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Imagine you run a company that sells healthy salads in a country where experts have spent years trying to stop school canteens selling junk food.
Now imagine, bingo! The government agrees to strip crisps and doughnuts from school meals. Investors pile into your industry. Analysts predict billions in healthcare savings. Medical experts are delighted. So are schools and parents. There’s just one problem: the people in charge of buying the nation’s school meals don’t seem to like you and your salads.
They insist they’re deeply pro-lettuce but their operations are so opaque it’s hard to tell, and industry data shows they are overlooking your salads in favour of the doughnut-makers they have known and trusted for years.
This is roughly the dilemma facing a technology in the UK that has at least as many benefits as a salad: battery energy storage systems.
Officials have spent years encouraging, though not subsidising, investors to build these facilities — rows of containers filled with racks of batteries that can power thousands of homes.
Net zero-minded authorities abroad have taken similar steps because, broadly speaking, the more salad-like batteries that can soak up wind or solar power and release it when needed, the fewer doughnut-esque gas or coal stations are required to keep the lights on.
As the UK’s National Grid says on its website, “battery storage technologies are essential to speeding up the replacement of fossil fuels with renewable energy”.
In California, solar farms charge batteries that can supply a fifth of the state’s evening electricity. But it’s a different story in the UK, even though it is good at building renewables, will close its last coal power station next week and has more than 100 operating battery sites.
Those batteries should be storing loads of excess green electricity from the dozens of offshore wind farms dotting the UK coastline. On gusty days when wind power can’t be sent to where it’s needed, these farms can be paid to switch off to stop the grid being overloaded while gas plants are paid to turn on.
The result: hundreds of millions of pounds in annual costs that are eventually passed on to consumer energy bills — and tonnes of avoidable carbon emissions.
The benefits of batteries have been evident since 2020, when the UK’s electricity system operator took part in trials that suggested batteries could deliver £700,000 of savings in just three weeks.
But by 2023, industry data showed that even when batteries were cheaper than gas, they were being underused or “skipped over” as much as 90 per cent of the time. Investors say the problem has continued this year, as the FT reported last week.
So what’s going on? Some think engineers simply prefer trusty gas power plants to newfangled green tech batteries. The electricity system operator denies this, but it has confirmed that oldfangled computer systems are a problem.
It says the IT system its engineers use to calculate whether batteries are cheaper than gas was built in the 1990s and doesn’t allow control room engineers to quickly calculate when to use batteries or fossil fuels.
A newer system had to be retired earlier this year, leaving engineers to use the older one until an even newer upgrade is fully operational in 2027.
The operator says the upgrade has already significantly increased average use of batteries this year and skip rates should reach low single digits early next year. However, the data provider Modo Energy says skip rates have only declined from 92 per cent in December to 76 per cent in August.
The system operator does not calculate skip rates itself and it has delayed publication of a consultants’ report it commissioned last year on the best way to measure rates.
Things may change after Tuesday next week. That’s when the electricity system operator, previously a legally ringfenced business in National Grid, becomes a separate, publicly owned body that may be better resourced.
Meanwhile, battery installation rates are stalling and it’s hard to disagree with people like James Bustin, assistant fund manager at Gresham House, one of Europe’s largest battery storage investors.
“Other countries are managing to fully utilise batteries, which is driving significant private investment to accelerate deployment,” he says. But despite Britain’s admirable record on renewables, “the electricity system operator’s inability to make the most of battery storage risks us being left behind in the energy transition”. Shifting gears is still possible, but there’s no more time to waste.
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