Introduction
Energy storage is becoming increasingly important in Slovenia and at EU level due to the significance of the energy transition and the benefits that energy storage brings to the functioning of the energy system and its users.
The new electricity market design has already addressed several important aspects of energy storage, such as defining the concept of energy storage, taking into account the double role (generator-consumer) of energy storage, addressing barriers to entry and participation in electricity markets, improving the cost-effectiveness of network tariffs and avoiding double taxation.[1] However, the development of energy storage technologies, infrastructure and services is still subject to technological, economic and regulatory barriers. The question arises whether the current economic environment adequately promotes efficient storage or more precisely what the options for financing electricity storage projects are.
Why is electricity storage important?
The development of energy storage technologies, infrastructure and services is one of the fundamental objectives for achieving energy security. It is key because it enables, among other things, the efficient integration of renewable energy sources into the system, which is important as their share is expected to reach around 69% by 2030 and 80% by 2050.[2] Energy storage also contributes to the electrification of the economy, to the decarbonisation of other sectors, to reducing electricity price volatility and the cost of grid investments (by reducing congestion), to the stability[3] of the electricity system, and to increasing system resilience and reliability. Energy storage is also important for active consumers and energy communities, as it enables greater self-supply of local renewable energy and increases energy efficiency and system resilience. [4]
Some obstacles to financing electricity storage projects
Despite the benefits of energy storage, there are barriers to the full deployment of energy storage technologies, infrastructure, and services. These include general difficulties in obtaining funding, the lack of deployment of research projects[5], lengthy project approval procedures at national level and ensuring that storage is treated in a comparable way across different energy carriers. Uncertainties about future project revenues, future market reforms and, above all, changing market conditions also have a strong impact on storage business models.
Identification of key actions by the European Commission
The Commission Recommendation of 14 March 2023 on Energy Storage – Underpinning a decarbonised and secure EU energy system[6] highlights financing as one of the main challenges that can affect the breakthrough of energy storage projects. With regard to the financing of energy storage, the Commission mentions in particular the issue of long-term visibility and predictability of revenues needed to facilitate access to finance.[7] The Commission therefore recommended that EU Member States identify potential funding gaps for short-, medium- and long-term energy storage and consider the potential need for financing instruments that provide visibility and predictability of revenues.
In addition to the above, the European Commission has recommended that Member States assess the flexibility needs of their energy systems when planning transmission and distribution networks, including the potential of energy storage (short- and long-term duration) and whether energy storage can be a more cost effective alternative to grid investments; explore whether energy storage services – in particular the use of flexibility in distribution networks and the provision of non-frequency ancillary services – are sufficiently remunerated, and whether operators can add up the remuneration of several services; establish cost-effective procedures, such as competitive bidding systems; publish detailed energy market data to facilitate investment decisions in new energy storage facilities; and support research and innovation, in particular on long-term energy storage, and introduce dedicated support programmes.[8]
Public funding and support for electricity storage projects at EU level
Due to the variety of technologies and their parameters, such as (i) duration capabilities (e.g. from minutes to months), (iii) different project applications (e.g. from services to the grid to savings to final consumers) and (iv) different sizes (e.g. ranging from large, stand-alone or front-of-the-meter utility-scale down to smaller behind-the-meter distributed energy storage), it is considered that there is no one-size-fits-all model for financing all electricity storage projects.[9] Tailored support may be necessary, in particular for technologies that have better carbon, environmental and material footprints and for projects that have a greater potential to contribute to the decarbonisation and environmental objectives and the security of energy supply.[10]
Support and financial tools at EU level
Specific support and financial tools are available to promote the deployment of energy storage, funded by the EU budget.
State aid measures
The Communication from the Commission on Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (“Temporary Framework“)[11] identifies State aid to accelerate the deployment of renewable energy and energy storage capacity as part of an appropriate, necessary and targeted solution to reduce dependence on imported fossil fuels. The Temporary Framework for investments in electricity storage allows for some temporary simplifications for the implementation of the support measures.
The European Commission is assessing when national environmental and climate aid can be compatible with EU state aid rules, based on the revised State aid for climate, environmental protection and energy[12] (“CEEAG“), which have introduced a number of new provisions facilitating support for energy storage.
Projects of common interest
The European Commission has identified categories of projects that have a key priority in connecting the infrastructure of the European Union’s energy system. A project of common interest must have a significant impact on energy markets and market integration in at least two EU countries. [13]
Regulation (EU) 2022/869 on guidelines for trans-European energy infrastructure[14] allows electricity storage projects with a significant cross-border impact to be redesignated as a project of common interest in the EU-wide ten-year network development plan. If selected as a project of common interest, it may be eligible for fast-track permitting procedures and financial support from the Connecting Europe Facility 2021-2027 energy funding source. [15]
Promoting innovation and development
Energy storage has been identified as one of the reform and investment priorities to be taken into account by Member States in the preparation of their Recovery and Resilience Plans (“RRPs“). The RRPs form the basis for the application of the Recovery and Resilience Facility, which is financially the largest part of the NextGenerationEU European Recovery and Resilience Package.
