News that the UK has launched a new way of storing power with the world’s first grid-scale liquid air energy storage (LAES) plant received significant attention, both within the renewables industry and further afield.
Indeed, the Pilsworth plant, owned by Highview Power, represents a significant step forward in energy storage technology, with many commentators speculating on the transformative impact it could have on the wider clean energy market.
The technology works by cooling air to -196C to turn it into liquid form, which allows it to be stored in high pressure tanks. When extra power is needed, the liquid is pumped and heated to turn it back into gas, where it can be used to drive electricity turbines. According to grid aggregator Kiwi Power, this means that storage plants using LAES technology could “easily store enough clean electricity generated by a local windfarm to power a town like Bury (around 100,000 homes) for many days, not just a few hours.”
While most common forms of energy storage today are lithium ion batteries and pumped hydro storage, the increasing role of energy storage in the UK's energy system has led to increased investment in other technologies – with proponents of LAES technology saying it could be a major rival to more prominent storage technologies.
Of course, the technology behind the LAES facility could prove particularly useful given the increased prominence of renewable energy in the UK (accounting for 29% of all electricity generated in 2017) and its challenges – namely its reliability during peak demand. Where coal-fired power stations once handled the lion’s share of peak electricity demand, LAES and other technologies like this could enable renewable energy projects to better fill the gap.
Despite these significant technological advances, the reason for the high level of interest around the opening of the Pilsworth plant is simple: new innovations can bring down the cost of energy storage and make these projects increasingly viable.
The end of government subsidies in 2017 left a significant question mark over the future of the UK’s clean energy market. However, rather than the slowdown that many predicted, smaller capital outlays have ensured that energy storage and other technologies can fill the void and become a key feature in the market. With the economic viability of energy storage established, modelling began in earnest with large-scale 50MW+ schemes, multi-technology schemes and direct off-takers all presenting potentially workable options.
This, together with energy storage winning contracts in the National Grid, enhanced frequency response and capacity market auctions, has led funders to strongly consider the investment opportunities it presents.
Further advances in technology – the Pilsworth LAES plant being the most prominent recent example – mean that energy storage is likely to be a key area of development in 2018. As outlined in TLT’s Clean Energy Investment Trends 2018 report, many operators are currently assembling portfolios of energy storage assets with the intention of selling the project rights or to introduce investment to fund a build out. Until very recently, this investment would have solely been on an equity basis from those who had a reasonable appetite for risk. In December 2017 however, we saw the first project financing of an assembled battery storage portfolio – which could be a game changer for energy storage and the wider clean energy market.
While concerns around regulatory obstacles persist, there is a growing sense of excitement about the increasing role that energy storage can play in the UK energy system and the investment opportunities it presents. This will only increase as other pioneering schemes begin to rival the Pilsworth plant. For example, Foresight Group has already invested in two UK storage projects totalling 45MW and plans to invest in more.
Going forward, it is also likely that we will see this technology enable greater co-location with existing assets to further enhance revenue streams. To that end, energy storage schemes may also be funded in combined technology models where they are linked to electric vehicles or subsidy free solar or wind. The financial modelling for this type of project is still in its infancy and schemes, in the short term at least, are likely to attract investors with more flexible risk profiles than traditional funders, but this is certainly an exciting prospect.
With Bloomberg New Energy Finance projecting the global energy storage market to grow cumulatively to 125GW/305GWh and attract $103bn of investment by 2030, it is clear that the global and UK energy storage markets are poised to see substantial growth in the coming years. While technological advances will play a major role, greater alignment between regulation, revenues and costs will also be important. If these factors fall into place, energy storage will make a substantial contribution to UK energy and facilitate the expansion of other clean energy technologies.
The Pilsworth LAES plant is ground-breaking in many respects and will likely represent a significant gear-change in how and where energy storage schemes are deployed, especially given the reduced costs the technology provides. It will be interesting to see how this technology, along with others, is harnessed to match the ongoing increases in clean energy demand.
This article was first published by Renewables Investor.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.