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Road to COP29: Our insights
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Energy storage updater - June 2016
Global | Publication | giugno 2016
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Norton Rose Fulbright E-Storage Matters
Since the publication of our first E-Storage Updater we have seen a multitude of interesting e-storage developments. New alliances aimed at the promotion of grid-scale storage have been formed, for example between ENGIE and SUSI Partners AG. We expect that the acquisition by the French oil and gas company Total S.A. of Saft Group, a leading designer and manufacturer of advanced technology batteries, marks the start of increased M&A activity of e-storage technology development companies.
Meanwhile, around the world, the contours of new regulatory frameworks are emerging which we expect to enhance the business case and drive down costs of e-storage technologies. Even in jurisdictions that do not (yet) have the proper regulatory framework or market design in place to boost energy storage developments, we note increased activity by early adopters to gain familiarity with various technologies at different levels in the energy system, mainly in anticipation of ‘the next big thing’ in the energy landscape.
At an energy storage event hosted by our Amsterdam office we saw great interest in e-storage from a variety of players active in the energy sector, ranging from technology developers to utilities and financiers. From the knowhow and experience of e-storage projects gained through our international energy practice, we have compiled some of the global trends, key (legal) considerations and opportunities for e-storage in an article located below in our In Focus section that was first published by Project Finance International and is available on our website here.
We hope the article and the second edition of our E-Storage Updater are of interest to you too, and look forward to receiving any comments, suggestions or queries you may have.
Technology and Corporate news
Global
Statoil recently launched a new venture capital fund dedicated to investing in companies in the renewable energy sector and supporting its strategy of growth in new energy solutions, including energy storage and smart grids. The fund will invest up to US$200 million over a period of four to seven years. This will be one of the world's largest corporate venture funds dedicated to renewable energy and low carbon solutions.
Asia Pacific
Panasonic India Ltd and AES India Private Ltd have agreed to construct a 10MW energy storage array at Panasonic's Technopark manufacturing facility in Jhajjar, Haryana, India. This joint project is the first large-scale battery-based energy storage project in India.
In March 2016, General Electric (GE) announced that its energy consulting business had been selected by wind energy firm IL&FS Energy Development to examine the feasibility of integrated wind, solar and energy storage projects at IL&FS Energy's sites in selected regions across India. As part of the study, GE will design an integrated wind, solar and energy storage plant, estimate the capex and operating costs as well as develop a business plan that includes the viability gap funding that will be required for the commercialisation of the project.
Kokam Co. Ltd recently announced that it has successfully deployed two Lithium Nickel Manganese Cobalt (NMC) Oxide Energy Storage Systems (ESSs) - a 24MW/9MWh system and a 16MW/6MWh system - for frequency regulation on the South Korean electricity grid. The 24MW system is the largest capacity Lithium NMC ESS used for frequency regulation in the world.
Mitsubushi Electric Corporation recently announced its delivery of an energy storage system with a 50MW output and 300MWh rated capacity to Kyushu Electric Power Co. The system is part of a pilot project to balance supply and demand via high-capacity energy storage systems. It was installed at the Buzen substation in Buzen, Fukuoka Prefecture, Japan.
Samsung SDI, a leading South Korean battery firm, is teaming up with Korea Electric Power Corp (KEPCO) to tap into the global energy storage system (ESS) markets. The companies have signed a Memorandum of Understanding for cooperation in the ESS sector. Samsung SDI will jointly enter global markets with KEPCO when they bid for global energy projects. Samsung SDI will also supply its battery when KEPCO delivers global power business models.
SolarReserve LLC, a leading global developer of utility-scale solar power recently partnered with Shenhua Group Corporation to deliver 24-hour solar power with energy storage to China. The companies have signed a Memorandum of Understanding to build 1,000MW of solar thermal projects in China with an estimated capex of US$2.31bn. It is hoped SolarReserve's energy storage technology will solve the intermittncy issues facing renewable energy in China, making their operational capabilities similar to fossil fuels and nuclear power.
Europe
In March 2016, Engie and SUSI Partners AG (an investment adviser) signed a Memorandum of Understanding with the aim of promoting grid-scale power storage projects. SUSI plan to contribute EUR50m in equity for projects, including energy storage projects that Engie intend to develop within the energy sector.
In light of diversifying its revenue away from highly volatile oil prices,Total has proposed to buy Saft, a French company that specialises in producing devices for the stationary storage industry as well as for transport ad other applicaitons. Total valued Saft at EUR950m (US$1.1m) and have stated this acquisition is part of the firm's goal to accelerate its development in the fields of renewable energy and electricity.
RES and National Grid are working on their first battery energy storage systems to provide a frequency response service in sub-second timescales. Both parties have signed a contract of four years in which RES has committed to provide 20MW of frequency response from battery storage.
