Energy storage is transforming the global electric grid and is an increasingly important element of the world’s transition to sustainable energy. However, its full potential is yet to be exploited. Scott McGregor, founder and CEO of Birdwood Energy, is a passionate advocate of the role of energy storage in future energy systems. He is also chair of the BSI ESL/120 committee with responsibility for standardization of grid and integrated electrical energy storage.
In conversation with Sebastian Van Dort, BSI Associate Director of Energy, Scott gives his view of how he sees a market for energy storage developing, and what needs to change for that to happen.
Sebastian Van Dort: Can you give us some background on where the international energy storage market is now?
Scott McGregor: We are at the very start of the market developing. The UK is one of the most advanced markets in energy storage but even in the UK, compared to overall demand generation, storage capacity is almost insignificant.
There are two energy storage projects which are widely reported on; in the UK there is the Smarter Network Storage (SNS) project in Leighton Buzzard and there is Tesla’s lithium-ion battery facility in South Australia. These are very basic, almost trial systems and I think things will look very different in five years’ time - there will be a big step forward.
Sebastian Van Dort: You work both in the UK and Australia. What are some of the differences in the various markets in those countries and around the world?
Scott McGregor: In the UK there is investment in grid storage with private investors owning those assets, as opposed to the traditional model of utilities owning them. There is very little being done on developing assets ‘behind the meter’, on the customer’s side.
By contrast, in Australia there is very little being done on the grid itself but there is a much more progressive ‘behind the meter’ market. This is largely because the price of energy for commercial businesses in Australia is very expensive. Commercial businesses in Australia have a lot more to gain by creating their own distributed energy systems behind the meter, in effect their own mini power stations.
In the US, California is very advanced across the gird and behind the meter. The North East US as well to some extent. In Germany there is a short-term secondary market on the grid.
So much depends on the policy environment in each country. I do firmly believe though, that in five to ten years most countries will have moved towards distributed energy systems and away from centralized generation.
Sebastian Van Dort: How important do you feel energy storage is to the ambition of governments to achieve net zero?
Scott McGregor: It is absolutely critical. You won’t achieve net zero without energy storage - it’s as simple as that. This is especially true during the transition to net zero where there will be different sources of generation in play.
Storage comes into its own with intraday energy balancing. I don’t think it’s the solution to seasonal balancing. What we need to unlock the full potential of energy storage is to get rid of unnecessary red tape and regulation. If we sort out the regulatory issues around energy storage and if we get investors on board, I think we will move very quickly towards net zero, faster than most people envisage at the moment.
Sebastian Van Dort: What do you see as some of the key drivers and trends in the energy storage market?
Scott McGregor: The main one is the volatility of energy supply caused by the increased availability of renewables. Energy storage is the perfect solution to that because it supports the grid by flattening out the price.
The other driver is the move towards distributed networks. My view is that our networks are going to change significantly and we’re going to end up with 60-80% of the network as distributed generation at the demand end of the grid. This will shift the balance away from centralized generation from nuclear, gas, coal and some certain classes of renewables.
Centralized generation will still have a role to play but it’s critical that generation and storage is allowed to develop where the demand is, at the customer end. This is already happening; in the UK distributed generation is around 31% and in Australia it’s about 9%.
Sebastian Van Dort: Do you believe regulatory and policy support is required to move energy storage to the next phase?
Scott McGregor: Yes I do, there is quite a bit that needs to happen there. I’ve said it before; regulation needs to be freed up. Energy storage needs to be seen as an asset class that can be traded and owned in its own right, rather than being lumped in with generation. It needs to be made easier to connect energy storage to the grid because ultimately it will help the grid to function more efficiently and increase the use of renewables.
Sebastian Van Dort: What do you see as the potential for local energy storage and how would this work on a practical level?
Scott McGregor: At a basic level, many businesses in the UK have already put in solar panels for their daytime load. However, I think businesses should be looking at doubling or tripling their solar generation capacity. Solar is the cheapest form of energy and businesses should be embracing it.
The next level would see a business setting up what we call a ‘smart power station’. You would need to manage your purchases from the grid, the trading market, your hedging, demand, storage, generation, and integrate all this with your EV (electric vehicle) fleet. This needs a serious amount of expertise and would also need to incorporate AI and machine learning.
Installing such a system requires additional capital expenditure but it will be money well spent. If the system is run in the most efficient way, over time you will be able to drive your marginal cost of energy down to zero. To optimize the use of those assets I think you will see these systems being run by external experts.
Sebastian Van Dort: How does energy storage support the resilience of businesses and of the wider grid network?
Scott McGregor: We are increasingly seeing catastrophic climate events which are a real threat to a country’s critical infrastructure. In Australia we’ve seen the network going down for days because of fires. The Covid-19 pandemic too has put pressure on critical infrastructure.
If more businesses felt able to develop their own renewable generation infrastructure, enabled by energy storage, then they would be better placed to carry on their businesses in times of crisis. The grid would then be concentrated on running a minimum service for domestic customers.
Energy storage also has the potential to make whole countries self-sufficient in energy generation and not have to rely on imported energy. I know that is something we want to achieve in Australia.
Sebastian Van Dort: What role do you think standards can play in supporting the emerging storage market?
Scott McGregor: A very important role. This something I’m very passionate about and why I chair the ESL/120 committee.
There are safety risks, as there are with any industrial process, but they can be mitigated and controlled through clear, commonly understood standards and procedures.
The sector is moving so fast you can’t define the technology. The standard has got to be flexible enough to say, ‘As long as that storage device interfaces with other parts in this way, which is safe and durable and follows a quality approach, it is ok.’
Standards are also critical in getting investors on board. If we want to see a major infrastructure investment fund put money into this sector, it’s essential that they can be confident that the system is going to be safe, it’s going to be durable and it has got quality certification. A simple, unified standard across energy storage will provide that reassurance.
That is what ESL/120 has been trying to do. It’s a slow journey to convince people to follow that path but it’s critically important. I think it will get done. There is good support from the UK Government and from other stakeholders who want this to succeed.
I am passionate about the sector. I firmly believe there is an entire revolution happening here based on distributed energy and people need to watch this space. Having assets where the demand is, where it can be controlled and it’s secure, will bring down the marginal cost of energy to zero. Once the investment is there I believe we will have reached the tipping point.
Click below to watch the full episode of Energy Talks: An international view of the energy storage market.