Without energy storage, the EU target for renewable energy cannot be reached. And that can only succeed if the incentives for investment are set correctly and if “ownership unbundling” rules in the EU energy market are strictly enforced, writes Dr. Hans Wolf von Koeller.

Dr. Hans Wolf von Koeller is Head of Energy Policy at STEAG GmbH, a German company which plans, constructs, and operates power plants and distributed energy facilities using fossil fuels and renewable energy sources.

Did you know that The Landlord’s Game is the predecessor of the popular board game Monopoly? In 1903, Elizabeth Magie developed the Landlord’s game, and created two sets of rules for her game: an anti-monopolistic set in which all were rewarded when wealth was created, and a monopolistic set in which the goal was to create monopolies and crush opponents.

Monopoly is still fashionable, the design has changed and so has the owner of the trade mark. But the rules of the game itself are not for sale. The most powerful players cannot climb to new levels of dominance where they are able to gain control of the game.

So, is the energy system any different? Unbundling in the EU energy market was intended to create a kind of anti-monopolistic set of rules. Competition in a European energy market was meant to lead to lower prices for customers but also secure the supply of energy, especially electricity. At the core of unbundling is a strict separation of the natural monopoly at all grid levels from power production, supply to customers and load management.

However, these fundamental principles risk being endangered by the electricity market reform currently under discussion at European level. Under the upcoming Austrian presidency of the EU, the Council and the European Parliament are expected to agree on a set of rules that foster innovative solutions for new services to participate in the system, including electricity storage.

Yes, EU energy rules are under constant change. This alone is already challenging for all players. But the greatest threat is if the rule makers decide to allow the game board – the grid – to take an ever increasing part in the game.

The opposite should be happening: Inconsistent rules that place the allocation of responsibilities at risk need to be cleared up. This is necessary in order to incentivise much needed innovations, like battery storage in new applications.

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A shallow overview versus a closer look

I have to admit that at first glance there seems to be acceptable reasons for letting the grid absorb new functions such as storage.

But such an approach confuses roles within the electricity market. These ideas are designed mainly as a solution to problems which would not exist if we had a more reasonable set of rules.

Therefore, we need a clear differentiation between players and the game board. Otherwise the game board takes over the role of making the rules in various ways. It could send the game pieces directly to jail. If the game board decides to wobble, the game pieces will fall down.

How should the rules be developed?

Let us think about charging Teslas as well as the feed-in of solar panels in a regime of paid for, planned but restricted grid access. This means, there is a known limit. As a consequence of this, the driver and the private PV-producer might think about installing a battery themselves. The same might happen if there is an incentive to more scheduled feed-in electricity.

A big battery, especially in the ownership of the grid operator, cannot be used to bridge redispatch needs without affecting the market – both ways. We have to accept that a battery has to be charged or discharged again with real power. So, a battery, which is a big installation, needs to be clearly separate from the grid serving as load management in a market-oriented manner. This will serve the grid as well.

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Keeping the game board independent

The future of the EU electricity market will certainly be marked by an increased share of renewable energy and distributed production of electricity. The needs and wishes of the customers – standard consumers as well as prosumers – demand for e-mobility as well as higher sensitivity due to high-efficiency techniques are of varying significance.

The use of renewable energy requires more flexibility since electricity input depends for instance on the weather. This means more participants and greater pressure on the grid infrastructure.

Energy storage will be an indispensable and essential part of the recipe for the future energy market in the EU system. Energy storage is one solution to increasing flexibility and to delivering ancillary services to the grid and its customers, like frequency control, black start capability and reactive power. Without energy storage, EU targets for renewable energy cannot be reached.

But the development of efficient energy storage solutions in Europe will only be successful if the incentives for investment are set correctly. Innovation is created in the free market and this requires the consequent underlying principle for unbundling the EU energy market.

Not sticking to the unbundling rules will lead to lower investment for storage solutions and fewer incentives for innovation.