The CRU published a decision on the initial procurement of Long Duration Energy Storage (“LDES”): Long Duration Energy Storage Decision Paper.

This follows an earlier consultation, which we looked at in our insights blog post: Energy update: Long Duration Energy Storage.

The CRU now approves the core framework for the initial procurement of up to 500 MW through a technology-neutral, service-based procurement, progressed through the ECP connection process (for more detail, see our briefing: New Connection Policy for Onshore Generators and Storage).

EirGrid proposes a two-stage procurement: qualification followed by a tender phase.

Which projects can participate?

 To qualify, projects must have:

• a minimum four hours’ import and export duration on the transmission system,
• a 1:1 ratio of maximum export capacity (“MEC”) to maximum import capacity,
• a minimum capacity of 20 MW for hybrid projects or 75 MW for standalone projects,
• a maximum capacity of 100 MW, and
• round-trip efficiency of at least 75%.

At qualification stage, projects must hold a connection offer at 110 kV or above.

At tender stage, projects must have a connection agreement, planning consent for the facility and grid connection, evidence of land rights for the grid connection, maps and AutoCAD drawings of the grid infrastructure, and a detailed connection programme.

Co-located sites must have at least 30 MW of TSO-connected renewable generation, with separate market registration and sub-metering.

How will projects be selected?

At qualification stage, company and project requirements will be assessed on a pass/fail basis. Company requirements include financial turnover (to be confirmed through further consultation), relevant experience and cyber-security requirements.

Qualifying tenders will be scored on cost (50%), impact (30%) and connection method (20%).

• Impact scoring evaluates a project’s ability to reduce renewable dispatch down and remain available to provide wider system value, using data from hourly ECP modelling.
• Connection method scoring is intended to incentivise efficient use of grid. EirGrid’s proposal is that new standalone transmission connections will receive zero points, while the maximum of 20 points will be given to existing standalone connections at tender closing date or to hybrid connection arrangements (with at least 30 MW of renewable generation). EirGrid does not propose MEC sharing for this initial procurement, considering it infeasible within the required timeframe. We touch on some of the issues in our insights blog post: Energy Update: Sharing Maximum Export Capacity at electricity grid connection points.

Highest-ranked projects will progress to a Best and Final Offer stage and a Deliverability Assessment, aspects of which are to be further consulted upon.

What revenue support will be available?

Service duration will be ten years. The CRU has approved in principle a competitively bid revenue floor, subject to an LCOS-informed bid limit. EirGrid proposes that the floor be set on a pay-as-bid basis and remain fixed over the contract term, subject to indexation, with a true-up payment where eligible market revenues fall below it.

The storage asset will retain 70% of revenues above the floor, with 30% shared with consumers. EirGrid proposes returning the consumer share through transmission use-of-system charges. The cost of electricity bought for charging (and therefore the round-trip efficiency losses) will be netted off against gross eligible market revenues, but the asset’s other operating, commercial and financing costs will not be deducted. Open-book accounting will be required.

EirGrid proposes quarterly interim settlements and annual reconciliation. Full approval of this framework remains subject to EirGrid demonstrating its effective interaction with other mechanisms, as noted further below.

How will assets operate?

Contracted assets will retain full SEM market access, subject to Trading Envelope compliance. The CRU supports the Trading Envelope model in principle and has approved initial issuance of dynamic import/export limits at 10:00 on the day before the Trading Day. EirGrid must publish a Trading Envelope methodology in advance of the tender and house the methodology and issuance timing in a protocol document so that any material changes are subject to public consultation and CRU approval.

The CRU supports in principle non-compliance charges (for taking positions outside a Trading Envelope) and a Trading Non-Activity Scalar (which would reduce the floor for insufficient participation or cycling). Methodologies remain to be consulted on, including treatment of inactivity caused by TSO instructions or Trading Envelope limits.

Next steps

Many of the revenue and operational design features are subject to final approval by the CRU following demonstration by EirGrid that these mechanisms operate together as a coherent and financeable package providing effective incentives for assets to operate and deliver system value.

Before tenders are invited, EirGrid must consult on and finalise the Trading Envelope methodology, Trading Non-Activity Scalar, Deliverability Assessment methodology, contractual arrangements and governance and change-control provisions. The consultation on contractual arrangements is to include timelines.

Before contracts are awarded, EirGrid is required to notify the CRU of the proposed selected portfolio, aggregate volume and expected costs.