The responsibility for imbalances for renewable energy sources (RES), introduced in early 2021, makes companies think about looking for more accurate forecasting systems. However, this topic is still painful for renewable energy producers, because the accuracy of these calculations in Ukraine is still too low. For their part, renewable energy producers are not ready to spend large sums on forecasting. But recently in the Verkhovna Rada was registered bill No. 5436-1 designed to ensure energy security and the development of energy storage systems. Whether it will help solve these issues and what the main innovations are envisaged for them were analyzed exclusively for Mind by Yaroslav Petrov, partner at Asters law firm, and Olena Sichkovska-Chornobyl, lawyer at Asters.
One of the options for solving issues in the field of forecasting and balancing is the accumulation (or storage) of electricity. This became especially relevant when the market operator began to give commands to curtail renewable generation. This resulted in significant losses for generating companies. For example, the last of the largest curtailments occurred on May 9-10, 2021 in the amount of 4374 MW. Only a part of the companies will receive compensation for such restrictions and only on condition that they have joined the TSO’s RES Restriction Management System.
On May 11, 2021, the Verkhovna Rada registered a draft law of Ukraine "On Amendments to Certain Laws of Ukraine Concerning Ensuring Energy Security and Development of Energy Storage Systems" No. 5436-1, which may become the key to solving this issue. According to the explanatory note to this bill, the main task of energy storage systems is to help optimize electricity production by aligning the load schedule for both the power plant and the electric power infrastructure.
Changes are made to the legislation regarding the electricity market and the National Commission for State Regulation of Energy and Utilities (NERC) in terms of regulating operation of energy storage systems and their implementation. The proposed innovations are based on European legislation, namely the Directive on General Rules for the Internal Electricity Market 2019/944.
What's new in the bill?
Among other things, the bill regulates the concept of "energy storage system", "operator of the energy storage system", "energy storage".
It is important to note that European legislation requires that the transmission system operator (TSO, NPC "Ukrenergo") and the distribution system operators (DSOs) cannot be operators of the storage system. However, there is an exception in case of self-consumption. These concepts are fundamental and have been lacking in the current legislation.
Guarantees of connecting the storage system to the grids
According to the bill, TSO and DSO don’t have the right to refuse to connect an energy storage system at points where future restrictions on the available power of the grid are possible, for example, congestion in remote parts of the transmission and/or distribution grids.
TSO must provide the necessary information to connect the energy storage system. TSO and DSO for their respective grids establish and publish procedures for connecting energy storage systems. These procedures have not yet been developed and must be approved by NERC.
Storage system requirements
Electricity storage activities require a license from NERC. The specified license conditions, which have not yet been developed, will determine the documents that must be submitted to obtain a license. However, if the installed capacity of the facility is higher than determined in the licensing conditions for energy storage, which have not yet been written, there is no need to obtain a license.
According to the general rule of the draft law, a producer of electricity has the right to use the system without obtaining an appropriate license. However, for this, the power supply of electrical energy should not exceed the installed capacity of electrical installations of such a manufacturer.
This accumulation license rule applies to electricity producers that have a feed-in tariff or are eligible for support through an auction. The fact that manufacturers with a feed-in tariff or an auction tariff use a storage system is not a reason to revise them.
Who cannot carry on the energy storage activity?
The bill establishes a general prohibition for TSO and DSOs to carry out energy storage activities and clearly stipulates exceptions. TSO has the right to own, develop and operate energy storage systems when they are fully integrated grid elements and agreed by the regulator, or if certain conditions are met.
Also, the draft provides that consumers have the right to use such a system without obtaining a license to carry out economic activities for energy storage. Provided that such a consumer at any time does not release the energy previously accumulated in the energy storage system in the IPS of Ukraine or in the grids of other entities.
Introduction of a price cap
The bill regulates procurement of services to ensure the development of generating capacities and energy storage systems, if such systems are necessary for the grid.
The document also defines the powers of the Cabinet of Ministers of Ukraine regarding the establishment of the maximum purchase price for services to ensure the development of generating capacity and energy storage systems. In addition, the bill also enshrines the powers of the regulator to approve the methodology for determining such a maximum price.
What should we expect?
In addition to the aforementioned bill on electric energy storage systems, there are several more documents. The above-mentioned bill is one of the alternative documents to bill No. 5436 dated April 28, 2021. Another alternative bill is No. 5436-2 dated May 19, 2021.
Bills proposed in 2019-2020 on storage systems (“On ensuring energy security and flexibility of the power system, real competition, decarbonization of the economy, lowering prices for electricity consumption (in relation to energy storage systems”) No. 2496 and on amending the Law of Ukraine "On the Electricity Market" (“Regarding energy security, balancing the power system and energy storage system” No. 2582) were returned to the initiator for revision or have not yet been considered. The fate of these previous initiatives is unknown.
So far, without appropriate legislation, storage systems have been launched and are undergoing certification to become a capacity reserve service provider for the grid operator.
In general, draft law No. 5436-1 will have a positive effect on the market, establishing the obligation of the TSO and the DSOs to disclose information on the available energy storage systems, which will contribute to the transparency of the system.
In addition, the document expands the NERC's authority over energy storage activities and gives it new powers. Also, the draft contains conditions for conducting a tender procedure for construction of generating capacities and defines the status of operators of electricity storage systems and removes contradictions with European legislation that have arisen in past draft laws.
So energy storage systems will be developed in Ukraine, but we have to wait for the necessary legislation to be passed, so as not to be a so-called pioneer and face a host of legal issues for which there is no definite answer.
For example, one of such pioneers is DTEK. At the end of May, this company launched the first industrial lithium-ion energy storage system in Ukraine with a capacity of 1 MW/2.25 MWh capacity. The battery is installed in the city of Energodar at the site of the Zaporizka TPP and is intended for accumulation, storage and delivery of electricity to the grid, as well as for the provision of services to ensure the reliability of the energy system of Ukraine.
