Our review demonstrates that no jurisdiction currently provides a comprehensive regulatory framework for energy storage, with the majority of jurisdictions currently allowing storage to be defined as “generation” for the purposes of licensing and other regulatory requirements. However, many countries are increasingly aware of the need to address energy storage within the wider electricity regulatory framework and are exploring this through strategy papers, consultations and proposed draft legislation.
Ideally, the development of an energy storage regulatory regime would be technology agnostic and not restrictive at this early stage of development of the sector, in order to avoid creating future barriers to entry. It should also provide for a clear and non-discriminatory system for connection and use of system charges as many regimes do not adequately deal with energy storage in this context at present. A robust regulatory framework would also reflect storage’s unique ability to act as generation and consumption and remove the need to pay end-user electricity consumption charges.
The vast majority of countries do not have a specific subsidy regime. However, there are some exceptions – Germany, for example, has a newly launched battery storage funding programme for decentralised battery storage systems, which aims to ensure that solar PV installations will be more beneficial to the overall system by smoothing their export. While some energy storage solutions are commercially viable without subsidy support, larger infrastructure-heavy projects, such as larger-scale pumped hydro, are currently struggling to attract investment due to the extent of the merchant revenue risk.
The variety of revenue streams available to storage, as detailed above, may help different storage technologies to develop, for example capacity markets, ancillary services and other grid services. However, many revenue streams cannot be stacked together and other system benefits are often not monetised, e.g. the deferral of network reinforcement costs.
The regulatory regime also influences which industry participants are able to participate in energy storage, i.e. the role that network operators should play. In Italy, for example, the transmission and distribution system operators are investing in storage facilities within their own networks, whereas the UK is allowing storage providers to bid into technology-agnostic auctions to provide services to the system operator, rather than the system operator developing energy storage projects directly.
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