• ICIS forecasts point to 35% of European storage market share for the UK by 2030
• Rise in wholesale prices and volatility linked to decarbonisation to drive sector growth
• Wholesale trading to make up majority of revenues
LONDON (ICIS)--The UK will maintain a dominant position within the European battery storage market throughout the next decade, according to ICIS forecasts.
This is due to strong renewable growth, dwindling thermal generation capacity and its already-established legislative framework for the technology.
In terms of installed battery storage capacity, the UK is predicted to make up around 25% of the European market throughout most of the 2020s, though this figure jumps to above 35% after 2028.
The industry’s success in the country will be predicated on the combination of expensive wholesale power prices, high price volatility caused by renewable penetration and a dynamic regulatory environment. According to BEIS’s Renewable Energy Planning Database more than 10GW of electricity storage are currently at various stages of the planning pipeline. The current installed capacity is 1.2GW.
RISING WHOLESALE PRICES AND VOLATILITY
According to ICIS’s Power Horizon model, the UK’s share of wind and solar PV in the generation mix is set to reach 61% by 2030, compared to the 39% EU-wide figure. The frequent variations in electricity supply in the system caused by intermittent renewable sources lead to significant price fluctuations and cause damage to the grid, underlining the need for the rapid flexibility provided by storage technologies.
As the UK decarbonises its power mix by increasing the share of renewables and closing coal assets, events like the cold snap of early January 2021 - when cold temperatures and low wind-power outputs caused intraday prices to rise above £1,000/MWh - are likely to become more frequent. This is due to the loss of the flexible source of supply that coal assets represented.
Battery storage projects in the UK will also benefit from a tightening supply picture between 2025 and 2030 causing wholesale power prices to increase by 15%, compared with Germany’s 10%.
“Our forecasts for rapid UK renewable growth over the next decade points to the need for flexible solutions to grid management, especially given the coal and nuclear closures due to take place before 2025. Such capacity changes further underline the UK case for battery storage investment” said ICIS analyst Roy Manuell.
The ability to stack wholesale trading with balancing and ancillary markets has allowed the United Kingdom to develop into the most mature European market for electricity storage, with over 1.2GW of capacity currently operational.
National Grid ESO has committed to improving the grid’s resilience and is expected to launch new frequency response products by end of Q1 2022. However, several market actors said long-term growth will come mostly in the form of wholesale trading due to the persistence of volatile prices, while increasing competition will drive ancillary service remuneration downwards.
“With the UK legislative picture mature relative to other European markets for battery storage technologies, as well as strong capacity growth already having taken place, the market is well-placed to grow over the next decade. In other words, we expect investor confidence in the UK battery market to remain strong due to the more developed and clearer legislative framework than other European countries, as well as the fact that over 1GW is already online,” Manuell added.
Overall, the investment incentive for UK storage technologies to provide flexibility and strengthen security of supply will be strongest in the second half of the 2020s as the country moves toward net zero and power prices remain high relative to neighbouring markets. David V Battista
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