UK govt claims smart grid seriousness, waves tiny check book

UK regulator Ofgem has outlined plans to invest $320m the Faraday Challenge, to be distributed over the next 4 years, and aim to upgrade the country’s energy infrastructure with battery storage. The plans are good news for battery storage technology providers, and those looking at improving integration of renewable energy generation into the grid, but don’t seem to go far enough to compete with the other major investments taking place in the smart grid ecosystem globally.

Ofgem (Office of Gas and Electricity Markets) has outlined measures to simplify the planning and grid connection process for battery storage, and could remove consumption charges (effectively a tax) that currently result in double charging the utilities (and therefore consumers) for storage devices.

Removing consumption charges for battery storage is the most positive piece of news to come out of the announcement. The consumption charge, previously known as the carbon tax, applied only to polluting sources of energy, before a Conservative led coalition government reformed the carbon tax to include all sources of energy generation. This had a negative effect on investment into both renewable energy generation and battery storage, as it increased the relative price of those sources of energy against their more polluting alternatives.

The fact that the UK government had been double charging utilities with the consumption tax for storing energy in battery resources suggested a lack of understanding with which the policy is being applied – especially as battery storage units do not generate energy. Scrapping the double charging of battery storage, as well as 39 other measures detailed by Ofgem to improve the regulatory system around storage technology, should help to encourage increased levels of private investment to build battery storage facilities.

Some $60m of the money promised will go into building a “battery institute,” which will act as a research center to make the technology more accessible and affordable. The rest of the cash appears to be going towards funding individual research projects, these projects might not be commercially viable, but have promise in improving battery technology.

Chris Wright, Chief Technology Officer at energy storage firm Moixa, which was featured as a case study in the government’s announcement, said the package of measures represented a shift in the official position on renewables in the right direction.

The UK Government estimates that introducing a smart energy system based on distributed generation and storage could save the country between $22bn to $52bn between now and 2050 – a lot of wiggle room. Currently, deployments of distributed energy plus storage in the UK are below even the tens of thousands of installations, so there is a long way to go – and if the government is serious about achieving these levels of savings then it will likely be required to further intervene.

The reason why the government investment figure can be characterized as not totally insignificant is due to its destination, rather than its scale. Governments are often characterized as poor distributors of resources, but it is worth remembering that government cash supported some of the most significant companies and technology innovations of the last century – DARPA, NIH, In-Q-Tel, SBIR, spring to mind. In light of this, the UK government will be hoping to support similar innovation in the battery sector.

Such funds are necessary in the UK because R&D spending has remained stagnant for past 15 years at 1.7% of gross national product (GNP). In comparison, R&D spending in South Korea is at 4.3%, in China it’s at 3.1% and Germany it’s at 2.7% – furthermore, of the total $21.8bn that is spent on R&D in the UK, half is absorbed by pharmaceuticals.

Policy makers have decided that if UK businesses are going to make any impact on global battery storage market, they will need to support innovations with investments in the area. UK vacuum vendor Dyson has committed to invest $1.85bn into battery storage research and innovation, but this figure still pales in comparison to the estimated cost of Tesla’s Gigafactory (around $5bn). Some ten new battery plants of a similar scale are currently in the pipeline, six of which were announced in the last six months.

The research money for battery storage also pales compared to the $26bn the UK government has committed to spend on building a new nuclear power station in the south of England (Hinkley Point C) – showing that the UK government isn’t taking the proposition of battery storage too seriously yet.

UK government ministers also announced they would be following France in banning all new diesel and petrol driven vehicles by 2040. The time frame is nowhere near as aggressive as that outlined by Norway, which will enforce a ban by 2025 – but adds to the number of countries now committed to moving away from gasoline, giving a clear signal to the automotive industry to shift to electric vehicles (EV).

The step to ban the internal combustion engines (ICE) should also help to further reduce the cost of battery storage, as increasing demand for EVs will mean greater production volumes of batteries – the effect of which will further drive down the cost of the distributed battery storage.

The ban of diesel and petrol engines was met with a more muted response from commentators – “the government is right to put an expiry date on dirty petrol and diesel engines, but 2040 is far too late,” said Areeba Hamid, clean air campaigner at Greenpeace UK, which is unsurprisingly against the ICE and its emissions.