Battery storage developers facing uncertainty as Capacity Market placed in ‘standstill’

Battery storage developers in the UK are facing uncertainty over their prospective revenue stacks as the Capacity Market was placed in an indefinite “standstill period”.

This morning the European Court of Justice (ECJ) ruled that in clearing the UK Capacity Market scheme for state aid, the European Commission had failed to properly investigate the scheme’s inner workings.

As a result, the ECJ this morning annulled the Commission’s granting of state aid, forcing the government to essentially suspend the scheme.

National Grid, the body responsible for running the scheme’s auctions, has confirmed that the forthcoming T-1 and T-4 auctions have been postponed indefinitely while discussions between the UK government and the European Commission continue.

The development is likely to spell trouble for battery storage developers in the UK as the Capacity Market had emerged as a growing source of revenue certainty for assets capable of responding to winter surges in demand.

There is now also doubt over a looming review of the Capacity Market scheme which could have seen renewables introduced for the first time. In August BEIS published the terms of a review of the Capacity Market scheme slated for next summer, but it is now unclear as to whether the review will go ahead as planned.

Tempus Energy, the clean energy tech firm that challenged the European Commission over its state aid clearance, said that the ruling meant that a “customer revolution is on the cards”.

“This ruling opens the door for cheaper energy – greater use of demand-side innovation would change the way we use electricity in practice, and place customers at the heart of the energy system for the first time.

"This ruling should ultimately force the UK government to design an energy system that reduces bills by incentivising and empowering customers to use electricity in the most cost-effective way – while maximising the use of climate-friendly renewables,” the firm’s chief executive Sara Bell said.

A BEIS spokesperson said: “We are disappointed with this judgement, but it poses no issues for our security of supply. As a responsible government, we have prepared for all outcomes, and we will be working closely with the Commission so that the Capacity Market can be reinstated as soon as possible.”