The initial situation
Based on their functioning, energy storage systems are considered end users regarding the storage of energy as defined in Sec. 3 no. 25 EnWG (Energy Industry Act) whilst they are seen as generators when energy is withdrawn as defined in Sec. 3 no. 1 EEG (Renewable Energy Sources Act). Since the StromNEV (Electricity Grid User Charge Ordinance) defines storage and withdrawal as two separate operations, in the past,in combination with §§ 15 Abs. 1 S. 2, 17 Abs. 1 S. 1 StromNEV this resulted in a double calculation of fees, levies and taxes which had to be paid by the operator of the storage system when energy was stored as well as by the end user when energy was withdrawn. The system-related double burden of temporarily stored energy left the usage of storage systems as being an unprofitable option.
To avoid these malfunctions, legislature exempted electricity that is withdrawn from the public grid and stored back in from grid user charges as defined in
Sec. 118 para. 6 EnWG. Furthermore electricity that is withdrawn for temporary storage was exempted from the renewable energy levy as defined in Sec. 60 para. 3 EEG 2014. These amendments to the statutory provisions were the first steps towards the usage of storage systems as an instrument of the balancing energy market and opened various concepts for storage systems substantially improved market prospects.
What is new
With the EEG 2017 coming into effect by the beginning of this year, legislature moved one step ahead. As defined in Sec. 61k EEG 2017 not only storage systems that withdraw electricity from the grid and completely restore
it are exempted from the Renewable Energy Sources Act levy (EEG levy) but also end users who store electricity temporarily and subsequently withdraw it for self-supply. Storage losses, e.g. the difference between withdrawal and re-storage, are also no subject to the EEG levy anymore, which is also new. Sec. 61k EEG 2017 opens up new opportunities especially for those storage models that aim for an increase of the private consumption rate.
Potentials for the various market participants
By using storage systems, the private consumption rate, more specifically the degree of self-sufficiency of private households and commercial enterprises, can be increased significantly with the decentralised power supply. Private or commercial end users can benefit from an increase of the private consumption rate or through buffering peak loads with storage systems. In contrast to purchasing power from the public grid, consumers can generate cost advantages by using self-generated or temporarily stored electricity. Peak shaving enables companies to control their peak loads by using storage systems and therefore negotiate lower electricity prices and grid charges with grid operators and energy providers.
In the future, business models based on private consumption will gain significance in private households, as well as in the commercial and industrial sector, and push growth in the segment of storage systems considerably. Various funding programmes for storage systems that subsidise concepts based on the optimisation of private consumption, including programmes of KfW,
the federal states (Bundesländer), municipalities and public utilities, also suggest a positive development.
Storage systems can reach a key role in the energy system when grid operators use them for the electricity balancing market or the network congestion management. Storage systems provide grid stability by taking up the surplus of electricity from the public grid (negative balancing energy). On the other hand stored energy can be released into the public grid within a very short time and thus balancing energy can be provided.
A further potential application for storage systems is to avoid the cost-intensive curtailment of renewable power plants. The energy surplus will be temporarily stored before feeding it into the grid and therefore curtailment would not become necessary in the first place. There is no existing legal framework yet but legislature already considered this possibility and enacted a pertinent enabling provision in the EEG. Traditional corporations in the sectors of energy generation and transport are already struggling to maintain their customer base. Besides developing complex products currently focusing on the transition
to supply management solutions, market participants must take the developments in the area of energy storage systems seriously and deal with this sector strategically.
The new regulations mentioned above and the increasing number of possible applications of energy storage systems coming with it will lead to a growth spurt in the energy storage sector which may result in interesting business opportunities and yield potentials for investors, banks and private equity companies. They could participate in the growth through joint ventures, participation in companies or project and company financings.
The market for energy storage systems is still small and quite fragmented but also richly facetted. Whoever decides to leap aboard the starting train should consider the risks that always come with new technologies and the long-term investment horizon. But the “front runners” in the sector of energy storage systems could also achieve attractive returns and competitive advantages.
For information about the opportunities and challenges of energy storage systems in the UK, please read the following articles from our Expert Legal Insights:
Energy Storage: Behind the Meter Part 1 - Benefits
Energy Storage: Behind the Meter Part 2 - Ancillary Services
Energy Storage: Behind the Meter Part 3 - 8 Key Challenges
What's in Store for Energy Storage? New Ofgem and BEIS Call for Evidence Published
The author thanks Christina Muschinka for her support on the research and scripting of the article.