Irish commercial battery storage units subject to levy, regulator confirms

Out-Law News | 15 Apr 2019 | 12:30 pm | 1 min. read

The Irish Commission for the Regulation of Utilities (CRU) has announced that commercial battery storage units will now have to pay the levy charged to all electricity customers to support renewable energy generation.

The Public Service Obligation (PSO) levy will only be imposed on commercial storage units based on their “house load” when offline, rather than on the total amount of electricity imported from the grid, stored, and subsequently exported.

As battery units operate by taking electricity off the grid when there is surplus generation, storing it, and then reinjecting that electricity into the grid at times of high demand when it is more profitable to do so, there had been uncertainty over whether they should be subject to the PSO levy. The levy is normally imposed on electricity customers who are supplied with electricity at a single premise for consumption on those premises.

The CRU released an information paper (14 page / 457KB PDF) which concluded that while commercial storage units should be subject to the PSO levy, this should only be due in relation to electricity consumed on the premises, and calculated when the unit is offline. Electricity consumed as part of the import-export process will not count towards the house load and the levy.

While commercial storage units should be subject to the PSO levy, this should only be due in relation to electricity consumed on the premises, and calculated when the unit is offline.

The CRU said the relevant system operators should develop, document and publish procedures as to how the levy on battery units will be calculated and administered.

The clarification follows a similar decision by the CRU in 2004 relating to a hydroelectric pumped storage site at Turlough Hill in County Wicklow. In that case, the CRU concluded that the levy should be calculated on the basis of the site's house load when it was offline, not when it was pumping water for storage and future electricity generation.

Energy law expert Matthew McMurray of Pinsent Masons, the law firm behind Out-Law.com, said: “This clarification is a strong indication of the institutional support for storage projects in Ireland. Increased certainty around costs and the regulatory framework relevant to this asset class is vital to encourage developers to progress battery storage in Ireland.”

The Irish government is currently pushing for at least 70% of Ireland's electricity supply to be generated from renewables by 2030, although it is unlikely to achieve an early target of 40% by 2020 set by the EU.

A report produced by EirGrid in 2017 estimated a need for up to 1,200 megawatts of battery storage in Ireland by 2030 in an optimum low carbon scenario. Together with the System Operator for Northern Ireland (SONI), EirGrid is carrying out a procurement process aimed at incentivising the provision of system services to maintain grid stability.

McMurray said battery projects were well-placed to provide these services and there was significant commercial interest, particularly in the fixed-term, fixed-revenue volume capped contracts. The first auction for these contracts is expected in May or June this year, with service delivery no later than 1 September 2021.