Energy Storage Capacity

Lord Callanan Excerpts

Tuesday 5th April 2022 Lords Chamber

[Lord Oates]

To ask Her Majesty’s Government what plans they have, if any, to increase energy storage capacity in the United Kingdom.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, energy storage is an essential source of flexibility for net zero and for energy security. The Government are analysing whether further intervention is needed to support deployment of long-duration energy storage, including hydrogen storage, to help ensure a least-cost transition to net zero. The diversity of the UK’s gas supply is a strength of our approach to energy security, and GB gas storage tops up supply during periods of high demand.

[Lord Oates (LD)]

I thank the Minister for his response. He will be aware that due to the UK’s lack of long-term energy storage, we waste enough wind energy every year to power over 1 million homes. Does he recognise that long-term energy storage, alongside renewables, could end this waste and provide the most cost-effective solutions to decarbonising the grid? Can he tell the House why the revised energy policy statement was so unambitious on long-term storage, and when we will get some decisive action in this area?

[Lord Callanan (Con)]

The noble Lord is right to point out the importance of long-term storage. We are aware that long-duration electricity storage—for example, pumped hydro—can struggle to deploy because of the high capital costs and the lack of forecastable revenues. We are analysing responses to a consultation from last year on a call for evidence on facilitating further deployment of this type of storage. We already have a considerable amount, but he is right that we must do more.

[Lord Howell of Guildford (Con)]

My Lords, I am sure most noble Lords agree that more storage of gas and electricity, and more nuclear power and wind, are desirable in the long term. But, as none of these will have the slightest effect on energy prices now, which are causing suffering and real fear for millions of households, is it not a bit feeble to offer them as the only answer? The real and immediate answer is surely for the world to pump more oil and gas, which OPEC is perfectly capable of doing with its spare capacity. Should we not press further on that? Is it not unwise and despicable of OPEC to refuse to replace Russian gas and oil exports now?

[Lord Callanan (Con)]

I take slight issue with my noble friend, in that I do not think we are offering long-term energy storage as the solution to the current massive price spikes but as something we need to do in the longer term. As we have more intermittent forms of power, it is important to store the power we generate for times when its intermittency means power is lacking. My noble friend also made a point about the importance of ramping up our own production, particularly from the North Sea, to help with security of supply. Unfortunately, it will not affect price, but it will affect security of supply.

[Lord Wigley (PC)]

My Lords, the Minister will be aware of the outstanding pumped storage scheme at Dinorwig in Gwynedd, which has enabled the network system to meet capacity demands without the extra necessity to meet the peak. Is he aware that two of the four surge shafts are being taken out of commission now and may be out of commission for two or three years, for renovation and safety checks? In these circumstances, is any provision being made to meet the loss that is a consequence of this work? Are there plans for further pumped storage facilities side by side with the nuclear programme?

[Lord Callanan (Con)]

Indeed, I am aware of the excellent Dinorwig facility. I remember studying it when I was an engineering student many years ago and it is an incredible feat of engineering. The noble Lord can be reassured that the capacity market auction has already secured enough standby capacity market supplies, through to 2025-26. We are aware of the point about Dinorwig.

[Lord Lennie (Lab)]

My Lords, given that in the last year energy storage capacity increased to record levels, which is something the Government can be congratulated on, what are they doing to turn this into savings for hard-pressed consumers, who are already dealing with a cost of living crisis that is not of their making?

[Lord Callanan (Con)]

As I responded to my noble friend earlier, more storage is not the answer to high prices at the moment. It benefits the system in the longer term. Sadly, in energy policy, nothing happens in the near future and everything is long term. The noble Lord is aware of the £9.1 billion package of support that the Chancellor announced to try to mitigate the effect of high prices at the moment.

[Lord Fox (LD)]

My Lords, the success of offshore wind was driven by the contracts for difference structure that has caused private money to pour into the sector. The Government have recently passed the Nuclear Energy (Financing) Act, which looks at the RAB model. What models are they now looking at to finance storage because, without companies knowing how they will make money from building storage facilities, they will not build them. It is really important that the Government step forward now to explain how this will work financially. What are the plans to deliver a structure that will finance this?

