UK’s new de-rating factors a boost for long duration batteries and energy arbitrage

on December 26, 2017

Energy Storage NewsChanges to the de-rating factors for battery storage projects competing in the UK’s Capacity Market (CM) will push the sector towards longer-duration batteries, while potentially sparking a shift towards energy arbitrage as a source of revenue for shorter duration applications.

That is the view of storage sector participants in the UK following the announcement last Monday, which cut the de-rating factors for 30 minute duration batteries by almost 80%.

UK Power Reserve, which secured pre-qualification for 400MW of battery storage across the upcoming T-1 and T-4 auctions, has said attention will now be directed towards technologies which can be better rewarded in the CM. UK Power Reserve is a provider of electricity and related services and a developer of low carbon energy projects. 

Michael Jenner, director of policy and regulation at UK Power Reserve, told our sister site Clean Energy News: “We support the de-rating factor because the CM is designed to ameliorate stress events, so you should be rewarding assets for their ability to help reduce those stress events. The incentive now is there for investors to think about building longer duration battery storage, there’s no question about that.

“I still think there’s value in the bankable 15 year revenue of a CM even after the de-rating rates, so investors certainly won’t discount that but the incentive now is firmly there for investors to think about longer duration assets that can actually help to ameliorate a CM stress event.”

Speaking to CEN earlier this week at the Low Carbon Network Innovation (LCNI) conference in Telford, Georgina Penfold, chief executive of trade association Electricity Storage Network (ESN), added that “the writing has been on the wall for a long time” regarding the changes and that investors were already considering their options.

“The initial consultation documents did say that if it went ahead their proposal was from January and it was something we put in our consultation response. It’s not a surprise to the industry.

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Energy Storage NewsUK’s new de-rating factors a boost for long duration batteries and energy arbitrage