Mr. Paddy Phelan:

This opening statement seeks to describe energy storage and explain its role in decarbonising electricity and hence energy overall. It describes the benefits of energy storage and raises the challenges and issues which need to be resolved so that it can make its key contribution to Ireland meeting its 2030 and 2050 targets.

Decarbonising electricity requires significant additional wind and solar generation and the phasing out of fossil fuel generation, with natural gas used largely as a transitional fuel until decarbonised biogas, green hydrogen or other measures come on stream. There are two main challenges to operating the grid primarily on wind and solar power. The first relates to grid stability. Up to now, big heavy fossil fuel-driven turbines and generators have had enough momentum to ride through the bumps. We now need to replace these with plant that can respond very quickly, going from zero to full output in a fraction of a second. The second challenge relates to the variable output from wind and solar generation. This variability creates the need for plant which can absorb energy when there is too much wind or solar generation to make up the deficit when there is insufficient wind and solar power to meet the demand.

On the role of energy storage, batteries with, for example, half an hour's worth of storage can provide a very fast response to provide grid stability. Plant capable of storing 350 MW is currently in operation and this capacity is expected to rise to 600 MW by 2023, which shows that the energy storage industry can deliver and is delivering. The variability in output from wind and solar generation can be managed by using different technologies offering different durations of storage. These include different types of batteries, pumped hydro storage like that used at Turlough Hill and compressed air or liquid air energy storage. These can provide output for up to 12 hours, which would cover most variations in wind and solar output.

Green hydrogen storage is seen as the main solution in the medium term for periods of longer duration when there is little or no wind for days, or even a couple of weeks, because of high pressure over Ireland. There will be a residual role for gas in the rare periods when low wind generation resulting from high pressure results in excess demand that exceeds green hydrogen storage capacity. Such periods occur approximately once every ten years. One of the biggest constraints on meeting the 2030 targets is the provision of sufficient grid connections. Strategically located energy storage can relieve grid congestion, remove constraints and obviate the need for some upgrades and can therefore contribute to the earlier provision of more grid connections.

On non-electricity forms of storage, thermal storage also has a role to play through mediums such as district heating and thermal storage at domestic and commercial levels. There is a role for green hydrogen, as I have mentioned, and natural gas will have a residual role in supporting the integration of hydrogen. There are also significant roles for biomethane and optimising the gas infrastructure to receive and transmit energy from clean, nonfossil generated gas. Local energy supply chains from clean energy sources can play a particular role in decarbonising our culture.

How much energy storage is needed? The Irish Energy Storage Association, IESA, commissioned a report by AFRY called The Missing Link – the value of energy storage in the AllIsland market. This report was circulated to the committee in January of this year. It concluded that 1,900 MW of energy storage will be needed by 2030. This is almost double the capacity proposed under current plans. On other added benefits of energy storage, the AFRY report concluded that this 1,900 MW of energy storage would provide: a low-emissions source of firm capacity replacing fossil-fuelled peaking and standby plant; a reduction in curtailment; a reduction in emissions; a net benefit of €34 million per annum; and a reduction in the public service obligation levy of €10 million to €14 million per annum.

My final point is on energy security. To decarbonise electricity, we must replace fossil-fuelled standby and peaking plant. Energy storage can be used instead. This also has the benefit of reducing curtailment of wind. Markets must provide investment signals for this sector. The current market for delivering a secure sustainable electricity system, or DS3, services, which are used to stabilise the grid, is based on tariff rates which are paid when the plant is available. This market is due to be replaced in April 2024 by a competitive daily auction. This will introduce great uncertainty for market participants. New plant will not be built unless longer-term hedge contracts are provided to mitigate the price risk. This is a great concern for the industry and companies within it have jointly submitted their concerns to the regulatory authorities seeking resolution of this issue before the high-level design is signed off. EirGrid could run competitive auctions for such contracts for the volume it forecasts will be needed over the given period of years.

Even if this is resolved for the system services market, this will only support short duration batteries. Longer duration batteries for energy balancing to manage the variability in wind and solar generation would still not be financially viable. The difference in price between charging and discharging is not high enough to provide sufficient revenue. The capacity market will not provide sufficient revenue to make up the difference required to make projects financially viable. The missing money could be made up by either increasing the capacity payments depending on the emissions, or possible supports such as RESS for wind and solar if there is a residual shortfall. As mentioned earlier, energy storage can relieve grid congestion and allow more grid connections at an earlier stage for the wind and solar generation needed to meet our 2030 targets. However, there is currently no market mechanism for this service. It is critical that a market is put in place urgently because it takes several years to develop and implement such projects.

There has to be a comprehensive and integrated policy on energy storage. This policy should have targets, just as there are targets for wind and solar. It must be integrated with policies on renewable generation, transmission and distribution connections, green hydrogen, the role of gas, sector couplings and so forth.

Ireland will not meet its 2030 or 2050 targets without energy storage to facilitate the required volume of wind and solar generation. It is needed to solve the problems of grid instability and also variable output from wind and solar. Furthermore, it can contribute to the provision of more grid connections while the infrastructure is being upgraded by relieving existing grid congestion. It is important that the roles and benefits of energy storage are understood by policymakers. Energy storage can contribute to energy security while also reducing curtailment of wind and solar generation. The markets must be put in place so that all the types of plants required to meet the 2030 targets, and beyond towards 2050, can be financially viable. There is an urgency to provide clarity on the high-level design for the system services future arrangements, particularly with regard to longer-term hedge contracts. A solution must also be found as soon as possible on a set of market arrangements so that longer duration storage can be financially viable. There must be a comprehensive and integrated policy on energy storage, which we acknowledge has commenced. This must take account of thermal storage, green hydrogen, biomethane and optimising the gas infrastructure to receive and transmit energy from clean gas generation.

I thank the committee on behalf of the Irish Energy Storage Association, the independent energy storage association.