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CMS Guide to Energy Storage

Editors: Munir Hassan Louise Dalton
 
Louise Dalton
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Austria
1. What electricity storage projects have been commissioned in your jurisdiction to date?
With its large-scale pumped-storage power and storage capacity in the Alps, Austria assumes an important role in the energy storage market in Central Europe. The total storage capacity of Austrian storage power plants amounts to circa 3 GW.

The Austrian electricity market was liberalised in 2001 and, generally, electricity is not generated and supplied by monopolistic companies but instead organised through a wide range of market players. However, most of the biggest pumped-storage power plants (Malta, Silz, Limberg, Kopswerk, Reißeck, Häusling) are still partly or fully state-owned.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
A study carried out by the Energy Economics Group of the Vienna University of Technology in 2013 assumed that the majority of upcoming pumped-storage power plant installations will merely be extensions and/or upgrades of existing equipment. Therefore, only a slight increase in storage capacity is expected in the future.

Because of the existing electricity storage capacity in pumped-storage power plants, alternatives such as compressed air storage systems etc. are not an important topic in Austria at the moment.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Electricity storage is not separately defined in the Austrian legislative framework. Neither the national Electricity Act (“ElWOG”) nor the provincial implementation laws define the term electricity storage. Despite this, pumped-storage power plants are referred to in various regulations.

Pumped-storage power plants are qualified as energy generators and have to comply with the relevant legislation, in particular, with the Electricity Act(s). As a result, projects usually have to hold a generation licence pursuant to the provincial Electricity Act.

However, there are certain exemptions for energy storage projects, e.g. temporary exemption from grid use fees for projects which were brought into operation after 7/8/2013 and exemption from electricity duty. In general, there are lower grid use fees for energy storage plants that qualify as end users under the Electricity Act.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Potential investors are being discouraged from investing in new pumped-storage projects by the current low electricity prices. Furthermore, the funding of green electricity affects the profitability of pumped-storage projects. Pumped storage power may not be labelled as hydro-generated power and therefore cannot be labelled as renewable energy. The expansion in wind and solar power, which provides more and more power at peak times (such as noon) and compete with “stored” electricity, have led to a reduced demand for stored energy at these times.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
Legislative competence in the electricity sector is divided between the federal state and the nine provinces. The federal state is competent for framework legislation and the provinces are competent for implementation legislation.

The relevant governmental departments in Austria are (on a national level) the Ministry for Science, Research and Economy, Section III (Energy and Mining), and (on a provincial level) specific departments in the governments of each of the nine provinces.

The enforcement of electricity law falls within the sole competence of the provinces; the competent authorities are defined by the respective provincial law.

“E-Control” (http://www.e-control.at), with its seat in Vienna, is the general regulator for electricity and natural gas markets throughout Austria.

The main Transmission System Operator in Austria is Austrian Power Grid AG (as a 100% subsidiary of Verbund AG) which has the function of control area manager (“Regelzonenführer”) for Austria. Vorarlberger Übertragungsnetz GmbH as a second, regionally active TSO is subordinated to Austrian Power Grid AG.
Contacts
Johannes Trenkwalder
Partner
T +43 1 40443 1750
E johannes.trenkwalder@cms-rrh.com


Florian Kromer
Associate
T +43 1 40443 1850
E florian.kromer@cms-rrh.com
Brazil
1. What electricity storage projects have been commissioned in your jurisdiction to date?
Brazil has a long tradition in hydroelectric energy production, with approximately 80% of its electrical energy coming from a combination of reservoir dams and run-of-the-river dams. Brazil has been at the forefront of hydro-storage technology, building the first two pumped-hydro storage plant in the world in the 1940s, respectively the Pedreira and the Traição Dams. Nevertheless, due to unrelated environmental issues, local authorities prohibited water pumping from the feeding river, effectively limiting the use of the two projects to a minimum. While it is true that today’s Brazilian hydroelectric plants do benefit from the storage of water during the wet months to guarantee baseload generation throughout the year, such storage facilities are different in nature from traditional pumped-hydro storage facilities. The water reservoirs are, in fact, state owned resources and hydro generators are required by law to obtain a minimum quantity of water rights from nearby reservoirs. Indeed, generators do not decide when to produce electricity, but rather this is a decision of the National Independent System Operator (Operador Nacional do Sistema Elétrico – “ONS”) based on the results of a stochastic analysis.

More recently, the increased interest in energy storage has driven investment in small-scale pilot programs to allow more stable access to electricity in isolated communities. The first of its kind went live in April 2016, and constitutes a 282 kWh battery pack connected to 360 photovoltaic modules for a total of 90 kW.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
In April 2016, the Brazilian National Regulatory Authority (“ANEEL”) published the first draft of a three-year energy storage initiative in the context of its R&D programme for technological innovation in the power sector, which was launched in 2012. The initiative is expected to launch this year and project selection will be concluded in 2017.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
ANEEL’s announcement is timely and shows an interest in pushing energy storage to be considered as a solution to Brazil’s growing renewables capacity and urgent need to fill the transmission infrastructure gap.

The regulator’s announcement is designed to prevent a sudden and inefficient implementation of storage technology in the future and seeks to incentivise technical and commercial arrangements for the evaluation and integration of energy storage systems in the Brazilian electricity sector. The initiative will be funded by the monies raised in accordance to legislation that requires all power companies to invest 0.4% of their annual revenue in R&D projects supervised by ANEEL itself.

ANEEL calls for the submission of propositions for innovating the current legislative framework and for the development of projects introducing new technologies and the installation of a pilot storage projects by any generation, transmission or distribution company that is currently authorised to operate in Brazil.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
While renewable energy projects, such as solar and wind, are growing exponentially, the Brazilian electricity matrix still relies heavily on a combination of hydro-power and fossil fuel peaking plants.

The current lack of a clear regulatory framework creates fundamental challenges. The absence of regulation relating to short-term intermittency management caused by renewable sources and the absence of specific compensation mechanisms relating to frequency regulation or back-up generation should be considered a priority in the process of developing an appropriate regulatory framework for energy storage.

Another challenge for energy storage in Brazil will be access to capital. Given the current unfavourable economic conditions, it is not clear how long it will take for energy storage to benefit from large-scale investments.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
A plethora of government entities are involved in the Brazilian electricity sector. The Mining and Energy Ministry (“MME”) has overall policy-making responsibilities, as well as having other important powers such as granting concessions and regulating the bidding processes for concessions relating to public services.

As the national regulatory authority, ANEEL is responsible for the implementation of MME’s policy directives as well as overseeing the market participants operating in the electricity sector. Pursuant to the national R&D program for the innovation of the energy sector, ANEEL is also responsible of incentivising innovation through initiatives such as the one mentioned above regarding energy storage.

The Company for Energy Research (Empresa de Pesquisa Energética – “EPE”) is another important stakeholder in the Brazilian energy sector, being responsible, in particular, for the country’s Ten and Thirty Year Energy Plans, as well as the implementation of Capacity Auctions for generation and transmission facilities. Given its crucial strategic development role, EPE will have important responsibilities once a preliminary energy storage regulatory framework has been established.

ONS is a private non-profit entity, responsible for the operational control and coordination of the generation and transmission facilities connected to the National Interconnected Power System. If the energy storage regulatory framework adopted considers storage as a generation activity, ONS will gain operational control of the energy storage facilities connected to the grid.

Finally, on the financing side, three main entities, the Brazilian Development Agency, the Brazilian Development Bank and the Funding Authority for Studies and Projects might provide incentives for private sector developers to invest in the energy storage sector.
Contacts
Ted Rhodes
Partner
T +55 21 3722 9831
E ted.rhodes@cms-cmck.com


Siddharth Fresa
Lawyer
T +44 20 7367 3000
E siddharth.fresa@cms-cmck.com
Bulgaria
1. What electricity storage projects have been commissioned in your jurisdiction to date?
There are currently three operational pumped hydro storage projects in the Republic of Bulgaria. Their combined capacity is around 1.4 GW. All these three projects are operated by the National Electricity Company EAD, a company licensed as the Public Supplier and for the production of electricity under the Bulgarian laws. The largest of the projects, called Chaira PHPP, is the biggest underground plant in the Balkans with an installed capacity of around 900 MW. It has been specifically designed and put in operation in the 1980s by the Japanese companies Mitsui & Co. and Toshiba Corporation in order to make sure that the excess electricity from the two 1000 MW Nuclear units – unit 5 and unit 6 of Kozloduy NPP – is properly stored and utilized.

The National Electricity Company EAD is an active participant on the Bulgarian Independent Energy Stock Exchange (established in 2015 and functioning from the beginning of this year), where it sells the electricity produced by Chaira PHPP.

Similar to other states, the Bulgaria market is actively trying to encourage the use of the battery storage technologies. However, currently there are only a few small projects to cover the needs of the wind and solar projects, as these additional investments are not currently sufficiently competitive.

Monbat AD, a private company, is a producer of such batteries in the Bulgarian market. It still has not put in operation any significant battery storage projects.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Yadenitsa, a pumped storage project, is one of the projects of common interest as determined by the regulations of the European Parliament and Council. This project was started by the National Electricity Company EAD in 1997 and has been put on hold in 2009 due to lack of financing. Recently, the European Commission decided to finance 50% of the project so it can be completed. The expected completion period is 7 years from 2015. The project is considered a common interest project because it will increase the energy efficiency of Chaira PHPP, and the time Chaira PHPP could operate at full capacity would be extended to 22 hours (currently being around 8 hours).

AES is one of the world leaders in the energy storage sector. As part of their expansion, the company is planning to develop a battery storage project in Bulgaria. In the middle of 2015, the company presented its proposal for the development of the battery storage technology in Bulgaria to the Minister of Energy. While AES has not started any specific projects, as it is the operator of the largest wind power plant in Bulgaria, some consider it most likely that the pilot project will be implemented there.

There are many small projects where consumers utilise battery storage technology for domestic purposes, such as reducing the demand charges of large energy users.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Energy storage is regulated under the Energy Act (promulgated on 9 December 2003, as amended from time to time). While gas storage is specifically regulated by the Energy Act, the electricity storage has no separate legislative framework. Gas storage is subject to licencing and specific regulations with respect to the storage, distribution and supply.

In practice, developers of electricity storage projects (such as hydro-pumped plants) over 5 MW must obtain a generation licence and comply with the Energy Act.