Energy storage projects are supported by available funding from the European Regional Development Fund,[16] the Cohesion Fund[17] and the Fair Transition Fund.[18] Energy storage may also be eligible for support under the EU’s Renewable Energy Financing Facility[19] and InnovFin under the Connecting Europe Facility managed by the European Investment Bank.
Innovation and research in energy storage is further promoted by the Horizon Europe Programme and the Innovation Fund.[20]
Objectives of energy storage projects in Slovenia
These EU-level support and financing tools will help to achieve the objectives identified by Slovenia in the Comprehensive National Energy and Climate Plan of the Republic of Slovenia (NEPN),[21] RRP[22] and the European Cohesion Policy Programme 2021-2027.[23] One of the key objectives of the Republic of Slovenia until 2030 is to ensure energy security and, to this end, to provide additional financial, human and technical resources for the integration of electricity storage from renewable sources[24] and the development of technologies, infrastructure and services for energy storage.[25] Slovenia aims to support the implementation of demonstration and pilot projects on energy storage by 2030.[26]
Support for energy storage projects in Slovenia
Notwithstanding the provisions of the General Administrative Procedure Act[27] , the Public Finance Act[28], and the regulations governing the implementation of the budget of the Republic of Slovenia, the procedure for granting financial incentives and other financial mechanisms will also be governed by the new Energy Act, which (at this time) in its proposal[29] provides for a procedure for granting incentives for investments in renewable energy sources and efficient use of energy.
The Act Regulating Emergency Intervention to Adress High Energy Prices[30] specifically addresses electricity storage and provides that, in order to promote the deployment of renewable energy and energy storage, aid in the form of direct grants shall be granted for investments in new renewable energy production installations for electricity and heat generation and for electricity and heat storage combined with power generation, in accordance with the Temporary Framework.[31]
The procedure for granting aid is regulated in more detail by the Regulation on aid for promoting the deployment of renewable energy, storage and heat from renewable sources (‘the Aid Regulation‘)[32] , on the basis of which Borzen, d.o.o. gives grants to promote the production of electricity and heat from renewable sources and the storage of electricity and heat.
The European Commission has recently approved €150 million[33] aid scheme for covering investments in the purchase and installation of a new production plant or a new production plant combined with a new attached feeder. According to the Aid Regulation, electricity and thermal energy storage can only be included in the context of a single production installation and cannot be an independent project.[34]
The deadline for submitting applications for direct grants to promote the production of electricity and heat from renewable energy sources and the storage of electricity and heat is starting from 6 November 2023 until the end of the public call for proposals published in the Official Gazette of the Republic of Slovenia, or until the funds are used up.[35]
Conclusion
With the transition to decarbonised energy systems, new energy storage technologies will be crucial to support the large-scale deployment of renewable electricity generation. Investments in energy storage projects can be made more attractive to investors by providing long-term visibility and predictability of revenues and by reducing or reallocating the risks associated with the projects. The need for transparency and availability of data and greater data accuracy is becoming increasingly important in investment decision-making, siting and evaluation of new energy storage facilities.
[1] European Commission: Study on energy storage – Contribution to the security of the electricity supply in Europe. Final Report, p. 111.
[2] Staff working document on the energy storage – underpinning a decarbonised and secure EU energy system, p. 13.
[3] On average in the EU, the overall flexibility requirements increase significantly if the share of renewable energy generation in the electricity system exceeds 74% of the total installed capacity.
[4] Staff working document on the energy storage – underpinning a decarbonised and secure EU energy system, p. 10.
[5] Europarl.europa.eu. A comprehensive European approach to energy storage. Available at: https://www.europarl.europa.eu/doceo/document/TA-9-2020-0198_SL.html (accessed 6.11.2023).
[6] The Commission Recommendation of 14 March 2023 on Energy Storage – Underpinning a decarbonised and secure EU energy system (C(2023) 1729 final).
[7] Ibid, Recital (10).
[8] Europal.europa.eu. Recommendations on energy storage. Available at: https://energy.ec.europa.eu/topics/research-and-technology/energy-storage/recommendations-energy-storage_sl?etrans=sl (accessed 5 November 2023).
[9] Staff working document on the energy storage – underpinning a decarbonised and secure EU energy system, p. 20.
[10] Staff working document on the energy storage – underpinning a decarbonised and secure EU energy system, p. 20.
[11] Commission on Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (2023/C 101/03).
[12] Communication from the Commission – Guidelines on State aid for climate, environmental protection and energy for 2022 (2022/C 80/01).
