The sharp decline in wholesale energy prices will prevent storage from taking off in the UK in the coming years, a panel of asset managers said on Monday.
Speaking at the Solar Finance and Investment event, which kicked-off today in London, Alex Capital chief executive Gerard Reid said that while storage is “only in its infancy”, the technology will be prevented from taking off due to lower than forecasted energy prices.
The UK’s wholesale energy price has fallen against the backdrop of collapsing oil prices and an abundance of cheaper renewables generators coming onto the grid. Last month Carbon Brief published price estimates put together by DECC and kept from public disclosure, revealing it expects wholesale electricity prices to fall to below 5p/kWh by 2020.
Tumbling energy prices also stand to have a significant impact on the Levy Control Framework and generators awarded Contracts for Differences, with Carbon Brief’s analysis citing the reviewed price estimates to add another £500 million to LCF expenditure.
Reid said that power prices are currently “not high enough” for storage to really take off in the UK, comparing the market with other countries such as Australia where high power prices and volatility added much stronger financial weight to the technology, particularly for commercial end users.
His view was endorsed by Camborne Capital managing director Dan Taylor, who said that the PPA route would be “fantastic” for solar-plus-storage in the UK.
Ilesh Patel, partner and European head of power at Baringa, added that before asset managers bundled storage solutions with their generators they would need security from OEMs and other storage manufacturers. Patel added that at the moment the risk was that projected sharp falls in the cost of the technologies threatened to detract from their potential.
Patel also said that there could be a future in firms offering solar-plus-storage solutions to a business’ entire portfolio of offices or facilities, and agreeing an overarching PPA with that company.
The Solar Finance and Investment event is held at the Grange City Hotel in London and concludes on Wednesday 3 February.