Is energy storage the main challenge we’re facing today in the green transition, given that renewable energy is becoming cheaper and more abundant, yet we seem to waste a lot of it?
Indeed, one of the significant challenges in the green transition is the curtailment of renewable energy. In Europe, we still curtail a substantial amount of renewable energy. For example, Germany alone, curtailed 8 terawatt-hours of energy in 2023. The issue lies in the fact that while we produce a lot of renewable energy, production and consumption do not always match and without and adequate storage capacity a large amount of local sustainable energy goes to waste.
Over the past five years, there has been considerable progress from a regulatory standpoint. Five years ago, energy storage wasn't even recognized in European legislation. Now, it has been placed on the map with policies like the Green Deal and Repower EU, which have been strong catalyzers for the development of the energy storage sector in Europe. However, the deployment rate of storage technologies varies significantly from country to country due to a number of reasons, including geographical constraints, market maturity, and regulatory differences. Countries like the UK, Spain, and Italy, which have greater interconnection challenges, and therefore a greater need for flexibility, are investing more in energy storage infrastructure.
What are the estimated needs for storage in countries where it is developing faster, like Spain and Italy?
Some countries have already shared their targets and needs the upcoming years. For instance, Spain has ambitious plans to increase its renewable energy capacity by 173% by 2030, and to deploy 20 gigawatts of energy storage in the same timeframe. For Italy, TERNA, the Italian TSO estimates a need for 71GWh of new energy storage need to integrate the country’s renewable energy pipeline.
The development of energy storage infrastructure is crucial for stabilizing the grid and ensuring that renewable energy can be integrated effectively in the energy system. To ensure that the deployment of energy storage occurs all over Europe in an effective way, we call the European Commission to set an energy storage strategy able to provide guidance to member states on the combined implementation of the many instruments developed in the past years.
Why is energy storage important for the EU’s and the world’s environmental goals?
Energy storage is essential for several reasons. Firstly, as it encompasses a range of technologies with varying maturity levels and durations, from milliseconds to seasonal storage, these technologies enable us to store electricity when there is an excess and release it when demand is high, which reduces pressure on the grid.
By having sufficient energy storage capacity, we can avoid wasting renewable energy and decrease our reliance on fossil fuels. Energy storage provides the flexibility needed to integrate more renewables into the energy system, thereby reducing greenhouse gas emissions.
Additionally, it helps to stabilize the grid and ensures a reliable supply of electricity, even when renewable energy production fluctuates.
What are the main financial and regulatory barriers to energy storage, and how is your association working to address them?
While we are pleased with the policy developments over the past year, moving forward, we need to look at implementing policies such as the Clean Energy Package, and REPowerEU whose transposition at national level is still incomplete. Similarly, the recent reform of the Electricity Market Design has significant potential, but its success depends on proper implementation by member states.
One regulatory barrier is double charging of energy storage in some member states is taxed as both a producer and a consumer. This makes energy storage less competitive compared to fossil fuels technologies. Financially, the innovative nature of some energy storage technologies creates challenges in securing long-term investments due to a lack of visibility and certainty.
The Electricity Market Design addresses some of these issues by introducing an obligation for member states to estimate their need for flexibility and storage for a period of 5 to 10 years, simplifying procedures of capacity markets and ensuring that only non-fossil flexibility benefits from support schemes. However, clearer definitions and more robust frameworks are sometimes needed to provide the necessary investment signals. For example, a clear definition of what constitutes a 24/7 renewable PPA would greatly help in providing investment certainty.
How do you see Europe recovering from the energy impacts of Russia’s invasion of Ukraine, and are we moving in the right direction?
Europe has made significant strides in response to the energy crisis triggered by Russia’s invasion of Ukraine. The Repower EU initiative, for instance, has led to substantial investments in clean and low-carbon renewable energies. As highlighted by President von der Leyen in her recent address at the European Parliament, there is a strong focus on competitiveness and reducing energy bills for households and industries while upholding our decarbonisation objectives.
There is a clear direction towards enhancing energy security and promoting renewable energy. However, achieving these goals requires ongoing efforts and effective implementation of policies at the national level. We are on the right path, but the journey is complex and requires continued commitment and collaboration.
How important are collaborations with industry stakeholders, government bodies, and financial institutions in promoting energy storage projects and accelerating the energy transition?
Collaboration between industry stakeholders, government bodies, and financial institutions is fundamental to our work. Progress in the energy sector, especially in energy storage, is impossible without this triangular cooperation. We engage with new companies and industries entering the market, fostering innovation and seeking clarity from European and national institutions on market operations.
Our primary objective is to collaborate with European institutions to ensure that the remaining barriers to energy storage deployment are removed and that the policies developed over the past five years are effectively implemented at the national level.
Financial institutions require long term visibility to invest confidently. We work to ensure that investment frameworks are clear and that the risks and benefits of energy storage deployment are well understood.
The reform of the Electricity Market Design requires member states to assess their flexibility and storage needs, which will provide critical clarity for investors. However, the methodology for this assessment is still being developed. Ensuring that this methodology accurately reflects all services provided by energy storage technologies at different time scale is crucial for meeting the system’s needs and guiding investment in the most effective resource allocation.
In conclusion, how do you see the future of energy storage and its role in the energy transition?
Energy storage will play a pivotal role in the energy transition by providing the necessary flexibility and stability to integrate more renewable energy into the grid. The future looks promising, with continued advancements in technology and increasing recognition of the importance of energy storage. However, achieving our goals requires coordinated efforts, effective policy implementation, and robust investment frameworks.
By working together with industry, government, and financial institutions, we can overcome the challenges and accelerate the transition to a sustainable and resilient energy system. The progress we make today will set the foundation for a cleaner, more efficient, and more secure energy future.