So far the Bulgarian legislation has placed a much greater focus on energy efficiency, having separate legislative acts and regulatory authorities. Recently the Energy Efficiency Agency has been renamed to Agency for Sustainable Energy Development, thus empowering this body with additional functions related to renewable energy and energy storage.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Energy storage projects are facing the following challenges:
  • Lack of revenue – Energy storage projects are expensive to develop. The Bulgarian market is quite competitive and electricity prices are low. As a result, the development of electricity storage project is uncompetitive. In addition, there is significant revenue uncertainty during the project construction period.
  • Storage and distribution licence requirement –The storage and distribution of energy are subject to licencing. Licensing is a costly and time-consuming process.
  • Regulatory changes – The renewable energy projects in Bulgaria developed between 2007 – 2014 were incentivised by way of a FiT. As a result, in the times of curtailment of production or offtake (due to grid-related or balancing reasons) developers were incentivised to develop electricity storage facilities. Since the changes to the Renewable Energy Act, which entered into force in 2014, there is a cap of the electricity produced under FiT and therefore this indirect support mechanism has been eliminated.
  • Cross-subsidies – Despite recent efforts, the electricity price is still cross-subsidised in Bulgaria, which is not providing the right price signals to the investors willing to consider energy storage projects.

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
Energy storage is mainly regulated by the Energy and Water Regulatory Commission (“EWRC”). This is the main regulatory body that regulates the licensing of electricity and gas storage operators, though, as noted above, there is no specific storage regulatory regime.

The Ministry of Energy (“MoE”) is the ministry of the Bulgarian Government which executes the Governmental policy in the energy field. Their function in relation to energy storage is to ensure that market participants implement the lowest-cost planning option when developing the various energy storage projects.

The Sustainable Energy Development Agency (“SEDA”) is the Governmental body dealing with energy efficiency and sustainable energy development, which implements various EU-led projects for efficient use of energy and will be driving the secondary legislation regarding the energy storage projects in the future.

Bulgarian Energy Holding EAD (“BEH”) is a company fully owned by the state. The main purpose of the company is the generation, extraction, transportation, storage, management, distribution and sale of gas and electricity. It has a function of general oversight of the electricity market in Bulgaria and usually its Chairman is the deputy minister in charge of electricity.

The National Electricity Company EAD is a subsidiary of BEH operating in the area of generation and sale of electricity to consumers. It operates the largest energy storage projects to date.

The Electricity System Operator is the Bulgarian Transmission System Operator. It is fully unbundled from the National Electricity Company EAD and is responsible for the common operational planning, coordination and control of the Bulgarian power system and its parallel synchronous operation with neighbouring systems. Its activity also includes transmission grid operation, maintenance and reliable functioning, auxiliary network servicing, as well as maintenance and repair services in the energy sector. It also manages the power transmission through the national grid and runs the electricity market.
Contacts
Kostadin Sirleshtov
Partner
T +359 2 92199 42
E kostadin.sirleshtov@cms-cmck.com


Borislava Piperkova
Associate
T +359 2 92199 10
E borislava.piperkova@cms-cmck.com
Czech Republic
1. What electricity storage projects have been commissioned in your jurisdiction to date?
There are currently only three operational pumped hydro storage projects in the Czech Republic: Stechovice with a capacity of 45 MW, Dalesice with a capacity of 480 MW and the newest Dlouhe Strane with a capacity of 650 MW, which was commissioned in 1996. All of them are owned by CEZ Group, which is the largest energy group in the Czech Republic and controlled by the Czech government.

In 2013, CEZ Group was considering constructing a new pumped hydro storage project; however, the project was postponed due to the low profitability of the investment. There are no other larger-scale electricity storage projects currently being developed in the Czech Republic.

However, the Czech government provides subsidies to household projects consisting of photovoltaic panels with electricity storage systems. Batteries and thermal energy storage are the two most commonly used methods of electricity storage for households in the Czech Republic.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
The importance of electricity storage (in connection with smart grids and other electricity management elements) is often discussed on various levels in the Czech Republic. Despite the ongoing discussions, there is no significant development in the area of energy storage.

In 2015, the Czech Government adopted the National Action Plan for Smart Grids (“NAPSG”) prepared by the Ministry of Industry and Trade under principles set out in the update of the State Energy Concept, which was also introduced in 2015. The NAPSG is meant to prepare the Czech energy system for new trends and allow citizens and businesses to reliably and safely make use of the increasing opportunities offered by the technological development in the energy sector. It is apparent from the NAPSG that energy storage is not a top priority for the Czech Republic in the short term, i.e. until 2020.

The NAPSG provides a set of questions that need to be addressed prior to the introduction of any larger-scale energy storage projects. According to the NAPSG, it is necessary to define the rules for the development of the energy storage units and to introduce relevant legislation, especially with respect to licensing, grid connection and tariffs.

The NAPSG regards electricity storage as the most expensive solution (from both capex and opex perspective) for the development of smart grid in the energy sector.

Pursuant to the NAPSG, prior to any future decision-taking regarding electricity storage by the end of 2016 a study will be prepared regarding the optimum future location of electricity storage projects within the energy system and their necessary capacity and application, in addition to the roles of the individual market participants.

No development of larger-scale electricity storage installations is expected within the Czech energy system until 2020, save for domestic installations. For the 2020-2024 period, we anticipate the development of facilities due to the requirements arising from the penetration of intermittent electricity generation, particularly solar PV plants and wind farms, as well as in respect of electrified transport. The gradual rise of electricity storage facilities is expected in the 2025-2029 period as a reaction to the anticipated considerable reduction in the price of electricity storage technologies.

In 2015, Tesla introduced new lithium-ion batteries for households in the Czech market and other household batteries projects are under research and development.

In addition, the CEZ Group (acting through its Inven capital fund) invests in small to medium-sized innovative cleantech companies. Their existing investments include holdings in a German producer of household batteries and a German company developing and industrialising the most progressive energy technologies.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
As indicated above, there is no specific legal framework for electricity storage, except for the existing pumped hydro storage projects. The study undertaken pursuant to NAPSG will be prepared by the end of 2016. However, no significant development of energy storage projects (save for domestic projects) is expected until the end of 2020.

The current pumped hydroelectric energy storage plants are considered to be electricity producers and must hold the respective licence in accordance with the Czech Energy Act. Pumped hydro storage projects are not eligible for any state subsidies.

The Czech government subsidises the installation of photovoltaic panels located on domestic properties producing energy for their own consumption and the purchase of co-located energy storage solutions. These subsidies are provided under the “New Green Savings Programme” administered by the State Environmental Fund.

As of 2016, small photovoltaic facilities with a capacity not exceeding 10 kW do not need to obtain an electricity production licence, which makes their installation and operation more accessible to the public.

The Czech Government also supports the research and development in the field of energy storage through its subsidy programs maintained by CzechInvest.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Larger-scale energy storage is currently not regulated by any specific regulation, nor is any such legislation contemplated. Until the relevant legal framework is implemented, any investor interested in developing an energy storage project in the Czech Republic should take into consideration that a close coordination with competent authorities on the energy market will be necessary.

The future applications of energy storage include standalone energy storage projects, co-located energy storage projects with either generation or consumers or energy storage facilities to even out the voltage differences within the low-voltage network operated by distributor system operators. Each of the above areas would benefit from the introduction of relevant legislation, especially with respect to licensing, grid connection and tariffs.

New energy storage projects face the following challenges in the Czech Republic:
  • New market segment – a completely new business segment of electricity storage is expected to be created in the Czech electricity market. This new sector must necessarily have the rules of operation in place (based on market principles as specified in the NAPSG) and rights and duties of its new players must be specified.
  • Licence – in the event that electricity storage is operated by the market participant for its own requirements, no licence will be required. If it is a part of business activities, a licence must be obtained. There have been discussions whether electricity storage licence will be covered by the electricity production licence or whether a new licence type will be introduced. In addition, it is expected that the issuance of state authorisations for electricity storage will regulate the sector, allowing the Ministry of Industry and Trade to control the development of any new electricity storage facilities.
  • Access and metering – Furthermore, the technical terms and conditions under which various electricity storage technologies will be connected to the energy system need to be outlined, while taking their impact on the electricity system into consideration. To ensure the measuring of electricity “passing through” the electricity storage, an appropriate meter will need to be installed at the connection point of the electricity storage facility to the electricity network.
  • Tariff – the tariff system is in need of adjusting, because it could be abused by the wide range of investors in the new electricity storage projects, which might result in the destabilisation of the regulated payments system. However, any reform should take into account the pumped hydroelectric energy storage projects that are already being operated. The use of electricity storage may be based on market prices only, free of any regulatory interference, save for the use of electricity storage in order to stabilise the low-voltage network.

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
The development of a legal framework for energy storage is primarily in the power of the Ministry of Industry and Trade, which also prepared the State Energy Concept and the NAPSG. As stated above, no specific subsidy for energy storage is currently expected.

The principal regulatory body in the energy sector is the Energy Regulatory Office that issues energy licences, approves technical terms and conditions for access to the distribution network and specifies tariffs on an annual basis.

The future role of OTE, the Czech electricity and gas market operator, which provides comprehensive services to electricity and gas market players, needs to be re-considered in light of introduction of energy storage facilities.

Distribution system operators may be involved in energy storage projects, primarily in cases where energy storage could even out voltage differences within the low-voltage network operated by them.

CEPS is the sole transmission system operator that procures various ancillary services whereby such ancillary services provide key revenue streams for energy storage.

It is expected that other utilities and independent developers will be at the forefront of the deployment of large-scale electricity storage in the Czech Republic.
Contacts
Lukáš Janíček
Partner
T +420 2 96798 833
E lukas.janicek@cms-cmck.com

Radim Kotlaba
Senior Associate
T +420 2 96798 830
E radim.kotlaba@cms-cmck.com
Germany
1. What electricity storage projects have been commissioned in your jurisdiction to date?
For many years pumped hydro storage projects were almost the only electricity storage technology. They still make up the largest share of the electricity storage capacity in Germany; about 30 projects commissioned between 1926 and 2004 provide a total capacity of about 7 GW. The majority are operated by utilities and they principally provide time-shifted electricity supply and balancing energy. Originally their main purpose was to store electricity during low-use hours, such as night-time, and provide additional energy during peak daytime hours. In recent years, their use during high production times of wind farms and PV plants has increased in importance while PV plants provide some of the electricity required during peak times.

Another older storage project is the Huntorf CAES plant, the world’s first compressed air energy storage, commissioned in 1978 and increased to a capacity of 321 MW in 2006. The first large battery storage plant in Germany, commissioned 1986 in Berlin-Steglitz with a capacity of 17 MW, served as energy reserve and frequency stabilization for the insular West Berlin power grid, but was taken out of operation after the reunification in 1994 as its operation was no longer necessary or economic.

