The EU Electricity Market Proposal Is Welcome, But It Still Falls Short in Supporting Energy Storage Deployment

 

Smart Power's large-scale battery energy storage project deployed in Germany

 

Members of the European Parliament voted on the electricity market design reform proposed by the European Commission earlier this year, with 55 votes in favour, 15 against and 2 abstentions.

 

The European Commission also agreed to start negotiations with the European Council on design reforms by a vote of 47 to 20, with five abstentions. But to continue negotiations, the European House of Representatives must vote in full.

The proposal would make wider use of the contract for difference (CFD) scheme to encourage investment in energy and create a market for EU power purchase agreements. Perhaps for the energy storage industry this proposal needs to place a high emphasis on power supply flexibility.

 

According to industry press reports, the reforms are aimed at addressing strategic weaknesses in Europe's energy sector, which were laid bare by last year's energy crisis.

 

The EU has been praised for recognizing that energy storage technology will play a key role in these goals, which will take some time to achieve.

 

Nonetheless, EU Energy Commissioner Kadri Simson has publicly stated that energy storage systems are at the heart of the energy transition, noting the recent formation of an energy storage coalition of different renewable energy and cleantech groups as an important development.

 

 

In a statement to industry media, the Energy Storage Alliance welcomed the adoption of the electricity market design proposal at the level of the European Parliament. Doing so sends a strong signal about the importance of flexibility — a key attribute that batteries and other energy storage technologies have brought to the power industry.

 

Indeed, the report highlights that intermittent renewable energy generation facilities can only reach their full potential with the deployment of additional energy storage, identifying energy storage as an enabler of energy security in Europe.

The EU would like to see low-carbon energy systems requiring EU member states to regularly assess and report on the flexibility of their own grids, as well as EU-wide assessments.

 

The Energy Storage Alliance welcomes specific aspects of the proposed assessment regime, including some newly revised since the report earlier this year.

 

These include extending the review period to 10 years from the originally proposed five years, which the coalition says is a positive step as some renewable energy and storage projects will take more than five years to deploy.

 

This means that the energy storage system is charged twice by the grid operator, once for charging and once for discharging. Meanwhile, the fossil fuel generation facilities the EU is seeking to phase out will not be charged twice, putting energy storage at a competitive disadvantage by comparison, the Energy Storage Alliance said.

 

Another drawback, in the Energy Storage Alliance's view, is that the proposed cap on the carbon intensity of the capacity market is set too high at 550 g CO2/kWh. The coalition has called for a gradual reduction of the cap to reach net-zero emissions by 2040.

Other positives include reporting levels of renewable curtailment, grid congestion and ancillary services in the assessment, and modeling high price scenarios in the event of future gas price increases.

 

missed opportunity

 

That said, the EU's proposed design still misses the opportunity to deal with "double charging". Under the regulatory regimes of most European countries, energy storage is considered both a load and a generator supplying the grid.

In a separate statement, the Association for Energy Storage Europe (EASE) also welcomed the proposal's passage, raising the same caveats as the Energy Storage Alliance.

 

said Thomas Lewis, policy officer at the European Energy Agency. "The result of this vote is a positive step towards better aligning European electricity markets with our climate and energy goals. The introduction of the Flexibility Support Scheme will give investors confidence in energy storage technology and pave the way for further integration." Renewables provide the needed flexibility. The European Energy Storage Association is pleased that this agreement ensures an in-depth assessment of flexibility at European level and introduces an alliance on demand response and energy storage from 2025 strategy and has the potential to achieve EU-level objectives."