What does the De-rating rule mean for the UK energy storage industry?

What does the de-rating rule mean for the UK energy storage industry?

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Companies developing Battery energy storage projects in the UK are coming to terms with the announcement by the Government to lower the de-rating factor in the Capacity Market auctions by nearly 80% for 30-minute battery duration. The new plans were announced just days after the pre-qualification results were published for the upcoming auctions, which will now be the first to feel the impact of these changes.

In its response to a consultation opened in July, BEIS said energy storage projects will now be split into different classes that reflect the amount of time that they can generate at full capacity without recharging, measured in 30-minute intervals. The de-rating factor is essentially a measure of the forecasted availability of a storage installation in the case of a potential system stress event. These events could last longer than the battery capacity, especially if the battery is not charged to full capacity prior to the event.

The Capacity Market is the driver for how generators are paid to provide enough power and electricity supply. Earlier this year industry participants highlighted to the Department of Business, Energy and Industrial Strategy (BEIS) that batteries involved in the Capacity market were potentially a risk to safety and security of supply due to the short-term facilities used to bid into the auctions.

New De-rating figures for 2018

The De-rating rules include a drop from the previous set value of 96% to a new figure of 17.89% for 30-minute duration batteries. The figures then follow an incremental increase every half an hour with the only batteries with four hours or more capacity gaining the full 96.11% rating.

Whilst many battery storage developers do believe this is the right move for the industry, they are concerned how the changes have been announced and will come into play so quickly. The initial belief was that the Government would gradually introduce these changes over a longer period of time, allowing businesses to respond and minimize the impact on existing and planned projects.

The new rules are however coming into play for the next auctions in January and February, which may have a big impact on businesses which secure pre-qualification prior to the de-rating changes. Whilst industry members are voicing their concern about this decisive change, the Government does not believe it will be an issue.The Government believes that be remaining with the existing rules will create additional costs to consumers of between £50 to £500 million over the next 15 years.

New technology for the energy storage industry?

The power company, UK Power Reserve recently gained pre-qualification for a 1GW battery energy storage project ahead of the upcoming auctions. The company understood the decision by the Government to de-rate battery storage explaining that the levels should be reflective of the technology duration and believe it is a decision that will favor the market and consumer in the longer term. The change will encourage battery developers to create more efficient batteries that last longer and provide a more secure and reliable energy supply to the UK industry.

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