Issue link: https://read.utilityweek.co.uk/i/665572
NETWORK / 22 / APRIL 2016 DISTRIBUTED STORAGE Julian Jansen, head of energy service research at Delta-ee, says the key to successful distributed storage businesses will be 'value stacking'. The energy system is undergoing a transformation and energy storage has the potential to play a central role. Delta-ee's research shows that the business model innovation required to make energy storage attractive to both customers and suppliers is the main challenge facing the industry. The winning business models will determine how energy storage will be deployed. MARKET The market for distributed energy storage today can largely be characterised as either driven by self- consumption (typically PV and storage, on the customer side of the meter) or grid support (larger batteries further up the energy system, on the utility side of the meter). But already we see new business models emerging. For example, behind- the-meter storage that is trying to give a "free lunch" to customers while providing value to the energy system. A virtual power plant is one of the endgames here. Or "energy banks" that act as central stores for local communities, with consumers able to "pay" energy in, and out, depending on their self-generation and consumption patterns. There are a range of potential values that can be created through distributed energy storage. However, the winning business models will be able to create a "value stack", enabling them to access different values and diversify their risks. During Delta-ee's research, many examples of business model innovation in distributed storage were identifi ed. Tesla may have captured many of the headlines, but in fact a range of deployment models has emerged in the background. We have built up a case study library that details how these business models work. Moixa – one of the leading providers of residential battery energy storage systems in the UK – is among those whose stories we've included. It has developed a management and aggregation model. This GridShare model aims to dispatch aggregated storage systems into the UK ancillary services markets, sharing part of the revenue streams with the customer. DEPLOYMENT Looking at these case studies, we believe that although a key primary value may drive deployment of technologies in the near term, different values will emerge in future. The winning business models will be able to capture these multiple values. So while many in the industry in Europe remain fi xated on the self-consumption model, Delta-ee believes this will play a diminishing role in future as other values from the energy system start to be realised. ENERGY STORAGE Ancillary services Capacity value RE integration Grid investment deferral Microgrid/off-grid deferral What makes up a storage value stack? Lower bills through more self-consumption Lower bills through time shifting Payments for ancillary services Back-up power UK energy storage capacity will increase in 2017 as a result of the enhanced frequency response service and then "increase exponentially" to more than 1.6GW by 2020. While National Grid develops its use of storage for rapid response services, there is growing speculation about how the technology could help distribution network operators (DNOs) handle a range of future challenges. What might seem like a straightforward value proposition for DNOs is complicated by regulation and the classi… cation of storage as both an end user of the system and a generating technology. This classi… cation needs to be rede… ned if DNOs are to play a signi… cant role in stimulating the energy storage market. And there are other challenges for DNOs. Distribution licences cap sales from non-distribution business activities such as storage at 2.5% of the DNO's revenue. Investment in non-distribution activities by a DNO is also capped, at 2.5% of its share capital and DNOs are prevented from trading energy. DNOs could look to a third party to do the trading, but this is a risky business model because third parties will need incentives to deliver peak shaving. Distribution network operator UK Power Networks, at the mid-way point in a two- year trial of an energy storage project at Leighton Buzzard, has said it expects to put forward a business case for DNOs based on the lessons from its trial. Elsewhere in the market, small-scale and domestic storage technologies are also pushing at doors to open up bigger opportunities for revenues (le– ). Evidence from international research group Navigant showed that small-scale energy storage deployment grew 12% in 2015, a signi… cant step up from the year before. The most popular technology for applications at this scale remains lithium-ion, but other technologies are becoming available. Also, aggregation so– ware that could allow small scale distributed storage to punch above its weight in the energy market is similarly advancing in maturity and accessibility. In short, the past year has been one of rapid development for energy storage technologies. They have developed from potential solutions to future energy system problems to become viable options for much nearer-term challenges. Prices for the most mature energy storage technologies are falling rapidly, and as organisations begin to stack their value propositions, more robust business cases are being built for their—operation. For maximum value to be gained from energy storage, all that is needed is for obstructive regulations to move out of the—way. N