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UTILITY WEEK | 20TH - 26TH OCTOBER 2017 | 9 Policy & Regulation different classes depending on discharge duration, each with a corresponding de- rating factor. The longest-range batteries will retain the current 96 per cent de-rating fac- tor. The rest will see theirs fall. The changes are being introduced to address fears that some shorter-range bat- teries may not be able to discharge power for the full duration of a stress event, and are therefore not as reliable as their current rat- ing suggests. However, BEIS has yet to reveal the de-rat- ing factors for the different classes of storage. As capacity contracts are paid according to de-rated capacity, Edwards says this is major concern for developers looking to bid into the next main auction in early 2018 who still don't know what their bids will be worth. "It's not the ideal way to have done this change, and that's putting it mildly," he says. 5. Ancillary services In June, National Grid released its System Needs and Product Strategy consultation, which detailed plans to overhaul the pro- curement of ancillary services to facilitate the transformation of the energy sector. As the document explains, the require- ment for ancillary services is expected to swell over the next decade and a half because of the increased penetration of intermittent renewables and the closure of conventional generation. Edwards says the main areas of inter- est for the storage market will be the sys- tem operator's plans to revamp frequency response and its efforts to find some way to provide value for system inertia, although not through a specific market. Frequency response contracts were the driving force behind the breakthrough of 500MW of battery storage in the most recent capacity market auction. Ancillary services remain "the only route to market" for grid- scale lithium-ion batteries, according to Edwards, and the consultation raises plenty of questions for developers. "Is there going to be FFR-like [Firm Fre- quency Response] products?" he asks. "Will there be an inertia project? Will there be another EFR-like [Enhanced Frequency Response]? How will these products inter- act? Will they be easily comparable? Can I transfer them. Can I stack them? "All these sorts of questions are unknowns, because National Grid has not yet told us what these products will look like in the future." Penfold is optimistic: "I think we're going to see some good things coming out of that. Certainly, National Grid has been engaging really well with our members." LITHIUM-ION BATTERY PRICE Source: National Grid System Needs and Product Strategy STORAGE CAPACITY Source: Ofgem Future Energy Scenarios 2017 FREQUENCY RESPONSE REQUIREMENTS 1,200 1,000 800 600 400 200 0 12 10 8 6 4 2 0 2,000 1,000 0 -1,000 -2,000 USD/kWh Storage capacity (GW) High response (MW) Primary response (MW) 2010 2015 2020 2025 2030 2015 2020 2025 2030 2035 2040 2045 2050 2017/18 2018/19 2019/20 2020/21 2021/22 Volume currently procured via firm contracts Primary response requirement with additional 300MW sub-second response High response requirement High response requirement with additional 300MW of sub-second response Primary response requirement Source: National Grid Future Energy Scenarios Two Degrees Slow Progress Steady State Consumer Power Initial strong growth in scenarios Historic average Forecast average NB: based on a 50th percentile in National Grid's Consumer Power scenario