CRA Insights

What’s in Store for Batteries in UK Power Market?

October 29, 2018

We recently had the pleasure of hosting the Young Professionals Network of the Energy Institute at CRA’s office in London for a panel discussion on the future of batteries in the UK power market. The discussion covered opportunities and challenges for batteries in the UK, such as the role of UK batteries in the operations of the electricity grid and the financing of batteries.  Participants benefitted from the views and perspectives of an exceptionally experienced panel:

  • Steven Meersman, founder of Zenobe Energy, the largest independent owner and operator of battery storage in the UK
  • Anna Carolina Tortora, Head of Innovation Strategy at National Grid
  • Robyn Lucas, Head of Data Science at Open Energi
  • Daniel Ballard, Associate at Burgess Salmon

The panel discussion was sobering and exciting in equal measures.  The battery sector has grown significantly, but remains in its infancy. Much remains to be done.  The panel discussion and the conversations that followed suggest that for batteries to reach their full potential, the following elements are critical:
Optionality:  Batteries are an asset class that requires active management. The option value of accessing and stacking different revenues streams is critical for the profitability of the sector.  The operation of batteries is an optimisation exercise, balancing a short-term need for revenue and the long-term degradation of the asset.  While this optimisation is for operators to define, market regulations need to allow the participation of batteries across all markets.  (For our short presentation on battery revenue streams see here.)
Regulatory certainty: The impact of derating factors on batteries in the capacity market is one example of how policy and regulation can deter the investment needed in the sector.  Without a stable and predictable regulatory regime, investors will be wary of investing in the battery sector.  Visibility and transparency on the different sources of revenue for batteries, and how they can be stacked, is critical for the ability to finance batteries.
Information symmetry:  There is significant information asymmetry between manufacturers and operators on the operating potential of batteries.  Battery manufacturers exert huge control over the operations of batteries through warranties.  As an asset class that needs to be actively managed across several markets with different operational requirements, extracting the full value of batteries will depend on having the right warranty cover.  The closer the operations of batteries get to their technical potential, the more value they can provide to the UK power market.
Information: The correct location of battery assets can help alleviate market-wide problems like renewable intermittency and solve local congestion and system issues.  Transparent and accessible information on where batteries can best maximise their value will not only help the profitability of batteries but will also support the growing transition towards a greener, cleaner electricity market.
We look forward to continuing the discussion about batteries in the UK power market.

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