Energy Legislation Updates in the European Union and United Kingdom

March 04, 2024

The European Union and United Kingdom have enacted energy storage policies and regulations, with both issuing landmark legislation in 2023.  

European Union Developments

EU energy storage initiatives are key for aiding energy security and the transition toward a carbon-neutral economy, improving energy efficiency, and integrating more renewable energy sources into electricity systems, as are balancing power grids and saving surplus energy. Onsite energy storage (batteries) will be another important element. To help track this growing industry, the European Union has created a comprehensive database of the European energy storage technologies and facilities.

Energy storage also plays an important role in the European Green Deal and the Fit for 55 green transition package, a set of policy initiatives aimed at ensuring the EU gradually becomes climate neutral. The Green Deal envisages that the regulatory framework should foster the deployment of innovative technologies with energy storage.

The European Commission published a working document on the role of electricity in energy storage in 2017 and subsequently reflected these principles in the Clean Energy for All Europeans package in 2019.

In 2020, the European Commission published a study on energy storage, which summarized some previous studies and reports, explored current and potential energy storage markets in Europe, and set out policy and regulatory recommendations for energy storage. Since 2020, the European Commission has published progress reports on the competitiveness of clean energy technologies on an annual basis, including in respect of technologies and solutions for energy storage and power systems integration.[1]

According to one such report published in 2022, Europe is a leader in renewable fuels, batteries, and storage technologies, and storage and system integration are key elements of clean energy technologies and solutions.[2]

In 2023, the EU adopted a unified batteries regulation introducing sustainability, recycling, and safety requirements applicable to design, production, and waste management of batteries produced or sold in the EU.

Key Regulations and Initiatives

The key regulations relevant for energy storage in the EU include the following:

Focus of EU Regulation

The EU regulation of energy storage is generally spread across a number of regulatory acts (many of which require implementing at the level of the EU member states). In 2023, the EU adopted the new EU Batteries Regulation, which is the first piece of European legislation taking a full life-cycle approach in which sourcing, manufacturing, use, and recycling are addressed and enshrined in a single law.

Further, the EU Commission published a series of recommendations on energy storage, with concrete actions that EU countries can take to ensure its greater deployment of energy storage.

In brief, the EU regulation in respect of energy storage appears to focus on the following:

  • Public support, strategy, and other policy aspects (for more information on EU state aid to energy projects, see Cross-Border Energy Projects in Times of Crisis: Is EU State Aid a Solution for Green Transition?)
  • Permitting
  • Effectiveness of energy markets and capacity mechanisms, including establishment of the European entity of distribution system operators (EU DSO)
  • Grid aspects
  • Tariffs requiring the EU member state not to discriminate against energy storage projects in its tariffs’ regulations
  • Batteries – the new EU Batteries Regulation regulates sourcing, manufacturing, use, and recycling of batteries in the EU, and introduces sustainability, recycling, and safety requirements applicable to design, production, and waste management of batteries produced or sold in the EU, which gradually come into force

The implementation practices and policy approaches in respect of current EU regulation still vary among the EU member states. With respect to the new Batteries Regulation, the EU member states are expressly required to lay down effective, proportionate, and dissuasive penalties for infringements by 2025.

Further development of energy storage regulation at the EU level is likely to be in line with its energy security and energy transition goals. One might also expect that such further developments will be in a spirit of solidarity demonstrated by the EU in respect of its gas storage amid the energy crisis, which would imply a greater alignment among member states.

United Kingdom Developments

On October 26, 2023, the Energy Act 2023 received Royal Assent and became law in what is described as “the biggest piece of energy legislation in the UK’s history.” Exactly a month later, the UK Department for Business and Trade published on November 26, 2023 a UK battery strategy setting out the UK government’s vision for the country to achieve a globally competitive battery supply chain that supports economic prosperity and the net zero transition, following a call for evidence launched in August 2023. The battery strategy is associated with the Critical Minerals strategy, which was refreshed a few months before.

The battery strategy sets out 15 ambitious measures to support the sector, including targeted support for zero-emission vehicles, batteries, and their supply chains. This will involve more than £2 billion of new capital and research and development (R&D) funding for five years (through 2030), building on the work of the Automotive Transformation Fund and the Advanced Propulsion Centre.

The strategy will see more than £60 million invested in R&D, including £38 million for the UK Battery Industrialisation Centre and £12 million for the Advanced Minerals Battery Industrialisation Centre. Another £11 million will go toward 20 competition winners developing technologies across the battery value chain in areas such as artificial intelligence and digital tools to increase battery performance, future technologies such as lithium-metal anodes and sodium-ion batteries, and improved recycling technologies. Further investments will be put toward expanding market access for the trade of critical minerals and promoting high international standards in supply chains when negotiating new free trade agreements.

As of 2024, the UK’s energy storage market volume is 10.74 megawatts (MW); this figure is expected to nearly triple to 28.24 MW by 2029.

Regulatory Requirements

Until the much-awaited Energy Act 2023 was issued, the UK legislative arsenal did not include a specific framework for energy storage. The Electricity Act 1989, the main piece of legislation governing electricity in Great Britain, was updated by the Energy Act 2023 with effect from December 26, 2023, and now includes a definition of energy storage: “energy that was converted from electricity and is stored for the purpose of its future reconversion into electricity.

Ofgem, the Great Britain energy regulator, clarified in 2020 that electricity storage is deemed to be electricity generation for the purposes of the Electricity Act 1989. As a result, any energy storage operator would require a generation licence unless an exemption applies. Under the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 (SI 2001/3270), the Class A so-called “small generators” exemption applies to sites producing no more than 10 MW, or 50 MW for a generating station with a declared net capacity of less than 100 MW.

When a generation license is required, the holder must comply with a number of industry codes (namely the Grid Code, Distribution Code, Balancing and Settlement Code, and Connection and Use of System Code) and with the license obligations in relation to all generation assets, including storage, that it operates.

Ofgem has introduced in the generation license standard conditions

  • a definition of electricity storage, which is the “conversion of electrical energy into a form of energy which can be stored, the storing of that energy, and the subsequent reconversion of that energy back into electrical energy”; and
  • a new “E1” license condition requiring the storage provider to record and make available accurate information regarding their electricity storage facility to their relevant suppliers; the E1 condition aims to facilitate the correct application of final consumption levies, irrespective of the size of the storage facility.

Nonexhaustive List of Technologies

Ofgem has provided a nonexhaustive list of technologies that fall within the scope of the regulatory definition of storage. These include electrochemical batteries (e.g., flow batteries), gravity energy storage (e.g., pumped hydro), air-based storage systems, kinetic energy systems (e.g., flywheels), thermal storage, chemical storage, and electromagnetic storage.

Application for a License

A standard license application form is available, as long as guidance, under the Schedule to the Electricity Licence Application Regulations 2019.

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