The Energy Transition | Details released for energy storage innovation competition, Emergent Energy’s new microgrid solution, and the announcement of a £10 billion hydrogen and wind turbine project

Written on 4 Jun 2021

This week we focus on the government's announcement about an upcoming energy storage innovation completion, Emergent Energy's new microgrid technology, Cerulean Winds £10 billion hydrogen and floating wind turbine project, and more.

Government announce details of energy storage innovation competition

The Department for Business, Energy and Industrial Strategy (BEIS) has released details of the government's long duration energy storage competition, which is due to take place on 17 June.

The competition was announced in December's energy white paper, and is seeking technologies that can be deployed at scale and provide longer duration storage capability, which is currently defined as over four hours. This could reduce the amount of fossil fuels and low carbon generation required and optimise the output from renewables, rather than paying to turn off generators when there is excess supply. Up to £68 million capital funding will be made available to entrants over two competition streams.

Stream 1 has £37 million available through grant funding for projects with technology readiness levels that are over six. However, there would be a requirement to secure matched private investment. Stream 2 will provide Small Business Research Initiative with £30 million in funding for projects with technology readiness levels that are between four and five.

Emergent Energy's microgrid solution awarded Energy Regulation Sandbox by Ofgem

Emergent Energy's smart local energy system solution has been awarded Ofgem's Energy Regulation Sandbox.

The sandbox was established in 2017 in order to allow for innovation projects that would otherwise be prohibited by current regulations. This is the first sandbox derogation to be part of the Balancing and Settlement Code, and will give Emergent Energy unique permission to trial its energy process on a microgrid network that allows households' to change energy supplier. The smart solution operates microgrids made up of heat pumps, solar panels and electric vehicle chargers, leasing the equipment from housing companies and using it to supply green electricity and heat to on-site residents. Regular payments would be made to the housing companies generated from the optimised running of the microgrid, which could cut the cost of installing a heat pump by 25% today. Emergent Energy would expect this to rise to a 100% reduction by 2025.

Anna Rossington, interim director of retail at Ofgem, said "we're pleased that the Regulatory Sandbox will give Emergent the flexibility to trial a new approach that could help consumers on private electricity networks – many of whom may live in vulnerable situations – get access to the full range of deals available to other energy shoppers".

Cerulean Winds announces £10 billon hydrogen and floating wind turbine project

Green infrastructure developer, Cerulean Winds intends to decarbonise oil and gas assets in the UK Continental Shelf (UKCS) with a £10 billion hydrogen and wind project. The 200-turbine floating development, includes projects in the Central North Sea and in West Shetland could remove 20 million tonnes of CO2.
There are no subsidies or contracts for difference for this project, and Cerulean's infrastructure project finance model remains in its regulatory approval stage. Financial close is expected in Q1 2022, with construction starting shortly afterwards and commissioning is set for 2024.

The site's largest floating turbines (with a 3GW per hour capacity) will supply more than 1.5GW per hour to onshore green hydrogen plants and power offshore facilities. Cerulean's development includes:

  • the supply of clean energy to offshore platforms at a lower price than current gas turbine generation (with no upfront cost to operators);
  • the electrification of UKCS assets and potential production from 2024;
  • £1 billion of potential hydrogen export revenue; and
  • the production of green hydrogen at scale.

Demand for flexibility solutions set to hit £4.6 billion by 2030

A new report from Guidehouse Insights, a market intelligence and advisory firm, has projected that the global demand for residential flexibility solutions is set to exceed £4.6 billion by 2030.

The growth is expected to be driven by maturing demand response, as well as the increased prevalence of distributed energy resources such as rooftop solar panels, battery storage and electric vehicles have created new opportunities for residential customers in the virtual power plant sector. Given this change, flexible capacity is expected to grow from less than £1 billion to over £4.6 billion by the end of the decade, with a predicted compounded annual growth rate of 23.3%.
Peter Asmus, research director at Guidehouse Insights, said "as grid operators develop a more urgent need to procure flexible capacity, we anticipate that the engagement of the aggregated residential capacity segment will become increasingly competitive with residential and industrial customers". The need to engage with residential customers in the provision of flexible capacity has become apparent during the COVID-19 pandemic, in which energy flows have shifted away from the commercial and industrial sector.

HMRC announces 20% VAT rate for public electric vehicle charging

Having received requests to clarify their position, HMRC has confirmed that VAT on public electric vehicle (EV) charging remains at 20%. HMRC explained that a taxation mechanism, permitting a 5% VAT rate for supplying small quantities of electricity doesn't apply to public EV charging, and that there is no exemption or relief to the 20% VAT rate.

This means that price increases are expected for InstaVolt's charging services, while other EV charging providers remain unaffected. In an interview with Current±, Osprey and Pod Point reported that they are not impacted by HMRC's announcement. Osprey stated that it has always charged 20% VAT as a result of its interpretation of the regulations. Instavolt, however, has announced a 15% costs increase that is to be passed on to consumers.

Adrian Keen, CEO of Instavolt, commented that the company “strongly disagrees” with the 20% rate, adding that it “discriminates between the millions of drivers who do not have access to off-road parking and rely solely on public charging”. Instavolt will continue to lobby the government to reduce VAT on public EV charging to 5% in accordance with domestic energy tariffs.