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20 July 2022

REPowerEU misses the boat entirely on Energy Storage

In the dying days of last week, just after we had put our latest issue together, a group of “energy storage” players in Europe expressed their dismay at European Union policy and its complete lack of targets and funding around energy storage.

The complaints were addressed in an Open Letter to policy makers and the media, and it demonstrated what we all know only too clearly, that politicians do not understand zero emissions targets and the science around them.

The organizations who served as signatories on the Open Letter included BESS supplier Fluence, investor Gore Street Capital, the UK’s Gresham House, Swiss energy storage provider MW Storage, UK renewables player Zenobē, the Spanish, Irish and German Energy Storage Associations, the Fraunhofer Institute for Solar Energy Systems and the German Karlsruhe Institute of Technology.

The idea is straight forward – energy storage was not mentioned at all in the European Union plan of action to deal with Russian sanctions on oil and gas – the REPowerEU Plan, published in a hurry in May.

They’re not wrong – the most frequent use of storage in the document was when they referred to LNG storage for the winter months, and energy storage was vaguely referred to only 4 times, with no amounts of money or targets associated with it.

The truth is that in different parts of Europe there is probably enough natural gas used in gas turbines to create electricity, often associated with “spinning reserve,” or peaker plants, that if it was entirely eliminated using energy storage, Europe could be free of Russian gas the following day.

Much the same is true of natural gas home heating, which could be dented by slightly higher subsidies at the point of purchase for heat pumps, and sweep natural gas aside in just a few years in places like Germany, Italy and the UK – all overweight users of natural gas for heating. If that happened inflation would also be headed off at the pass, and those politicians would be given the credit, but they failed to understand what was happening around them.

The letter is introduced, “The current geopolitical situation across the continent, combined with high dependency on imported natural gas, growing electricity demand, and consequently, higher bills for households and businesses, create an urgent need to rethink the structure of European energy systems.

“The REPowerEU Plan aims to increase the security of energy supply by building and connecting more renewable generation to the grid. However, for this plan to be successful, it must be accompanied by adequate targets and policy frameworks for the deployment of energy storage and other flexibility technologies. They are necessary to enable the safe and efficient integration of renewables into the electric grid, and now is the time to recognize them as the pillars of the European energy transition.”

It has become increasingly obvious that the only interest the EU has in lithium ion battery is in keeping its car industry afloat, and bringing native battery plants to bear on that issue. Extending that to include battery energy storage, or to invest in alternative chemistry batteries which are less prone to thermal runaway compared to lithium ion, is quite simply not in its comprehension.

While the US and China continue to pioneer Battery Energy Storage Systems (BESS) within their grids, the bulk of European planning has gone into extending those grids so that each EU country can supply their neighbors in times of short electricity supply, and to import electricity from neighbors in turn and it has promised to spend €29 billion on the power grid by 2030, to make it fit for increased swapping of electricity resources.

Spending on the grid certainly helps – and high speed interconnectors between countries are a good thing, which can ameliorate some spending on energy storage. If a solar plant in Western Spain is still outputting solar power when it gets dark in Eastern Europe, that electricity can be sold and sent 1,000 miles east and be used to support the prime time energy requirements quite cheaply. But if solar power needs to be used locally in Spain, and there is sufficient energy left to fill storage after day time of air conditioning has taken a bite out of it, then that needs to be put into a BESS.

There is definitely a case for both. Right now that falls entirely on companies like those who signed this letter, enterprising businesses who take risks. Grid operators too often hide behind out of date policy and fail to make BESS system trading easy.

The letter says, “Battery-based energy storage can enhance network stability and ease congestion on transmission lines, reducing renewable curtailment and the significant costs associated with it. It can provide capacity and ancillary services that balance supply and demand, often more efficiently and cheaper than other technologies. It can also limit price volatility and thereby overall electricity cost in the wholesale energy markets through energy arbitrage.

“In several markets around the world, energy storage technologies have proven their ability to replace thermal power plants as a more economical and low-carbon way of providing secure energy supply during periods of peak demand and low renewable generation. But despite having access to this ready-to-deploy and cost-effective technology, we continue to rely on high-emission natural gas-based generation.”

And the letter goes onto complain that “the Europe-wide targets that would strategically scale up energy storage projects are yet to be developed and embedded in law. In 2021, capacity market auctions across Europe awarded approximately 2.4 GW of contracts to energy storage, but various studies predict that to increase the security and reliability of energy systems on the continent, we will need up to 200 GW of energy storage by 2030.”

Rethink Energy has been forced to lower its expectations for energy storage in Europe because of this paucity of activity, and the reluctance of utilities and grid operators to embrace energy storage.

The key element of the letter is calling for the energy market to be designed around clear pricing signals, so that industry and customers can decide when to buy their energy and decide if and where they want to store it.

Energy prices should be low at times of high renewable generation, and higher during periods of low generation. Similarly, the cost of using the grid should be higher when it is congested, itself providing price signals to local generation and consumption which would help to lower congestion on the grid and cut away the costs of improved transmission.

All of those changes would make the economic argument for BESS so irresistible that everyone would wade in with their own money, and overnight gas peakers would be a thing of the past.

The group also called for grid connections for energy storage to be prioritized and national market barriers to all be eliminated through a single European Commission directive so that charging of fees, levies or taxes which currently disadvantage storage technologies are removed in line with existing European legislation.

Among the short term measures which were adopted by REPowerEU were the common purchasing of gas, LNG and hydrogen across member states, the rapid roll out of solar and wind projects combined with renewable hydrogen deployment. Solar and wind were not encouraged to partner with their own battery energy storage, but to partner with hydrogen services.

Other short term measures mentioned making biomethane and accelerating hydrogen projects and advising EU citizens on using less gas. Medium term measures for REPowerEU were similarly focused on faster permitting of renewables, and investments in adapted gas infrastructure and money was made available for a hydrogen accelerator fund to build 17.5 GW by 2025 of electrolyzers and to build a modern regulatory framework for hydrogen and specific funding to push hydrogen into the steel industry.

It’s not like embracing energy storage would cost a lot. If grid organizations simply made it easy to trade BESS, and governments insisted their first stop for peaking resources was a battery, then investors could go to town knowing they would get their money back and it would be self-funded.

Already, especially in Germany where grid energy is really expensive, rooftop solar is now committing to battery at an alarming rate, and leading the shift to home BESS, way ahead of industrial usage. If utilities are not careful this shift will have customers deserting the grid entirely.