In recent years, the focus of industry participants and research has been on battery storage technologies and to a lesser extent also on power-to-gas solutions. Two recent pioneering projects combine renewable energy plants with battery storage units. Since July 2014, a joint venture of Robert Bosch GmbH and the owners of the Barderup wind farm have operated a hybrid battery storage consisting of a 2 MW/2 MWh lithium-ion battery storage and a 330 kW/1 MWh vanadium redox flow battery storage. The storage is connected to the Barderup wind farm to save any production surplus, time-shift export and allow participation in the balancing energy market. In November 2014, a 1.3 MW lead-acid battery storage, supplied as a turnkey solution pre-installed in containers, was commissioned at the 68 MW PV plant Alt Daber to allow the plant to provide primary control reserve.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Germany’s Energiewende, the increasing wind energy and PV capacities and the planned decommissioning of all nuclear plants put a focus on storage solutions. Midsize and larger scale battery storage options above 1 MW are a hot topic. They are installed primarily by grid operators or utilities to balance the grid and provide control power. However, recent projects also include the co-location of battery storage with renewable energy generation to improve grid compatibility of renewables, while at the same time opening improved marketing opportunities for the project owners in times of decreasing financial support through feed-in tariffs.

About ten such larger scale battery storage projects have been realized in recent years already, most of them using lithium-ion technology, and at least eight projects are currently under construction with further projects in various planning stages. While many early demonstration projects received funding under the Federal Ministry of Economic Affairs and Energy’s 200-million-euro-energy storage funding initiative, recent commercial projects depend solely on revenue from participation in the frequency response market. Among others, the power plant operator STEAG already operates a 5 MW/5 MWh lithium-ion battery storage and plans six more 15 MW projects alongside existing power stations.

Falling PV system and small battery costs as well as innovative leasing and rental models are likely to lead to an increase in the combination of small battery storage with household or commercial small scale PV plants to increase self-sufficiency and open opportunities to provide frequency response services. New solutions include connecting small batteries to centrally controlled units. The resulting virtual power plant can be used to provide frequency response and thereby support grid stability. With the same aims district storage solutions are developed, such as the “electricity bank”, a project supported with funding by the Ministry for Environment Baden-Württemberg, consisting of a 100 kWh lithium-ion central battery storage in which owners of small PV and CHP plants can store their surplus energy comparable to money in a bank account.

Finally, car manufacturers are entering the stationary battery storage market both for second-use of car and electric car batteries, and to create economies of scale for electric car batteries, again with the goal of financing the projects by providing frequency response.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
There is no separate legislation on electricity storage facilities in Germany.
German law regards electricity storage facilities as consumers of electricity. This would imply that storage facilities, when withdrawing electricity from the distribution or transmission system for storage purposes, need to pay all fees, charges, etc. which normally are associated with the consumption of electricity. However, there are several exemptions in place, which aim to facilitate the use of storage facilities.

The German Federal Energy Industry Act (EnWG) exempts storage facilities which were built after 31 December 2008 and were put into operation within 15 years on or after 4 August 2011 from the duty to pay network tariffs for a period of 20 years when withdrawing electricity from the distribution or transmission system for storage purposes. The exemption only applies if the electricity withdrawn is stored in an electrical, chemical, mechanical or physical storage facility and the electricity is re-fed with a delay into the same distribution or transmission system. Special rules apply to pumped hydro storage plants. Whether the exemption from network tariffs also means that other charges and levies, such as concession levies, which are to be paid together and on top of network tariffs, do not have to be paid either is disputed.

Furthermore, the German Renewable Energy Sources Act (EEG) exempts electricity supplied for the purpose of being temporarily stored in an electrical, chemical, mechanical or physical electricity storage facility from the EEG levy if the electricity stored is only withdrawn to be fed back into the same network from which it was withdrawn.

According to the current electricity tax regulation, electricity tax does not need to be paid on the generation of electricity. Pumped hydro storage facilities are regarded as generators of electricity. Thus, they are exempted from the duty to pay electricity tax. However, other electricity storage facilities are not mentioned in the regulation and thus not exempted. Therefore a legislative amendment has been proposed. According to the proposal, the respective administrative body could, on request, allow stationary battery storage facilities to be regarded as part of a network if electricity is stored only temporarily and fed back into the network. In this case the battery storage operator would not need to pay electricity tax.

To open up the market for balancing energy to more suppliers, such as storage facilities, the German Federal Network Agency has proposed some changes to the balancing energy regulations. Amongst others, it proposes exemptions from the minimum size of products on the secondary and tertiary control market. Storage facility operators would prefer to have the conditions on the primary frequency response market changed to open it up for battery storage. However, changes are not expected on this market yet.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
The main challenges for new energy storage projects are as follows:
  • Revenue uncertainty: Main source of revenue for most projects is the participation in the frequency response market. The prices for frequency response are not secured by long-term contracts but subject to auctions, meaning that the prices can and are changing.
  • Difficulties to pre-qualify for the frequency response market: Participation in the frequency response market is the primary business model for many electricity storage projects. This requires firstly that storage projects are pre-qualified, i.e. meet the transmission system operator’s reliability requirements. Currently, this is difficult, especially for small storage units that already do not meet the minimum size requirements. But some of the other criteria, especially for the primary frequency response market are also challenging for larger scale battery storage. Further projects face the additional risk that requirements may change even during construction. Current proposals to facilitate participation of storage facilities in the frequency response market are so far limited to the secondary and tertiary control market.
  • Higher operational costs: As set out above, the import of electricity from the transmission or distribution system is in principle considered “end-use” of such electricity. While exemptions from network tariffs exist for certain types of storage, including battery storage, it is unclear whether this also extends to other charges and levies normally being charged together with the network tariffs. Furthermore, according to the current electricity tax regulation, electricity storage (other than pumped hydro storage) is not exempted from the electricity tax on electricity imported out of the network for storage purposes. This situation would be improved if the proposed amendment to the electricity tax law is implemented.

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
The Federal Ministry for Economic Affairs and Energy, responsible for energy policy in Germany on the federal level, supports the development of electricity storage facilities. Under the Energy Storage Funding Initiative launched in 2012, funding for the development of energy storage systems has been provided to around 250 projects. Currently a newly launched battery storage funding programme for decentralised battery storage systems aims at ensuring that PV installations connected to electricity networks will be more beneficial to the overall system by limiting a PV installation’s maximum export to 50 per cent.

The Federal Network Agency is the relevant regulator for electricity storage. As noted above it has proposed some changes to the current balancing power markets which can also help storage facility operators to be active in these markets.

The German Energy Agency (Deutsche Energie-Agentur GmbH – “dena”) (50 % of dena’s shares are held by the German state, the rest by private entities) is researching storage use in its study “Optimised use of battery storage systems for grid and market applications in the electricity supply”. The study consists of various network and market oriented case studies, and will be carried out from March 2016 to early 2017. The study aims to analyse concrete network situations for the use of storage systems and attempts to cover the various areas of use of storage facilities in Germany in its entirety. In order to implement the study, dena is collaborating with transmission and distribution system operators, energy providers, plant manufacturers, and storage solution providers.
Contacts
Dorothee Janzen
Partner
T +49 40 37630 338
E dorothee.janzen@cms-hs.com

Agnes Wippich
Counsel
T +49 711 9764 702
E agnes.wippich@cms-hs.com
Hungary
1. What electricity storage projects have been commissioned in your jurisdiction to date?
Currently no electricity storage projects are operational in Hungary. Although, the concept of building pumped hydro storage has been raised time to time for decades. In the 1980s various possible sites were investigated, primarily next to the mountainous regions of the River Danube, but no such project has ever materialised.

Later, around 2005 (simultaneously with the commencement of larger scale renewable generation developments) the then electricity wholesaler (the state owned MVM) again raised the idea of an about 500-600 MW capacity pumped hydro storage project. Again, it did not materialise partly because of environmental concerns (the possible location was a Natura 2000 area).

No battery storage or other advanced technology electricity storage projects are installed.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Recently, Paks II project, the planned extension of the existing Paks Nuclear Power Plant, triggered discussions over the development of a pumped hydro project.

Some experts believe that pumped hydro storage might be necessary in connection with the Paks II project so the inflexible generation of the future nuclear power plant can be balanced by a pumped storage facility.

Despite it, the National Energy Strategy 2030 (the “Strategy”) does not recommend building pumped storage power stations in Hungary. According to the Strategy energy storage may be solved more efficiently with regional cooperation (i.e. through the export/import of the excess volumes of electricity).
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
There is no specific electricity storage regulatory regime in Hungary.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Virtually all potential sites of the contemplated pumped hydro projects are located next to the River Danube and other environmentally sensitive locations, which are Natura 2000 territories.

With respect to one such possible site, the competent environmental authority refused to issue the necessary environmental license, and this refusal was later confirmed by a court. So this site was excluded from any further pumped hydro development procedure.

In addition, the development of larger scale energy storage facilities (i.e. pumped hydro projects) is not an immediate necessity from technological and system balancing points of view. Therefore, the possible developers are reluctant to finance the excessive costs of such projects.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
The Hungarian Energy and Public Utilities Authority (“HEPURA”) is the competent regulatory authority responsible for the licensing of all electricity generation facilities. In case of any future development e.g. pumped hydro storage, HEPURA would act as the licensing body.

So far it has been the state-owned utility company, MVM, that has occasionally raised the idea of pumped hydro projects. If such a project would ever materialise, then most probably MVM or an MVM group company would be the developer.
Contacts
Peter Simon
Partner
T +36 1 48348 29
E peter.simon@cms-cmck.com

Tamara Turzo
Associate
T +36 1 48348 30
E tamara.turzo@cms-cmck.com
Italy
1. What electricity storage projects have been commissioned in your jurisdiction to date?
There are currently nineteen operational pumped hydro storage projects in Italy, mainly located in the Piedmont and Lombardy regions, with a capacity of over 7.7 GW. Originally these projects were developed by the then state-owned electricity companies, but after the liberalisation of the electricity market, most of them are owned by commercial companies. Enel, which is partially owned by the Italian government with 25.5% of the company’s shares, is the main operator in the field of pumped hydro storage.

Over the past few years, the Italian Government adopted legislative measures so that the transmission system operator (“TSO”), Terna S.p.A., and distribution system operators (“DSOs”) may develop and manage storage facilities by means of batteries on their own grids. Terna has developed an investment plan of more than EUR 200 million, testing new technologies in several areas of Italy, especially the Campania, Sicilia and Sardinia regions. The project, which operates with both sodium-sulphur and lithium-ion batteries, was approved by the Italian Ministry of Economic Development (“MiSE”) in 2012, and will secure the supply of electricity in the south of Italy with the installation of storage systems with a total capacity of 40 MW. Some of these technologies are still under construction.

