Planning for the future of energy storage – a boost to the industry

The UK Government has announced legislation to change the consenting process for electricity storage projects. This is expected to provide a boost to the battery storage sector.

Last November, we wrote a blog detailing the Government’s proposed changes in relation to energy storage under planning law. The Government is now proceeding with its proposals and will remove electricity storage from the National Significant Infrastructure Projects (NSIP) regime. This outcome is welcomed as it will enable proposals for larger battery facilities to come forward more quickly and at a lower cost.

While this development is welcomed, the wider regulatory framework for electricity storage is not currently tailored to accommodate electricity storage. We hope that future changes in licensing regulation will improve legal certainties around this technology, to align with the step forward taken by the planning system.

The Changes

The Government’s response to its second round of consultation, published 14 July 2020, concluded that the Government will relax planning legislation by removing electricity storage (except pumped hydro storage, due to the larger planning impacts of this technology) from the NSIP regime, both onshore and offshore, in England and Wales.

This outcome is welcomed as it means that electricity storage projects of any size (except pumped hydro), can be progressed under the Town and Country Planning Act 1990 (TCPA) regime, which is expected to reduce the time and costs for such applications. This will apply both to new projects, and for projects seeking extensions to existing facilities.

This change reflects the evolution of storage technologies in recent years, and the fact that the majority of storage projects are not developments of national significance, but instead are localised deployments of technology with limited planning and environmental impacts, which are most appropriately assessed at a local level.

To implement this outcome, two orders will be made. The first, the Infrastructure Planning (Electricity Storage Facilities) Order 2020 under the Planning Act 2008 was laid before Parliament on 14 July 2020. The second, the Electricity Storage Facilities (Exemption) (England and Wales) Order under the Electricity Act 1989 will also begin its passage through Parliament shortly. Subject to the approval of these two orders by Parliament, the Government will ensure the statutory instruments come into force on the same date.

Points to note

It should be noted that:

1. Section 35 of the Planning Act 2008 will continue to apply in England meaning that the Secretary of State will still have the power to direct that an electricity storage project located in England (or English waters) will be determined under the NSIP regime.
2. In respect of offshore projects there will, at least initially, be a misalignment in the regimes between England and Wales. This is because the granting of section 36 consents under the Electricity Act 1989 (which are currently required for offshore projects) are devolved to the Welsh Government. The Government has stated that it is working closely with the Welsh Government to put requisite legislation in place to allow for a coordinated approach for storage located in offshore Welsh Waters.
3. Consultees were concerned that local planning authorities may have a limited understanding of electricity storage technology, which may hinder assessment of storage planning applications. To address this, the Government has confirmed that it will be working to update the planning practice guidance for renewable and low carbon energy to specifically reference electricity storage.

Wider regulatory context

Beyond the realm of planning, electricity storage is subject to a regulatory framework which is not tailored to the industry. The regulatory framework for electricity storage includes a system of licences, industry codes and agreements, but there is no specific definition of electricity storage under the Electricity Act 1989, the principal legislation governing electricity in Great Britain. As such, electricity storage is generally treated as a subset of generation, and this lack of specificity causes legal uncertainty when developing and designing projects.

Additionally, when treated as a generator, large scale storage providers are faced with the administrative burden of obtaining and complying with an electricity generation licence, unless an exemption applies. Furthermore, industry specific codes and agreements are likewise neither specific nor tailored to energy storage, creating uncertainty as to compliance.

In 2017, Ofgem published a consultation (the “2017 Consultation”) on changes to the electricity storage regulatory regime to clarify the existing electricity generation licence regime for storage. The 2017 Consultation proposed to include a definition of electricity storage in the electricity generation licence and clarify expectations for storage with respect to compliance with the standard conditions. As of July 2020, an outcome is yet to be published.

We hope that the momentum built by the recent developments in the planning system will spur Ofgem to review and publish its decision on the 2017 Consultation, and provide further clarity in this sector.

The Government has stated in its response to the planning consultation that it will consider whether there are remaining barriers to storage deploying at different levels. We will be sure to watch this space for further developments.