Introduction

Why GB needs energy storage to drive net zero and how is electricity traded in the GB market

In the UK’s 2008 Climate Change Act, the UK Government announced a goal to reduce greenhouse emissions by 80% compared with 1990 level by 2050. Since the announcement, installed renewable capacity has increased from 8GW in 2009 to 56GW in 2022. In 2019, the UK announced it would increase the previous target to bring all greenhouse gas emissions to net zero by 2050.

Energy storage bridges the gap between variable renewable generation and electricity demand

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Solar Energy Production

The increase of variable renewable generation in the UK's energy mix drives the reduction in generation from thermal dispatchable units (i.e coal and gas).

Energy generation from renewables is intermittent and does not necessarily match the daily demand profile of electricity.

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Energy Consumption

The electrification of additional end-uses, such as electric heating or transport will raise the peaks and variability of electrity demand in the future.

Energy storage bridges the gap between generation and demand, storing renewable energy at times of excess and redistributing that energy to the grid when demand rises.

The reduction in fossil fuel energy generation (synchronous) has an impact in grid stability services like inertia, system strength and voltage. Batteries are very efficient at providing these services and can replace for the loss of synchronous generation.

How is electricity traded in the GB market?

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Please note: orange indicates it being most suited for trading in BESS.

Forecasts from National Grid ESO (“NG ESO”) suggest the UK needs 40 GW of electricity storage by 2050 to meet the UK Government’s pledge of net zero by 2050. This article discusses the different revenue opportunities for battery storage in the GB market, its evolution over time and the outlook for the business case.

The evolution of the UK's battery storage market is driven by 4 key factors

1

Increasing Wholesale Market Volatility

Greater volatility widens the spread between low and high intraday prices increasing battery profitability.

2

Decline in Battery cost

80% reduction in BESS cost since 2013.

This has supported shift to longer duration batteries.

3

Increased Battery Duration

High duration batteries (>2hr) now account for over 50% of annual buildout.

This allows the transition from ancillary services to energy arbitrage business model.

4

From Ancillary Services to Energy Trading

Wholesale market and balancing mechanism revenues have increased from an average of 5% to over 40% as a proportion of a battery’s revenues.

Key contacts

Peter Hamid

Senior Vice President, Investor Relations
NextEnergy Group

Dario Hernandez

Head of Energy Storage, UK
NextEnergy Capital [email protected] Phone: +44 (0) 203 746 0700