My Lords, I refer to my entry in the register. Amendment 55D is tabled in my name and that of my noble friend Lord Teverson. When I was the Minister responsible for energy in Scotland and, in particular, for renewable energy, the Scottish Government set some very ambitious targets to increase renewable generation and decrease reliance on fossil fuels. I used to give speeches saying that 100% of Scotland’s electricity should come from renewables. I got challenged on this quite substantially from certain sources. One of the big challenges was intermittency. People said that it was okay if renewables were 10%, 15% or 20% of what we were generating, but if it went higher than that and into base load territory, it would be a disaster as renewables could not be relied upon and could not be a secure source for future energy supply. When you adopt that line of argument, what happens when fossil fuels become extremely expensive or substantially start to run out, I do not know, but there are plenty of people, some of whom we have seen in this Room over the past few weeks, who are quite prepared to put that to one side and hope for the best.
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Instead of that and instead of backing off or changing my mind, I now realise I was being too timid. We have to start tackling, in a substantial way, not only electricity
generation in this country but two other major areas of energy use in all countries: transport and heating. Making major inroads into reducing our reliance on fossil fuels for transport and heating will require even more renewable energy and, almost certainly, even more renewable electricity. One of the most important answers and, I would argue, the most central one, is storage. I do not know what sort of storage it will be but it will probably be big. At the moment it is estimated that for every megawatt of storage you need a block roughly the size of a London double-decker bus, though that may reduce over time. Could we have storage the size of Peterhead power station in vast buildings in centralised locations, or will it be much smaller-scale, decentralised storage? There may be a need for both but if so we need to get on with it. We need to develop our skills, technology and experience in relation to storage. Will it be fuel cells or liquefied air? Will more pumped storage be more environmentally acceptable in this century? All of this and more—new technologies that have not even been thought of or developed yet— will probably be needed.
If we are, through this Bill, helping to set down and create the energy infrastructure for the century ahead, then storage is important. How important is storage? For example, is it more important than carbon capture and storage? I do not know but I guess it probably is. I do know that people talk far, far more about carbon capture and storage than about electricity storage. Is electricity storage crucial in the same way as electricity demand reduction? I believe it is just as important. Both carbon capture and demand reduction are being encouraged or progressed and are specifically referred to in the Bill, yet there is currently nothing, nil, zero on electricity storage.
I am not in any way disheartened by this. As we will all recall, when the Bill was first published decarbonisation was not any part of it but it is now, rightly, absolutely central to it. I am not seeking a whole new Part 1 of the Bill for electricity storage but rather one short, simple amendment introducing a new clause. In all of this, we are building on what is already there and what is being done in other countries. For years, we have had large-scale electricity storage in the United Kingdom. We have already referred to hydroelectricity in Scotland and Wales and some of that is in storage plants with 3 gigawatts of pumped hydroelectricity. So we already have, in a different form, quite a few London double-decker buses of stored electricity capability. However, we have to do a lot more. I suspect that not many in this room will know about the newer types of electricity storage. There are large-scale batteries in Shetland, Orkney and Northumberland. A new type of electricity storage based on liquid air is operating in Slough, developed by Highview Power Storage, a UK company, and UK Power Networks is due to start construction on a 6 megawatt electricity storage project in Leighton Buzzard. That project is the biggest battery in Europe, even at only 6 megawatts. The Japanese, in contrast, are already developing a 34 megawatt battery to balance wind power, and their proposals clearly dwarf ours at present. Interestingly, the Leighton Buzzard project will illustrate how electricity storage defers the upgrade of new power lines as well as providing essential
balancing services to the National Grid and services to the local community, so it is not all about renewable energy.
We will place more and more reliance on renewable generation, but the output from both solar photovoltaic and wind generation is time variable. Photovoltaic is the best example of that. This means that we need a method to balance the output to make it useful for our electricity system. There are suggestions that the problem could be solved by more interconnectors and adding more flexible gas fire generation through the capacity payments system, switching demand or just averaging out the renewable generation over the whole country. However, recent reports to DECC point out that interconnectors cannot be relied on as a source for balancing services and demand response is not a complete solution.
Electricity storage is a perfectly valid and achievable method to provide system balancing. It can absorb and reject power and act as reserve capacity to cover short or long-term interruptions. Through trading, it smoothes prices and so reduces the overall system cost. By reducing the peak demands on the system, it lowers the investment costs of our distribution networks; by absorbing energy from our wind farms and PV installations at times of low demand, storage lowers the carbon intensity of our electricity industry. Electricity storage remains one technology that does not receive support or any form of secure income stream under the Energy Bill proposals.
My noble friend the Minister said recently in response to a question on electricity storage from the noble Lord, Lord Grantchester, that both storage and demand-side response were eligible to participate in the capacity market auctions. However, I am told that the capacity market does not provide the right commercial framework for new build electricity storage. I have been given reasons for that, although I will not list them here—but one thing I can say with absolute certainty is that the capacity market has not in any sense been designed to support electricity storage, which is a technology with high initial capital expenditure and low operating expenditure. Because of the lack of the right signals, there are still not enough orders to achieve economies of scale in terms of initial upfront capital cost and the operating costs involved. All this could change if there was a greater focus, new momentum and new investment.
Financial support is available in all other areas—and we are led to believe that that includes tax breaks for fracking—giving lower costs of capital for supported green tech projects at the expense of increasing the cost of capital for electricity storage. Without a clear revenue stream, higher costs of capital place financing costs out of reach of most electricity storage projects. As I have said, our competitors in Italy, Japan, Korea, Germany and the USA have recognised the value of electricity storage. These countries are developing a commercial structure in their electricity markets to recognise the valuable role of electricity storage.
The UK’s industry expert group, the Electricity Storage Network, which contacted me after I had tabled this amendment, proposes a target of 2,000 megawatts, or 2 gigawatts, of additional new
electrical energy storage in the UK by 2020, and recommends a plan to develop a market framework that brings forward pilot and demonstration projects within the framework of electricity market reform.
This amendment seeks to encourage and support these developments. I have set out the different elements of the amendment in terms of the onus I wish to place on the Secretary of State to include a strategy for storage, to put in place sufficient pilot projects, to set targets for the introduction of energy storage and so on. I believe, in short, that this is crucial to the sort of infrastructure that we will create in this early part of the 21st century. It is a hugely neglected issue and I would very much like the Government to recognise the need to strengthen the Bill by bringing in an amendment of this kind.