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Policy Brief / Electricity

Electricity Storage: How to Facilitate its Deployment and Operation in the EU

Author(s): RUESTER Sophia, HE Xian, VASCONCELOS Jorge, GLACHANT Jean-Michel

Editor(s): ZORN Annika

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–– Many claim today that greater variability and intermittency of supply must inevitably go with a significant development of electricity storage. However, what the future  power system needs is not electricity storage per se, but rather a well-adapted system architecture which allows for decarbonization while also ensuring system reliability and supply security, and thus, reacting amongst others to increasing variability and intermittency of generation and the proliferation of distributed energy/power resources.

–– Alternative means of flexibility – including a more flexible operation of generating units as well as various demand-side measures – are all able to react to the system requirements of up-/ downward adjustment and also include the opportunity to benefit from inter-temporal arbitrage. The main differences relate to quantity and degree, i.e. response time, power rating, and energy rating. One flexibility means is not necessarily superior to another and the often expressed need for electricity storage to enable decarbonization is a technical and economic question. –– To reveal the overall value of electricity storage, multiple services need to be aggregated and multi-income streams need to be maximized. Viable business models can be categorized by the nature of the main target service, with a distinction between a deregulated-driven business model (where the main income comes from activities in electricity markets), and a regulated-driven business model (where the main income comes from offering services of which a regulated actor is the only buyer).

–– The future role of the EU is to ensure a level playing field for all alternative means of flexibility, including electricity storage. An investigation of current market design and regulation shows that it is necessary to improve market price signals and to adjust regulatory incentives in order to better reflect the value flexibility means can provide. A relaxation and harmonization of market rule setting in balancing markets could allow small, decentralized market players (including storage operators) to access these markets, which would facilitate the cross-border exchange of flexibility resources. Regarding the provision of ancillary services, the use of competitive tendering instead of bilateral contracts wherever possible could help to evaluate and quantify value. As regards tendering, performance-based and source-neutral remuneration schemes should be adopted.

–– The future role of the EU is also to provide smart direct public support for innovation. The coordination between Member State and EU support policies should be improved and public support should target a balanced portfolio of identified key technologies, including both centralized and decentralized energy storage technologies. Of particular interest are areas where European players already have a strong position in RD&D and/or manufacturing and which have potential for future growth.