How energy storage can help balance the grid and reduce energy bills for customers

Renewable electricity generation is hailed as the cornerstone of a net zero future, but can we operate the electricity network with the majority of power generation coming from Solar, Wind, and A diminishing nuclear base, and how might this impact the cost of energy in the future?

With the recent dash for connections at 400kV and 275kV, and the continued high number of applications for distribution network connections, the grid is seeing unprecedented constraints on the electricity network. This is requiring network owners to invest more and more money to reinforce the electricity grid, installing new cables, substations and transformers across the UK. Distribution Network owners are finalising their business plans for the next five years and together they have announced they will invest £20.9 billion into the networks over the next 5 years, with transmission networks investing an additional £10.7 billion.

The investment into the network is needed because network operators design the network for multiple different scenarios, including peak solar and peak wind, each of which may only happen for a few days a year. The network operators also assume energy storage and other dispatchable power plants are generating at 100% of their export capacity, this is because they are not limited by the weather and therefore it is difficult to predict how and when they will operate. Networks must plan for different scenarios all whilst making sure the network is 99.99999% reliable, as consumers have come to expect.  All these factors mean that network operators may build assets that are under-utilised, or even unnecessary.

The electricity system operator (ESO) is spending historically high amounts in the balancing mechanism (21st July exceeded the previous record of £112.29/MWh, unprecedented in the summer) to ensure that the demand and supply of electricity are always equal. Increased spending through the balancing mechanism suggests that the current network is not able to adequately cope with the variability of renewable energy and the transition of energy generation from centralised large power stations in the middle of the country to decentralised renewable generation in rural areas, Scotland, and offshore.

With the government target of 50 GW of offshore wind by 2030 and continued interest in building subsidy free solar farms, the situation looks like it will only become more difficult and costly in the future. NGESO have proposed changing how energy prices are determined, moving from one price for the whole country to different prices for different locations in the country. Moving to a locational based pricing system would aim to make investment in the network more efficient and reduce or even remove the balancing costs for the network, reducing total system costs. The process to change the pricing mechanism in the energy market is a slow process and changes are unlikely until 2025 or later.

A large proportion of the cost of Renewable generation is the upfront capital cost for construction, therefore once built the cost of energy is essentially fixed, unlike other types of generation which can be very volatile and depend on the wholesale cost of fuel such as gas. Therefore, an electricity network run entirely on renewable energy could provide a low and stable energy price, if the intermittency of renewable energy is well managed.

There are two ways to balance the demand and generation of electricity, you can either change the demand, which is known as demand side response, or you can change supply which is known as supply side response.

Energy storage, such as lithium-ion batteries, can respond to pricing signals and market incentives to provide both demand side response and supply side response. Energy storage can charge up at times of excess electricity generation (e.g. middle of the day or on windy days) and discharge at times of high demand (e.g. 5pm-8pm when everyone gets home). Energy storage owners can respond to the wholesale energy price ensuring that as much renewable energy is captured and used productively.

Therefore, energy storage can help reduce costs for bill payers in two ways, it can ensure the cheapest electricity, at times of low demand, can be captured and used at times of high demand, and it can reduce the cost of reinforcing the network which means that the networks can charge less money to bill payers for the use of the networks.

With the current energy crisis network operators are forcing customers to restrict their energy use when there is not sufficient energy generation. This is often inconvenient and does not reward customers that are able to be flexible with their energy use. Alternatively, Octopus energy has trialled customers being paid to reduce or even increase their energy consumption during periods of network in-balance, and this is likely to be a very cheap solution as it does not require any additional infrastructure to be built. At the moment it requires customers to be highly engaged and participation dropped as the initial enthusiasm for the trial dissipated. It is likely that energy storage will be providing most of the flexibility in the networks with customer led Demand Side Response playing a supporting role, or even being mandated at times of low energy generation.

With the recent cost of living crisis and high inflation being driven by high gas and oil prices it is clear to see how renewable energy can be a positive force for creating long term price stability and low cost of energy which will benefit society, particularly those that are most sensitive to changes in the energy price.

But with renewable energy developers focused on short duration (<2hr) energy storage assets this leaves the question of seasonal storage unanswered. How will the UK energy market cope with the seasonal changes in solar irradiation and long spells of still weather?

Innova believe energy storage can be used in innovative ways and we aim to minimise the cost to electricity bill payers. Innova is helping large energy users reduce their impact on the electricity network with the use of private wire solar farms and we are also delivering a pipeline of more than 8GW of energy storage projects to enable the smart future of green energy.


Written by Joe Colebrook