The Clean Energy Package (CEP) defines an 'energy storage' in the electricity system as 'deferring the final use of electricity to a moment later than when it was generated, or the conversion of electrical energy into a form of energy which can be stored, the storing of such energy, and the subsequent reconversion of such energy into electrical energy or use as another energy carrier' (Article 2(59) of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU).
Consequently, 'energy storage facility’ means, in the electricity system, 'a facility where energy storage occurs' (Article 2(60) of the Recast Electricity Directive).
It is noteworthy, the definition of 'energy storage' was subject to evolution in the process of the CEP comitology - the initial European Commission's Proposal of 30 November 2016 (for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), COM(2016) 864 final 2016/0380 (COD)) in Article 2(47) contained the following wording: 'deferring an amount of the electricity that was generated to the moment of use, either as final energy or converted into another energy carrier'.
Further, the Report of the European Parliament’s Committee on Industry, Research and Energy (ITRE) of 27 February 2018 on the proposal for a directive of the European Parliament and of the Council on common rules for the internal market in electricity (recast) (COM(2016)0864 – C8-0495/2016 – 2016/0380(COD)) proposed the following modification to the definition of energy storage in the electricity system:
‘deferring the use of electricity to a later moment than when it was generated or the conversion of electrical energy into a form of energy which can be stored, the storing of that energy, and the subsequent reconversion of that energy back into electrical energy or another energy carrier'.
It is visible, the ITRE's definition has been also slightly altered in the final text of Directive (EU) 2019/944 (the Recast Electricity Directive).
Article 36 of the Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)
Ownership of storage facilities
1. Distribution system operators shall not be allowed to own, develop, manage or operate energy storage facilities.
2. By way of derogation from paragraph 1, Member States may allow distribution system operators to own, develop, manage or operate storage facilities only if the following conditions are fulfilled:
(a) other parties, following an open and transparent tendering procedure, have not expressed their interest to own, develop, manage or operate storage facilities;
(b) such facilities are necessary for the distribution system operators to fulfil their obligations under this Directive for the efficient, reliable and secure operation of the distribution system; and
(c) the regulatory authority has assessed the necessity of such derogation taking into account the conditions under points (a) and (b) and has granted its approval.
3. Articles 35 and 56 shall apply to distribution system operators engaged in ownership, development, operation or management of energy storage facilities.
4. Regulatory authorities shall perform at regular intervals or at least every five years a public consultation in order to re-assess the potential interest of market parties to invest, develop, operate or manage energy storage facilities. In case the public consultation indicates that third parties are able to own, develop, operate or manage such facilities, Member States shall ensure that distribution system operators' activities in this regard are phased-out.
The noteworthy alteration has also been introduced by the aforementioned ITRE Report of 27 February 2018 to Article 15 of the said directive - that the EU Member States must ensure that active customers owning a storage facility:
(a) have the right to a grid connection within a reasonable time following the request;
(b) are not subject to additional taxes, surcharges, and fees for the electricity stored in the storage facility;
(c) are distinguished from generators and not subject to related licensing requirements and fees;
(d) are allowed to provide several services simultaneously, if technically feasible.
However, this ITRE's drafting was subject to more subsequent - and important - amendments and, finally, materialised as Article 15(5) of the Recast Directive - see the textbox below.
The policies and measures to ensure the non-discriminatory participation of energy storage, including via aggregation, should be described in the national climate and energy plans, the EU Member States are required to prepare under Article 3 of the Regulation of the European Parliament and of the Council on the Governance of the Energy Union.
According to "Study on energy storage – Contribution to the security of the electricity supply in Europe, Final Report" (March 2020, p. 11):
"Member States should eliminate the double charging of grid tariffs. Double imposition of grid tariffs (that is, during storage charge and discharge) on stored energy are especially detrimental and should be eliminated. The current tariffication practices across Member States are still quite diverging, and even if eliminating double charging, do not address all possible cases. For example, concerning the application to existing and new storage facilities, the inclusion of conversion losses, whether the energy is traded in wholesale markets or supplied to end consumers, and the application of tariff rebates on all volumes or only for electricity providing specific services (e.g. balancing)."
Also the E.DSO in its Guidance of June 2021 on Distribution Network Tariff Structures underlines that while producers (renewable as well as conventional) should pay for the distribution network availability as well and be incentivised to efficient location and usage, when storage is applied, a solution needs to be considered for the problem of paying twice for the energy withdrawn and injected.
The need to eliminate double charges is addressed by Article 15(5)(b) of the Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast).
Ownership, development, management and operation of energy storage facilities by Transmission System Operators
A new important provision (Article 54 of the Recast Electricity Directive) prohibits Transmission System Operators (TSOs), as a general principle, from owning, developing, managing or operating energy storage.
The underlying idea is that network operators should not own, develop, manage or operate energy storage facilities, as in the new electricity market design storage services should be market-based and competitive (Implementation of TSO and DSO Unbundling Provisions, Update and Clean Energy Package Outlook, CEER Status Review, Legal Affairs Committee, Ref: C18-LAC-02-08, 14 June 2019, p. 45, 46).
Consequently, cross-subsidisation between energy storage and the regulated functions of distribution or transmission should be avoided.
This prohibition is involved with the two potential derogations for the EU Member States: they may allow TSOs to own, develop, manage or operate energy storage facilities:
- where they are fully integrated network components and the regulatory authority has granted its approval or,
- where a series of (cumulative) conditions is fulfilled including a tendering procedure as well as ex-ante review and approval by the National Regulatory Authority (NRA).
Decisions to grant a derogation also have to be notified to ACER and the European Commission.
As regards the first derogation, Recital 63 of the Recast Electricity Directive clarifies that where energy storage facilities are fully integrated network components that are not used for balancing or congestion management, they should not, subject to approval by the regulatory authority, be required to comply with the same strict limitations for system operators to own, develop, manage or operate those facilities.
Capacitors or flywheels which provide important services for network security and reliability, and contribute to synchronisation of different parts of the system, are given as examples of fully integrated network components.
The conditions for the second derogation are as follows:
a) other parties, following a tendering procedure (subject to review and approval by the regulatory authority) have not been awarded with a right to own, develop, control, manage or operate such facilities or could not deliver these services at a reasonable cost and in a timely manner;
b) such facilities are necessary for the TSOs to fulfil their obligations under this Directive for the efficient, reliable and secure operation of the transmission system and they are not used to buy or sell electricity in the electricity markets; and
c) the regulatory authority has assessed the necessity of such derogation, has carried out an ex-ante review of the applicability of a tendering procedure, including the conditions of the tendering procedure, and granted its approval.
This implies new tasks for NRAs, among others, NRA approval in case of a derogation.
Derogations are to be also be subject to regular reassessment by the NRA in view of a phasing-out of TSO energy storage activities (in which case the NRA also has to ensure phase-out).
In sum: derogations are subject to clearly detailed conditions and can only be granted after an enquiry and approval by regulators.