Earlier this month in Brussels, several business leaders from various parts of the energy supply chain signed a contract to develop what they say will become the largest clean energy hub in the world outside China by the time it is finished. The project, first announced in June by German energy company LEAG, US energy storage company ESS, Siemens Energy and Breakthrough Energy, will see a decommissioned coal power plant in Germany turned into a combined solar generation and storage facility.

The first phase will include installing a 50MW/500 megawatt-hour iron flow battery system for energy storage at the Boxberg Power Plant site, to be commissioned by 2027, with the goal of eventually offering 2–3 gigawatt-hours (GWh). LEAG and its partners are betting big on the project, initially pumping in €200m ($213.5m), with further support anticipated from additional investors and stakeholders. The project is not the only large solar installation planned in Europe in the coming years, but what makes it unique is its emphasis on storage, something energy analysts warn has been dangerously neglected over the past decade of renewables deployment.

“The initial installation, 50MW at ten hours [charge], will already be the biggest battery in Europe,” Eric Dresselhuys, CEO of ESS, told Energy Monitor in Brussels after signing the contract. “They will need 2GWh of storage to [match the project’s total capacity], so they will need to replicate that 40 times.” It is a daunting task, and Dresselhuys says the key to achieving it will be the use of a different battery technology than what is usually deployed.

“Most storage today is lithium-based, which has a short duration of two-to-four hours,” he says. “That lithium comes from China, which leads to energy security concerns. We’ll be using an iron flow battery. You can expand [that] easier to get to longer hours by just expanding the tank,” he explained.

EU policy push

The Boxberg clean energy hub is exactly the type of project the EU is trying to encourage, and that is why the contract was signed in the EU capital. LEAG and ESS are part of the Energy Resilience Group, a multi-stakeholder initiative led by Breakthrough Energy and Siemens Energy launched earlier this year with the cooperation of the European Commission. Maroš Šefčovič, the new EU Vice-President for the Green Deal, was on hand for the signing.

“This is the poster child for what everyone in the EU is talking about but not enough people are doing,” says Dresselhuys. This is true not only for the focus on storage but also for the just transition solution it provides by converting an old coal power facility – something that is also being done at other sites in Europe. “The genius of the LEAG project is that there is already infrastructure and transmission lines in place, and we are creating jobs for all the people who were working in coal.”

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The European Commission adopted a Recommendation on Energy Storage in March of this year, with key suggestions to national authorities for how to make sure enough storage is being built to accompany expanding wind and solar renewables facilities.

“We said, OK let’s look into what is there already that we can put together and remind member states what are the main issues on which we should already act now,” Paula Pinho, director for energy innovation at the Commission, said at an event in Brussels in mid-Septmber. “We need to integrate storage already when we design and operate the network – something that has been put on the back burner.”

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Storage must be a key component of grid development going forward, she added. “Already in the [revised] Renewable Energy Directive, which is now adopted, we grant the possibility to have accelerated permitting for renewable energy, which is combined with energy storage.” This system is already in place in Portugal, which gives incentives to add storage to a renewables installation.

This idea of storage as a grid asset is increasingly recognised as a public policy urgency around the world. “When solar penetration [as a share of electricity] is low, the grid can just about absorb it, but when you get to 20–25% penetration, all of a sudden people wake up and say, ‘Holy cow we’ve got a problem, the grid isn’t as reliable as it once was’,” explains Dresselhuys.

He notes that while you can control when you put a fossil fuel like a lump of coal into the furnace, you cannot control when the sun is shining or when the wind is blowing.

“So solar plus storage is now the least expensive generator of electricity.”

The problem is that storage hasn’t been deployed at scale to match the rollout of renewables, and utilities are now playing catch-up. “Last year California curtailed 2.5 terawatt-hours of electricity they couldn’t use,” Dresselhuys notes. The lack of storage is causing electricity, and money, to fly out of the window.

Deployment of storage: roadblocks

However, the deployment of storage is facing significant roadblocks. “The LEAG announcement has generated a lot of interest, so it is great that you are seeing projects like this, but the scale that is needed can be daunting,” says Dresselhuys. He notes that one of the biggest problems can be the permitting procedure. “Our customers want faster approval and permitting processes, and they want the market mechanisms to be clearly spelled out with predictability.”

Niels Fuglsang, a centre-left Danish member of the European Parliament, says the national roadblocks to building energy storage need to be tackled. “When it comes to the regulatory obstacles, there is a number of things we could do,” he said at the Brussels event where Pinho spoke. “One thing that I hear often is the question of double taxation. When you produce energy you are taxed, and then if you store it and later sell it on, you are taxed again. That destroys the business case.”

He says he has heard from several electricity generators that this is what has prevented them from investing in storage, although he notes that Denmark has just changed the taxation rules to stop this. “I am not sure what we can do about that at EU level though, since taxation is a national competence.”

Another major roadblock is the difficulty in attracting financing. “It is not clear for the moment if investors should invest in energy storage or in wind and photovoltaics,” Patrick Clerens, secretary-general of the European Association for Storage of Energy (EASE), said at the event. “Because there is a lot of support schemes still around [for wind and solar], but storage is new. The first movers made a lot of money in the last years because the more volatile the energy price gets, the more you can earn money with storage. Energy storage reduces peak prices by releasing energy into the system when prices are high, and when prices are low, we get it out of the system.

“But the costs, like double taxation, are killing the business case,” he lamented. “And then the grid costs cause another question.” He notes that the latest EU electricity market design proposal make transmission system operators and distribution system operators factor in operation costs when taking investment decisions, not just capital expenditures. This needs to be done, he said, “otherwise there is only an interest to invest in capital expenditure because there the revenue is calculated”.

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The other thing holding back investment is that it is not clear which of the various energy storage technologies is going to emerge as the winner – or at least the most lucrative. EASE defines five different families of storage technology: electrochemical (lithium-ion or flow batteries); mechanical (pumped hydro or compressed air), chemical (hydrogen or synthetic fuels); thermal (heating water or stone and storing it); and electrical storage (storing electrons as they are with supercapacitors or superconducting magnets). There are questions about the knock-on effects of each; for instance, if batteries will increase dependence on China for raw materials, if thermal could harm the environment through water use, or if hydrogen would be generated from fossil fuels. Hydrogen is the option with the most question marks around it.

However, Clerens said investors shouldn’t be afraid of choosing the wrong technology now. “It is not one technology that will be the panacea,” he said. “We will have to use all the technologies; we need them all to work together – and then we will have an optimisation done, by the availability, affordability and price signals of the materials and the long-term thinking of the system needs.”

Looming over this investment discussion is the US Inflation Reduction Act (IRA), whose subsidies for energy storage have many in Europe worried that innovation and deployment in this area is going to be lured across the Atlantic. Dresselhuys says the IRA is indeed providing a more attractive investment landscape – but only because it is providing more certainty.

“Someone here said that there is as much money in the EU as in the IRA, it’s just harder to find,” he says. “But there’s more predictability with the IRA. Having clarity for what these funding mechanisms are will accelerate and spark action – because if you know you are eligible for a 30–40% reduction in capital costs from the start, it lowers the hurdle.”

Now that the Boxberg contract is signed, the project moves into the design phase. Dresselhuys says that will be key to demonstrating the storage project’s viability. For storage, just like renewables, “people want to see stuff”.

“We talk about it a lot, but you have to show that it is real. How do we quickly get something there to show that there is a model?” If the initial deployment is completed by 2027 as planned, it could prove an inspiration to other similar projects around the world.