A Big Push for Energy Storage in Europe

In its latest effort to support the deployment of energy storage in Europe, the European Commission adopted its “Recommendation on Energy Storage – Underpinning a decarbonised and secure EU energy system,”on March 14, 2023. It addresses the most pressing issues to help accelerate the broad deployment of energy storage by the EU member states.

The “Recommendation on Energy Storage” was released in the same week as the Electricity Market Design (EMD) reform, and the Net Zero Industry Act (NZIA).

The EMD proposes tools to reduce short-term electricity market price fluctuations. It also recommends measures that could make the market better suited to deploy (variable) renewable generation. To improve the flexibility of the power system, member states will have the possibility to introduce new support schemes especially for demand response and storage.

The NZIA is an initiative to accelerate and scale up the manufacturing of clean technologies in the EU by simplifying the regulatory framework. Contrary to an earlier leaked draft document, the final version explicitly mentions energy storage as an included clean technology.

Together with the European Commission’s “Recommendation on Energy Storage,” these proposals are the strongest push for the development and deployment of energy storage in Europe so far. Recommendations are non-binding acts for member states.

The share of renewable energy in the EU’s electricity system is expected to reach 69% by 2030, according to the European Commission. As the share of renewable energy in the system increases, the need for flexibility grows. According to a 2022 study on energy storage by the Energy Transition Expertise Centre[1], the need for flexibility can increase exponentially when the share of variable renewable generation in the electricity system grows beyond 74% of total installed capacity.

Energy system flexibility in Europe must therefore increase rapidly in the coming years in order to guarantee security of supply. Energy storage is a key instrument to increase system flexibility, as are interconnectors, supply-side flexibility, and demand response systems.

The aim of the “Recommendation on Energy Storage” is to provide member states with concrete recommendations and action points to help facilitate the fast and broad deployment of energy storage in their energy systems.

Energy Transition Expertise Centre (EnTEC), “Study on Energy Storage,” 2022

The document provides 10 recommendations. Of these, we believe the five most relevant recommendations or issues that member states should take into consideration are:

· Prevent double taxation and facilitate permitting procures: In some regulatory frameworks, energy storage is still double taxed because the activity is seen as consumption when storing energy and as supplying when feeding energy into the grid. Additionally, the permit-granting process can take a very long time and is complex and not energy storage specific.

· Identify financing gaps and de-risk revenues: The financing gaps for short-, medium-, and long-term duration and behind-the-meter energy storage should be identified. Financing instruments that create visibility and predictability of revenues should be provided.

· Facilitate revenue stacking: Revenues should be broadened by allowing more revenue stacking and services should be sufficiently remunerated.

· Provide transparent and detailed data: Member states should provide real-time, transparent, and detailed (dynamic) data on electricity market prices, network congestion, curtailment, greenhouse gas emission content, and installed energy storage facilities.

· Identify flexibility needs: Member states should identify the flexibility needs of their energy systems in the short, medium and long term. System operators, when planning, should take into account the flexibility needs of their systems and see if short-, medium-, and long-term duration energy storage could be a cost-effective alternative to grid investments. Additionally, they should also consider the full potential of flexibility sources when assessing their connection capacity (flexible connection contracts).

The commission includes five more recommendations to boost energy storage deployment in Europe, but it is beyond the intention of this note to outline them all here. Find the full list in the “Recommendation on Energy Storage – Underpinning a decarbonised and secure EU energy system.”

The “Recommendation on Energy Storage” marks the first time that the European Commission has addressed the relevance of energy storage in an official document this explicitly and with so much detail. It is by far the strongest and most concrete push for the deployment of energy storage until now.

We welcome this push from the European Commission. The most pressing issues and bottlenecks have been addressed, and the 10 recommendations provide a useful checklist for member states to act on. However, we do think that the push from the European Commission comes fairly late. This swift and decisive action seems to have been triggered by today’s geopolitical reality, in which energy is weaponized. It is directly related to the Russian invasion of Ukraine last year, which threatened to compromise the security of Europe’s energy supply, and has led to high and volatile energy prices and massive dissatisfaction among European citizens.

As with the Green Deal Industrial Plan, which was the European Commission’s reaction to the Inflation Reduction Act in the US, one could worry that EU policymakers might need a stick in order to show a sense of urgency in policymaking. Energy storage is not a new solution. It has been flagged and recognized as a key facilitator of the energy transition for quite some time.

However, it is also fair to say that the European Commission isn’t always to blame for slow progress on policy and strategy matters. Even when policies and regulations have been adopted at the EU level, member states don’t always implement EU policy swiftly. They sometimes linger when adapting national legislation to EU policy, leading to unnecessary delays.