As far as DSOs are concerned, no specific pilot projects have been adopted. Nevertheless, some distributors, above all Enel Distribuzione and ACEA, have installed batteries connected to their respective distribution grids.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Batteries have become an attractive technology for electricity storage projects lately; however, in Italy energy storage applications are traditionally represented by thermal storage at domestic or commercial levels, and by pumped hydro storage.

The main goal of the project which Terna is currently developing is to increase the security of electricity systems in the Italian islands of Sicily and Sardinia. The project is divided into two phases. Phase 1, called “Storage Lab”, which is still in progress, plans the installation of two multi-technology power plants (with different storage technologies) with a total 16 MW in Sicily and Sardinia. Based on the results of Phase 1, Phase 2 is anticipated to install an additional 24 MW using the most promising technologies. During the Storage Lab phase, batteries are being supplied both by Italian and foreign companies, and Italian and foreign universities and research centres will be able to participate.

Particular attention is paid to the integration of renewable energy in the Puglia region, where a project based on hydrogen storage is expected to match energy supply and demand and optimise the electricity generated by intermittent renewable energy sources while ensuring security and stability of the power distribution network. The project is being developed by a consortium, which will design, build, deploy and operate the 39 MWh facility.

Other anticipated projects concern the increase in the uptake of battery storage at a domestic level, and applications to reduce the demand charges of large energy users.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Even though the market of electricity storage is growing very fast in Italy, the legislative framework is fragmented and does not fully cover all the main features of this market.

Until a few years ago the legislation mentioned only pumped hydro and no other forms of energy storage. The unexpected boom in PV installation increased the stress and the risks faced by the Italian network, so Legislative Decree no. 28/2011 stated that the TSO may develop storage systems in order to increase the despatch of intermittent generation. Moreover, the TSO may develop and manage distributed storage facilities by means of batteries, and the same may be done by DSOs on their own grids. Terna undertook to develop its project in the south of Italy on the basis of such legislation. As of today the legislation described above is the main legislative framework in Italy as regards the electricity storage sector.

Ancillary legislation adopted by the Italian Regulatory Authority for Electricity Gas and Water (“AEEG”) provides the legal framework for storage solutions connected to the grid by non-regulated subjects, like energy producers or end-users.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
The main challenges that energy storage projects are facing, as of today, and which may slow down the growth of the market, are:
  • the high revenue uncertainty; and
  • the high costs of batteries and relevant technologies involved in the storage.
Projects have to manage greater revenue uncertainty over their lifetime, and currently there are no government incentives which can increase profitability in the near future. Moreover batteries are still expensive, and according to producers and experts they could become cheaper only in the coming years.

To date, these challenges have been overcome by the use of the available research and development funding, also fostered by AEEG, which in the past few years has repeatedly stressed the importance of energy storage and its effects on the entire energy market.

The project of Terna on its grids and other projects concerning DSOs’ systems are also intended to develop new technologies and facilities that will be able to make Italy one of the most important and attractive markets in the energy storage field.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
AEEG is the independent body which, inter alia, regulates, controls and monitors the electricity market, including energy storage, in Italy. It was established by Law No.481/95 with the purpose of protecting the interests of users and consumers, promoting competition and ensuring efficient, cost-effective and profitable nationwide services with satisfactory quality levels. AEEG’s mission includes defining and maintaining a reliable and transparent tariff system, reconciling the economic goals of operators with general social objectives, and promoting environmental protection and the efficient use of energy. It provides an advisory and reporting service to the Government and Parliament, and formulates observations and recommendations concerning issues in the regulated sectors of electricity, including energy storage.
Gestore Servizio Energetici (“GSE”) is the state-owned company which promotes and supports renewable energy in Italy. In particular, GSE fosters sustainable development by providing support for renewable electricity generation and renewable energy storage, and by taking actions to build awareness of environmentally-efficient energy uses.
Contacts
Matteo Ciminelli
Partner
T +39 06 4781 5404
E matteo.ciminelli@cms-aacs.com

Pietro Cavasola
Partner
T +39 06 4781 5216
E pietro.cavasola@cms-aacs.com
The Netherlands
1. What electricity storage projects have been commissioned in your jurisdiction to date?
In January 2016 the first large battery-based energy storage facility in the Netherlands was commissioned by AES. The array can provide 10 MW of interconnected energy storage. It will help to balance supply and demand for electricity by providing primary control reserve for the national transmission grid operated by the transmission system operator (TSO) TenneT. In this regard, the AES project provides operational flexibility while lowering overall system costs and emissions levels.

A further development in the field of energy storage is the rolling out of the small-scale Tesla home battery, Powerwall, which was launched in the first quarter of 2016 in the Netherlands. The Powerwall has a 7 kWh energy storage capacity, sufficient to power a home during the evening using electricity generated by solar panels during the day. The Powerwall can also store cheap electricity imported from the grid at night that can be consumed during the day when electricity is more expensive, therefore optimising energy consumption behind the meter. The Dutch energy company, Eneco, is the supplier of the Tesla Powerwall.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
AES is planning to build two more battery-based energy storage facilities in the Netherlands, of which one may be installed near Arnhem. Furthermore, the Dutch energy company NUON is researching, in cooperation with the Technical University of Delft, the possibility of converting Magnum, its gas-fired electricity generation plant in Eemshaven, into an ammonia based energy storage facility. Under the project name “ReCharge”, SUEZ and Cofely are exploring possibilities to reuse car batteries in order to create a large scale battery to store energy. Although these projects are still in their exploratory phase, the interest in energy storage from market participants is steadily increasing.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Although renewable energy projects in general are possible under current legislation, the Netherlands has no specific legislation for energy storage. The legislator has drafted a bill combining and improving the current Electricity and Gas Act also knows as “STROOM”. The bill provided for more room for research and development for, amongst other projects, energy storage. Unfortunately the bill was rejected and the Ministry of Economic Affairs is currently redrafting the bill to facilitate experimental storage projects. The Ministry of Economic Affairs wants to then adjust Dutch legislation depending on the outcome of the R&D projects. In accordance with the roadmap (explained in more detail below), new legislation should be implemented in the period 2018-2022 to keep up with the developments related to energy storage.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
A primary conclusion is that energy storage in the Netherlands is still in its infancy and, except for the commissioned AES battery project, most projects are still in the exploratory phase. Furthermore, due to the proposed new Electricity and Gas bill having been rejected by parliament, national legislation provides little to no incentives for the development of energy storage. Occasional incentives have been provided by local governments, which have signed “green deals” to support research into opportunities for energy storage. A possible governmental incentive for energy storage could be provided in the form of a discount on the entry and exit connection tariffs, as has been done for gas storage in the Netherlands.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
The Ministry of Economic Affairs is the legislative entity responsible for future legislation in the field of energy storage. The developments and solutions in the field of energy storage are in line with the recently released Netherlands Energy Storage Roadmap, developed by the international certification body and consultancy DNV GL, the Technical University of Delft and consultancy firm Berenschot. The roadmap was initiated by the Ministry of Economic Affairs.

The electricity distribution and transmission networks are publicly managed and owned. The Netherlands has one TSO, TenneT, which is owned by the state, and has the task of balancing supply and demand for electricity, in which energy storage will become a factor in the future.

The energy market in the Netherlands is regulated by the Dutch energy regulator, the Authority for Consumers and Markets (ACM) (Autoriteit Consument en Markt).

As for the development of energy storage projects, commercial parties such as AES, NUON, SUEZ, Cofely, among others, are exploring the possibilities for energy storage.
Contacts
Mexico
1. What electricity storage projects have been commissioned in your jurisdiction to date?
There are currently no major energy storage projects in Mexico. The following examples are a selection of projects which have received press coverage:
  • A hybrid electricity project, including lead-acid batteries, was installed in San Juanico, Baja California Sur in 1999 by a consortium of local utility companies and other organisations. The system comprised 17 kW photovoltaic cells, ten wind turbines with a capacity of 70 kW, an 80 kW diesel generator and a flooded lead-acid battery bank. The original batteries lasted only two and a half years before they needed to be replaced as their capacity had declined to less than 80%.1
  • More recently, in 2014, Benito Juarez International Airport in Mexico City purchased three kinetic energy storage flywheel systems to use as backup power. The flywheel system was installed with the aim of safeguarding runway lighting and other critical navigation systems.2
  • As part of the city’s commitment to generating all of its energy from clean sources, Grupotec began installing a 25MW solar park in La Paz, Baja California Sur in January 2015, as part of a 20 year power purchase agreement with the Federal Electricity Commission (CFE). The project includes 11 MW of battery storage.3

2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Presently, there is not a strong demand for energy storage in Mexico. However, after the electricity reform and the commencement of operations of the Wholesale Electricity Market has opened up the market to private investments, other electricity trading alternatives may be developed in Mexico.

The main topic in Mexico is the State’s obligation to obtain 35% of its energy from clean sources by 2025. To ensure future energy security alongside the clean energy reforms, there is an increased need for systems that can provide stability to offset the variability of wind and solar power production, which are the focus of Mexico’s clean energy reform.

Furthermore, the enactment of the new Grid Code will modify the current behaviour of market participants and will force the operators and regulators to find new alternatives to provide reliability for the Mexican grid.

These new requirements for the reliability of the Mexican electricity system may force CENACE (the National Centre for the Control of Energy) to launch several auctions to purchase ancillary services that may have a positive impact for electricity storage projects.

Finally, the creation of the new Capacity Balancing Market (an ex post market that may take place under the 100 most critical hours in a regular year) might force the market participants to increase their reserve capacity to avoid any risk arising from price volatility. Likewise, this market might give electricity storage projects developers more options and incentives to develop projects in the future.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Mexican law does not currently specifically consider energy storage. However, it is anticipated that upcoming business practice manuals that are being drafted will include several provisions in connection with energy storage. Such upcoming rules are anticipated to consider energy storage providers as either “generators”, which will need to obtain a generation permit, and/or as “end-users” as storage devices will import electricity from the distribution or transmission system.

As there are no particular regulations under Mexican law, we anticipate that energy storage technology will be commercialized as an ancillary service under the Wholesale Electricity Market and frequency response will be a key factor in the industry’s development in Mexico.
4. please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Energy storage projects are still considered as a luxury in Mexico as currently they are too expensive to be financially viable. Energy storage infrastructure will require private sector financing. These investments will require a coordinated effort from different stakeholders, including research institutions (i.e. Instituto de Investigaciones Eléctricas), policy makers and commercial banks to design financing programs and instruments to ensure that funding and technical assistance is available for energy storage projects.