The Danish financial investor Recharge will take a 50.1% stake in a hybrid renewable storage project on the Azorean island of Graciosa. The renewable energy system will be developed by Younicos and will have the capability of enabling up to 100% spontaneous renewable power penetration, allowing the Portuguese island to replace around two-thirds of its fossil fuel generation with wind and solar power.
North America
Green Charge Network, an energy storage company based in California, USA who have approximately 48MW-hours of storage deployed or under construction, have been acquired by the multinational utility company Engie. Engie have acquired an 80% stake in Green Charge with the view of utilising their energy storage and battery solar expertise.
Advanced Research Projects Agency Energy (Arpa-E), a branch of the US Department of Energy and founded in 2009 under Barack Obama's economic recovery plan to fund early stage research into the generation and storage of energy, says it has attained the 'holy grail' of energy - the next generation system of battery storage. According to Arpa-E's Director, the battery storage systems they have developed are on the verge of transforming America's electrical grid, especially in the realm of large-scale energy storage systems and utility-scale storage, and expanding the use of micro grids for the military and disaster relief.
According to the U.S. Energy Storage Monitor 2015, the rise of solar and wind power is leading to an explosion in energy storage. GTM Research and the Energy Storage Association found that the overall U.S. energy storage market grew by 243% in 2015 and predict the market will reach 17GW by 2020.
Greensmith Energy have deployed 70MW of energy storage, all powered by the company's GEMS software platform. Greensmith is reportedly on track to install over 100MW of energy storage this year in the USA, after announcing this in December 2015, an US$18.3m round of growth funding led by American Electric Power and E.ON.
Concept by US has launched a complete solar power and energy storage solution called Powerstation 247 for the domestic and small business markets. This system provides 17.28 kWh of energy storage along with a solar power system of 5,10 or 15kW. The system uses hybrid inverters, a charge controller, solar MPP-trackers, wiring terminals and disconnect switches, also having the ability to function on or off-grid.
In February 2016, the Edison Electric Institute (EEI) released their annual Wall Street briefing on the state of the electric power industry. The briefing discusses the financial outlook of the industry, the ongoing grid transformation. and the hope for a 'clean' energy future.
Over the past 3 years SolarCity has signed a number of supply agreements with Tesla Motors for energy storage systems, however GTM Research estimates Tesla Motor's expected revenue from Solar City to jump from US$8m in 2015 to US$44m this year. This is equivalent to an increase of 450% from just one customer. SolarCity will install 60% more Tesla batteries behind the meter in the US than the entire market in 2015.
California-based Verengo Solar and battery provider Swell Energy have partnered up to establish another one-stop home energy storage and backup power solution for the residential market. Under the terms of agreement, Verengo Solar will become a preferred installer of Swell Energy's home solar battery products. The services offered include an energy storage solution that will allow customers to power their homes independent of the electrical grid for up to one day or, when paired with solar, potentially indefinitely.
Policy and regulatory news
Global
GTM released a report in January 2016 predicting that energy storage costs are expected to decrease by 41% by 2020 as key components get cheaper and the balance-of-system costs, including hardware, labour and customer acquisition fall below US$400 p/kW from a current average of US$670 p/kW.
The International Energy Agency (IEA) have released their first publication that focuses on the electricity market framework for low-carbon power systems. The publication discusses the relevant dimensions of electricity market design, the balance that policy makers must strike between supporting innovation and competition while mobilising capital for the deployment of low carbon sources.
Storage has been titled as being the 'game-changer' which has the potential to contribute to solving the challenge of wind and solar electricyit generation. The World Energy Council has published a report which analyses what the cost base of an array of storage technologies actually means, considering the importance of defining the business model and how the storage plant is being operated. The report further identifies a number of insights on the value of storage from which certain recommendations can be made by policymakers including:
- "focusing less on an investment cost only approach for storage technology assessment;
- examining storage through holistic case studies within a specific context;
- accelerating the development of flexible markets, working with transmission and distribution system operators and regulators to help quantify and realise the true potential value of increasing system flexibility;
- establish policy support and an enabling regulatory framework to facilitate further commercial deployment of storage technologies; and
- consider storage as a key component when planning for grid expansion of extension."
Asia Pacific
In April 2016, China's National Development and Reform Commission (NDRC) and New Enterprise Administration (NEA) released The Energy Action Plan (EAP) 2016 - 2030. The EAP seeks to circumvent some of the prominent challenges China's energy systems currently face. It is hoped the implementation of the EAP will sharpen the country's focus on energy technology and increase technological innovation in the energy sector.
China is expected to raise its power storage capacity by ten-fold to 14.5 GW by 2020, as the world's second-biggest economy tries to cut massive waste from renewable energy projects, a recent report by the China Energy Storage Alliance has said.
