Long-duration energy storage: get on with it Contents

Executive Summary

Long-duration energy storage technologies allow storage of energy from renewables over extended periods of time, days, weeks, or months and even years, allowing energy to be used when it is most needed. They will be essential in the future to balance energy supply and demand over time.

The Net Zero energy system will use more electricity, as fossil fuels are phased out and replaced by electricity for heating and transport. Much of this will come from renewables like wind and solar, where generation depends on the weather. Consequently, both electricity supply and demand will be much larger and more variable in the future. Whilst renewables deliver increased energy security by removing dependence on imported fossil fuels, long-duration energy storage will be needed to maintain the electricity supply, for example at times when there are prolonged periods of low wind generation. The long-duration storage replaces fossil fuels as back-up stores of energy.

Deploying long-duration energy storage technologies at scale is critical to ensure the UK can maintain energy security and reach Net Zero. They can allow more of the UK’s renewable electricity to be used and help insulate the economy from energy supply shocks such as the crisis following the invasion of Ukraine.

The consequences of failing to prepare for energy supply shocks have been starkly illustrated by the recent energy crisis. In light of the huge economic damage this has caused, it is distressing to see that the Government seems to lack a clear plan for energy supply risks and indeed is still deliberating over investment in storage to prevent future crises.

Long-duration storage facilities can take 7–10 years to build and require up-front capital investment. Developers need a clear business case, supporting infrastructure such as grid connections, and financial support in order to invest. The Government has a goal to decarbonise the electricity system by 2035. If long-duration storage is to scale up in time, it is clear that construction needs to start as soon as possible. The Committee is concerned that this is not being treated with sufficient urgency.

Energy storage has multiple benefits. It allows a greater amount of cheap renewable power to be integrated into the electricity system, lowering the overall cost of electricity for consumers. It provides power capacity that can be switched on and off, making the grid more flexible. It avoids the waste when, as often occurs today, renewables have to be curtailed due to excess supply or congestion on the grid. And it provides electricity system services to the grid, such as the ability to restart after power failures. For many of these services, energy storage facilities can replace fossil fuel power plants.

If the UK establishes a strong domestic energy storage industry, it can export storage capacity and technologies. Storage would reduce the UK’s dependence on costly, polluting and uncertain fossil fuel imports. Following the global mean temperature breaching 1.5˚C of warming for the first full year in 2023, and as climate impacts grow, it is more critical than ever to demonstrate that a secure economy powered by low-carbon energy is possible.1

A number of technologies could provide long-duration energy storage, but for storage at scale over weeks and months, the front-runner is hydrogen. This can be made from water by electrolysis using excess energy generated from wind and solar, stored underground, and converted back into electricity when needed.

The Government recognises that new forms of energy storage are crucial. It is consulting on policy mechanisms to support low-carbon storage, and set a goal in the British Energy Security Strategy to deploy enough to balance the electricity system. However, key strategic decisions and policy action, not just ambition, are needed now to unlock the substantial investment required to scale up storage to the tens of terawatt hours needed. This is orders of magnitude more low-carbon storage than the UK has today.

Commercial development of long-duration storage needs financial support mechanisms for investors due to high upfront capital costs, long lead times for planning approvals and construction, and uncertain revenue streams. In addition to commercially operated storage, a strategic reserve of energy storage will be crucial for maintaining supply during rare extreme events, such as extended periods with low wind and solar generation.

The Committee was pleased to hear that the Government is consulting on a Long Duration Energy Storage business model with a cap-and-floor mechanism. This would provide revenue certainty while sharing any excess profits for commercially operated storage. However, it is unclear how much storage capacity this policy will support and it will not deliver all of the UK’s long-duration storage needs.

Commercially operated storage depends on frequently buying and selling energy—there is therefore no guarantee it would be available during a crisis. This is why a strategic reserve will need to be operated under different arrangements that will ensure it is available when it is most needed.

The energy crisis that began in 2021 showed that the UK is vulnerable to global energy supply shocks. The UK spent £265 billion on energy in 2022, with £100 billion of that on oil and gas imports, compared to £159 billion in 2010.2 The Office for Budget Responsibility estimated that Government support for energy bills alone cost £78.2 billion from 2022 to 2024.3 The economic impact from the inflation that has been at least in part driven by energy prices is substantial and the damage has been felt throughout the UK.

The crisis provides a stark illustration of the desperate need for better energy security including domestic long-duration energy storage. It also shows that, given current economic incentives, the existing energy market will not provide it. The UK came to regret and partially reverse the closure of the Rough gas storage facility, which had shut down because the private sector argued that it was uneconomic to maintain. The Government should be planning now for how this storage capacity will be replaced.

The Committee was very concerned to hear the Minister equivocate about whether a strategic reserve was necessary. Relying on the market to deliver energy security in a crisis will immediately pass on the costs of future energy shocks to the consumer in an uncontrolled way, as the UK has experienced recently. Failure to prepare a strategic reserve would jeopardise energy security and Net Zero.

Relying on gas as a strategic reserve would leave us again dependent on expensive, volatile imports. Cheaper, renewable energy, stored in forms such as hydrogen, offers more energy independence and security. If a reserve did use gas with carbon capture, the Government must explain how it will maintain gas infrastructure as a backup and in a way compatible with Net Zero.

The Committee welcomes the Government’s reforms to the energy system, such as establishing the Future System Operator, Ofgem’s new Net Zero mandate, and committing to deliver a Strategic Spatial Energy Plan that will set out in detail how the system will work and the infrastructure it will need.

But there are many actors in the energy system and it is not clear who will be responsible for delivering on this plan. Keeping everyone on the same page, cutting through red tape to deliver infrastructure at pace and ensuring the resulting energy system is coherent and resilient will need a guiding mind capable of making key strategic decisions. The Committee is not convinced that it is clear who will take responsibility for mitigating future energy supply crises.

Our report makes several key recommendations. The Government should:

Since 2023, the Government has had a Department for Energy Security and Net Zero. Long-duration energy storage is critical for ensuring the UK can have both: it must be a key priority for the Department. But storage needs urgent support in order to scale up in time. Major decisions about future energy infrastructure must be made and coordinated effort is needed to unlock investment in commercial energy storage and to ensure a strategic reserve is delivered.

The prize for investing in storage and decarbonising the electricity system is clear:

Time is running out for the UK to secure that brighter future. We urge the Government to take action now.

1 Copernicus Climate Change Service, ‘Tracking breaches of the 1.5˚C global warming threshold’ (15 June 2023): https://climate.copernicus.eu/tracking-breaches-150c-global-warming-threshold [accessed 23 February 2024]

3 Office for Budget Responsibility, Economic and fiscal outlook, CP 804, March 2023, box 3.1: https://obr.uk/docs/dlm_uploads/OBR-EFO-March-2023_Web_Accessible.pdf [accessed 23 February 2024]

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