As is the case in many other countries, finance is available in Mexico but more work needs to be done to systematically channel those funds to the most appropriate projects. Providing technical support to help financers evaluate storage projects will certainly help to overcome these challenges.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
The main government entities involved in the electricity sector are:

5.1.1. Secretaría de Energía (Ministry of Energy): responsible for nationwide energy policy and for drafting the first Market Rules for the implementation of the Wholesale Electricity Market. It is likely to take on the principal responsibility in relation to energy storage as it implements policies required for the sector.

5.1.2. Comisión Reguladora de Energía (Energy Regulatory Commission): the regulator of the sector. It is responsible for regulating and granting generation permits, as well as transmission and distribution supply tariffs and monitoring the behaviour of the electricity participants.

Furthermore, the regulator is responsible for amending the Market Rules enacted by the Ministry of Energy in the manner it deems proper. Therefore, if electricity storage projects become important in the Mexican sector, it may have the authority to amend such rules accordingly.

5.1.3. Centro Nacional de Control de Energía (independent system operator): responsible for the operation of the Mexican energy sector and the Wholesale Electricity Market, and responsible for facilitating the connection and interconnection of power plants and load centres to the transmission and distribution systems.
Contacts
Derek Woodhouse
Partner
T +52 55 2623 0869
E dwoodhouse@wll.com.mx

Luis Fernández Lagunas
Senior Associate
T +52 55 2623 2272
E lfernandez@wll.com.mx
Morocco
1. What electricity storage projects have been commissioned in your jurisdiction to date?
There is currently one operational pumped hydro storage station in Afourer, Morocco, with a capacity of 460 MW. This project provides for time shifted electricity supply capacity and spinning reserve capacity. The Afourer pumped storage station, which was completed in 2004, is owned by the Moroccan Government.1 It was developed by the Moroccan state owned electricity company, the National Electricity Office, and private companies such as Alstom were also involved.

More recently, the Moroccan Government has developed the Noor Project, which is currently one of the world’s largest thermal solar power stations. The Government plans to expand the capacity to 580 MW. The first phase of this project, the Noor I station in Ouarzazate, was inaugurated in February 2016. Noor I has a thermal storage system with a capacity of more than 3 hours.2
2. What electricity storage projects are anticipated in your jurisdiction in the coming years?
The Moroccan Government intends to develop a second hydro pumped storage project with a capacity of 360 MW, called “STEP Abdelmoumen”, near Agadir3, which is expected to become operational in 2020.

Moreover, the second and third phases of the Noor project are currently being developed by MASEN, the Moroccan Agency for Solar Energy. Just like Noor I, Noor II and Noor III projects aim to install storage capacity of 3 hours each.
3. Is there any specific legislation/regulation or program that relates to energy storage in your jurisdiction?
Electricity storage is not separately defined in the Moroccan legislative framework. The rules concerning the issue of energy storage are to be found in the law applicable to the production of electricity.

However, with the increasing penetration of renewable energy and the political will to provide access to electricity over the whole Moroccan territory acting as the main drivers, the legislation on electricity storage is likely to develop in the near future.

Indeed, in its opinion dated 31 March 2011, the Economic and Social Council for Green Energy (the “Economic and Social Council”) has issued specific recommendations for a “successful transition into a Green Economy”. Among a diverse number of recommendations, the Economic and Social Council considers the necessity to achieve a competitive electricity market (art § 28). Three recommendations are made in this regard:
  • It is necessary to solve the problems of peak power demand and energy storage.
  • Ensuring a diverse mix of energy sources (“STEP”, biomass, clean coal, liquid natural gas) is recommended.
  • Developing small and medium power installations (particularly renewable energy) is recommended.
In addition, the legislative decree n° 2-14-541 has set out the tasks of the Ministry of Energy. According to Article 1, the Ministry has to implement “a strategic energy storage policy” and “to control the organization and the functioning of the electricity markets”, in the framework of the consolidation of a liberalised energy market.

It is also worth noting that the Moroccan Institute for Standardization (“IMANOR”) has recently enacted standards applying to battery storage.4 Standard NM CEI 61427-1 regulates the general conditions applying to the battery storage for renewable energy, NM EN 12977-3 regulates the performance testing methods applying to the storage installations for water solar heating, and NM EN 12977-4 regulates the conditions applying to the combined storage methods for solar heating. These standards adopt the international standards in the electricity storage area.5
With regard to the legislation already in force relevant to the issue of electricity storage, the law 13-09 related to renewable energy regulates the conditions under which installations producing electricity out of renewable energy sources can be installed and operated.6 Law 13-09 has liberalised the system of electricity production based on renewable energy sources.

The law provides for three different types of regimes depending on the threshold of energy produced. The installation, operation or modification of stations with an installed capacity less than 20 kW is free (art. 6.1). The installation, operation or modification of stations with an installed capacity over 20 kW and under 2 MW is subject to a declaratory regime (art. 4.1). The installation, operation or modification of stations with an installed capacity equal or over 2 MW is subject to a prior authorisation from the electricity transmission system operator (art. 3).

Law 58-157 has recently amended Law 13-09, and has brought important modifications. First, Law 58-15 has modified article 1 of Law 13-09 and increased the threshold of electricity production from 2 to 30 MW, for electricity produced from hydro sources. Second, the new draft of article 5 extends the scope of Law 13-09; from now on, electricity stations referred to in law 13-09 will also have access to low voltage electricity grid. Third, according to the new draft of article 6, the manager of a station producing electricity from renewable energy sources is now entitled to sell excess electricity production to the National Electricity Office (“ONEE”) or to the electricity transmission system operator.

Consequently, those developments might have future consequences on the question of electricity storage in Morocco. However, for the moment, the question of electricity storage in itself is not regulated.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Electricity storage is still at a development stage in Morocco and therefore faces the following challenges:
  • Lack of a specific legislation regulating electricity storage – the question of storage will be dealt on a case by case basis.
  • Restriction of the electricity resale to the ONEE – although the Law 58-15 allows the resale of excess electricity production to the ONEE or to the electricity transmission system operator, the resale is limited to 20% of the electricity produced.
  • Uncertainty of the electricity production – for electricity produced from hydro sources, the production highly depends on the pluviometry. In a semi-arid country such as Morocco, the production of electricity out of hydro sources can drastically vary from one year to another. For instance, in 2012, due to drought, the electricity produced by hydro stations fell by 15% in comparison with year 20118.
  • Public regulation entities – there is currently no electricity transmission system operator in Morocco. To overcome this gap, the draft legislation n° 48-15 provides for the creation, within the ONEE, of an independent entity in charge of this role. Draft legislation n° 48-15 also provides for the creation of an independent regulator (see below).

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
Electricity storage in Morocco falls within the scope of competence of the Ministry of Energy, Mines, Water and Environment.

ONEE is in charge of the production, the transmission and the distribution of electricity. According to art. 2 of law 13-09, ONEE is, in parallel with public and private entities, in charge of the production of electricity based on renewable energy sources. In that regard, the ONEE is the relevant entity concerning all projects that are related to electricity storage. In that regard, on the 4th of November 2015, the European Bank for Reconstruction and Development (EBRD) and the Moroccan Government have concluded a guarantee agreement for the loan of 35 million euros granted by the BERD to the ONEE, for the funding of the rehabilitation project of the hydroelectric plants9.

On 17 September 2015, the Council of Government has adopted the draft legislation n° 48-15 regulating the electricity sector, and establishing a National Authority for Electricity Regulation10 (Autorité Nationale de Régulation de l’Electricité – “ANRE”). According to the draft legislation, ANRE will exercise control over the electricity market, and will have power to issue sanctions. In application of Law 13-09, ANRE will regulate the access to the national electricity grid –with the aim of preserving free competition between the private investors, and fix price charges for access to the grid. ANRE will also be in charge of settling disputes that may arise between the electricity transmission system operator and the electricity producers, or between a distribution system operator and an electricity producer.

This draft legislation has been recently published in the Government’s official gazette11 and will enter into force six months after the date of the entry into force of the ANRE’s executive bodies.
6. References

Contacts
Marc Veuillot
Managing Partner
T +212 522 2286 86
E marc.veuillot@cms-bfl.com

Néna Lardy
Senior Associate
T +212 522 2286 86
E nena.lardy@cms-bfl.com
Poland
1. What electricity storage projects have been commissioned in your jurisdiction to date?
In May 2015 the Polish transmission system operator (PSE S.A.) concluded a feasibility study agreement with other Polish energy companies (Energa Operator S.A. and Energa Wytwarzanie S.A.) and a Japanese consortium led by Hitachi Ltd. The agreement’s objective is to increase the security of the Polish energy system by developing smart grids and electricity storage facilities. The project involves utilising electricity storage facilities to help balance the national electricity system if wind sources generate a large amount of electricity. It also limits the risk of having to turn off wind turbines. The project receives financial support from the New Energy and Industrial Technology Development Organization, a Japanese governmental organisation.

A letter of intent has been signed concerning another project, which is to be carried out by the leading Polish energy group, PGE S.A., and the gas transmission system operator, Gaz-System S.A.. Excess electricity from wind farms is to be utilised in a completely different way in a power-to-gas installation. The electricity will be used in an electrolysis process to produce hydrogen, a zero-emission fuel.

The Polish company Tauron Wytwarzanie S.A. is working on an advanced technology which transforms CO2 from industrial installations into synthetic natural gas (SNG) by a process called methanation. This process involves reacting the CO2 with hydrogen derived from electrolysis of water. In order to power the process the company will use excess electricity produced from renewable energy sources, mainly at night when electricity consumption decreases. The commencement of a functioning installation is planned for Q1 2017.

Another electricity storage project is to be carried out by Polish company Novavis and Storion Energy Inc., part of the American holding ITN Energy Systems Inc., which signed an investment memorandum in September 2015. The parties plan to build a factory in Poland and start producing innovative electricity storage systems using Vanadium Redox Flow Batteries (VRFB). With the support of Polish scientists, the parties are planning to begin intensive works on the improvement of the effectiveness of the batteries. The estimated value of the investment is EUR 10m. At the first stage of production, the main market will be Western Europe, in particular Germany.

Finally, by the end of September 2016 the company Energa-Operator, a Polish Distribution System Operator, is planning to complete the construction of a local distribution network balancing area, the first of its kind in Poland. This is a separate part of the distribution system where energy production and demand is balanced in order to ensure security of supply and improve energy efficiency. It will include a 0.75 MW capacity electric energy store, which will constitute a key element in the construction of a modern smart-grid. The company also plans to build a photovoltaic farm and carry out advanced research.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Despite the fact that electricity storage is becoming a “hot topic” in Poland, it is still quite a new subject here. Thus, projects planned for the coming years are still at an early stage of development. One of them is the new research programme commenced by the Polish Gas Company. The Company created a special department to pursue research on feeding hydrogen into the distribution network and storing electric energy.

