UK electricity generation licence will cover storage says regulator

Out-Law News | 02 Nov 2020 | 10:29 am | 1 min. read

UK energy regulator Ofgem has announced that an electricity generation licence can now be obtained for electricity storage under changes to licensing definitions.

Following consultation over the past three years, Ofgem said it would now include a definition of ‘electricity storage’ and ‘electricity storage facility’ (14 page / 312KB PDF) in the electricity generation licence.

The change clarifies that electricity storage is essentially subject to the same licensing rules and regulations as electricity generation.

The regulator will also introduce a new licence condition into the generation licence that will be applicable only to licence holders that own or operate storage facilities.

This condition will require licensees to provide accurate information regarding their electricity storage facility to suppliers, in order to correctly identify facilities operating under licence as electricity storage, the correct calculation of relevant charges by suppliers, and ensure that suppliers are able to report accurately against their own obligations.       

However, Ofgem stopped short of introducing a previously proposed condition that would have required storage operators to publish information about their facilities on their websites. Respondents to Ofgem’s 2019 consultation had expressed concerns that requiring publication of this information online would add extra cost and potentially force operators to disclose commercially sensitive information.

Ofgem said electricity storage would be defined in the generation licence as “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”. An electricity storage facility is defined as a place where electricity storage occurs.

There will also be an explicit reference to electricity storage in the definition of ‘generating unit’ and ‘generation station’ in the licence terms.

Energy law expert Ronan Lambe of Pinsent Masons, the law firm behind Out-Law, said: “Ofgem’s recent decision, coming some 16 months after it published a second consultation on the topic in two years, is an overdue clarification of the regulatory position for electricity storage."

“Investors are likely to welcome the clear definition of ‘electricity storage’ provided by Ofgem and re-iteration of its previous ‘future-proofing’ policy of including a non-exhaustive list of technologies which should be considered as electricity storage,” Lambe said.

Lambe said the fact that the new Standard Licence Condition E1 clearly provided for exemptions from payment of final consumption levies where the electricity imported is used only for electricity storage was an important and welcome clarification.