Navigating the energy transition: How regulations slow down energy storage

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Energy storage systems are key to the energy transition. Despite double-digit annual growth in market volume and storage capacity, numerous legal, technical, and bureaucratic obstacles still hinder their widespread adoption.

2024/08/15 – Energy storage systems (ESS) are crucial for the energy transition: By storing energy peaks from renewable sources such as solar and wind power, they balance out frequency fluctuations and thus ensure a stable electricity grid. Storage systems are necessary in order to utilise renewable energies in line with demand - in the electricity market, for structuring supplies and energy management on the consumption side and for system services. While they store energy in times of low prices or peaks in electricity generation, they release it again in times of higher and therefore more lucrative electricity prices. These are all good reasons to promote the expansion of ESS, were it not for the regulatory problems in Germany and the EU that are hampering their widespread introduction and profitability. It is therefore high time to harmonise and simplify the framework conditions in order to successfully drive forward the energy transition.

This starts with the complex and time-consuming authorisation procedures for ESS. Germany is not an isolated case here, as a look at France shows. In our western neighbour, there is no specific legal framework for the development of storage systems, which leads to uncertainties there. In Germany, the lack of anchoring in building law leads to difficulties in obtaining authorisation for outdoor storage systems.

On both sides of the Rhine, ESS operators often pay double grid fees when they draw electricity from the grid and feed it back in. The EU Commission therefore recommends avoiding double taxation and simplifying authorisation procedures.

Then the question of "green or grey electricity?" ESS store electricity regardless of its origin. In Germany in particular, there are strict requirements for guarantees of origin, which increases administrative costs.

Another problem: Stored green electricity normally loses its eco-privilege through storage. The EU is currently working on harmonising the certification systems in order to reduce the administrative burden and improve traceability.

Next problem: Strict technical and administrative requirements make it difficult for ESS to participate in the balancing energy market. To explain: balancing energy is the energy that a grid operator needs to compensate for unforeseen power fluctuations in its electricity grid. The EU is also striving for more flexible regulations in this area in order to facilitate market integration.

Another obstacle to the profitability of ESS is unclear or unfavourable tax regulations. In Germany in particular, high construction cost subsidies and inconsistent tax incentives increase investment costs. In addition, different technical standards make interoperability more difficult and increase certification costs.

High security measures are necessary to protect networked ESS against cyber attacks. In Germany, operators must also fulfil extensive data protection requirements.

This leaves inconsistent or limited funding programmes, which impair the economic viability of ESS. In Germany, regional differences and complex application procedures also make access to funding more difficult.

Despite this multitude of obstacles, the European market for energy storage systems is expected to grow significantly over the next few years. Forecasts vary, but some estimates assume that the market volume will grow by double-digit percentages annually until 2030 and that the installed storage capacity in Europe will increase to several hundred GWh of storage capacity. European harmonisation of tax incentives, subsidy programmes and technical standards as well as the removal of bureaucratic hurdles could accelerate this development.