National Grid’s Underuse of Battery Storage Hinders Energy Transition
Highlights
- UK’s largest battery storage fund warns of underutilization of battery technology due to National Grid’s practices.
- Falling power prices and increased competition are affecting battery developers’ revenues and share prices.
- Despite the surge in renewable energy, National Grid’s slow response to leveraging battery storage hinders the energy transition and raises concerns about meeting carbon neutrality targets.
In a critical revelation, the UK’s leading battery storage fund has sounded the alarm, highlighting that the nation’s electricity system is failing to leverage the full potential of battery technology.
Ben Guest, managing director of Gresham House’s new energy division, expressed concern over the underutilization of battery storage by National Grid, cautioning that this trend could impede crucial investments in the sector and jeopardize efforts to achieve carbon neutrality by 2025.
Guest’s remarks underscore a pressing issue within the energy sector: the failure to fully integrate and optimize battery storage solutions despite their pivotal role in reducing carbon emissions.
With falling power prices and intensifying competition, according to Financial Times, battery developers are facing financial challenges, affecting both revenues and share prices.
Batteries play a vital role in the electricity system by smoothing out fluctuations in power supply from renewable sources like wind and solar energy.
As renewable power generation continues to rise in the UK, the number of battery storage sites has surged, reaching approximately 130 locations with a total capacity of 4GW, according to industry experts.
Revenue for battery storage facilities primarily comes from trading electricity in the wholesale market and providing services to National Grid’s Electricity System Operator (ESO) to balance supply and demand.
However, despite the availability of batteries, ESO often procures electricity from conventional sources like gas-fired power plants, citing technical limitations and system constraints.
The decline in wholesale market volatility has further impacted battery developers’ earnings, with revenues per megawatt plummeting from £150,000 in 2022 to around £50,000 by the end of 2023, according to analyst Sachin Saggar.
This downward trend in revenues raises concerns about the feasibility of new battery investments, potentially stalling the expansion of storage capacity.
Gresham House, with a substantial battery storage portfolio of 640MW, recently took the unprecedented step of suspending its fourth-quarter dividend, citing challenges in generating sufficient cash flow to cover dividend payments.
While National Grid has initiated measures to enhance battery utilization, industry experts, such as Olly Frankland from Regen, believe progress has been sluggish.
Frankland emphasizes the need for a broader role for battery storage within the energy ecosystem, advocating for proactive steps to capitalize on its potential.
However, despite the industry’s calls for action, National Grid ESO declined to comment on the matter, leaving stakeholders concerned about the pace of reforms and the urgency of addressing the underuse of battery storage.
As the UK strives to transition towards a cleaner and more sustainable energy future, optimizing the utilization of battery storage emerges as a critical imperative.
Failure to address the current underuse of this technology not only jeopardizes investments and financial viability but also undermines the nation’s commitments to combat climate change and achieve net-zero emissions.