It is only a matter of time until new projects get started, as the Polish government is encouraging companies to increase their interest in energy storage.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
As electricity storage is a relatively undeveloped field in Poland, there are still no detailed acts in Polish law which refer to it. However, the Renewable Energy Sources Act (“RES Act”) defines an electricity storage facility as a dedicated facility or group of facilities where electric energy generated as a result of technological or chemical processes is stored in a different form. The RES Act also specifies that an electricity storage facility should be considered a part of a renewable energy source installation.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Research and Development remains a key barrier to the sector. It is crucial for the Polish government to commence advanced research on electric energy storage to find new solutions and technologies in the storage sector. The plan is to focus on one innovative key investment which will guarantee the progress of the whole energy sector and allow Polish players to be competitive on the global market.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
Currently the Minister of Energy is the most important position that can actually influence the electricity market. His competence provided in the Energy Law Act covers preparing state energy policy, which should include plans for developing electric energy storage in the country. This will not be possible without the support of transmission and distribution system operators and other Polish energy companies which are conducting many surveys and works on new storage technologies. These technologies should enable Poland to manage its own resources in a better way. As can be understood from the above list of pending projects, companies are considering an ever-widening variety of possibilities aimed at improving this sector.
Contacts
Portugal
1. What electricity storage projects have been commissioned in your jurisdiction to date?
In Portugal, there has been a clear strategic focus on pumped hydro storage projects – currently there are several pumped storage projects across the country. Indeed, Alqueva’s pumped hydro storage project is one of the largest in Western Europe with a combined capacity of over 520 MW, which had an increase in its capacity since 2012.
A pilot project – Storage InovGrid – was launched by EDP and Siemens in January 2016, in which lithium-ion battery technology was implemented to supply electrical energy for Évora University Campus. This lithium-ion battery technology is combined with a storage capacity of over 360 KWh until the end of the project’s life cycle.
In addition, the Storage InovGrid project is intended to demonstrate that this technological driver – lithium-ion batteries – permits smart grid-scale use of the distribution network in order to promote energy efficiency. The main benefits of this technology relate to the operation of the distribution network, especially with regards to the continuity of the service through non-conventional storage systems.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Certainly, the lithium-ion project pilot mentioned above planted a seed of curiosity in the minds of energy companies and developers, which may have positive repercussions in the future for new projects using this energy storage technology.
Portugal is a pioneer in the implementation of an electric vehicle network. This network links various stations across the country and enables electric vehicles to recharge, using a recharge card. Organised by the public entity, MOBI.E, this enterprise is in charge of the electric vehicle network, as well as creating the infrastructure in order to promote a transition to electric vehicles without constraints.
In 2014, the Fund for Innovation Support (“FAI”) was established to financially assist MOBIE.E in order to enhance the network by building charge stations across the country.
In order to promote a more dynamic electric mobility network, it plans to install 124 charge stations (on public streets) and 50 fast-ways (covering service areas). Although the management is attributed to a public enterprise, commercial companies are entitled to supply the electricity needed to charge the batteries of the electric vehicles.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
In spite of foreseeing some innovative projects for energy storage in Portugal, there is not yet a general framework in this field.
Nevertheless, Portugal has a sectorial legislative framework for the electric mobility network that describes the general framework of the network and the licences required to operate within it, this being Decree-Law no. 90/2014, of 11 June. In this particular field, we expect governmental deployment (through legislation, but also through other political measures) will encourage a paradigm shift towards electric vehicles that reduces carbon emissions and is more efficient in the long-run. A good example of an incentive in this field is the regime of tax benefits associated with the acquisition and utilization of electric vehicles.
Still within the scope of the electric mobility, it is important to highlight that, in a communication dated February 2016, the Secretary of State to the Minister of Environment announced an investment of €1.9 million for the further development of the electric mobility network in Portugal. Also, the approval of a set of legislation in this area was announced. It is expected that this legislation will complete the general framework of the electric mobility network that already exists, allowing the creation of an open and competitive market of energy suppliers and charge station operators, under the coordination of the network operator MOBI.E.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
In relation to pumped hydro storage projects and lithium-ion battery technology, the main challenges can be summarised as:
  • higher operational costs – as mentioned above, all projects begin with a pilot project, therefore the instalments and experiments represent higher costs and revenue uncertainty, which is another challenge, as such technological experiments have not always been a success story; and
  • commercial companies will need to demonstrate licence compliance, which sometimes is a complex process, due to the environmental and technical issues which arise during the implementation of such projects.

With regard to the electric mobility network, there are three main obstacles that need to be tackled in the future:
  • difficulty on charging electrical vehicles combined with lack of charge stations;
  • financial constraints in acquiring electric vehicles; and
  • cultural obstacles as the paradigm shift is difficult to achieve.

Overcoming these three challenges will simply take time. People need to gain confidence in electric vehicles, and know that there is an infrastructure capable of supporting their needs. Only a strong foundation can assure and build this confidence. Therefore, the regulator, Government and industry would need to play their role efficiently in order to promote higher levels of trust in both investors and consumers.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage
Firstly, we would point the role of the Regulator (“ERSE”) which is responsible for regulating the electricity sector. ERSE is a public corporate body with administrative and financial independence.
ERSE performs its duties independently, within the framework of the law. Moreover, ERSE strongly encourages efficient energy use and protection of the environment. Therefore, regarding energy storage, we expect ERSE will have a special role in this area.
Also, the Government will play a strategic role, as it will outline the guiding principles of energy policy.
Industries are expected to promote innovation and a shift through technology drivers, including implementing and testing new technological advancements in order to promote efficiency in the electricity sector.
Contact
Russia
1. What electricity storage projects have been commissioned in your jurisdiction to date?

