Electricity Storage, Regulation Play key Role in Development of Renewables and Energy Independence

Energy Trade

Dr. Róbert Szuchy, Managing Partner, BSLAW BUDAPEST Bocsák & Szuchy Ügyvédi Társulás

The EU regulatory framework supports the development of smart systems and the possibility of demand-side regulation. It makes the deployment of smart meters mandatory, as well as the local storage of renewable energy, particularly locally produced renewable energy, and decentralized storage of electricity. The regulation promotes a variety of decentralized and lower voltage energy transmission and storage options, including the potential of energy storage capacities in electrically powered cars.

Given the very dynamic technological development in the field of smart grids, decentralized energy production and storage, EU legislation sets out only the main regulatory and support framework, leaving each member state with a wide range of regulatory options to promote and support the deployment of new technologies, within the framework of the relevant EU state aid rules.

The prices of chemical energy storage systems for the electricity market have fallen significantly in recent years, in line with the increasing demand for electronic devices and electric vehicles. This is evidenced by the fact that the cost of a battery unit was almost USD 1,000/kWh in 2010, but by 2021 had fallen to USD 130/kWh.

Relatively low prices support the move of energy storage away from the typical uses specialized for them (e.g., grid balancing support) and offer value-added services to market players in several areas, such as replacing off-grid diesel generators for reliability and sustainability, providing energy quality improvement services and supporting the integration of renewables into the system.

Downward Demand

In the future, chemical energy storage will allow a combination with solar energy storage, which will even be able to supply energy independently of the public grid. As a consequence, traditional energy traders may face downward demand for electricity. Trends are significantly reshaping the functioning of the electricity system and energy markets, users’ generation and consumption patterns, and the activities of energy traders, distribution system licensees, and other non-core energy service providers.

In the new electricity market design, energy storage services should be market-based and competitive. Consequently, cross-subsidization between energy storage and the regulated functions of distribution or transmission should be avoided. Such restrictions on the ownership of energy storage facilities are to prevent distortion of competition, eliminate the risk of discrimination, ensure fair access to energy storage services to all market participants, and foster effective and efficient use of energy storage facilities beyond the operation of the distribution or transmission system.

With the objective of progress towards a wholly decarbonized electricity sector that is entirely free of emissions, it is necessary to make progress in seasonal energy storage. This would serve as a tool for the operation of the electricity system to allow for short-term and seasonal adjustments in order to cope with variability in the production of electricity from renewable sources and the associated contingencies in those horizons.

The emergence of household-scale energy storage will also pose new challenges. At the same time, these solutions will have significant potential to contribute to grid balancing.

This article was first published in the Budapest Business Journal print issue of October 7, 2022.

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