Study Review: EU Commission Energy Storage Study DOI: 10.2833/077257

Yesterday the European Commission published a new study on energy storage. The study re-affirms that energy storage is one of the most important bottlenecks in the European Union for the acceleration of growth of renewable energy in our energy systems. This blog entry takes a look at the main outcomes of the study, focussing on the regulatory and legal parts. While overall the study can be recommended as a valuable source for future research, two areas of interest for energy lawyers can be highlighted that require a more in-depth discussion.

The study `Energy Storage Study - Contribution to the security of electricity supply in Europe´ 
is divided into three parts, one on data collection from Memeber States, a second dealing with flexibility options in the period 2030-2050 and a third on regulatory conditions and how they would need to change to facilitate the markets.

Being no major surprise, the study finds that the main flexibility options currently used for energy storage in the EU is pumped hydro storage. However, the study finds that with falling electricity prices other flexibility options become feasible, in particular lithium-ion batteries and behind-the-meter storage. In addition, due to its potential for easy transformation of intermittent renewable electricity to storabel hydrogen, the study identifies electrolysers as further key technology for the period 2030-2050.

Regulatory barriers and unclear legal frameworks are identified as major risks, jeopardising the use of storage technologies in the future (p. 72). The study features six main recommendations on how to improve the situation concerning the need for standardisation on safety issues and EV interoperability, issues of permitting, double grid tariffs and taxes, price signals and access to ancillary services markets. Similarly, it underlines the importance of reliable and regular data. In order to address these issues, it calls for a comprehensive update of the regulatory framework to speed up the market penetration of storage technologies, both at Member State and EU level.

In some areas, however, the study indicates that no common approach exists, or that even the need for a common effort is not consensual amongst member state. One example is the question of particular storage support schemes, which do not exist as of yet or merely at an ancillary basis (p.77). There, however, is also no consensus amongst Member States on whether or not such support schemes are required in the first place.

A similar approach is taken with a view to permitting procedures in the individual Member States. Most Member States do not have specific permitting rules applicable to storage (p.79) with the notable exception of Austria. Most of the permitting is, thus, not done at the national but at local level, which  might lead to different outcomes in factually similar cases.

With a view to integration of storage in wholesale markets and national capacity mechanisms a mixed picture emerges. While some technologies (hydro storage) are well integrated others (e.g. behind-the -meter storage are not. Overall, a certain reluctance to participate in these areas may be observed, despite the fact that legal barriers to market participation have been largely eliminated (p.81/82).
Reserves for balancing of electricity grids and ancillary services are currently mainly procured outside of the markets (p.83). The study suggests that this should be changed and energy markets should come into the picture as a source (p.84).

Grid charges are identified as a further barrier. In many countries electricity storage providers are considered both as consumer and producer of electricity, depending on what activity is being performed at a certain point in time (charging/offtake from grid or discharging/feeding into the grid). The study picks up the industry-argument that this results in double grid charges applicable in many Member States, as storage is not specifically designed as a lone-standing activity in the legal frameworks (p. 84/85). This point of double charging will be discussed below.

The possibilities for network operators to participate in energy storage differ widely amongst Member States. While some allow these, others do not (p. 90).

With a view to the definition of energy storage in national frameworks, a huge variety exists. While some Member States addressed the issue in a technology neutral way in their national energy law frameworks, most others have not (p. 94). The main question in this context is whether storage requires the conversion back to electricity or whether conversion to another energy carrier (for instance power-to-hydrogen) is allowed (p. 91).

 There are some points of criticism where the study did not go enough into depth and two will now be briefly discussed in an exemplary manner. The first relates to the issue of an energy storage definition, as discussed before. Overall, the study arrives at the conclusion that the definition of energy storage, that has been newly introduced at the EU level via the new recast Electricity Directive (EU) 2019/944. Article 2(59) of the Electricity Directive defines energy storage as:

(…) in the electricity system, deferring the final use of electricity to a moment later than when it was generated, or the conversion of electrical energy into a form of energy which can be stored, the storing of such energy, and the subsequent reconversion of such energy into electrical energy or use as another energy carrier.

While the study mentions that power-to-gas stakeholders are interested in certain clarifications of the definition (p. 101/102), this is insufficient. An interesting discussion for the future interpretation is the one about intention (‘dolus’). In cases where hydrogen is stored and not re-converted to electricity, is there a need for an intention to undergo this process with the aim to store electricity? What if someone is using Power-to-Gas to produce hydrogen and wants to produce hydrogen for the sole purpose of producing hydrogen and with no intention to store electricity. This would most likely not be considered as electricity storage. Mind you, article 2(59) Electricity Directive actually does not define ‘electricity storage’, but instead the term ‘energy storage’ is used. Given that this is broader than only storing electricity, the described constellation would still be likely to fall within the definition, even without a deliberate ‘storage’ intention.

A second issue relates to the question of double charging and network tariffs. While this is a real issue, it is questionable whether or not teh criticism directed towards that practice is always appropriate. Big storage facilities (for instance power-to-gas) will make it possible in the future to have seasonal storage (for instance in summer storing electricity for the winter, when there is less electricity production from spolar panels) or even storage for a period longer than one year. Given the fact that electricity consists of electrons that cannot be traced back directly to their origin, it cannot be differentiated if a certain electron has been stored short term or long term. If, to take an extreme example, an electron is taken from the grid in one year and only fed back into the grid the next year then it would be difficult to argue that the grid has not been used twice and therefore double charges should be applied. It, thus, does not make sense in all cases to argue that double charging shpould be eliminated becuase the grid is only burdened once.

Overall, thus, an interesting and good study with lots of food for thought. In particular the sections dealing with current practice in Member States provide an interesting and helpfull overview. The full study is available here.