There are two hydroelectric pumped storage power plants in operation in Russia: the Stavropolskaya GAES in the Stavropol region (15.9 MW, commissioned in 1969) and the Zagorskaya GAES in the Moscow region (1,200 MW). The Zagorskaya GAES was first commissioned in 1987, with full operation achieved in 2000. The power plants are owned and operated by the state-controlled company RusHydro, which owns the majority of hydroelectric power plants in Russia. The Russian state holds a 66% stake in this company. The Zagorskaya GAES provides peak-smoothing services for the Moscow power system, while the Stavropolskaya GAES serves essentially as a seasonal water level regulation in the local irrigation system.
There were reports on the eventual implementation of several pilot projects of electrochemical (lithium-ion, hybrid) energy storage of minor capacity by the Federal Grid Company (FSK EES, a state-controlled transmission company), but information about their actual realisation is not available.
Two pilot projects of lithium-ion and lead-acid energy storage (1,800 Ah and 3,000 Ah respectively) are being tested by RAO ES of the East (a subsidiary of RusHydro, which provides electricity to Yakutia and the Far Eastern regions of Russia) as a part of solar-diesel power plants in two isolated settlements of Yakutia (i.e. the Sakha Republic).
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
there are two pumped storage power plants under construction in Russia: the 2nd stage of the Zagorskaya GAES (installed capacity 840 MW, due to be commissioned in 2018) and the Leningradskaya GAES (installed capacity 1,560 MW, currently the construction has been suspended until financing could be found and the project could be restructured). While the Zagorskaya GAES-2 is intended to provide further peak-shaving for the Moscow region, Leningradskaya GAES is intended as a flexibility option for the Leningradskaya nuclear power plant currently under construction in the same region.
RAO ES of the East has expressed more interest in evaluating energy storage options for isolated regions of Russia. Energy storage is being evaluated in connection with the possible replacement of diesel generators in isolated power systems by renewable energy sources coupled with energy storage. The main technologies being evaluated are different electrochemical energy storage technologies, such as lithium- ion and lead-acid systems. The company has concluded memoranda of understanding for the construction of several power complexes consisting of renewable energy sources and energy storage.
Transmission and distribution companies (mainly state-controlled Russian Grids and FSK EES) also show significant interest in the possible ways of using energy storage as a means of enhancing their power transmission effectiveness.
Energy storage as a means of increasing the flexibility of nuclear power plants is also being evaluated by the state-owned State Nuclear Energy Corporation – Rosatom (a state corporation which owns and operates nuclear power plants in Russia and abroad).
Russia’s System Operator (a power system dispatching entity) is studying possible applications of energy storage for ancillary services, such as frequency regulation and spinning reserve.
Industrial and commercial consumers are adopting energy storage as a means of reserve power supply (for example, electrochemical energy storage is used to provide uninterruptible power supply to cellular operators’ towers).
Generally speaking, energy storage is a topic of increasing interest within the Russian power sector and with consumers, and many different possible applications are being considered and assessed.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Currently, there is no specific regulation or programme to support energy storage in Russia. Pumped storage power plants are functioning under a common regulation applicable to the hydro power plants in Russia (with some individual exceptions such as the elimination of capacity payments for the capacity consumed in the pump mode). The projects developed in the isolated regions are subject to government regulation as isolated fully-regulated power systems.
A National Technology Initiative (the “NTI”) implemented pursuant to a resolution of President Vladimir Putin comprises modern power generation, distribution and consumption technologies (the EnergyNet division of the NTI), which includes energy storage applications. The NTI’s goal is to secure an advantage for the Russian industry in the developing sectors in the mid-term. One of the topics being examined under the EnergyNet initiative is the need and the scope of changes required to the Russian legislation in order to better develop energy storage projects.
National development institutions such as Rusnano, the Russian Venture Company and the Skolkovo Institute of Science and Technology (“Skoltech”) have also expressed interest in creating a programme for supporting the development of the energy storage industry in Russia.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
as the differences between daytime and night-time power prices in the Russian wholesale power market are relatively small, the economics of pumped storage power plants faced challenges functioning within the standard market regulations. As stated above, a solution was found by modifying the market regulations so that pumped storage power plants would not pay the capacity payments for the capacity consumed during the operation in the pump mode. The capacity payments are a significant part of the total electricity cost payed by the consumers thus, pumped storage power plants have benefited substantially from this regulatory amendment.
Generally, however, due to the relatively early stages of development of the energy storage sector in Russia, there is very little information on major obstacles that market players faced in such projects.
In our opinion, the main challenge for effective energy storage deployment in the centralised power supply zones of the Russian Federation (besides the economic viability of the projects) is the uncertainty in the way the energy storage projects will be treated by the regulators. The Russian legislation in the power sector has been elaborated without energy storage in mind and it sets a clear (sometimes irreconcilable) distinction between power generation and power consumption activities.
In isolated power supply zones, energy storage developers face uncertainties in the technical performance of the different energy storage systems due to the harsh climate. This type of problem may be overcome with the deployment of test/pilot projects, coupled with proper tariff regulation (which affects revenue streams). This is achieved by concluding agreements between the project developers and the local authorities.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage
The Ministry of Energy of the Russian Federation is the main governmental body responsible for developments in the power sector. It coordinates and approves the innovative policies of regulated companies in the power sector, which may include energy storage deployment. The Ministry of Energy is also the body responsible for the elaboration of regulatory amendments in the power sector.
The Market Council is a self-regulated association of wholesale power market participants and is the main body to address and consult in the process of development of the wholesale power market regulation and the amendments needed to accommodate grid-scale energy storage projects.
The Russian state-controlled power sector companies (Russian Grid and FSK EES as the main transmission and distribution companies, System Operator as the dispatching entity, RusHydro, RAO ES of the East and Rosatom as generation companies) all have their own innovative policies, which may include financing of energy storage projects. These companies, as well as the private power sector companies, may also develop economically viable energy storage projects on their own.
The Agency for Strategic Initiatives (the “ASI”) is a non-profit organisation which will coordinate the realisation of the NTI, including the EnergyNet section, described above. The NTI focuses on the development of brake-through industries in the Russian economy, building the relevant infrastructure and legislation, as well as the development of the demonstration, pilot and first commercial projects. The EnergyNet focuses on the development of the energy storage industry as well.
Development institutions, such as Rusnano, the Russian Venture Company, Skoltech and the Skolkovo Foundation are interested in the development of the energy storage industry in the Russian Federation and may participate both in the creation of the roadmaps for this industry and in the development and financing of the test, pilot and demonstration projects in the energy storage sector.
Contacts
Paul Miasnikof
Senior Associate
T +7 495 786 4000
E paul.miasnikof@cmslegal.ru
Switzerland
1. What electricity storage projects have been commissioned in your jurisdiction to date?
Hydropower plays an essential role in the Swiss electricity supply. In fact, over half of the country’s electricity is generated by hydropower. Therefore it is not surprising that electricity has been traditionally stored in pumped storage power plants. In the past, a total of 14, mostly small sized pumped hydro storage plants, were built, the last of which was commissioned in 1990. However, the combined capacity of these plants only amounts to 1380 MW contributing to approximately 4.4% of the total electricity produced in Switzerland. The pumped storage plants are almost entirely owned by state controlled companies.
More recently, ABB together with the Zurich power company EKZ has installed a 1 MW power battery storage solution with a capacity of 250 kWh in Dietikon, located in the canton of Zurich. In 2012, the battery was connected to the grid and it is still the most powerful of its kind in the Swiss distribution network. It consists of 10,368 battery cells, similar to the ones used in electric cars. In 2015, the EWZ, the electric power company of the city of Zurich, installed a lithium-ion battery with a capacity 719 kWh. The pilot project ensures that the locally generated solar energy can be stored and later be used in the same city district.
Furthermore, several other projects using power-to-gas technology have been commissioned in the last few years. For instance, the hybrid power plant Aarmatt in the canton of Solothurn converts renewable energy into gas, which can later be used as fuel or as a heat generator.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
In the Swiss Energy Strategy 2050, the government calls for a step-by-step withdrawal from nuclear energy. In the future, energy supply is to be secured through the development of additional hydropower capacity, the use of new renewable forms of energy and the promotion of energy efficiency. The Energy Strategy 2050 forms the political basis for these objectives. One important pillar of this strategy is the further development of electricity storage capacity in Switzerland.
In the next years, three large-scale pumped hydro storage power plants will be connected to the grid. The first, the Limmern pumped storage plant (1 GW), should become operational in 2016. Together with the existing storage plant, the capacity will be increased from around 480 MW to 1480 MW. The second project, the new Veytraux power station, will provide an increase from 240 MW to 480 MW. The commissioning is scheduled for autumn 2016. The final large project, Nant de Drance located in the canton of Valais, is expected to be finished in 2018. This project will have a capacity of 900 MW with an efficiency level of 80%. These projects significantly increase Switzerland’s energy storage capacities, from 1380 MW to 3520 MW.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Electricity storage is not separately defined in the Swiss legislative framework. The biggest obstacle for electricity companies is to obtain a construction permit and a concession for the operation of a pumped storage plant, which is granted for a maximum of 80 years.
Despite the government’s objectives defined in the Energy Strategy 2050, there is currently no direct support via subsidy for pumped storage operators in Switzerland. However, the energy lobby recently demanded financial support due to the low energy prices in Europe and the preference of small producers of solar energy (e.g. households with photovoltaic systems).
As improvement of the electricity storage technology is required for the realisation of the Energy Strategy 2050 goals, research and development of different storage methods is largely funded by the Swiss Government.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
Currently, several of the hydropower plants face problems of profitability. A few years ago, several large-scale projects were announced with the aim to become nothing less than the “Battery of Europe”. However, since then unexpected difficulties have arisen, namely:
Revenue uncertainty: A number of projects were announced under the assumption that pumped storage plants will store the surplus energy produced by renewable energy sources in order to stabilise the energy grid and provide electricity in times of high demand. However, subsidised renewable energy sources, especially from wind power plants located in the North Sea, combined with the low price for CO2-certificates, which favour electricity from fossil energy sources, caused a sharp decline of electricity prices in Europe. At the same time, the strong Swiss franc put additional pressure on national electricity producers. Further, the introduction of a cost-covering fee for feed-in to the electricity grid, in order to subsidise new renewable energy sources in Switzerland, disadvantaged traditional hydro electricity producers. As a result, high prices during peak load times dropped, which substantially lowered the revenue stream of pumped storage plants.
In addition, several studies and reports conducted by the Federal Department for the Environment, Transport, Energy and Communications (“DETEC”) show that pumped storage plants can be operated in an economically viable manner only after 2020.
A perfect example of the current conditions is the pumped storage plant “Lago Bianco” in the canton of Grisons. In 2012 an electricity company was granted a concession relating to the construction of “Lago Bianco”, which was planned with a capacity of 1000 MW. The construction was scheduled for 2013 and should cost CHF 2.5b (around EUR 2.226b). However, due to the sharp drop of energy prices in Europe, the electricity company is no longer able to finance this project. It is now put on hold and the construction will start earliest in 2019.
Construction restrictions: The size and therefore also the capacity of pumped storage plants are by nature restricted by geographical preconditions. This substantially limits their expandability. The execution of large-scale projects take at least between eight and ten years. Sometimes project may even take longer depending on the scope of the project and the local situation. In general, a construction project includes the following steps: a feasibility study followed by different permit procedures, i.e. several concessions and construction permit procedures (including environmental impact studies), the building phase and the implementation of compensatory measures. These procedures can also result in various limitations, e.g. relating to the size of a dam, and therefore the capacity of the pumped storage plant.
To date the revenue uncertainties have not been overcome. However, supporting pumped storage through governmental subsidies is currently being intensively discussed in Switzerland.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage
The Swiss Federal Office of Energy (“SFOE”) is the country's competence centre for all issues relating to energy supply and energy use at the DETEC. The SFOE creates the prerequisites for a sufficient, crisis-proof, broad-based, economic and sustainable energy supply. It largely supports, inter alia, research and development in the field of energy storage.
On the other side, the Swiss Association of Electricity Companies (“SAEC”) represents the interests of the majority of electricity companies on a national level. SAEC’s members are, among others Axpo, Alpiq, BKW, EWZ, and they cover combined 90% of the electricity demand in Switzerland.
Swissgrid is the national grid company, and in its capacity as owner of the transmission system, it ensures the secure, reliable and cost-effective operation of the Swiss high-voltage grid. As a member of the European Network of Transmission System Operators for Electricity (“ENTSO-E”), it is also responsible for coordination and grid usage in the cross-border exchange of electricity in Europe.
Contacts
Alain Raemy
Partner
T +41 44 285 11 11
E alain.raemy@cms-vep.com
Ukraine
1. What electricity storage projects have been commissioned in your jurisdiction to date?
Hydropower is the only large-scale and cost-efficient storage technology available in Ukraine today. Pumped storage hydro power plants with reservoirs are still the only technology offering economically viable large-scale energy storage in Ukraine. Further development of pumped storage will play a major role in securing system stability in the future.
Currently the following pumped storage projects are operating in Ukraine

Name Capacity (MW)
Kyivska Pumped Storage Power Plant (Open-loop pumped hydro storage)

Operator: state (hydro power) company “Ukrhydroenergo”

Kyivska PSPP and Kyivska Hydro Power Plant at Dnieper river are two integrated power plants. Water sent from the upper reservoir generates electricity with three 33.3 MW conventional hydroelectric generators and three 45 MW reversible pump-generators. The first PSPP generator was commissioned in 1970, the last in 1972.
135
Tashlykska Pumped Storage Power Plant (Open-loop pumped hydro storage)

Operator: state (nuclear power) company “Energoatom”

Tashlykska PSPP on the Southern Bug River is a part of the South-Ukrainian Power Complex (which also includes the South Ukrainian Nuclear Power Plant and Oleksandrivska Hydro Power Plant) which was designed to cover peak loads in the southwestern part of the Power System of Ukraine. It also provides the reliable basic operation mode of South-Ukrainian NPP. The first unit was commissioned in December 2006, the second in August 2007. Works on the commissioning of the third unit and completion of the first stage of Tashlyk PSP are in progress at the moment.
320 (to be further increased up to 900)

2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Pumped storage can and should be further developed in Ukraine as there is still significant potential to be optimised and developed. In order to benefit from Ukraine’s remaining pumped storage potential, existing plants will have to be optimised and new ones will have to be built.
Name Power (MW)
Dniester Pumped Storage Power Plant (Open-loop pumped hydro storage)

Operator: Ukrhydroenergo

The Dniester PSPP uses the Dniester River 8 km northeast of Sokyriany in Chernivtsi Oblast. Currently, two of the planned seven generators are operational. In December 2015 the third generator was launched in a test mode, it is to be commissioned in 2016.
750 (to be further increased up to 2,268)
Kanivska Pumped Storage Power Plant (Open-loop pumped hydro storage)

Operator: Ukrhydroenergo

Construction of Kanivska PSPP on the Dnieper River started in 1984. Due to a lack of financing and the collapse of the Soviet Union in 1991, construction was terminated. In 2013 the construction project was adapted to the Power System of Ukraine and re-approved.
In the Ukrainian “Energy Strategy through 2030” Kanivska PSPP plays a significant role for load shifting in order to provide sufficient electric energy during peak hours. Concerns have been raised that the operation of the Kaniv PSP will have a negative impact on the river reservoir.
1,000

