Project Summary

Displacing fossil fuel, primarily natural gas, for heating represents a major
challenge for the electricity system due to the huge peak demand for heat and the
huge seasonal variation heat demand, requiring network reinforcement.

A further challenge arises from the increasing levels of intermittent renewable
generation required to support the demand. There are periods during the year
when renewable (wind) generation is insufficient to meet demand, and others
when it is curtailed at considerable cost to customers and loss of a valuable low
carbon energy resource.

The main objective of project Heat Balance is to demonstrate the application of
large-scale thermal energy storage (LTES) to exploit curtailed wind and support
inter-seasonal alignment of wind generation and thermal demand.

Challenge Aims
Heat Balance meets the aims of the challenge: -

• 'Develop innovative products, processes and services .....'

LTES is an innovative solution to help address transmission constraints and help
mitigate network reinforcement that is not currently part of BaU flexibility solutions
for GB networks.

• 'Produce insights and findings ....'

The Discovery phase findings have shown that LTES is a practicable technology
in large areas of GB. The project has demonstrated a positive CBA based on
network benefits alone.

• 'Demonstrate how low carbon heating can be intelligently managed ......'

The project has demonstrated that LTES in conjunction with intelligent
management systems can reduce costs across the energy system, in the heat
sector in addition to several parts of the electricity sector.

Alpha Phase

The Discovery phase found that LTES can significantly help with decarbonisation
reductions to net zero, improve energy and heat security, reduce curtailed energy
costs, and offset investment costs.

The study found that all of these benefits can be realised through appropriate
deployment of LTES. In the Alpha phase, we will develop the technical and
commercial readiness level of the solution, enabling a pathway to realise the
potential benefits.

The required deliverables will be developed through the technical and commercial
work packages listed in the project description and explained in the project plan.

Project Partners

SP Transmission is the lead organisation. We want to help electricity customers
transition to low carbon heat at the most efficient cost and enable a quicker
transition.

Academic Partners

The University of Edinburgh will leverage their experience of LTES/transmission
system modelling in the INTEGRATE project.

The University of Glasgow will be a major contributor to the Technical WPs
bringing their extensive experience in geological thermal energy storage.

Technical & Commercial Expertise

Ramboll will lead one Technical WP bringing their experience in the rapid
development of the thermal pit storage technology in Denmark.

DELTA-EE will primarily contribute to the Commercial WP building on learnings
from their research into large-scale TES undertaken for BEIS and others.

Heat Network Providers

Vattenfall bring their practical experience as one of Europe's largest producers
and retailers of electricity and heat.

Erda Energy bring expertise from their innovative solutions for low-carbon
heating, cooling and geo-exchange technology.

Partner capability is explained in the Skills and Expertise Appendix.

User Needs

We identified user needs from the experience of our heat networks partners,
Vattenfall and Erda, and from recent experience of grid scale battery developers.
We consider two broad categories of user:-

• Those who will deploy heat networks with LTES such as commercial heat
  service providers, housing developers, local authorities, housing associations,
  and institutional investors. These users need a clear pathway to de-risk any
  investment into LTES.
• Network licensees who can use the flexibility available from LTES including the
  ESO, TOs, and DNOs.

These users need to understand how they can help facilitate this low cost form of
energy storage for network benefit.

Innovation Justification

Credible pathways for decarbonising heat result in a large increase in electricity
demand as gas and other fossil fuel fired boilers are replaced by heat pumps. One
of the major challenges for the electricity system is the huge seasonal variation in
the demand for heat. In addition, there are extreme intra-day fluctuations in heat
demand with rapid ramp rates.

Problem statements:

• The current trajectory of the electrification of heat risks overloading the
  transmission and distribution networks, requiring major investment.
• Heat demand doesn't align with the output from non-dispatchable renewable
  generation. Forecast transmission renewable constraint payments could exceed
  £1bn per year through to 2040.
• Around 30% increase in generation capacity is required for peak heat, if not
  mitigated, requiring major investment in generation and connection capacity.

Therefore, if we do nothing, these will result in an increase in consumer
bills.

All forms of large scale energy storage will be essential to address these
problems.

LTES is one of the lowest cost methods of energy storage and one of the most
flexible. Under smart control it can shift electricity demand over timescales
between a few hours to inter-seasonally. There is a huge potential for LTES in
conjunction with heat networks.

The number of heat networks is set to rapidly increase as part of the government's
energy and environmental plans and legislation. There is an opportunity to ensure
that appropriate LTES is incorporated with heat networks to assist with an efficient
transition to low carbon heat and optimal development of the whole energy
system.

However, LTES has not been commercialised in GB to date and innovation is
therefore required to overcome the technical and commercial risks.

The current knowledge missing is both on the technical application at scale in GB,
and the regulatory and commercial framework which will make it attractive to
investors.

