Policy Brief

The Role of Storage in the Future Electricity Systems: What can we learn from the UK?

Policy brief

Published: 24 of July, 2023

This policy brief is based on the discussion titled “ Flexibility, Energy Storage and Demand Side Response - Knowledge sharing between the United Kingdom and Hungary to enhance energy security workshop ”, which took place March 16th, 2023.

Main conclusions:

  • A decarbonized electricity grid requires flexibility from multiple sources to integrate variable renewable energy sources. Electricity storage is a key enabler for this flexibility, along with demand-side response and market integration.
  • The Hungarian government is planning to expand battery capacity across the power grid for different market segments in cooperation with network operators from the current level of 28.18 MW/37.5 MWh.
  • The revenues for Hungarian battery installations mainly come from the balancing markets as they are not yet used for inter-temporal arbitrage. A significant portion of their operational portfolio is dedicated to the FCR market. In the aFRR market batteries participate as part of aggregators.
  • The uptake of batteries largely depends on the regulatory environment.
    • Hungary’s recent retail electricity price regulation raises significant barriers for the uptake of household batteries. The limited availability of varying end-use consumer prices and net metering for household photovoltaic systems do not provide the right investment signals.
    • Major changes to Hungarian balancing markets are required in order to ensure greater participation of batteries. The national transmission system operator MAVIR has begun to introduce balancing products that are favorable to new types of market players, but much remains to be done to unlock the potential of batteries in the reserve market: the time horizon for reserve products, procurement and requested delivery duration need to be shortened and the minimum product size should be reduced. The UK experience shows that the path is not straightforward since TSOs prefer fewer large battery assets than numerous smaller units. Furthermore, bundled storage aggregators participating in the ancillary services markets presents several challenges.
  • Developing market participation conditions favorable for batteries requires continuous consultation and fine-tuning of market conditions between the regulator, TSO and battery project owners.
  • The UK example shows that optimization platforms can help batteries operators maximize revenues across different market segments.

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