to the infrastructure than generation does. We don't want anything that could in five years' time reflect back negatively on the industry." Tom Edwards from consultancy firm Cornwall Insight welcomes the change, say- ing it will provide investor-friendly "regula- tory certainty". But, he adds, the practical implications will be somewhat limited. Storage developers can already "pretend" The state of storage Recent weeks and months have brought a series of key developments for the energy storage sector. Utility Week presents the five most important. instance proving that it would be in the best interests to consumers and would not harm competition. Penfold says the success of the rule change will depend on how effectively Ofgem manages this process and what its deems to be grounds for an exemption. "We need to have a clear determination on what a market that is or is not working looks like," she says. 3. The RO The month prior, Ofgem also revealed that it would allow three solar farms operated by Anesco to continue to claim Renewable Obligation Certificates (Rocs) for all electric- ity generated at the sites, even if the power was used to charge co-located storage. It was previously unclear whether such projects would be able to claim Rocs for electricity used to charge storage without applying to be accredited again from scratch, which is no longer possible following the winding down of the scheme over the past few years. Anesco executive chairman Steve Shine described the removal of this potential bar- rier as a "game changer" for the storage market. "Ofgem has firmly cemented energy storage as being a vital part of the solution to keeping the country's lights on," he says. It remains to be seen how exactly Anesco managed to work around the rules of the scheme to retrofit storage and retain accredi- tation, because the company said it was una- ble to publish its methodology. Ofgem has promised to clear things up by releasing "bespoke guidance later this year on key storage considerations" under the Renewables Obligation and feed-in tariff mechanisms. 4. The capacity market In July, the Department for Business, Energy and Industrial Strategy (BEIS) put forward a series of "tweaks" to the capacity market. Most notable was a change to the de-rating factor for batteries (a measure of reliability). As things stand, all storage has a de- rating factor of 96 per cent, based on the his- torical reliability of pumped hydro. BEIS wants to separate storage into eight to be generation to avoid consumption lev- ies, because they are already able to apply for a generation licence. The clarification by Ofgem merely makes it official. 2. DNO-owned storage At the same time, Ofgem released separate proposals setting out its intention to stop distribution network operators (DNOs) from owning and operating storage, with some very limited exceptions. The regulator says the change is nec- essary to prevent DNOs from using their monopolistic power to strangle competition, for example by impeding rivals' access to their networks or using information that is inaccessible to the wider market. The DNOs argue that the move could prevent them from deploying storage when there is clear ben- efit to consumers but the market is unable to deliver. Penfold shares their concerns: "While I absolutely believe we need competition in the marketplace because it drives better pric- ing, to preclude DNOs from owning some- thing that would enable them to provide a much better service does seem wrong." Ofgem plans to allow DNOs to operate storage in very specific circumstances, giving the example of a battery being used to tem- porarily restore power to consumers during a local power outage. However, the networks would need to persuade Ofgem to grant them exemptions on a case-by-case basis, in each Large-scale storage would be a game-changer for balancing intermittent renewable generation

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