Electricity storage

Energy Bill [Lords] – in a Public Bill Committee at 3:00 pm on 4 February 2016.

Alert me about debates like this

‘(1) Section 4 of the electricity Act 1989 is amended as follows.

(2) After subsection (1)(c) insert—

“(d) stores electricity for the purpose of giving a supply to any premises or enabling a supply to be so given,”

(3) At end of subsection (4) insert—

““Store” means the conversion of electricity into a form of energy which can be stored, the storing of the energy which has been so converted and the reconversion of the stored energy into electrical energy in devices with an individual capacity of more than 50MW.”

(4) Section 6 of the electricity Act 1989 is amended as follows.

(5) After subsection (1)(d) insert—

“(e) a licence authorising a person to store electricity for the purpose of giving a supply to any premises or enabling a supply to be so given (‘a storage licence’);”

(6) After subsection (2) insert—

“(2ZA) In addition to holding a storage licence, the same person may be a holder of—

(a) a distribution licence,

(b) a transmission licence, or

(c) a generation licence.

(2ZB) The Secretary of State may by order determine the circumstances under which a person may hold a storage licence in addition to a distribution licence, a transmission licence or a generation licence under subsection (2ZA).””—

Brought up, and read the First time.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

I beg to move, That the clause be read a Second time.

Observant hon. Members will note that this is not only the last new clause to be considered this afternoon but the most helpful clause that we have yet seen in this Committee. I trust that hon. Members, being in the general mood they are in this afternoon, will see the new clause for exactly what it is and ensure that no Division is required by passing it with acclamation. That would be an appropriate way to round up our business.

I will not take an enormous amount of the Committee’s time. The new clause relates to something in which all Committee members should be very interested: the extent to which electricity supply can first, be given most value, and secondly, smoothed out in terms of when it does and does not arise, by the emerging technologies of battery storage. Indeed, a number of the issues we have discussed in the Committee—intermittency of wind, base-load problems and a whole range of other issues—can begin to be addressed by battery storage of electricity.

For example, if a battery storage system is attached to a solar array, the life of that solar array can be extended far beyond the period during the day when the sun shines. Clearly, the power that comes from it can go right through the night. We are already seeing that effect, to a minor extent, with solar arrays on streetlights, but on a much larger scale it could revolutionise the way in which solar is used in future.

Battery storage can also be used in relation to wind. We have heard that wind, quite self-evidently, does not always blow, and sometimes when it does blow, it blows rather a lot. Ensuring that the capturing of that variability is smoothed out into a regular supply through the attachment of battery storage to the wind turbine is clearly a positive step forward as far as wind supply is concerned.

Larger battery storage in distribution network operators can capture what would otherwise be downtime in terms of conventional energy production, inasmuch as that production does not necessarily then have to follow dispatch requirements, but can follow the requirements of filling up a battery associated with that distribution network system. When that power is needed in the system, it can then be released in a way that resists electricity storage arrangements that historically consist of cutting open a mountain, putting a large pond at the top and the bottom of it, pumping up water from the pond at the bottom and storing it in the pond at the top, and then letting it come down again at some considerable electricity value when it is needed. That process is undertaken already, but no new traditional forms of storage have been built for something like 30 years. The most well-known is Dinorwig in north Wales, which provides reasonably regular additional power at a cheap price uphill and a more expensive price downhill, and helps to balance the system.

Providing battery storage at scale in operating systems would clearly be a much more efficient way of doing that and a much more straightforward way of balancing the process. The good news is that battery storage is proceeding by leaps and bounds. The technology is now such that it is efficient to provide battery storage. I am sure that the Minister is concerned about the cost to the public purse or otherwise of battery storage roll-out, but with the right arrangements battery storage could be rolled out at no cost to the public. I will come to the necessary arrangements in a moment. Given the efficiency of battery storage and the ability to build substantial sets of it, which allows large amounts of electricity be stored, it is now feasible for the first time, and I think we are on the cusp of introducing it into the system.

The problem is that the system, as it stands, is not friendly to the introduction of battery storage for two reasons. First, under the BSUoS—Balancing Services Use of System—energy transit arrangements, operators that have large-scale battery storage arrangements will get charged twice, because they will be regarded as a generator when the electricity is going out of the battery, and as a supplier when the energy is going into the battery. Under the present transit arrangements, two charges are applicable to batteries. That is unlike any other form of electricity arrangement.

