Enhanced frequency response is the primary revenue stream currently available to (battery) energy storage. • Capacity market does not limit duration of supply provision. • Constraint payment spending has and is expected to continue to increase. How to unlock these costs for energy storage.

1. Xero Energy Limited ∙ Tel: +44 (0)141 221 8556 ∙ www.xeroenergy.co.uk
Registered as No. SC313697 in Scotland at 60 Elliot Street, Glasgow G3 8DZ
ENERGY STORAGE
REGULATORY BARRIERS
MARC SMEED
05 May 2016

2. Where does energy storage fit in?
2

3. Where does energy storage fit in?
3
Storage forms
part of the
overall narrative
of network
flexibility that
includes demand
side response
and active
network
management.

4. Revenue streams for storage
4
Transmission
(NGET)
Balancing
services (EFR)
Capacity market
Network
reinf’ment
deferred
Distribution
(DNOs)
Embedded
benefits
DSO model
(balancing)
ANM
Network
reinf’ment
deferred
Generators
Shape output
(renewables)
Avoid
constraints
Consumers
& Industry
Demand shift
“Behind the meter”

5. Services to the NETSO
5
• Enhanced frequency response is the primary revenue
stream currently available to (battery) energy storage.
• Capacity market does not limit duration of supply
provision.
• Constraint payment spending has and is expected to
continue to increase. How to unlock these costs for
energy storage.
Transmission
(NGET)
Balancing
services
(EFR)
Capacity
market
Network
reinf’ment
deferred

6. Services to the DNO (DSO)
6
• There are clear prizes to be gained from providing
services to DNOs.
• DNOs moving toward DSOs (passive to active)
• Technical opportunities
• Manage system constraints
• Defer network reinforcements
• DNOs are incentivised to be innovative – they should
be looking and progressing storage solutions if it is
economic and efficient. However, unbundling
precludes this.
• Therefore, down to service providers to identify need. How
is this need identified?
• However, the key barrier is the charging arrangements – it’s
not clear how existing charging arrangements can facilitate
the payment of these services.
• Evolution of distribution tariffs
Distribution
(DNOs)
Embedded
benefits (?)
DSO model
(balancing)
ANM
Network
reinf’ment
deferred

7. Behind the meter applications
7
• Generators (intermittent)
• Complete cycle efficiency <100%.
• Hence no value to a site that is
paid a premium for MWhs
generated – regardless of when.
• Flexible connections – how does it
sit with ROCs/CfDs?
• Consumers
• Currently there is no incentive on
when to consume electricity.
• Smart meters and storage allow
consumers to have the
opportunity to choose ‘Time of
Use’ tariffs
• Shift demand to times of lower
cost electricity.
Generators
Shape
output
(renewables)
Avoid
constraints
Consumers &
Industry
Demand
shift
“Behind the meter”

8. Legislative and regulatory framework
8

9. Licences
9
• Electricity Act 1989
• Utilities Act 2000
• Energy Act 2004 (BETTA go-live
direction)
• Energy Act 2008 (FITs etc.)
• Energy Act 2010 (CCS incentive)
• Energy Bill 2015/16
• Licence needed for:
• Generation (storage?)
• Transmission
• Distribution
• Supply
• The regulatory/legal classification of
storage is unclear. Storage can be
classified variously as ‘consumption’
and/or ‘generation’ and/or ‘supply’.
“Should energy storage be a
separate licensable activity?”
“Should other licence holders
(DNOs/TOs) be able to
own/operate storage facilities? “

10. Codes, agreements and statements
10
Charging
&
Access
Technical reqs.
• Connection and Use of System Code (CUSC)
• Distribution Connection and Use of System
Agreement (DCUSA)
• Balancing and Settlement Code (BSC)
• Grid Code
• Distribution Code

11. Distribution charging (DCUSA)
11
• How can DNOs recover energy storage costs from their customer base?
• Connection charging
• Network investment need is based on the expected operating regime of the site (i.e.
services provided)
• How will this be assessed?
• Full export/import
• Background system conditions
• Use of system charging
• CDCM / EDCM – tweaks needed?
• Needs to reflect mode of operation

12. Transmission charging (CUSC)
12
• Connection charging
• Local user assets
• For standalone T connected sites – this will be straight forward
• Perhaps some thought required for co-locating with other users
• D/T interface?
• Use of system charging – locational
• Storage liable for demand AND generation tariffs.
• Project Transmission – intermittent or not?
• Embedded benefits…?
• Underwriting
• As with connection costs at distribution – the network investment drivers need careful
attention.

13. Balancing charges
13
• Balancing and Settlement Code (BSC)
• Balancing costs (BSUoS) are paid per MWh consumed and produced.
Therefore BSUoS will be paid by storage projects, for the ‘same’ MWhs
flowing in and out, i.e. twice. Does this make sense?
“Electricity storage’s potential for helping balance the
transmission network should be recognised by exempting
operators from Balancing Services Use of System (BSUoS)
charges.” ICE 2015

14. Technical standards
14
• Engineering Recommendations
G59, G5/4, P28, P29, P2/6…
• Security and Quality of Supply
Standard (SQSS)
• Updates to technical standards
should be straight forward. ENA
report on P2/6 changes this month.
• Technical standards impact on system
design – how should storage be
accounted for in system design
studies?

15. Energy storage – regulatory barriers
15
Thank you
Marc Smeed MSc MEng CEng MIET
Xero Energy Limited
T: +44 (0)141 221 8556
marc.smeed@xeroenergy.co.uk
Registered as No. SC313697 in Scotland at 60 Elliot Street,
Glasgow G3 8DZ