[13] Agen-rs.si. Projects of common interest. Available at: https://www.agen-rs.si/izvajalci/plin/prenosno-omrezje/projekti-skupnega-interesa (accessed 6 November 2023).
[14] Regulation (EU) 2022/869 of the European Parliament and of the Council of 30 May 2022 on guidelines for trans-European energy infrastructure, amending Regulations (EC) No 715/2009, (EU) 2019/942 and (EU) 2019/943 and Directives 2009/73/EC and (EU) 2019/944, and repealing Regulation (EU) No 347/2013.
[15] Gov.si. Connecting Europe Facility 2021-2027. Available at: https://www.gov.si/zbirke/projekti-in programmes/instrument-for-connecting-europe-2021-2027/ (accessed 5 November 2023). The budget for the energy sector is €5.84 billion.
[16]Europal.europa.eu. European Regional Development Fund (ERDF). Available at: https://www.europarl.europa.eu/factsheets/sl/sheet/95/evropski-sklad-za-regionalni-razvoj (accessed 5 November 2023).
[17] Europal.europa.eu. Cohesion Fund. Available at: https://www.europarl.europa.eu/factsheets/sl/sheet/96/kohezijski-sklad
[18] Europal.europa.eu. Fair Transition Fund. Available at: https://www.europarl.europa.eu/factsheets/sl/sheet/214/sklad-za-pravicni-prehod (accessed 5.11.2023).
[19] Energy.ec.europa.eu. EU renewable energy financing mechanism. Available at: https://energy.ec.europa.eu/topics/renewable-energy/financing/eu-renewable-energy-financing-mechanism_en (5.11.2023).
[20] Eur-lex.europa.eu. An EU strategy to harness the potential of offshore renewables for a climate-neutral future. Available at: https://eur-lex.europa.eu/legal-content/SL/TXT/HTML/?uri=CELEX:52020DC0741&from=EN (accessed 5 November 2023).
[21] Energy.ec. Comprehensive National Energy and Climate Plan of the Republic of Slovenia. Available at: https://energy.ec.europa.eu/system/files/2020-02/si_final_necp_main_sl_0.pdf (3 November 2023).
[22] Gov.si. C1K1 – Renewable energy and energy efficiency in the economy. Available at: https://www.gov.si/zbirke/projekti-in-programi/nacrt-za-okrevanje-in-odpornost/o-nacrtu-za-okrevanje-in-odpornost/zeleni-prehod/c1k1-obnovljivi-viri-energije-in-ucinkovita-raba-energije-v-gospodarstvu/ (accessed 5 November 2023).
[23] Eu-skladi.si. European Cohesion Policy Programme 2021-2027 in Slovenia. Available at: https://www.eu-skladi.si/sl/dokumenti/kljucni-dokumenti/program-ekp-2021-27_si_razlicica-4-2-1_28-10-2022.pdf (6. 11. 2023).
[24] Comprehensive National Energy and Climate Plan of the Republic of Slovenia, p. 22.
[25] Ibid, p. 56.
[26] Ibid, p. 57.
[27] General Administrative Procedure Act (Official Gazette of the RS, No 80/99, as amended, “ZUP“).
[28] Public Finance Act (Official Journal of the RS, No 11/11, as amended, “ZJF“).
[29] Energy Policy Law (later renamed Energy Law), EPA 2023-2570-0065, Article 129.
[30] The Act Regulating Emergency Intervention to Adress High Energy Prices (Official Journal of the Republic of Slovenia, No 158/22, as amended, the “ ZNPOVCE“).
[31] Article 6 ZNPOVCE.
[32] Regulation on aid for accelerating the deployment of energy from renewable sources, storage and heat from renewable sources (Official Gazette of the Republic of Slovenia 69/2023 of 23.6.2023).
[33] Energy.ec.europa.eu: State aid: Commission approves €150 million Slovenian scheme to support the rollout of renewable energy and energy storage to foster the transition to a net-zero economy. Available at: https://energy.ec.europa.eu/news/state-aid-commission-approves-eu150-million-slovenian-scheme-support-rollout-renewable-energy-and-2023-06-09_sl (8. 11. 2023).
[34] Energetika-portal.si. Regulation on investment aid for the deployment of energy from renewable sources issued. Available at: https://www.energetika-portal.si/nc/novica/n/izdana-uredba-o-nalozbeni-pomoci-za-uvajanje-energije-iz-obnovljivih-virov/ (8.11.2023).
[35] Ove.borzen. AWARDING DIRECT GRANTS TO PROMOTE THE PRODUCTION OF ELECTRICITY AND HEAT FROM RENEWABLE SOURCES AND THE STORAGE OF ELECTRICITY AND HEAT. Available at: https://ove.borzen.si/ (8.11.2023).
