The recent development of the UK's energy storage industry has drawn increasing attention from overseas practitioners, achieving significant progress in recent years. According to Wood Mackenzie, the UK is expected to lead Europe's large-scale energy storage installations, reaching 25.68 GWh by 2031, with substantial growth anticipated in 2024.
According to Solar Media, by the end of 2022, the UK had approved 20.2 GW of large-scale energy storage projects, which could be completed within the next 3-4 years. Additionally, approximately 61.5 GW of storage systems have been planned or deployed. Below is a comprehensive analysis of the UK's energy storage market.
The Optimal Point for UK Energy Storage: 200-500 MW
The battery storage capacity in the UK has significantly increased, evolving from under 50 MW a few years ago to today's large-scale storage projects. For example, the 1040 MW low-carbon park project in Manchester, recently approved, is touted as the world's largest battery storage project.
With economies of scale and improvements in the supply chain, the UK government has removed the cap on Nationally Significant Infrastructure Projects (NSIP), contributing to the growing scale of energy storage projects. The intersection point for the return on investment and project scale currently appears to be between 200-500 MW.
Co-locating Power Stations May Present Challenges
Energy storage stations can be co-located with various forms of power generation, such as solar PV, wind energy, and various types of thermal power generation. There are numerous advantages to such joint projects, such as sharing infrastructure and auxiliary service costs. Energy generated during peak production times can be stored and then released during peak consumption or low production periods, thus achieving peak shaving and valley filling. Additionally, energy storage stations can generate revenue through arbitrage.
However, co-locating power stations presents challenges. Issues such as interface compatibility and the mutual impact of different systems may arise. During the project construction process, problems or delays are not uncommon. Contracts involving different technology types are often more complex and cumbersome.
From the perspective of PV developers, adding storage usually has positive implications. However, some energy storage developers may focus more on grid capacity rather than integrating solar PV or other renewable energy sources into the project. These developers might not locate storage projects around renewable energy facilities.
Developers Face Declining Revenues
Compared to the peak years of 2021 and 2022, energy storage developers currently face declining revenues. Factors contributing to this decline include increased competition, falling energy prices, and decreased value of energy trading. The overall impact of declining revenues on the industry remains to be seen.
Supply Chain and Climate Risks Persist
The supply chain for energy storage systems involves various components, including lithium-ion batteries, inverters, control systems, and other hardware. The use of lithium-ion batteries exposes developers to fluctuations in the lithium market. Given that energy storage project development takes a considerable amount of time—securing planning permission and grid connection is a lengthy process—this risk is particularly prominent. Developers need to consider and manage the potential impact of lithium price volatility on the overall cost and feasibility of projects.
Furthermore, the long lead times for battery and transformer deliveries mean that replacements can also take a long time. International instability, trade disputes, and regulatory changes can all affect the procurement of these components and materials.
Climate Change Risks
Extreme seasonal weather patterns pose significant challenges for energy storage equipment developers, requiring extensive planning and risk mitigation measures. The long daylight hours and abundant sunlight during summer favor renewable energy generation but also increase storage difficulties. Higher temperatures can overburden the cooling systems within batteries, potentially leading to thermal runaway. In the worst-case scenario, this could result in fires and explosions, causing personal injury and economic loss.
Changes in Fire Safety Guidelines for Energy Storage Systems
In 2023, the UK government updated the Renewable Energy Planning Policy Guide, adding chapters on fire safety developments for energy storage systems. Prior to this, the National Fire Chiefs Council (NFCC) released guidelines on energy storage fire safety in 2022. The guidelines recommend that developers contact local fire departments during the pre-application stage.
Source：PV ESS PLANET