UK Needs to Rebuild Their Energy Sector for 2021

The COVID-19 pandemic and associated lockdowns have resulted in significant global disruption, plunging the global economy into what has been described as ‘the worst recession since world war II’. Despite this, through the need for an economic recovery, the pandemic has presented a unique opportunity to rebuild the energy sector to a net-zero economy, which includes the departure from environmentally insensitive investment patterns and an alignment of public policies with climate objectives.

COVID’s Impact on UK Electricity Demand

The commercial and industrial slowdown during the lockdown period resulted in as much as a 20% reduction in energy demand. Furthermore, this period coincided with record renewable generation due to favourable weather patterns. It is estimated that as much as half of the UK’s electricity was derived from renewable energy sources in the first quarter of 2020, leading to the lowest carbon dioxide emissions on record as coal power generation declined by 26% compared to the same period the previous year.

Despite demonstrating a shift in the transition to a clean energy sector, the impact of low power demand combined with high levels of intermittent renewable energy sources poses new challenges for the UK’s energy grid. This is evidenced by the record-high power grid balancing costs of £718 million from March to July – a 39% increase over the last year. This was due to a surge in constraint payments to energy suppliers to disconnect from the grid, ensuring that supply matches the levels of demand and the system remains stable.

The achievement of the net-zero emissions target by 2050 will be supported by a major expansion of renewable technologies including wind and solar PV, meaning an increasing share of energy generation will be derived from intermittent sources. This will make it increasingly difficult to balance supply and demand and evidences the need for system flexibility, which storage technologies can provide.

The role of Battery Energy Storage Systems

Battery energy storage systems collect energy from the grid during off-peak hours and discharge this energy during shortages or peak demand hours.The deployment of battery energy storage technology will help enable the UK’s transition to a low carbon energy system, facilitating the integration of more renewables into the energy mix. This technology can help the National Grid attain flexibility and shift away from the reliance on expensive supply-side measures. It is estimated that the use of flexible technologies such as battery storage could help save the National Grid’s electricity system operator (ESO) up to £40 billion by 2050.

3 Market Drivers for Battery Storage

Continued Cost Reduction

There has been a continued reduction in the cost of battery storage technology due to the expansion of the electric vehicle market which makes investment more attractive. Research conducted by Bloomberg in 2019 reported a reduction of 35% to the average cost of building and operating lithium-ion battery storage arrays from the previous year.

Focus on a green recovery following COVID-19

Part of the government’s green recovery programme sets out plans for the UK to become a world leader in clean wind energy. Speaking to the Conservative Party Conference on October 3^rd, Boris Johnson announced funding of £160m to upgrade ports and infrastructure for the construction of turbines, suggesting that wind farms could power every home in the UK by 2030. Vast additions of renewable energy to the UK’s power mix will drive demand for flexibility.

Regulatory Frameworks

In July this year, the UK Department for Business, Energy and Industrial Strategy announced that in order to remove significant barriers to the deployment of large-scale battery energy storage projects (greater than 50MW in England and 350MW in Wales), it would be relaxing planning legislation, making it easier and less costly to construct energy storage projects. This is expected to treble the number of batteries serving the electricity grid, ensuring efficiency in the energy system and accelerating the transition to the government’s net-zero pledge.

Building Back Better

Achieving energy system flexibility is critical as the UK’s energy sector transitions to renewables, a move that will help achieve the government’s net zero emissions target and the delivery of a green recovery. The increasing share of variable energy sources in the system threatens grid stability. Battery storage systems offer a solution to increase system flexibility, due to their ability to quickly absorb, retain and reinject electricity.

It is likely that the recent government announcement to remove regulatory barriers to energy storage projects will maximise the UK’s renewable energy storage, enabling the transition to net zero. However, as batteries are a key technology in the transition to renewables, it is crucial that there exists long term governmental support to encourage widespread adoption and unlock the full potential of battery energy storage technology.