Energy Storage Solutions – how to harness renewable energy generation

Renewable energy generation is intermittent: wind speeds are temperamental and therefore wind generation oscillates, irradiation levels are not always sufficient to deliver solar power generation (and solar generation is ‘offline’ at night), and rainfall patterns (among other factors) impact hydroelectric power generation. 

By contrast, conventional forms of power generation, such from burning fossil fuels or nuclear power plants, generally provide a far more reliable and continuous supply to meet ‘baseload’ power requirements –the minimum amount of power required at any given time. The relative unpredictability of renewable energy generation, combined with its increasingly dominant position in the energy mix, means natural gas and nuclear power stations are needed to help balance the supply and demand requirements of the grid. However, investment in energy storage solutions will provide scope for the full potential of renewables to be harnessed, by capturing output during times of high generation and smoothing the delivery of power to the grid. 

Pumped-Storage Hydroelectricity. The oldest form of large-scale energy storage, the use of pumped-storage hydropower can be traced back to c.1900 in Italy and Switzerland. Two reservoirs at different altitudes are required. When water is released from the upper reservoir it is channelled through a turbine and generator to create electricity. The water is then pumped back from the lower reservoir to the upper reservoir and represents a store of gravitational potential energy until it is released again. Pumped-storage hydropower can provide a dynamic response to balancing grid requirements, offering critical backup during periods of excess demand. 

Although the losses associated with pumping water to the upper reservoir results in pumped-storage being a net consumer overall, using low-cost surplus, or off-peak electric power, to run the pumps – for example, when wind generation is above grid requirements – it can be stored for periods of higher demand, which will typically be associated with higher electricity prices.    

Pumped-storage hydroelectricity accounts for over 90% of the world’s existing storage capacity. The world’s largest pumped-storage assets are located in the U.S., China, Japan and Continental Europe, although the Dinorwig power station in Snowdonia national park, commissioned in 1984, is the world’s tenth largest hydroelectric scheme.  

Battery Storage Solutions. In recent years, cost-effective battery-storage technology has emerged, storing electrical energy as chemical energy. The majority of utility-scale battery assets use Lithium-ion technology, currently the most cost-effective and versatile option, capable of adaptation to small scale applications, like powering an electric vehicle (EV), or multi-megawatt grid-scale applications able to power thousands of homes. 

Grid-scale battery-storage assets can store energy at times of oversupply and release that power back into the grid during periods of higher demand. This ability to import and export power rapidly can help keep, for example, the UK grid’s electrical frequency at 50Hz. 

Multiple revenue streams are available to battery-storage operators, and unlike renewable power generators, revenues attracted by battery storage assets are not linked to absolute power prices. 

 Battery storage is increasingly integrated alongside renewable energy generation assets. This allows the wind or solar farm operator greater flexibility over when power is sold, providing the operator with scope to sell electricity at better prices and store excess production rather than wasting it.

The build out of energy storage solutions will not only save wastage and the need for fossil fuel power generation capacity, but will help to reduce energy-system costs. The UK’s Electricity System Operator (ESO), National Grid, has (at the time of writing) paid more than £190m of constraint payments to wind farm generators in 2020. These payments are made when the supply of electricity from wind is too high and – without sufficient storage capacity – output must be curtailed to balance the grid. This has been particularly acute during 2020, with decreased electricity demand associated with the economic shut-down. 

Unsurprisingly, National Grid refers to battery storage as a ‘vital tool’, that will play a wide range of roles in balancing the grid. It appears likely that the availability of regulated revenue streams for battery operators will broaden. The potential to lower constraint payments and the build-out of storage capacity is likely to put downward pressure on wholesale electricity costs over time, as battery assets will help to smooth the deployment of power throughout the day.

Moving towards a zero-carbon energy system in the UK will depend on a significant increase in battery storage capacity. The National Grid forecasts UK battery storage capacity could reach 2.3GW in 2025, representing growth of approximately 160% compared to 0.88 GW of capacity available at the end of 2019. On a global view, energy consultant Wood Mackenzie anticipates that global energy storage capacity will grow at a compound annual rate of 31% between now and 2030. This would see the global battery storage market reach 741 GW cumulative capacity, of which the U.S. will account for approximately half.

There are a range of benefits to come from an increase in global storage capacity. As renewable energy sources begin to reach a tipping point in terms of their contribution to the electricity supply mix, these storage assets will represent critical energy infrastructure in the future world of high renewables penetration. 

The VT Gravis Clean Energy Income Fund invests in energy storage assets through the ownership of publicly traded companies. This includes specialist energy storage companies that own and operate free-standing, utility scale battery storage assets and pumped hydro assets, as well as renewable energy companies that have integrated battery storage capabilities within operational wind and solar projects.   

William Argent, Director 
Fund Adviser, VT Gravis Clean Energy Income Fund