There are very few documented examples of TES at the required scale in the
United Kingdom. BEIS, Evidence Gathering: Thermal Energy Storage (TES)
Technologies, 2016 commented 'For interseasonal heat storage, developments in
the UK are far behind those advancements made in other northern and central
European countries.'

The key findings of the Discovery phase project arising from the two work
packages are:-

Technical

• In conjunction with heat production units, LTES can provide Electricity network
  services
• GB has a significant proportion of high-quality aquifers suitable for LTES
• Flooded mines also provide a significant opportunity for LTES
• Easter Bush campus modelled as a case study

Commercial

LTES can:-

• Use otherwise curtailed renewable generation
• Reduce distribution system reinforcement
• Reduce size of heat provision systems by smoothing demand
• Shift energy purchase to low cost electricity periods

The Alpha phase project will build on these learnings, generating a roadmap that
supports both heat networks and electricity networks users of the solution.

In addition to progressing plans for a specific case study, the Alpha phase will:-

• Create a matrix of archetype solutions and an evaluation matrix to help
  developers identify appropriate solutions including Population, Geological,
  Scale, Local Generation, and engineering considerations.
• Report on environmental and social considerations around large schemes.
• Address the commercial/regulatory requirements to facilitate LTES, drawing on
  relevant stakeholder knowledge and experience through a commercial working
  group.

Not completing the project could prevent or delay the implementation of a
particularly cost effective method of decarbonising energy generation and
consumption within GB.

Deployment of flexibility from LTES is not currently a BaU solution in GB networks
and there is no funding under the price controls for this. The scale of ambition
needs SIF funding to fully realise a tangible solution which can enable
decarbonised heat at the lowest cost to the consumer.

Benefits

The Electricity System Operator (ESO) estimates that over 13GW of energy
storage is required by 2030 and 40GW by 2050 (2021 FES). LTES is one of the
lowest cost forms of energy storage (Lund et al. -- 2016 Energy Storage and
Smart Energy Systems). Converting 'excess' electricity into stored heat provides
flexibility, and both short-term and long-term (inter-seasonal) energy storage.

LTES provides benefits to the whole energy system including the heat and
electricity sectors. Electricity consumers and heat consumers will ultimately be the
recipients of these benefits.

• Reduced overall energy costs for heat networks providers
• Reduced network constraint payments to wind farms
• Reduced need for reinforcement of the Scotland- England transmission capacity
• Reduced investment in peak electricity generation capacity

Heat Networks Benefits

If LTES is to be installed in conjunction with heat networks, there needs to be a
business case for the heat network operator to make this additional investment.
The Discovery phase Cost Benefit Analysis (CBA), included in the appendix,
shows that adding LTES, supplied with otherwise curtailed wind energy, to heat
networks can have a positive Internal Rate of Return (IRR) of up to 14.5% for the
heat network provider, while providing significant benefits for the wider energy
system. The positive CBA requires that some of the benefit accruing to electricity
networks is transferred to the heat network provider to make the inclusion of LTES
economically feasible. We included this in our modelling by considering that ESO
savings in constraint payments could subsidise the cost to the heat network
provider of otherwise constrained wind energy.

Transmission Network Benefits

There are two main economic benefits:-

Avoiding Renewables Curtailment: Allow renewables to operate instead of
reducing or curtailing their output. In its Modelled Constraint Costs - NOA 2020/21,
the ESO has estimated that constraint costs could peak at over £2bn per year by
2026 and remain above £1bn per year to 2040.

Network Investment Deferral: Reduce the need for investment in the electricity
network for reinforcement. The capacity of the B6 boundary between Scotland and
England is currently 6.6GW. According to the ESO Future Energy Scenarios, the
required boundary flow could be up to 20GW by 2030. As an indicator of costs,
the two Eastern HVDC links are providing additional 4GW capacity at a cost of
£3.2bn (Ofgem Consultation document, March 2022). By storing energy as heat
and using this at times of winter system maximum demand, the required boundary
flow and therefore reinforcement requirement can be reduced.

Our estimate of benefits included within the appendix shows that the
cumulative net benefit of the above to electricity consumers to 2040 could
be £444.7m.

Carbon Benefits

LTES has significant potential to reduce CO2 by enabling low carbon renewable
energy that would otherwise be constrained. In our case study, using curtailed
wind energy from Kilgallioch windfarm saved over 50 tons of CO2 per year.

LTES can potentially displace 5GWh of peak CCGT generation each day during
the heating season, equating to ~ 439,000 Tonnes of CO2 annually.

Carbon reduction will also be achieved by reducing reinforcement works on the
network.

Regional and wider energy supply resilience benefits

Areas where renewable generation is constrained coincide in many cases with
areas experiencing high levels of fuel poverty. An example is the East Ayrshire
region where we estimate that 120GWh of electrical energy is constrained
annually. This energy could potentially be used to benefit these communities.

The solution increases the security and resilience of the GB energy system due to
the reduced reliance on imported fossil fuels. It would provide benefits through
lower heating costs, protected from price increases on the global commodities
market.