Secondly, under the Electricity Act 1989, which set up the licensing arrangements, licences were deliberately provided in a way that would prevent vertical integration of the system, although that has not quite worked out in practice. The licensing arrangements were separated out so that licences for generation, transition and supply could not be held at the same time. The 1989 Act is clear that that separation is rigid only up to a de minimis point. Anybody who puts in place battery storage on any scale will fall outside the licensing arrangements. Indeed, the only transition network experiments in large-scale battery storage have all been under the de minimis level. The 6 kW arrangement in Kenilworth is, I believe, the only one of any size, and it is relatively small due to the constraint on licences to DNOs for larger installations.

The new clause seeks to resolve one of those two problems. The other requires more detailed arrangements relating to how BSUoS works. It seeks to amend the Electricity Act 1989 to maintain the separation of generation, transition and supply licences, but make it possible to have a distinct storage licence that could apply to other forms of licence arrangements. It is a simple, straightforward amendment, which requires the Secretary of State to organise licensing arrangements so that that can be brought about. The content of the licence is entirely up to the Department; it simply separates out those licences.

I honestly cannot see any good reason why everyone with any concern at all for the future of the electricity system should not jump on the new clause and say, “What a good idea this is; it should be done immediately.” I know that the Government have announced that they are considering methods by which electricity storage might be advanced, but I suggest that the new clause is absolutely basic to even starting to consider it, because this is a fundamental impediment to battery storage getting going on any decent level, as far as our present landscape of generation, transmission and supply is concerned.

Therefore, I do not think that the new clause cuts across the Government’s planned consideration in more detail of how battery storage can be advanced. If it is not adopted, considerable time could be lost before another occasion arises on which a future Bill could be amended in such a way. That would be a substantial break in progress, regardless of what the Government may be thinking in terms of the details of discussions.

I therefore suggest that whether or not it completely fits the bill for achieving the purpose that I have described—I personally believe that it does; it has been consulted on considerably with numerous bodies that ought to know what they are doing as far as such licences are concerned—and even if it is not accepted exactly in the form that it has been tabled, the Minister should say, “We’ll have a look at it, come back on Report and put in something that does fit the bill.” I would be happy with that. Indeed, if that were the conclusion of our business in this Committee, I would consider that we had had rather a good time after all in these proceedings. I offer that to the Minister to consider, and I hope that she will be able to do so a positive light.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill 3:15, 4 February 2016

I will keep my remarks brief. The issue of storage is underdeveloped in terms of a solution, GB-wide and from a European energy design perspective. We should invest in research and development, and the SNP welcomes any clause that would encourage such investment.

New clause 14 will hopefully open up many more storage projects, traditional and unconventional, as has been well pointed out by the hon. Member for Southampton, Test. Adequate storage is a solution to the intermittent nature of several types of energy, including solar and wind, as he also said. He also touched on battery power, so I will skip that and move on to a few other examples, such as compressed air energy storage and pump storage, which is particularly poignant in Scotland, given that we have Cruachan and Coire Glas sitting ready to go, should everything be suitable, as well as the usual hydroelectric solutions.

The only thing about battery power is the need for more research and development, as the hon. Member for Southampton, Test pointed out. It is often described as a megawatt solution to a gigawatt problem, in terms of energy generation in the UK. Something like the new clause is needed to open up and encourage further investment.

In compressed air storage, air is compressed and stored when cheap energy is available, such as on a windy night, and then released at peak times when required. The difference between that and current facilities for battery power is scale. The nuances of local solutions and local control touched on by my hon. Friend the Member for Aberdeen South during the debate on new clause 6 are relevant. Suitable salt basins are available onshore in England, where a pilot scheme could be run for about £45 million, whereas in Scotland we would need much more investment for an offshore solution. We are minded to support the clause inasmuch as it would encourage, as we sincerely hope it will, the uptake of much more storage.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

I should perhaps emphasise that although the clause is headed “Electricity Storage”, it is about storage licences and therefore the particular technologies that the hon. Gentleman mentions, such as compressed air storage, would come entirely within this arrangement. So that no one is under any misunderstanding about that, it is intended to deal with all forms of storage, not just electrical battery storage.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

I thank the hon. Gentleman for his intervention; it is most helpful and clarifies the position, should anyone be in any doubt. As such, we are minded to support this clause.

Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change

Since this is our last new clause, I thank all hon. Members. We have had a very entertaining and at times quite feisty debate. I put on record my gratitude to Opposition Members for raising so many different issues. I reassure them that in a lot of areas we are not disagreeing, it is just that the proposals they have made on specific methodology is not what the Government agree is the right way forward. I am grateful to Opposition Members and, of course, to my hon. Friends who have contributed enormously to an interesting debate. On this last new clause, I am as keen as mustard on electricity storage; it has a vital contribution to make to dealing with intermittency and I wish we were five years ahead—it will be interesting to see how much we have managed to achieve in creating this new ability to store intermittent generation.

New clause 14 would create a new licence category for electricity storage operators and allow other licence holders, such as generators and transmission and distribution network operators, to hold an electricity storage licence. The creation of a separate electricity storage licence is an option that is being considered by my Department and one of a number of issues for storage operators to be included in a call for evidence in the spring. This will enable us to test it against other options, which may be less regulatory and burdensome, more targeted and, importantly, faster to implement. So, much as I would love to say, on this very last new clause, that we agree with the hon. Member for Southampton, Test, the problem is that licensing storage now would be premature. Indeed, the Electricity Storage Network, which is a key trade body for the storage industry, has criticised this new clause on the grounds that it

“pre-empts the current work by the Department” and

“may hinder, rather than help, the progress of well thought-out strategies to support … the storage industry.”

I fear that the new clause could also have unintended consequences. For example, it could put the UK in breach of EU unbundling rules in the third energy package. These rules make it clear that transmission owners, in particular, must not own generation or supply assets, which could include storage. Also, and fundamentally for me, licensing storage is just not a simple or a quick solution. While, as the hon. Gentleman points out, we could include it in the Bill, it would require wholesale changes to the industry codes, which could take up to two years or more from licensing. This autumn, when we respond to the call for evidence, we will set out what actions we will take, and by when. These actions will include measures to address policy and regulatory barriers to storage.

I know that all hon. Members recognise how vital energy storage could be for our system. It is a feeling we all share, but I hope that they will also recognise the wider implications of acting too soon. I hope that hon. Members are reassured that the Government are actively seeking solutions to how best we can deploy storage while keeping an open mind about their proposals.

Before I sit down, I very much thank the Clerks, the Doorkeepers and you, Mr Bailey, for all your efforts in managing this Bill Committee so well.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change) 3:30, 4 February 2016

It is encouraging to hear that we share a sense of urgency about bringing forward energy storage and, indeed, a sense of inquiry about how that can best be done. As the Minister has said, the new clause that I proposed this afternoon appears to be one of the options that the Government might consider. I emphasised that it was not itself the solution, but part of a wider solution, and that it could be introduced in a relatively straightforward way, but the Minister said that there could be some issues with it. Nevertheless, I hope that it is considered with the same sense of urgency as we have heard this afternoon.

I remain concerned that we may miss the boat for legislation as far as the outcome of any discussions are concerned. The Government might introduce an Energy Bill next year, so that might be when such detailed legislation could be made. If that is the case, as the Minister seems to be convinced, that will be a step forward. On careful consideration of what she has said, I am happy to withdraw the new clause, but I hope that its content does not disappear and will be firmly on the table for future discussions.

I thank you, Mr Bailey, for your wise and careful chairmanship of our proceedings, and offer similar thanks to your co-Chair, Mr Davies. I thank the Clerks, the long-suffering—in terms of our proceedings—Doorkeepers, and all who have taken part. I concur with the Minister: we have had a good examination of the issues, and matters have been conducted in a spirit of considerable civility and, sometimes, conviviality. I particularly thank the Minister for occasionally actually laughing at my jokes, which was very helpful. Finally, I thank her for her excellent supply of raisins and associated commodities, which have helped the Committee in its deliberations. With that, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

I must inform the Committee that the pleasantries were, to a certain extent, pre-emptive. I am sure Members will be delighted to hear that we must now deal with new clauses 15 and 16.

New Clause 15