UK electricity battery storage could grow to 10GW by 2025 - VEST Energy

Author: Eugene Poon

2020/09/28

LONDON (ICIS)--The UK electricity battery storage capacity could increase tenfold to 10 GW by 2025 as the grid would need more flexible assets to cope with the challenges posed by the energy transition, according to UK trading and optimisation services provider VEST Energy.

The UK currently has around 1GW of operational battery storage capacity. The recent pandemic-driven demand plunges have shown that the technology is much needed to allow the market to balance more optimally.

The economics of storage assets have been held down by balancing costs that are higher than other generation types but a series of new regulatory and system changes are set to open up new opportunities for the integration of battery storage.

As electricity markets become more segmented and with technology costs dropping by 80% in the last 10 years, battery storage is likely to gain a bigger share in the electricity mix and become a fundamental price driver, according to VEST Energy managing partner Aaron Lally.

ROUTE TO MARKET

Renewable energy and storage operators currently lack much if any trading infrastructure. The aim of VEST Energy is to help asset owners such as storage operators to adapt to the new market conditions by offering services and technologies to streamline their processes and increase their revenue streams.

VEST Energy’s business model would entail them to be fully responsible for managing any assets of their clients hands on. Any available output of these assets would be traded on behalf of their clients.

“We can offer ancillary services, merchant trading on spot as well as more bespoke bilateral agreements,”Lally said.

Since their inception in early August, VEST Energy are currently operational in the UK and are in the process of taking on clients.

They aim to scale to the continent in France, Germany, Italy and Spain within two years.

“A lot of energy storage providers are being offered enhanced frequency response contracts in the UK. Similar contracts will start being signed in the rest of EU.

“We see EU facing the same issues in two-three years as the UK in a sense that these battery operators will need technology to manage their assets,” Lally said.

LIQUIDITY SHIFT

UK power prompt liquidity has been on the rise this year amid the increasing share of renewable generation, the suspension of the market making obligation (MMO) and the coronavirus pandemic.

With the development of battery storage, the trend of liquidity shifting to the short-term market would intensify.

Batteries would become a new fundamental price driver for electricity prices as they can ramp production up and down much quicker compared with traditional thermal and hydro assets. Therefore batteries would start setting peakload prices in future.

Electricity storage is an unprecedented technology on the industrial scale and would bring solutions to contemporary shortcomings in the sector.