3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
krainian law does not provide for any specific regulations or programmes related to energy storage projects in general or to pumped storage hydro power plants in particular.
Development of the new projects is funded out of the operators’ investment programmes. Such programmes (both for Ukrhydroenergo and Energoatom) are adopted by the state regulator (as funded mostly from the income generated by the operators and debt funds obtained from the World Bank).
Currently the tariffs for electricity produced by pumped storage projects are established by the state regulator according to the relevant methodology. The tariffs are double rated and include the rate for electricity produced by the power plant (per 1kWh, established on an annual basis) and the rate for the installed capacity (per 1 MW, updated quarterly).
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
There are a number of challenges for development of the energy storage projects in Ukraine, including:
  • Single-buyer model of the electricity market in Ukraine and overregulation. Under the current market structure, the electricity generated by power plants is traded through the mandatory pool - the Wholesale Electricity Market of Ukraine (“WEM”), operated by the state company “Energorynok”, which off-takes the electricity produced in the country. The price formation is mostly regulated (a non-transparent bidding mechanism is applied only to thermal power plants). However, the situation is changing and the new liberalised electricity market is to be implemented from 1 July 2017 (as envisaged by the Law on Electricity Market). The new model introduces direct electricity sales, market-driven prices and should significantly enhance competition at the market.
  • Absence of the effective market of ancillary services. Pumped storage has the potential to bring added value through ancillary services. However, a lack of the national energy policy has a significant impact on the value of such services, including those related to energy storage. Currently in Ukraine only two services may be traded at the market for ancillary services: (i) supplementary regulation (to be ensured by hydro power plants under the regulated prices) and (ii) tertiary regulation (to be ensured primarily by thermal power plants on a competitive basis). Starting from 1 July 2017 the following ancillary services may also be traded at the market (however, it is still not clear how prices and/or tariffs for such services will be calculated):
    • services for primary, supplementary and tertiary regulation to accumulate a reserve of the demand management capacity;
    • services for accumulating reserves of the new and/or reconstructed generation capacities;
    • services for regulation of voltage and reactive power;
    • services for resuming operation of the Unified Power System of Ukraine after system collapses;
    • any other services as may be provided by the market rules and necessary for load frequency control, maintenance of the balance of voltage and power in the Unified Power System, quality of the supplied electricity.
  • Absence of the consistent national policy and effective programs for the energy storage projects. Another significant challenge facing the energy storage project developers is absence of the adequate legal mechanisms which would ensure successful implementation of the energy storage projects in Ukraine by private investors. It is worth noting that in the absence of detailed revenue structures, the existing pumped storage projects in Ukraine are developed exclusively by the state companies. The new national policy should include financial incentives and guarantees to provide certainty in the long-term revenue for the investors, as currently very few financial institutions are willing to finance these types of long-lead projects.

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage
The Ministry of Energy and Coal Industry is in charge of developing the energy sector’s strategy and its regulatory framework. The Ministry is also responsible for maintaining the integrity and reliability of the energy system. It participates in the forecasting and scheduling of power generation and develops and implements investment policy in the industry.
The National Commission on State Regulation of the Energy Sector and Municipal Services is the energy industry regulator. The Regulator has several roles, including:
  • issuance of the licences for power generation and supply;
  • setting tariffs for electricity sold from pumped storage to Energorynok; and
  • approval of the investment programmes for Ukrhydroenergo and Energoatom.

Ukrenergo is a state company, which is managed by the Ministry of Energy and the Coal Industry. Ukrenergo is an operator of the Unified Energy System of Ukraine and is responsible for its stable functioning, power transmission via high-voltage power lines within the territory of Ukraine. Ukrenergo also is responsible for cross-border electricity transmission and synchronous interconnection of the Ukrainian power system with the Russian and Moldavian energy systems and maintenance of the so-called Burshtyn Island, which is synchronised with the UCTE European power grid.
Ukrhydroenergo is a state-owned company, an operator of the seven hydro power projects and three pumped storage projects in Ukraine.
Energoatom is a state-owned operator of four nuclear power projects in Ukraine, which also owns and operates 1 3 pumped storage project as a part of its nuclear power complex.
Contacts
United Kingdom
1. What electricity storage projects have been commissioned in your jurisdiction to date?
There are currently four operational pumped hydro storage projects in the UK with a combined capacity of over 2.8 GW, the last of which was commissioned in the 1980s. These projects principally provide for time-shifted electricity supply capacity and spinning reserve capacity and, whilst originally developed by the then state-owned electricity company, are now owned by commercial companies.

More recently, industry participants have been turning their attention to battery storage technologies. One distribution network operator (“DNO”), UK Power Networks, commissioned a 6 MW/10M Wh lithium-ion battery storage project in Leighton Buzzard in October 2014, with the help of funding from the regulator, Ofgem, through the Low Carbon Networks Fund. This project has been pioneering in demonstrating that grid-scale battery storage is viable in the UK and has raised industry and public awareness of this storage technology.

AES’ 10MW battery array became operational in January 2016 and utilises the company’s Advancion technology. This battery storage project is co-located with the coal-fired Kilroot power station in order to optimise its efficient operation. This project is a fully commercial project which creates no additional cost for consumers.

There are many smaller storage projects installed, in particular lead-iron and lithium-ion battery storage projects installed by DNOs for grid-reinforcement reasons or on islanded networks.
2. What electricity storage projects are anticipated in your jurisdiction in coming years?
Larger-scale standalone grid-scale battery storage is the “hot topic” in the UK currently, with lithium-ion technology being an area of focus. National Grid, the system operator, is currently running a tender for enhanced frequency response services (for details please see below) that is particularly well suited for battery technology. The tender has been hugely popular with over 1 GW of proposed capacity pre-qualifying, much of which is from utilities and developers looking to develop standalone battery storage projects. Results of the first tender are expected in August 2016, with the services required to be provided from March 2018.

Co-location with generation (particularly renewables) is also high on the energy storage agenda. Earlier this year, Western Power Distribution, a DNO, signed a contract with RES (a renewable energy company) to deliver an energy storage system co-located with a 1.5MW solar farm. This project aims to demonstrate the network services “solar + storage” can provide behind-the-meter to the owner and operator of the solar farm and to DNOs. The project will be supported by Ofgem in its Network Innovation Allowance programme.

There are many other anticipated projects, such as an increase in the uptake of battery storage at a domestic level and applications to reduce the demand charges of large energy users.
3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?
Electricity storage is not separately defined in the GB legislative framework. For historical reasons, it is currently deemed to be generation for the purposes of licensing under the Electricity Act 1989. As a result, projects over 100MW (currently only pumped-hydro falls into this category) must hold a generation licence. Holding a generation licence places a number of obligations on the licensee, such as compliance with the Grid Code.

Whilst the Department of Energy and Climate Change (“DECC”) and Ofgem have been supportive of energy storage and recognise the benefits and flexibility provided by the various technologies, there is no specific legislation or regulation of storage at present. No specific subsidy or Government commitment to a level of deployment of electricity storage is expected. As a result, developing a viable business case is more complex than has been the case for renewable generation technologies. This can require the “stacking” of multiple revenue streams, such as ancillary services revenues, capacity market payments, Triad benefits and other embedded benefits.

There is certain funding available for research and development purposes, for example the Low Carbon Networks Fund administered by Ofgem.

National Grid is currently running the first tender for a new ancillary service, enhanced frequency response (“EFR”). Whilst the tender is technology agnostic, it is of particular interest to stand alone battery storage, as the service is required to be provided in less than one second. This tender will award contracts with a term of four years and it is expected that three tender rounds will deliver 600MW of the services.
4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.
The challenges for new standalone energy storage projects are as follows:
  • revenue uncertainty – the contract terms available for many of the available revenue streams are short in duration; at four years, the proposed term of EFR contract is the longest. As a consequence, projects have to manage greater revenue uncertainty over the lifetime of the project. The impending review of embedded benefits has increased this revenue uncertainty. Further, a number of benefits that energy storage projects can offer, such as the deferral of network reinforcement, are not yet formally monetised;
  • higher operational costs – where an energy storage device imports electricity from the transmission or distribution system, it is charged as if the storage device is an “end-user” for the purposes of the Renewables Obligation, Contract for Difference, and Feed in Tariff charges. This is despite the same electricity being exported back on to the system at a later point for use by a true energy end user. The position is similar in relation to the Climate Change Levy (“CCL”); however, HMRC (the UK tax authority) has waived CCL charges on individual projects. Storage projects can also face double-charging of use of system and connection charges; and
  • distribution licence restrictions on DNOs – the distribution licence places further restrictions on DNOs:
    • firstly, a DNO is required to “manage and operate the distribution business in a way that is calculated to ensure that it does not restrict, prevent, or distort competition” in the electricity or gas market. The operation of energy storage assets by a DNO could impact on the competitiveness of the electricity market. As a result, to date, DNOs have contracted with third parties to handle the energy flows in order to demonstrate licence compliance, adding further cost and structural complexity to such projects; and
    • secondly, there are “de minimis” restrictions on DNO licensees conducting non-distribution related business. This “de minimis” is set at 2.5% of the DNO business revenue or the DNO’s share capital. As a result, there is currently a cap on the extent to which DNOs can be directly involved in energy storage.

Co-located projects can also face additional challenges, for example ensuring that the project remains eligible for renewable benefits such as the Renewables Obligation.

To date these challenges have been overcome by the use of the available research and development funding and the scale of projects being such that they do not meet the DNO restrictions requirements identified. The Government intends to consider the removal of some of the additional costs that such projects incur and the EFR tender is seen as a key scheme to provide greater revenue certainty.
5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?
Electricity storage falls within the remit of DECC. DECC is supportive of the development of electricity storage with a consultation regarding the removal of barriers to its deployment expected shortly. Nevertheless, as stated above, a specific subsidy for storage is not currently expected. The newly formed National Infrastructure Commission emphasised the central role that the Government expects electricity storage to play in the move to a smarter electricity system.

Ofgem is the relevant regulator for electricity storage, though as noted above there is no specific storage regulatory regime. Ofgem has recognised that there are regulatory changes required to enable the full commercial development of storage and it has committed to working with other stakeholders to consult on such changes. However, Ofgem has indicated that it is not minded to reform the restrictions on the participation of DNOs in the electricity storage market.

National Grid is the system operator in Great Britain, which procures various ancillary services, including EFR (as described above). Such ancillary services provide key revenue streams for energy storage.

The DNOs have been pioneering storage with research and development funding, such as the Low Carbon Networks Fund. However, as identified above, their future role in the development of electricity storage is uncertain given the licencing restrictions currently in place.

It is expected that other utilities and independent developers will be at the forefront of the deployment of grid-scale electricity storage in the UK.
Contacts
Munir Hassan
Partner
T +44 20 7367 2046
E munir.hassan@cms-cmck.com

Louise Dalton
Senior Associate
T +44 20 7367 3449
E louise.dalton@cms-cmck.com
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