Electricity import charges: which do battery energy storage pay?
Importing electricity doesn’t just cost the wholesale power price - several other additional charges are included. Some help maintain and operate the electricity network, while others are designed to support renewable generation. Electricity consumers pay these charges, but battery energy storage is not always liable.
So, what are the different charges, and which will battery storage assets ultimately pay?
Batteries can avoid many of the costs associated with import charges
- Recent changes to network and balancing charges mean batteries no longer pay for many of these. The remaining charges can often be avoided through appropriate operation.
- Batteries are exempt from charges that apply to ‘final demand’. This includes all charges which recoup the costs of renewable generation support schemes.
- Action is required to avoid these charges. This is either a ‘non-final demand’ form provided to National Grid ESO, or through acquiring a Generation Licence.
- This does not apply to storage located ‘Behind-the-Meter’. These batteries are currently unlikely to qualify for these exemptions.
Network and balancing charges
Transmission Network Use of System (TNUoS) demand charges recover the cost of installing and maintaining the transmission system in the UK and offshore. TNUoS demand fees comprise a large fixed residual charge and a smaller import tariff charged through the Triad mechanism.
Battery storage is exempted from the fixed element of TNUoS fees as long as owners have submitted a Non-Final Demand form to National Grid ESO. National Grid provides information on Non-Final Demand declarations here.
This means battery owners are only liable for the import tariff, which applies to energy imported during Triads. National Grid ESO set import Triad tariffs for 2023/24 at an average £2.2/kW, you can read more about this here.
Because import tariffs only apply to energy imported during the three Triads, battery energy storage can avoid all TNUoS costs by not importing across these periods.
Distribution Use of System (DUoS) charges cover the cost of maintaining local distribution networks and depend on the Distribution Network Operator licence area.
There are three main components to DUoS: variable charges based on time of day (p/kWh), a fixed charge per metering point (p/day), and a charge based on connection capacity (p/kVA).
These charges can vary significantly by region and by connection voltage level. Batteries connecting at extra high voltage (EHV) have bespoke charges, identifiable via their MPAN.
A large portion of DUoS now falls under the fixed charge and as non-final demand, battery energy storage is exempt from most of this. You can read more about this here.
The capacity charge relates to the size of the distribution network connection and must be paid by battery storage.
The variable charge can be minimized by minimizing imports during peak periods. In addition, exports can earn battery storage Generation DUoS payments. In some circumstances, this can more than offset DUoS costs.
Balancing System Use of System (BSUoS) charges recover the costs of balancing the electricity system. National Grid ESO recently changed how these costs are recovered, passing all costs on to end users.
BSUoS charges are now split into fixed summer and winter tariffs, set for 2023/24 at £13.41 / MWh and £14.03 / MWh, respectively. Like fixed TNUoS fees, only final demand users are liable to pay BSUoS charges, therefore battery storage can be exempt from paying BSUoS.
Battery owners must submit a Non-Final Demand form to National Grid ESO to avoid BSUoS fees.
Renewable levies and schemes
Some charges for electricity consumption support the generation of low-carbon and renewable electricity. The costs from these schemes are passed onto electricity consumers, in what are commonly known as final consumption levies.
- Renewable Obligation (RO) - Supported the buildout of large-scale renewable generation before the scheme’s closure in 2017. Currently costs around £27/MWh.
- Feed-in-Tariff (FiT) - Supported the buildout of smaller-scale renewable generation before the scheme’s closure in 2019. Currently costs around £8/MWh.
- Contracts for Difference (CfD) - Supports the ongoing buildout of large-scale renewable generation, including off-shore wind. Currently costs around £13/MWh.
Battery storage with a Generation Licence is exempt from paying these three charges, as it does not qualify as final consumption. You can find more about licenses here.
The Climate Change Levy is a separate charge focused on businesses that use energy, introduced by the government in 2001. The rates are set from the 1st April each year, with 2023/24 fees charged at £7.80/MWh. Battery storage with a Generation Licence is exempt from the Climate Change Levy.
Owners should also know the Assistance for Areas with High Electricity Distribution Costs (AAHEDC), Capacity Market Supplier Charges (CMSC) and Settlement Costs Levy (SCL).
Like the renewable support schemes, the costs of the Capacity Market are passed onto electricity consumers through the Capacity Market Supplier Charge (CMSC). A separate Settlement Costs Levy (SCL) recoups the administration costs of the scheme. These currently total around £11/MWh on average, with the CMSC making up the vast majority of the fee. Battery owners with a generation license do not pay towards the CMSC or the SCL.
Finally, all electricity consumers (including battery storage) pay the Assistance for Areas with High Electricity Distribution Costs (AAHEDC) charge, which helps alleviate the cost of supplying Northern Scotland with electricity. The rates for the AAHEDC are typically low, with the 2023 tariff set at just £0.42/MWh.
This is all good news for grid-scale battery storage
Battery storage has not always been exempt from the charges listed in this article - the most recent changes only came into force in 2023. Because these charges apply to electricity imports and are not paid on exports, they can massively reduce trading revenues and increase the costs of providing frequency response.
The actions that have made battery storage exempt from most of these charges greatly benefit the business case for grid-scale battery storage. As such, owners and operators should prioritize taking the actions required to ensure their systems are exempted as soon as possible (if not yet in place).