[Lord Callanan (Con)]

The noble Lord is correct and, as I said earlier in response to the noble Lord, Lord Oates, we had a call for evidence last year and we will announce our analysis and the results of that shortly.

[Lord Lilley (Con)]

My Lords, could my noble friend confirm that the cost of providing storage for periods when the wind does not blow, which can last for days, will be astronomical? That is particularly true of batteries, since the cost of lithium is 10 times what it was a year ago. We will continue to need gas for quite a considerable while to provide that back-up. Will the Government implement the recommendations of the Dieter Helm report that, when bidding to go on the grid in future, intermittent suppliers should do so in conjunction with the back-up supplies that are needed when theirs are not available as the wind is not blowing?

[Lord Callanan (Con)]

My noble friend’s question deserves a long answer because it is a complicated subject. We need to differentiate between short-term storage, particularly from batteries and elsewhere, which is currently expensive—although prices are coming down—and longer-term storage provided by the likes of pump storage stations such as Dinorwig. That has been around for decades, and there are similar schemes in Scotland too. We need to do all these things. We need to get more offshore wind because it is a very cheap form of power, but it is intermittent, so we also need storage capacity to balance out that intermittency. As the noble Lord, Lord Fox, said, we also need more nuclear for baseload power.

[Baroness Wheatcroft (CB)]

My Lords, storage is a long-term solution, so can the Minister tell me whether Dungeness B, which was finally decommissioned only last year, might be brought back into service? Has the department examined the possibility of doing that as a short-term solution?

[Lord Callanan (Con)]

Of course we will want to ensure that the existing nuclear stations, of which Dungeness B is an excellent example, will continue into their lifespan as long as possible, but we will need to replace many of these ageing nuclear stations, which is why we recently passed the nuclear financing Act.

[Lord Grantchester (Lab)]

In a climate emergency it makes little sense to increase fossil fuel storage capacity. What steps are the Government taking to speed up battery storage as a vital first step to store renewable power?

[Lord Callanan (Con)]

We have some fossil fuel storage capacity, particularly for gas, and we have 90 days’ worth of oil storage capacity because of our IEA commitments. All these technologies are important, but we do not need to increase our gas storage capacity; we have tremendous security of supply from our suppliers in the North Sea, from Norway, from interconnectors with the continent, and from LNG storage. We are well supplied there, but we need to increase our battery storage as well as our pump storage, and we will.

[Baroness Foster of Oxton (Con)]

My Lords, I think we all agree in this House that we need to generate enough energy to store in the first place. I understand that the Secretary of State has called for a review of shale gas extraction. Can my noble friend the Minister assure this House that this will be carried out swiftly and by people who have certainly not opposed fracking in the past? If it goes forward, we should then anticipate the storage for shale gas along with the other storage requirements that we need.

[Lord Callanan (Con)]

My noble friend makes an important point. She is right that the Secretary of State has asked the British Geological Survey to carry out a review of fracking technologies to see whether it is possible to carry it out safely, without seismic events. We have always said that we will be led by the science on these policies.

[Baroness Bennett of Manor Castle (GP)]

My Lords, does the Minister agree with me that the other side of energy storage capacity, which is reducing the need for it, can be done by storing up demand and unleashing it when the capacity is available? With that in mind, I am not sure whether the Minister is aware of the industry report that said that we should be saving £12 billion a year by 2050 by demand-side management ensuring that heat pumps, household appliances and car chargers come on only when there is capacity in the grid. The report calls for common standards and for the demand-side response having the same language so that appliances and the grid talk to each other. What are the Government doing to ensure that that is ready and able to take its place to cut the demand for storage?

[Lord Callanan (Con)]

In general, I do agree with the noble Baroness, for a change. Demand-side management is important and is why we are rolling out smart meters and suppliers are increasingly offering variable tariffs—for instance, you can get your electric car charged when electricity is cheap during the night, et cetera, and, if consumers are willing, sell that power back into the grid again at times of high demand. A flexible system, providing the appropriate storage capacity, and demand-side management with the consent and acquiescence of consumers are all important, and we are looking at all these matters through our smart grid policy.