Battery de-rating changes – what they will mean for the industry and businesses in the UK

Recently, the National Gird Electricity Transmission (NGET) announced changes to the de-rating factors for batteries installed in capacity market projects in the UK. N-ERGY managing director David Bowman raises his concerns about the announcement, as well as discussing how it will positively shape the market.

 The change of de-rating factors came at the most unexpected time, as it was published only one day after the T1 2018/19 and T-4 2021/22 auctions prequalification results came out.

The previous de-rating factor of 96% did not change for batteries with a 4+ hour duration, but was lowered to almost 18% for batteries with less than 30-minute duration. This will have a detrimental impact on the revenues of many companies bidding on less than 4-hour duration batteries.

The new de-rating factors will promote the development of better technology and higher quality batteries, when reliable discharging into the grid for longer durations is needed the most. It will however, reduce the return on investment for small-scale projects and especially batteries with less than 30-minute durations.

Two things concern us, the constant changing of regulations, and the timings of these changes as that can deter potential investors in the capacity market, especially when the changes take place in the middle of an auction. On a more positive note, it helps to know what the regulations are as the market can be re-shaped around it.

Energy storage will play a major role in the capacity market, so that the new electricity market can provide flexible, affordable, and stable electricity for consumers. This becomes essential at the time of the renewable energy revolution as more intermittency from renewables is expected to happen with the UK moving away from coal to meet its carbon reduction targets.

There is currently 3 GW of utility-scale operational storage capacity in the UK, and this is expected to reach 8.9 GW by 2030, as per the National Grid Future Energy Scenario.

Many predict that the UK will be one of eight nations to lead the storage market in the next 12-13 years, that the global energy storage market will attract $103bn of investment, and that the capacity is expected to reach 125GW by 2030.

New battery de-rating factors, however unpopular they may be, can help redirect some of the investments toward batteries with longer discharging durations. It may also encourage companies in the capacity market to switch to behind the meter market, while helping with price and time shift on the Demand Side Response (DSR).