Authors: EUEA Director – Oleksandra Gumeniuk, EUEA Senior Analyst – Iryna Kuroiedova, NECU Chairman – Ruslan Gavrilyuk.

“Development of renewable energy and creation of balancing capacities – analysis of challenges for the sustainability of Ukraine’s energy system in terms of achieving energy and climate goals” – an initiative within the project “Support to the Ukrainian National Platform of the Eastern Partnership Civil Society Forum (EaP CSF)” and political consultations funded by the Eastern Partnership Civil Society Forum and the European Commission.

The aim of the initiative is to analyze the possibilities of developing balancing capacities as a key condition of Ukraine’s “green transition” and increase the share of renewable energy sources (RES) and provide quality recommendations to industry stakeholders to address the current crisis in RES development.

Summary:

Around the globe, 2.9 GW of storage capacity were added to electricity systems in 2019 – almost 30% less than in 2018. The factors behind this trend underline how much storage remains an early-stage technology, present in only a few key markets and heavily dependent on policy support.

In Europe, the European Commission has signalled strong long-term support for energy storage. The European Clean Energy Package (CEP) has defined storage as an entity separate from generation, transmission or load, preventing it from being double-taxed when charging and discharging.

On a more positive note, pilot projects were launched around Europe to explore new applications and markets for storage: as transmission assets in Germany (Netzbooster) and France (Ringo), and through aggregation in Italy (UVAM) and the United Kingdom (by Powervault and Kaluza).

Rules governing who should own and operate storage assets have long been a source of contention in electricity markets, and in 2019 the number of markets ruling or revising these regulations increased. At the core of the issue is whether storage can provide services to electricity grids, including transmission and distribution deferral, together with flexibility and balancing services in energy and capacity markets.

The European CEP, approved in May 2019, allows transmission and distribution operators to own and operate storage only under exceptional circumstances, which have yet to be codified in national legislation.

China also reviewed its regulations in 2019, and grid companies are no longer permitted to include storage costs in their transmission and distribution fees. As a result, the announcement of new projects was frozen and installations throughout the year shrank by one-third.

US states are working to further clarify the role of storage. California’s Independent System Operator continues to review its storage ownership rules; the Midwest Independent System Operator requested the federal regulator’s permission to use storage as an alternative to transmission; and ERCOT, the Texan grid operator, appointed an internal task force to define storage as an entity separate from generation or load.

Other jurisdictions are actively planning to deploy storage in networks: in Germany, a slew of projects under the Netzbooster programme will evaluate storage as a transmission asset, and a similar programme in France (Ringo) received regulatory approval to begin development in 2020.

In Australia, grid companies are allowed to own storage assets under certain conditions, and in Chile the national law was changed to allow for storage to serve as transmission network reinforcement in emergency cases.

Storage remains strongly dependent on favourable, stable policy environments. Storage underperformed in 2019, largely due to uncertainty and slow progress in establishing rules and regulations for its deployment and use.

Experience from 2019 shows that storage is diversifying into new markets and applications. Consumer-led deployment driven by resilience (California, Japan), prosumerism (Australia, Germany), and other factors are emerging as key forces.

Nevertheless, the role of storage in networks remains a contentious issue and regulations will need to evolve to reflect its new functions, including leveraging flexibility from consumer aggregation or grid congestion.

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