On the 22nd of May, PubAffairs Bruxelles hosted a debate about what role energy storage systems play in the EU energy transition. Mr Michel Matheu, Head of EU Strategy and Stakeholder Relations, Électricité de France, EDF, Ms Andreea Strachinescu, Head of Unit of New Energy Technologies of DG Energy, European Commission, Mr Per-Olof Granström, Director for Energy at the Centre on Regulation in Europe, CERRE, Mr Patrick Clerens, Secretary General, European Association for Storage of Energy, EASE and Mr Jean-Baptiste Bart, Deputy Head at EDF were all present as speakers. The debate was moderated by Hughes Belin, freelance journalist.
Mr Belin introduced the speakers and outlined the topicality of the issues at stake with special regard to the ongoing negotiations on electricity market design in Europe. He then invited Mr Matheu to showcase the role of energy storage in the EU energy transition.
Mr Matheu began by stating that the question of energy storage is a work in progress, which, for the time being, implies both challenges and opportunities. He highlighted the need to cope with more and more variable energy generation as decarbonisation of electricity proceeds. Within this context, Mr Matheu outlined four ways of providing flexibility to achieve a fully-fledged energy transition. Firstly, energy generation could be used in a flexible way, however, the speaker explained, such flexibility is currently provided not only by carbon free generation like hydro and nuclear but also by fossil fuelled generation that is bound to be phased out gradually. Secondly, it is possible to expand the networks. However, the speaker underscored the fact that network building can be expensive and its cost-effectiveness is not always guaranteed. As a third focal point, Mr Matheu stressed the potential of a smart demand side, although he also underlined that there are limits to shifting consumption to the periods of energy generation through renewable energies, such as solar power. By taking these limitations into account, Mr Matheu stressed the importance of energy storage as a solution to provide flexibility for the energy transition. He added that in future, in his opinion, these four ways of providing flexibility will be competing; in quite a few cases the most efficient one might well be an energy storage solution. The speaker subsequently emphasised that a huge variety of storage technologies is already available with different specificities that can be appropriate to respond to different flexibility needs; depending on how much energy you need for how long. Furthermore, the speaker explained, not only are the flexibility needs very diverse, but there are also different contexts in which storage solutions can be deployed: for example, there are different types of power systems which can work at a global, national or regional scale, as well as at a decentralised level. Mr Matheu added that specific solutions would be needed to address different contexts such as energy systems on islands, isolated places, off grid areas or in big cities in continental Europe. This setting would create opportunities for different types of solutions that storage could provide, as there is the need to address specific contexts. In the competition between different types of flexibility solutions storage has real opportunities. In some technologies like electric car batteries there has been a steep learning curve and electric engines will soon be as cost-effective as conventional ones. Some types of storage can also be used for several purposes, which creates more opportunities. The speaker added that he expected rapid developments of storage applications in the next 10-15 years, while different storage solutions should be able to compete on a level-playing field, which would in turn encourage innovation. Mr Matheu concluded his remarks by outlining the EDF’s global strategy for the energy transition. The company will develop research projects to enhance the energy transition. He also underlined further fields in which EDF will be active and develop new use cases as optimisation software for storage systems, batteries for frequency regulations, hybrid power plants (storage + variable generation) and services for self-consumers. He finalised his remarks by stressing EDF’s efforts to develop a holistic strategy contributing to the energy transition process, including not only energy storage but also high investments in renewables, in particular through an ambitious solar plan, an electric mobility project, a further reduction of its already very low emissions and innovative energy services.
After the introductory remarks, the moderator invited the panellists to elaborate on the energy storage regulation and technology and their possible future impacts.
Ms Strachinescu started her intervention by elaborating on the European Commission’s efforts to evaluate the potentialities and to support energy storage systems within the framework of the EU programme Horizon 2020. The speaker subsequently highlighted that the rise of renewable energy production and consumption in Europe has yet to increase the need for distribution flexibility within the 2020 EU energy target. However, if we look at the projection for the 2030 energy objectives, the Commission forecasts that roughly half of the energy consumption will come from renewable sources, hence increasing further the need for flexibility of energy systems already mentioned in the introductory speech. For these reasons, the speaker pointed out, the Commission via the Horizon 2020 has introduced integrated energy projects not only at the level of distribution grids and transmission grids, but also at a local level. Ms Strachinescu finally emphasised storage as a key part of the Commission’s work together with various stakeholders and member states within the “Strategic Energy Technology Plan”.
