Ireland’s electricity storage policy vital to clean energy drive

The policy will drive action by government and regulators – including the priority procurement of approximately 500MW of ‘long duration’ systems for the transmission grid and approximately 500MW demand flexibility solutions for the distribution grid – and sends a signal to developers and funders that Ireland will be a business-friendly growth market for electricity storage.

The context

When properly structured and optimised, storage offers a commercial and logistical solution to the inherently intermittent nature of renewables. In Ireland, new commercial arrangements are evolving, including specific state subsidies such as EirGrid’s DS3 and LCIS models, battery power purchase agreements, and tolling agreements – where an infrastructure provider builds and maintains the storage facility with and contracts with a tolling counterparty, like a data centre operator, to control and manage dispatch.

Battery energy storage systems (BESS) and other storage systems will increasingly be co-located and linked to renewable energy generation to facilitate storage when prices and conditions permit, to be subsequently “dispatched” at times of higher demand.

The new policy, set in July, is complimentary to wider long-standing decarbonisation policies aimed at scaling up the application and deployment of renewables to underpin capacity and flexibility of the Irish grid.

The policy document also promotes the role electricity storage systems can play in ensuring energy security in Ireland and reducing energy bills for consumers, and notes that although there is over 1 GW in capacity across electricity storage systems in Ireland currently, more is required and must be placed in an “efficient and strategic” manner to ensure as much renewable energy can feed the grid as possible at any one time.

The policy sets out specific proposals to support the commercial viability of developing and operating storage systems, including remuneration, revenue certainty, and gaps in funding that can arise in the context of prospective new storage projects. The new policy sets out a series of actions that, when taken together, seek to address these challenges and therefore attract fresh investment.

The actions

The policy sets out 10 policy actions, which include the following proposed key actions:

• Electricity storage system operators are to be given access to all wholesale electricity markets in Ireland. So-called “revenue stacking” – the ability to generate financial revenues from specific electricity storage products in one or more markets – will also be permitted alongside this.
• Immediate additional procurement of both long duration systems and demand flexibility solutions is provided for under the policy – up to 500MW of additional demand flexibility capacity would be built into the distribution system, under the plans, while a guide volume of 500MW of additional long duration storage capacity is envisaged to be added to the transmission system. A new “layered procurement framework for products that are not amenable to daily auctions” is also proposed.
• Funding certainty for long-duration storage through a three-stage approach. Firstly, by undertaking a study to determine whether existing financial incentives sufficiently facilitate the incorporation of the right quantity of electricity storage systems required by the grid. Secondly, if a gap is identified, undertaking supplementary financial analysis with a view to proposing a market framework to encourage long duration energy storage. Finally, developing a suitable market framework to ensure long-duration electrical storage systems that meet a ‘route to market’ have a sufficient and effective business case.

Actions have also been identified to resolve challenges relating to operation of the electricity grid that regard dispatchable and non-dispatchable generation. In this regard, greater emphasis is placed on ensuring ‘long duration’ electricity storage systems – systems that have the capacity to deliver electricity throughout at least a four-hour period – are integrated into Ireland’s electricity grid. The policy states there is potential for “market saturation” in respect of demand for shorter duration storage systems – a concept that describes storage systems that offer the potential to supply energy to the grid for between 30 minutes and four hours. In tandem with this, the Irish government is seeking incorporation of strategically located demand flexibility products to alleviate grid congestion, facilitate grid re-powering, and store excess electricity.

The policy is technology agnostic and acknowledges the potential for electricity storage systems to be developed from non-lithium technology, such as chemical, electrochemical, mechanical, and thermal, as well as others that have not yet been envisaged. To support technological innovation, a new ‘sandbox’ project is to be created to allow new electricity storage technologies to be tested in a controlled environment.

While the policy framework is primarily focused on improving the position in respect of ‘front-of-meter’ storage, it does highlight the role for domestic consumers to actively participate in the electricity market and provide flexibility through small-scale distributed storage solutions, such as residential BESS, electric vehicle storage systems, and distributed aggregate storage systems.

In relation to residential BESS, the Commission for Regulation of Utilities (CRU) is in the process of establishing a new regulatory framework “to facilitate the ability of active customers that own an energy storage facility to participate in flexibility schemes and sell self-generated electricity back to the grid”. That initiative is driven by Ireland’s obligations under a related EU directive. The CRU’s new regime will address issues such as connection offers, double charging, licencing requirements and fees, as well as service provision, according to the policy.

The CRU is also responsible for the application of licensing to encourage the aggregation of electricity storage systems. It is aiming to initiate development of such licences this year.

The policy also provides an insight into the potential future role of electricity storage systems in addressing pressures being placed on Ireland’s electricity grid and climate commitments by large energy users – including data centre operators. Regulation of grid connections in Ireland has already been tightened in response to growth in the data centres market.

Challenges associated with connecting electricity storage systems to the grid along with co-located existing wind and/or solar assets – challenges that arise particularly in the context of behind-the-meter storage – are acknowledged in the new policy, which highlighted ongoing work by the CRU to remove the existing barriers in place.