Europe
The Renewable Energy Association have predicted 2016 as a 'breakthrough year' for energy storage; a technology not only seen as vital to the large-scale rollout of renewable energy, but also offering the prospect of lowering customer's energy bills across the UK. KPMG have released a report which assesses the trends relating to the development of decentralised energy and storage, the key benefits and the barriers to its introduction.
The UK government announced in the Budget 2016 that it will allocate at least £50 million for innovation in energy storage, demand-side response and other smart technologies over the next five years to help new technologies and business models access the market. Ofgem also will consult later this year on the future of the £100 million Network Innovation Competition to maximise the delivery of genuinely innovative projects and technologies.
In March 2016, Carbon Trust and Imperial College London published a report on the significant changes the United Kingdom's electricity system is undergoing to provide electricity that is secure, affordable and ultimately low carbon. The report focuses on energy storage, distinguishing the different types of storage and the services a storage solution can provide, alongside other flexible options such as demand response and interconnectors as a way of providing the flexibility required by a future system that is likely to see an increasing share of intermittent renewables and more distruibution generation.
According to a newly released report from the eStorage Project, development ready sites for new pumped hydro energy storage plants will offer generation potential of 2,291 GWh. These sites are in the EU-15, Norway and Switzerland.
On 4 May 2016 the EU Member States gave a favourable opinion on the Draft Regulation establishing a guideline on electricity transmission system operation – the System Operation Guideline. Part of the SO Guideline includes the Load-Frequency Control and Reserves Network Code which will help ensure coherent and coordinated operation of transmission networks to achieve a satisfactory level of frequency quality. It will do this by focusing on frequency quality criteria, frequency control structure, frequency containment reserves, frequency restoration reserves, replacement reserves, exchange of reserves and synchronous time control and as such is of importance for all storage systems who want to participate in the reserve control market.
The National Infrastructure Commission (NIC) has called for a raft of regulatory changes to create a level playing field that would allow energy storage and demand flexibility to ensure security in the UK's future low-carbon energy system. The NIC published a report on the challenges facing the energy sector in the UK and focused on the benefits that can be achieved through building more flexible electricity systems and steps that will enable the country to get there. The Commission believes a future UK system principally built on interconnection, [energy] storage and demand flexibility could save businesses and domestic consumers as much as £8 billion a year by 2030 whilst helping the UK meet its 2050 carbon targets and achieving security of supply.
Trade groups representing Europe's solar power, heat pump and battery energy storage sectors have come together to call for new policies designed to promote the combination of solar and storage technologies. The trade groups recently released a policy paper stating that 'regulatory adjustments' are needed to unlock the potential of solar power with storage.
North America
- Extension of federal Investment Tax Credit may offer promising boost to the US energy storage market
According to GTM Research, the recent extension of the federal Investment Tax Credit may also offer a promising boost to the US energy storage market. GTM expect an additional half a gigawatt of storage paired with renewables to come in on-line between 2016 and 2020.
The role of energy storage solutions in diversifying the grid's power resources and increasing electricity reliabilty continues to become more important. Four complementary energy storage bills will be passed in California, with the aim of ensuring that energy storage solutions are poised to help California improve reliability and achieve its renewable energy and greenhouse gas emission reduction goals.
In April, the U.S Senate passed the first broad energy bill in nine years. The legislation known as the Energy Policy Modernisation Act, contains measures to respond to the rapidly transforming energy landscape. It also aims to spur innovations in power storage from wind and solar energy. The bill includes a funding of US$500mfor a 10 year research program to develop large-scale energy storage systems to better accommodate the expanding production of wind and solar power that fluctuates throughout the day.
The Energy Storage Association 26th Annual Conference was held on 27 April 2016. The keynote address, given by the Deputy Direcor of the White House Office of Energy and Climate Change, highlighted how storage can play a significant role in the U.S.'s energy future. The World Energy TV provide media coverage and interviews ranging from the Chief Technology Officer at Renewable Energy Systems to the Vice President of the US Strategy & Group Technology at National Grid.
In focus
Energy Storage Projects: a global overview of trends and developments
With the continued growth of decentralised energy solutions, industry players and expert commentators predict energy storage to be a multibillion dollar global industry by 2020, transforming the energy industry for the better.
In this article , Simon Currie, Global Head of Energy and Matthijs van Leeuwen, Of Counsel at Norton Rose Fulbright, have highlighted some of the key regulatory considerations and trends we believe utilities, developers and financiers should take into account when assessing energy storage projects.
Energy storage developments in Africa
In Africa, the focus is on renewable energy generation and the need to store it. This article by Katia Mengel, Director in our Johanesburg office, comments on the emerging energy storage initiatives in Africa.
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