Mr Clerens opened his statement explaining that storage technologies can be grouped into five ‘families’: chemical, electrochemical, electrical, thermal, and mechanical. With accelerating R&D efforts, more efficient and cheaper storage technologies – not only batteries are being developed and deployed on the market. As of now, the speaker explained, batteries are the most rapidly growing storage technology, but other technologies – such as liquid air energy storage – also show promise. A variety of different technologies will be needed to store energy as all of them have different durations and capabilities to address specific applications. Mr Clerens also stressed that moving towards a decarbonised society using renewable resources will force us to face further challenges. A key issue outlined by the speaker was smoothing solar power and wind generation throughout the year, as weekly, monthly and even seasonal balancing needs to be achieved. For these reasons, both short- and long-duration storage technologies will be needed to incorporate increasing shares of renewables into the energy system. Within this context, Mr Clerens explained how different energy storage systems will be fundamental for a successful energy transition. The speaker also mentioned, as an example of thermal energy storage, a city in the Netherlands which stores energy generated from burning waste underground, and uses it for heating during winter. Mr Clerens concluded his intervention by stating that all of the technologies mentioned have an added value and need to come together to create a balance within the power system, as, in his opinion, there will be no single technology winning over the others in the energy storage sector.
Mr Granström started his intervention by highlighting the dramatic changes to the energy system: very ambitious decarbonisation, the structural change and decentralisation, while we are moving towards a system where the renewable capacity can increase to maybe 3-4 times the system peak load. He highlighted that flexibility is the driver and that energy storage will be at the core of this energy transition. Mr Granström outlined the importance of a good regulatory framework for energy storage that takes into account both that energy storage will be critical for grid companies and the safeguarding of the electricity price, not to distort the market more than has already been done. Mr Granström then referred to the ongoing trilogue negotiations on the proposed energy regulation and emphasised the potential risks of distorting the market and not using the smart possibilities that are offered by the grid, a double risk of increasing costs for the consumer. He highlighted that this is why CERRE is preparing a study on an energy storage system that can work in an unbundled environment. The speaker then mentioned that CERRE is an independent body that promotes robust and innovation and investment friendly regulatory frameworks for digital and network industries. The aim of the study will be to look at the use of energy storage from a grid perspective and to investigate the many exceptional cases. This exercise will be done to highlight the possible complications of this new setting and to study the possibilities for specific rules regarding energy storage for regulated grid purposes.
Mr Bart opened his statement by giving more information on the EDF storage plan. The storage plan aims at developing 10 new gigawatts of storage around the world divided in different segments. The first segment will be at a utility scale, where storage will be used in support of electrical power system and, within this context, Mr Bart emphasised the historical role of EDF in energy storage in France. He then highlighted that energy storage is essential for the flexibility of the generation mix and outlined how EDF will work on new experimentations to connect batteries to power systems. Subsequently, Mr Bart elaborated on the customer dimension, which will be supporting storage for residential customers, but also business customers in territorial projects for communities. He also underlined that the EDF noticed the growing need for self-consumption and is developing self-consumption solutions in key markets such as France, Italy, UK and Belgium. This process should give possibilities to customers to generate their own electricity and store power. In addition, the EDF’s speaker elaborated on electricity access by stressing that power storage could help electricity access in developing countries. Mr Bart continued by stating that there are still one billion people in the world without access to electricity. He outlined how off grid systems could improve access to electricity using solar panels and batteries as accessible combination, such as in some pilot project which tool place in the Ivory Coast, Ghana and in other countries in sub-Saharan Africa. He concluded his remarks by announcing that EDF plans to reach up to 1.2 million customers in sub-Saharan Africa by 2055 and that the company will continue to invest in R&D of energy storage systems.
A second focal point of the panel discussion consisted of a debate on whether energy storage should be owned by regulated market participants or by the free market.
Mr Clerens replied that the public debate should not be about ownership. Indeed, the speaker explained that the crucial question is which services might be rendered by regulated entities vs market players with a storage device. Mr Clerens stated that infrastructure services should be allowed to be provided by regulated entities, whereas market applications (e.g. arbitrage) should only be provided by market players. He emphasised that the well being of the consumer and the stability and efficiency of the overall energy system are of utmost importance. Furthermore, the speaker added, buying services on the market might be even cheaper for the regulated entity depending on circumstances. As a result, he urged European and national regulating authorities to check if the costs for the consumer is the lowest available option and reiterated his main point, namely that the public debate should not be about ownership but rather the specific services that can be provided with storage.
Mr Granström also highlighted that it is all about the function and the use of storage and that there are a number of very complicated cases to be assessed. He emphasised the need to give the regulators the best tools possible to handle this very complex reality. The speaker then reiterated the double risk that might result in higher costs for consumers.
Mr Bart outlined the EDF position on this topic. In his opinion, ownership is a big question for every utility. Indeed, Mr Bart explained, when the transmission system operators need flexibility at some point of the grid, there would be four sources to facilitate this process: storage, development of new lines, flexibility of generation and demand. In his opinion, storage could therefore be the best option on both a technical and economical level in some contexts.
The moderator asked the panellists if there would be a potential conflict of interest between grid management companies and energy storage providers.
