Building Blocks For Market Design

By Patrick Clerens, Secretary General, EASE the European Association for Storage of Energy
Winter 2015

In 2009 there was no such thing as a regulatory framework for Energy Storage (ES). This is why the European Commission launched an Energy Storage Task Force and why, in the aftermath of this Task Force, a group of European leading players in the energy sector – incl. manufacturers, utilities and academic bodies - decided to come together and found EASE in 2011.

Since then, both the energy system and EASE have come a long way. Energy Storage is the talk of the town – Electric Cars, PV+Storage, Empowering Prosumers, Smart Cities & Smarter Citizens, Demand Side Management - and not a day goes by without an article or conference about it. But that regulatory framework for Energy Storage - which the Commission was after and why those leading players created an association - is still not complete.

EASE has taken a look at the current energy system and regulatory framework and has come up with a list of hurdles that would need to be overcome in order to achieve the full integration of Energy Storage and the full realisation of its potential.

The basic need, in order to create a legal framework dealing with Energy Storage, is to have an Energy Storage definition on EU level. Without it, energy storage cannot be included in legislation– such as the upcoming EU legislative "Winter Package" – and no true regulatory framework can even be conceived. This is why EASE worked over a year to create a definition that is accepted by all stakeholders and has been shared with the European institutions, encouraging them to either provide us with comments or help us disseminate this definition as wide as possible in order to potentially adapt and gather a consensus around it.

"An "Energy Storage Facility" for the electricity vector means a facility used for the intake and stocking of electricity in different suitable energy forms. The release of this energy, at a controlled time can be in forms that include electricity, gas, thermal energy and other energy carriers."

An important aspect of this definition is that, although it has been limited to the "electricity vector"1, it covers all known energy storage technologies (and there are quite a few of them) and is general enough to allow for the integration of innovations to come, a.o. since it is not defining specific services, which could evolve over time. This technology agnosticism is fundamental for EASE, and we would encourage institutions and regulators alike to take this same approach.

Now that we have begun to tackle this particular hurdle, it is time to look ahead, and a good place to start is the European Internal Energy Market (IEM), the completion of which can be considered paramount for the full integration and realisation of energy storage. The creation of a competitive level playing field will show the variety of applications energy storage can perform, and will prove (and demand!) the market readiness of its technologies.

An important factor therein is the recent Market Design Consultation. In it, energy storage is finally recognised as being able to render the above mentioned services and applications. Additionally, EASE is thrilled to find that this Market Design Consultation includes a few features EASE has been trying to insert in the European legislation.

No double payment of Grid Fees and Taxes for Energy Storage
Storage is both a consumer (charging) and a generator (discharging). This leads to storage operators often having to pay double fees, levies and taxes for both the charging and discharging of energy, preventing storage projects from being economically viable and thus rolled out on the market.

It also prevents storage to be operated in line with system needs. Additionally, the situation differs from Member State to Member State, which creates further distortion for the allocation of storage. Studies by regulators (e.g. CREG, the Belgian regulator) exist that demonstrate how the different fees and taxes applied to ES devices strongly reduce the income from ES business models for all configurations operating with a connection to the Grid.

A Market-based approach is preferable
Such an approach allows longterm price signals and short-term markets as well as scarcity prices. Price fluctuations will have a high potential to properly remunerate flexibility and capacity options like energy storage, as long as all energy storage technologies are allowed to participate in all mechanisms

All generators should be in the market
One of the "raisons d’être" of Energy Storage is the integration of intermittent RES into the grid. Alternatives to the current subsidies for RES should be found and these should be harmonised at EU level, incentivising intermittent generation to follow the market and to get support using market rules; meaning that the energy must be sold on the market. Non-discriminatory access to technologies which can facilitate the economic growth of renewables (like energy storage) should be facilitated with market based regulation, assuring that the benefit is delivered at the best cost.

1. There are currently three different Energy Vectors used accross the EU: Electricity, Gas & Heat. ES has applications within all vectors and often serves as a gateway between them.

The European Association for Storage of Energy (EASE) is the voice of the energy storage community, actively promoting the use of energy storage in Europe and worldwide.

EASE actively supports the deployment of energy storage as an indispensable instrument to improve the flexibility of and deliver services to the energy system with respect to European energy and climate policy. EASE seeks to build a European platform for sharing and disseminating energy storage-related information. EASE ultimately aims to support the transition towards a sustainable, flexible and stable energy system in Europe.

Disclaimer: This response was elaborated by EASE and reflects a consolidated view of its members from an Energy Storage point of view. Individual EASE members may adopt different positions on certain topics from their corporate standpoint.