Drax Group (LSE:DRX) and SSE PLC (LSE:SSE) will be among the firms vital for the decarbonisation of the UK’s energy grid, according to a new report from clean energy research specialist Longspur Capital.
Energy storage, which essentially charges up at times of low demand and saves power until it is needed later, comes in various forms, including pumped storage, which Drax and SSE will both soon operate.
As the UK’s reliance on renewables like wind and solar power grows, storage will become ever-more vital, due to specific conditions needed for generation making them more unpredictable.
Wind turbines require speeds of between 8mph and 55mph to operate, for instance, while solar energy – of course – simply only works when the sun is shining.
As a result, the UK needs “to champion solutions” such as battery storage, to prevent energy shortfall risks.
Through the move towards net zero, 56 days' worth of UK chemical energy storage, including coal and natural gas, will likely disappear in the UK, meaning roughly 353TWh (currently roughly one year's use in the UK) of capacity will have to be replaced, Longspur added, suggesting “the requirement for energy storage in a market dominated by intermittent renewables is essential".
“We would go so far as to say that designing a renewable energy system without storage is like designing a car without brakes.”
Longspur highlighted several companies, aside from Drax and SSE, which could provide intriguing investment opportunities as the demand for storage grows.
Gresham House Energy Storage Fund PLC (LSE:GRID), Harmony Energy Income Trust PLC (LSE:HEIT) and Gore Street Energy Storage Fund PLC (LSE:GSF) all offer exposure to the storage market as fund-based lithium-ion developers.
Invinity Energy Systems PLC (AIM:IES) and Corre Energy were also picked out for growth opportunities in battery and compressed air storage, alongside AMTE Power PLC (AIM:AMTE), Talga Group and Gelion PLC (AIM:GELN).
So how does it all work?
Instant sources
Lithium-ion, flow batteries, gravity and flywheels can all offer energy within milliseconds of it being required, minimising the risk of blackouts or damage to equipment on the grid.
Gore Street, Gresham House and Harmony all develop lithium-ion batteries, commonly used in electric vehicles, laptops and phones.
These create electricity through the flow of electrons from negative to positive electrodes and visa versa while charging, generally offering power for between two and four hours.
They can also be fitted to solar panel systems to store energy for later use, alongside other batteries.
Flow batteries work in a similar way but provide a longer cycle life of over four hours.
These pump liquid through electrodes to extract electrons to create electricity.
Flywheels can be used to store kinetic energy, being spun on a near frictionless mount using electricity, which can later be regained through the same motor.
Gravity storage is also simple, seeing a weight lifted using power, storing its gravitational potential energy for later, which can be harvested as it is dropped at times of high demand.
Gravity and flywheels can both provide a “rapid response,” explained Longspur, but only offer energy for a short period of time, meaning they are best used for immediately balancing supply and demand by system operators like National Grid PLC (LSE:NG.).
Long duration storage
“At long durations of more than 10 hours, thermal, compressed air and pumped hydro offer the large capacities required for multi-day and seasonal storage,” Longspur said.
Hydro pumped storage sees water forced upwards from one reservoir to another using excess power from the grid, to be released later to spin a turbine at times of high demand.
Pumped hydro can offer power within 30 seconds, so is more useful for longer-term storage than instant market balancing.
Drax already operates one of these facilities in Scotland and has begun preliminary work on its second Crauchan power station, which combined will have more than 1GW capacity.
SSE is also building a pumped hydro station in Scotland, which it estimates will hold 1.5GW of capacity, equal to 30GWh.
Thermal storage, operated by small caps Azelio, Brenmiller Energy and Saltx Technology, quite simply sees a material heated using surplus energy and stored in an insulated container.
When needed, the heat can then be used to power a generator.
Corre’s compressed air storage works on a similar basis – it is created using energy at times of lower demand for the air to be released later to power a turbine to feed a power grid.
Each system offers benefits and will likely feature in the UK's energy mix, according to Longspur, which suggested five key markets for the tech, including wind, solar and long-duration storage, alongside frequency response and volume trading on the energy market.