Mr Granström elaborated on the issue of implementing real sector coupling between electricity, gas and heat. He emphasised the importance of taking a step back and looking at the energy system as a whole. He also stated that there are many possibilities and stressed the importance to keep an open mind and to not only focus on one “killer” technology. Mr Granström concluded by saying that in order for someone to invest, it is essential to let the market and pricing work and named the EU ETS as an example of a good system that can work well together with the market, as long as it is not distorted.
Ms Strachinescu highlighted the importance of looking at what is happening beyond the regulatory proposals. She raised the question of what is actually happening with current experimentations. Indeed, the speaker noted that there is plenty of appetite to act on the side of the distribution grid, and for this reason, it would be fair to expect a high degree of positive developments. The speaker also underlined that, for the time being, the majority of the solutions suggested to the Commission concerned batteries-related questions. Ms Strachinescu then emphasised that it will be crucial to discuss how to deal with the transformation of the energy system and how Europe and European consumers might gain from this process. Furthermore, while reiterating that there are still a high degree of projects on batteries-related technologies, she added that the EU needs to be competitive on storage technologies beyond batteries. Ms Strachinescu raised further questions on what kind of technologies should be used in the energy transition process, on how the system will look like in the future and on what can the Europe gain from future energy storage technologies. On the question of which technologies might bring a breakthrough in energy storage, Ms Strachinescu argued that she would not pick a specific one, as the main question is which technology can provide advantages given the context considered. The speaker then stressed that the Commissions projects have also investigated business models, as well as on how they can stand in the energy market. Ms Strachinescu also suggested looking at the whole value chain with the ambition to have producers in Europe. She emphasised that there are different solutions to store energy and synergies need to be developed. However, she also stated that there is no technological “silver bullet” as the search for the optimal mix of technologies to develop an efficient and decarbonised energy system for countries, regions, districts and cities should prevail as a principle. She concluded that there will be several factors to be considered and to work on, as well as the future need for a new Strategic Energy Technology Plan. She concluded that it is necessary to look at synergies and involve stakeholders from sectors such as gas, hydro, heating and cooling to work together in order to develop the most efficient solutions.
Mr Bart responded to the question with special regard to batteries and the EDF position by stating that, on the grid, there may be an error in assessments, as batteries should be built when the conditions are optimal. In his opinion, batteries could be used for short-term solution as it would be difficult to build new lines; he highlighted, as an example, the difficulties of building new lines in Germany connecting the north and south. Mr Bart continued by elaborating on the barriers of development of energy storage and arguing that prices on the electricity market are not very high and by using the example of pumped hydro storage, which notably uses arbitrage. He subsequently stated that there are economical barriers to develop such projects in continental Europe, as they are costly and, due to low electricity prices, tend to make few profits. Mr Bart then answered the very question of whether EDF is heading towards the development of a particular technology by outlining that EDF has projects on different technologies from hydro storage solutions, to battery solutions and hydro pump solutions. He stressed that using different technologies to provide different services to the grid is essential and emphasised to look beyond lithium-ion batteries and rather work on batteries that use less rare materials such as cobalt. In his opinion, it is important to look at the value chain of storage, to see which advantages different technologies can bring to the power system and which advantages they can bring to the European industries. A value chain would include the development of storage, the manufacturing of storage, the battery management and the recycling of batteries. He concluded his intervention by stating that certain technologies are not mature yet, but will be in the future.
Mr Clerens replied that there is a need to compromise between utilities and regulated entities. He called for a level-playing field on the revenue side. He stressed that one technology or solution would always be preferred because a company’s aim is to maximise revenues for shareholders. Mr Clerens emphasised that energy storage should offer the same access to different revenue streams as other technologies, as, in his opinion, storage technologies may be faster, more accurate and more flexible than any thermal generation, depending on the specific service to be provided. However, if both, namely energy storage systems and steam plants, would bid on the same frequency containment reserve market, the steam plant would make the same revenues despite the fact energy storage could provide a much faster response time. The speaker subsequently emphasised the need for a fair market design where conventional energy generators compete on an equal footing with storage systems that are faster, more flexible and accurate. Mr Clerens also suggested giving a closer look at business cases behind energy storage and raised the question on how a mix business case between a regulated and a non-regulated entity might look like. In his opinion, potentially smart algorithms could manage the shared usage of storage devices between regulated and non-regulated entities.
The other parts of the debate and the Q&A session covered the following issues: the feasibility of the European Battery Alliance, political will and ambition to create a European energy storage system, Asian companies’ perspective on recycling batteries, battery networks and energy clouds as a threat to utilities, meeting the renewable energy targets, CO2 reduction and the Paris Agreement, flexibility of lithium-ion batteries, marriages of different technologies to create synergies, blockchain, artificial intelligence and quantum computers to revolutionise storage systems, big data as a game changer for energy storage and electric vehicles and sector coupling.
Do you want to go further into the issues discussed in our debate? Check our list of selected sources, which we have provided for you!