During the winter, especially January to March, it is common for northern Europe to experience periods of low wind lasting several days or weeks. When they coincide with low sun levels (dunkelflaute (dark doldrums)) and very short days as well as with the ‘heating season’ for domestic customers, they present a challenge for countries aiming for energy systems that rely largely or wholly on renewables for heat and power.
So-called ‘long duration energy storage’ (LDES) is needed to manage this problem. LDES could take many forms, storing energy as heat (Finland’s fourth largest city, Vantaa, is planning to store enough waste heat in summer, in underground caverns, to cover its heat need for the winter), as hydrogen, or using technologies (such as pumped storage) that will produce electricity directly. It could encompass energy stored for hours, weeks or months, and released over days or weeks.
The problem for all these LDES options is that they are typically high capital cost and slow to build, while the timing of returns from selling energy at periods of scarcity is uncertain. That contrasts with very short term storage options, like batteries, which have attracted investor interest because they are quick to build and can earn returns in within-day and balancing markets immediately. LDES developers have been calling for government support to kick-off their industry.
The UK is particularly interested in LDES, as it is already spilling wind from North Sea wind farms that could be used to cover periods of wind drought. Meanwhile, developers have a variety of projects waiting in development.
Although the UK already has a capacity market that provides a 15-year revenue stream for new-build capacity, the government recognised that it alone “would be unable to provide enough revenue certainty to support the necessary investment into LDES, due to [LDES’s] high upfront capital costs coupled with long build times.” Now the UK is hoping to move to construction on some projects under a new ‘cap and floor’ support scheme, modelled on one that has been used successfully to bring forward interconnector projects and following an initial consultation earlier this year.
In general, a ‘cap and floor’ scheme provides a minimum revenue certainty, which gives security to investors that debt will be repaid (the floor). It also places a regulated limit on revenues (the cap). The security provided by the floor reduces the cost of financing the project, transferring some risk to consumers, while the cap ensures consumers benefit from any excess revenues.
Cap and floor agreements will be offered for up to 25 years, and allocated via a competitive process. The government said the first round of the cap and floor model is expected to be open to applicants in 2025, following a second consultation in the autumn, and (as with interconnectors) the process will be run by Ofgem.
The allocation process will have two tracks. One will be for mature technologies (technology readiness level 9), with a minimum capacity of 100 MW and a six-hour duration. The other is for less developed technologies (technology readiness level 8) which may be based around lower capacity and longer duration.
Pumped storage hydro was named as the most mature LDES technology (several projects are in development), but the government also highlighted “more novel technologies” such as liquid air energy storage (LAES), compressed air energy storage (CAES), gravitational, high-density pumped hydro and flow batteries, that are “at varying stages of commercial readiness and deployment.”
There was disappointment in some quarters that the new scheme would be based around electricity rather than energy. Some consultation respondents argued it should be supporting thermal energy storage, or other approaches such as demand response that can act as forms of long-duration energy storage by using the wider infrastructure (such as data centres or heating and cooling networks). But the government decided that “an LDES scheme is primarily to support the power system and grid, rather than wider outcomes such as low-carbon heat which are best regulated separately, and therefore should not support technologies which do not meet the electricity storage definition.” Using an existing electricity storage definition also would also allow the new scheme to be brought into operation more quickly, it said.
A forthcoming technical decision document will give the market a clear explanation of how the scheme will work and what exactly it is seeking to achieve, and before the first application window next year Ofgem will clarify the exact assessment methodology and application requirements. But the government said its LDES publication “should be read as a ‘green light’ for projects in the pipeline regarding government’s commitment to introduce a cap and floor scheme.”
The proposal was welcomed by potential developers offering a variety of technologies.
Roderick MacLeod is director of Glen Earrach Energy, which is developing a hydro pumped storage power project in Scotland’s Loch Ness. He said: “Globally, pumped storage projects have historically relied on government support. The UK government’s proposed income floor is the right move in the right direction, which Glen Earrach Energy fully endorses….We are eager to work in collaboration with the UK government to develop a cap and floor mechanism that optimises grid benefits, consumer value and environmental and community benefits.”
Stephen Crosher is chief executive of RheEnergise, which is developing a new long-duration hydroenergy storage system. Welcoming the support scheme, he said “We anticipate that under a cap and floor mechanism, our particular type of long-duration energy storage will be financed and built in the UK.” RheEnergise’s technology is similar to pumped hydro storage but it uses a proprietary high-density fluid, which the company says requires elevations about 2.5 times less than water, ie the height of small hills rather than mountains. A demonstrator project is currently under construction near Plymouth, Devon, with financial support from UK DESNZ.
Also standing to benefit from the scheme is Highview Power, which is developing liquid air energy storage. In a June funding round Highview Power secured £300 million investment for its 300 MWh project at Carrington, near Manchester. A follow-on plant at Hunterston will deliver 2.5 GWh. Hunterston is planned to be the first of four plants totalling 10 GWh of LDES, including one in Aberdeenshire. Highview Power chief executive Richard Butland said that would be, “strategically positioned to support the onshoring of renewable energy resources from the North Sea and the critical need for grid stability at this location.”
Renewable Energy Association (REA) deputy director of policy Mark Sommerfeld said: “Long-duration energy storage is essential for meeting future low-carbon energy demands in a cost-effective way while ensuring the security of supply. [The cap and floor] announcement finally confirms a scheme the Renewable Energy Association long advocated for to unlock private investment in several ready-to-go projects, allowing construction to begin.”
