Expert energy analysis and insight for UK businesses.
Back in October 2014, I said new technology would soon make energy storage more accessible to businesses . Now we’re seeing that prediction start to come true - opening up new ways for businesses to reduce costs and create new revenue.
The biggest sign is that energy storage facilities have started entering – and winning – Capacity Market auctions . The Capacity Market exists to support National Grid, which buys capacity in advance through regular auctions to make sure there will always be enough of the right kind of energy available when it’s needed.
With storage winning Capacity Market agreements alongside new gas power stations and other established technologies, this may indicate it has hit a price point and perceived level of accessibility which the market finds acceptable.
Storage provides valuable flexibility
Lithium ion batteries, a key piece of the energy storage technology puzzle, are being manufactured in ever greater numbers, mainly for mobile devices like smartphones and increasingly for electric vehicles. This has the potential to create new economies of scale, which can only bring the price of each individual battery down. Looking to the future having a large number of small, locally sited batteries could offer significant benefits to the stability of the overall system. This is likely to become a reality with the advent of electric vehicles [MM5] which will offer “vehicle to grid” energy.
But demand is also a factor. With renewables and nuclear playing a growing role in generating the UK’s electricity (accounting for just under 50%  of the UK’s energy sources in the last quarter of 2016), flexibility – a site’s ability to very quickly change its contribution to the grid – is more important than ever to National Grid. Storage can offer that flexibility.
Take the recent Enhanced Frequency Response (EFR) auction. This called specifically for capacity flexible enough to ramp up or down with just one second’s notice. All 200MW of the capacity secured through the auction is in the form of storage . Nearly a quarter of the capacity secured is from just one facility, EDF Energy Renewables’ new 49MW battery storage project at West Burton .
The third annual four-year-ahead auction also saw battery storage win agreements for the first time in a regular market-wide auction .
Non-energy cost savings
This isn’t just an opportunity for energy companies. Thanks to ongoing changes in the electricity market, flexibility is also becoming important for businesses that use a lot of energy. With the cost of energy storage coming down, the flexibility it offers is now accessible to these businesses too.
In today’s market, non-energy costs are growing as a proportion of business electricity bills. One way to reduce your non-energy costs is to reduce your business’s energy consumption of grid imported electricity for short periods at defined times.
As this is often on fairly short notice, this just isn’t possible for some businesses. Data centres, for example, need a constant, uninterrupted power supply. But with a battery storage facility on-site, the same data centre could switch briefly from grid power to battery power when necessary, bringing its non-energy costs down without interrupting service to its customers.
On-site energy storage would also protect this data centre from unexpected interruptions – such as power cuts – which could otherwise be disastrous for business.
Demand side response and on-site generation
And as well as reducing costs, energy storage can generate new income for large businesses thanks to another recent development in the electricity market: demand side response. This is where large energy users help National Grid to regulate supply and demand by changing their consumption when they’re asked, in return for a reward. Battery storage can give businesses the flexibility to get involved in demand side response (DSR). Participating in a DSR scheme using storage involves consumers switching to their stored power when required.
Finally, more affordable energy storage also makes on-site renewable generation more accessible for businesses.
Generating wind or solar power on-site not only reduces how much electricity you use from the grid, reducing your electricity bills; it can also be fed back into the grid by businesses, generating revenue and helping the UK move towards more of a low-carbon energy supply.
Because wind and solar power generate electricity intermittently, dependent on weather conditions, limits can be imposed on how much wind or solar power a business is able to feed back to the grid at any time. But energy storage can compensate for wind and solar being intermittent, by storing energy when weather conditions are right, releasing it when they’re not, so the grid receives a smoother, more consistent flow of power. Businesses that back up their renewables with storage can therefore connect more renewable capacity more often – further reducing their bills and increasing their revenue.
Is energy storage right for your business?
So now more than ever, energy storage is an option worth investigating – especially if your business has high non-energy costs, but struggles to manage them by other methods, such as ramping energy consumption up or down, or by shifting use to different times of day.
Energy storage is still at the point where it’s most likely to be cost-effective if you can realise multiple layers of value from it at once – reducing non-energy costs and gaining demand side response revenue, for example.
There is no single energy storage strategy that will work for every business. It all depends on your patterns of energy use, on-site generation and many other factors.
If you want to know for sure whether your business could benefit, our experts can help. Contact us to talk about opportunities for your business.
 page 9, www.emrdeliverybody.com/Capacity%20Markets%20Document%20Library/Early%20Auction%2017-18%20Provisional%20Results.pdf