Towards an EU Battery Strategy: The Role of Energy Storage in the New Energy Market Design | Francesco Gattiglio, EU Affairs Manager, EUROBAT

The proposal for the EU new energy market design, published by the European Commission on 30 November 2016, is a clear step forward for battery energy storage. However, some points still need clarification and improvement, from separate asset class and double grid fees to ownership. An overall EU Battery Strategy is needed to foster the competitiveness of the EU battery sector.

Francesco Gattiglio, EU Affairs Manager, EUROBAT

Francesco Gattiglio, EU Affairs Manager, EUROBAT

The long-awaited EU energy package was finally published on 30 November 2016. Titled “Clean Energy for All European”, the jumbo-package (over 4.000 pages, including new legislative proposals, impact assessments and communications) represents an important step forward for battery energy storage.

Before the publication of the package, the energy storage sector and batteries in particular were suffering for several legislative barriers, which in most of the cases were unintended. Energy storage was not even defined in European legislation, showing a clear sign of the lack of consideration for the importance of battery energy storage. However, the absence of a definition brought some very important practical consequences, from unclear ownership rights to the issue of double grid fees.

The good news for battery energy storage is that the package, and in particular the proposals for a Directive and a Regulation on the Internal Market for Electricity, partially addresses these concerns. The proposals include several positive measures for energy storage: in particular, the package stimulates the empowerment of citizens who want to take control of their energy production, the so-called prosumers. The package includes the right for consumers to “generate, store, consume and sell self-generated electricity in all organised markets” (Electricity Directive, Art. 15), the recognition of the importance of aggregation and the proposal for a dedicated network code on demand response, aggregation and storage. The promotion of electricity scarcity prices reflecting actual demand and supply is also a fundamental pre-condition for storage, since they will send the right market signal and stimulate the deployment of energy storage systems. Besides, the responsibility of all market actors for the imbalances they cause in the system will be an important incentive for the balancing services offered by batteries.

batteries offer services at every level of the grid

Batteries offer services at every level of the grid | Source: EUROBAT

A key point is the proposal for a definition of energy storage, now defined as “deferring an amount of electricity that was generated to the moment of use, either as final energy or converted into another energy carrier” (Electricity Directive, Art. 2.48). However, even if this definition is a first good step, it does not really recognize the fact that storage is neither consumption nor generation, leaving the issue of double grid fees unsolved: today, in many EU countries the owner of a storage system is taxed twice for the same kWh during charging and discharging. A separate asset category for storage would address this issue.

Another key point is the ownership of energy storage facilities for Transmission System Operators (TSOs) and Distribution System Operators (DSOs). The proposals of the European Commission stated that TSOs and DSOs “shall not be allowed to own, develop, manage or operate energy storage facilities” (Electricity Directive, Art. 36 and 54). Five-year derogations to this rule are included in case of market failures, provided that the regulatory authority has assessed the necessity of such facilities. It will be important to carefully design the derogations to these clauses, to avoid a situation where the market is not ready to offer these services but at the same time grid operators are not be entitled to own and operate storage facilities. For instance, a five-year derogation seems a short timeframe compared to the lifetime of the battery, while taking into consideration the cost-effectiveness of storage compared to other solutions would be preferable over its necessity.

Another extremely interesting proposal for battery energy storage is included in the Communication on accelerating clean energy innovation, where the Commission clearly states that “re-launching the production of battery cells in Europe is essential”. To do so, among other measures, the Commission will deploy more than EUR 2 billion from the Horizon 2020 work programme for 2018-2020 to support research and innovation projects in four priority areas, all relevant for batteries: the decarbonisation of the EU building stock, EU leadership on renewables, energy storage solutions and electro-mobility.

This measure is clearly good news, but it will be paramount to see it in conjunction with other policy measures. Batteries are at the very heart of the shift towards a decarbonized society, encompassing several industrial sectors, from energy storage and grid stability to warehouse and port logistics, telecommunication and all modes of transport touching different sectors, from energy to transport. Europe already has an existing strong battery production base of battery technologies, but to ensure policy coherence, business certainty, jobs and growth along these different sectors an overall framework for battery is needed.

Several several EU initiatives are relevant for batteries, but they often consider batteries from their particular angle, being it energy, transport or recycling, often missing the wider picture. The development of a long-term ‘Battery Strategy for Europe’ would provide business certainty for EU battery manufacturers, create new opportunities for all battery technologies and deliver jobs, growth and innovation in Europe. The develoment of a proper market design for battery energy storage will be a key milestone for this strategy.

Francesco Gattiglio,
EU Affairs Manager,
EUROBAT

Image Source: pixabay | pixabay.com

 

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