Halfway through 2018 and large-scale battery storage in the UK has reached over 450MW installed capacity, with around 250MW being completed this year alone. This is made up of projects bigger than 1MW, including larger behind-the-meter projects that have begun to emerge. The past few weeks have seen a flurry of activity with supply contracts being awarded, projects changing hands as well as those being completed. With sites under construction from the likes of Centrica, Anesco and Ørsted, and when projects from UK Power Reserve recently awarded to Fluence are factored in, it seems very like that the capacity installed in 2018 could reach over 500MW.

After a slow start to the year, which saw FFR (Firm Frequency Response) prices falling and Capacity Market revenues become more difficult to access, it looked like energy storage could be cut off before it had really got started. However, the energy industry is never one to sit still and immediately companies started discussing the opportunities in behind the meter storage, which is much less vulnerable to fluctuations in external revenue streams by providing wider benefits to the site owners. The pipeline which we have been tracking for the past two years has reached over 8GW and we are now seeing the successful completion of projects proposed back in 2016 as more continue to add to the total pipeline. Development timelines are also being reduced, with some projects only submitted into planning in the second half of 2017 already completed. Compare this with the two years it has taken for Enhanced Frequency Response (EFR) projects to come through and it’s plain to see just how quickly the industry is bringing new projects forward.

Uncertainty continues from the top

As always there is a degree of uncertainty in the sector from policy and regulation – summed up by last year’s Capacity Market being derailed for many developers by the changes to de-rating. At the same time the increased number of battery projects available to provide frequency response services has caused the prices being offered for these services to be reduced. However, the System Needs and Product Strategy (SNaPS) work being undertaken by National Grid has offset some of this. There has been cause for some optimism owing to signals from National Grid that changes made through SNaPS will simplify the process for projects to be able to bid into its tenders, while opening up services that were previously not accessible to battery storage. However, the work being done by Ofgem on embedded benefits has also caused hesitation in the sector while the impending changes to TRIADs have prompted some project developers to adapt their business models further. But, there does remain an understanding that the new changes will still need to charge large energy users for the use of the grid and the benefits of behind the meter storage are broader than just avoiding TRIADs. On top of all this indecision and policy uncertainty there are new opportunities beginning to emerge in addition to those with National Grid. DNOs are starting to look at how they can procure services at a local level, with UKPN preparing to launch its second procurement round for local flexibility services in Q4 of this year. Meanwhile WPD has been working on a trial local energy network in Cornwall alongside Centrica that will provide opportunities for local projects both behind and in front of the meter.

How 2018 is shaping up

Year on year, the number of new planning applications being submitted has decreased since 2017 however, the large numbers submitted that year in advance of the Capacity Market auction showed that speculative efforts were present. It remains unclear how many of these projects will be progressed without a CM contract. In 2018 we have seen over 700MW of new projects being submitted into planning, including at screening stage, made up of just 30 sites as we see the larger average size increase. The majority of the capacity submitted in 2018 is made up of 49.9MW projects and shows how the market is currently split between large front of the meter projects, which make up the majority of this capacity, and smaller behind the meter projects which are more common. Some are going even further, with the likes of RWE, Drax and EDF all submitting plans for battery projects in the hundreds of MWs, while Pivot Power’s recently unveiled plans will see the market entrant set out to deliver a network of 45 50MW sites. In the midst of the large projects submitted last year, a few major players have appeared with both in front of and behind the meter projects. These companies have shown their ability to develop projects quickly and adapt business models to take advantage of the most favourable revenue streams. An indication that these companies have developed a sustainable business model is the rate at which they are now building projects under a variety of models including behind the meter projects, those co-located with renewables and stand-alone batteries. As of June 2018 the top ten EPCs and integrators accounted for over 90% of the MW capacity built. The majority of the top ten have previous experience of installing renewables such as solar PV and have looked to diversify as markets in Europe have fluctuated. They have projects currently under construction which means that they will only increase their dominance of the market by the end of 2018. As the battery storage market in the UK develops and more projects are completed it is increasingly important to track the types of projects being built, by who and which revenues they are accessing. This allows us to see which projects are being proposed and who is active in the different segments to identify future market trends. The UK Battery Storage Project Database Report from Solar Media Market Research tracks over 500 battery storage projects in the UK, from the early planning stages through to completion and is an essential resource for anyone doing battery storage projects in the UK.