Long-duration electricity storage - what does the BEIS report tell us?

In July, the Department for Business, Energy & Industrial Strategy (BEIS) published its Benefits of Long Duration Electricity Storage report. (The report defines ‘long-duration’ as twelve hours or more - and able to balance variations in generation and demand across seasons.)

This article is a summary of the BEIS report. The summary below reflects the key features of the report - it is not a Modo view of the future storage market.

Spoiler alert

• Long-duration storage is necessary on the journey to net zero.
• It will be expensive in the short-term, with no reliable long-term revenue streams yet in place - and deployment will be slow-moving.
• However, if rolled out successfully, it could reduce system costs by up to £24bn by 2050.
• BEIS is placing all of its long-duration electricity storage eggs in the basket labeled ‘hydrogen’. It is predicted to make up 95-99% of Great Britain’s long-duration storage volume by 2050. That said, the report was commissioned before 2022, and doesn’t take into account the latest gas price dynamics. A lot of hydrogen currently comes from gas (in the short- to medium-term), which affects the report’s cost analysis.
• With uncertainties around the suitability of hydrogen as a long-duration storage solution, we need to test and deploy a diverse range of non-hydrogen technologies over the next 15-20 years.

* All graphs and tables in this article are taken from the report.

Why do we need long-duration storage?

There are three main drivers behind the need for long-duration storage:

1. Our increasing reliance on intermittent renewable generation. The wind doesn’t always blow, and the sun doesn’t always shine. Therefore, we need to store excess energy for use at times of lower generation.
2. The widespread electrification of our system. As we move away from our reliance on gas and fossil fuels, and towards things like electrified heating and electric vehicles, we will need more electricity.
3. Locational transmission constraints. Generation sites are often located far from places with high demand.

The combination of these factors means that Great Britain will require greater flexibility - i.e. the ability to shift generation and consumption across time and location. Figure 1 (below) shows the seasonal challenges of meeting demand in the future. Predicted 2050 levels of generation and demand have been applied to illustrative January weather (based on January 2017).

In this scenario, there’s a significant gap between generation and demand for large parts of the month.

How do we bridge the gap?

The gaps between generation and demand are expected to increase over time, and be sustained for longer periods. Storage technologies offer flexible solutions to manage this. They can:

• Balance supply and demand across very short timescales.
• Store renewable generation in periods of high output.
• Store power for periods of high demand.
• Provide system stability services.
• Manage transmission network congestion.

Table 1 (below) shows a sample list of potential storage technologies, split by duration.

Barriers to long-duration storage deployment

Each of the potential technologies listed in table 1 has different characteristics. Within the current system, there are already established roles and markets for (short-duration) battery energy storage. Many of the potential solutions listed above are as yet unrealized technologies. As such, question marks remain about their ability to be deployed at scale.

Currently, long-term electricity storage solutions have:

• High CAPEX costs.
• Long lead times, from investment to commissioning.
• Few - if any - long-term contracted revenue streams on which to base an investment decision.

Despite these barriers, long-duration storage solutions will be vital in the journey to net zero. According to the report, long-duration could reduce system costs by up to £24bn, by 2050 (compared with a system reliant solely on shorter-duration - below four hours - storage) - as seen in figure 2 (below). (The y-axis is £bn, 2030 indexed NPV.)

Compressed-air and liquid-air long-duration storage

Compressed-air and liquid-air energy storage technologies are currently capital intensive. To build a convincing business case, assets will need to achieve a high cycling rate. If not, they will require unusually large spreads between buying and selling prices from season to season. It’s unlikely that either will happen. Therefore, the report assumes that peaking thermal generation will remain a more cost-effective solution.

Short-duration storage is likely to remain the most cost-effective flexibility solution over shorter timescales. This will inadvertently limit the potential daily cycling rates of long-duration assets, which removes a lucrative revenue stream - and forces long-duration systems to earn the majority of their revenues over longer timescales.

While necessary upgrades and reinforcements to network infrastructure take place, strategically placed medium- and long-duration storage could help reduce constraint costs - provided it is locationally flexible. However, by 2040, the report expects hydrogen will be the dominant long-duration storage technology.

Hydrogen

According to the report, hydrogen long-duration storage is the way forward. Thich isn’t a surprising conclusion, given the government’s enthusiastic support for the nascent industry. It is more suited to taking advantage of seasonal volatility than the alternatives, because of its longer durations.

Investment in hydrogen comes as a result of its apparent versatility. It has the potential to provide non-power sector (transport and industry) solutions, which will help the government achieve its wider net zero goals. The knock-on effect of this is that its use may spill over into power markets as a consequence of its mass deployment elsewhere.

Figure 3 (below) shows the extent to which the report suggests hydrogen will be the primary source of long-duration electricity storage. (“Power” long-duration storage, highlighted here in yellow, refers to the total combined volume of compressed-air, liquid-air, and potential long-duration pumped hydro facilities. The y-axis is TWh.)

Modo’s caveats around hydrogen

• This report was written before the recent gas price rises. Once we take these into account, hydrogen becomes much less viable. It is more likely that some combination of interconnection, short- and medium-duration storage solutions, and other technologies (e.g. compressed-air and liquid-air storage) will provide a more cost-effective solution.
• BEIS foresees hydrogen playing a major role in non-power sectors. It is likely to be pushed as a way to decarbonize the steel industry, and in some transport situations.
• Because of this, BEIS assumes massive demand for clean hydrogen. In theory, this demand from non-power sectors will lead to an excess of hydrogen that can be used in the power sector - regardless of how suitable it actually is. There are still concerns around the ability for it to be stored at the scale needed.

Pumped hydro

The anticipated rate of decarbonization may mean that longer-duration balancing requirements emerge more quickly than hydrogen technologies can be developed and built. Pumped hydro is already proven to scale. In Great Britain, there is already around 3 GW of pumped hydro storage. Therefore, it can help speed up the transition away from carbon-intensive generation, and help to mitigate any delays (or deficiencies) in emerging hydrogen projects.

Existing pumped hydro assets in Great Britain are classed as medium-duration storage here (between four and twelve hours). In its modeled scenarios, BEIS predicts a need for 15-20 GW of medium-duration storage, to provide flexibility across the day. Dinorwig - the ‘Electric Mountain’, which can pump at full volume for seven hours - was commissioned in 1984, and Ffestiniog before that, in 1963. We’re also expecting a new construction (Coire Glas?) this decade.

Key takeaways

The deployment of long-duration storage will be vital to achieving net zero by 2050. Great Britain will need between 12 TWh and 17.6 TWh of long-duration storage (greater than twelve hours). As explained in the report, the preferred technology will eventually be hydrogen storage (making up 95-99% of all long-duration storage volume in GB by 2050). Large caveats still remain - the proof will be in the delivery.

There is a very strong case for other long-duration storage technologies to help speed up the transition and avoid reliance on nascent (and unproven at scale) technologies. Regardless of which technologies make up Great Britain’s long-duration storage portfolio, support will be necessary to overcome the barriers to deployment and make it a viable investment.

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